Does PPC advertising work for small businesses?

You have a new business and a website. What you need is traffic, better, converting traffic. It sounds easy, but it is actually very difficult. Some say "build it, and they will come". If you open marketing blogs or older books, you will get advice to use a PPC campaign, e.g. Google Adwords. This sounds logical, however, it is more difficult than it sounds. Why? Creating a PPC campaign is easy. The issue is with the cost per click. In majority cases, the price per click (CPC) is much higher than you can afford to stay profitable.

PPC campaigns - price per click and ROI

Dollars Let's have a look at several different niches and compare the prices per click for different keywords. We will use data from and Google Keyword Planner.

Clothes cheap online tshirts   $2.60 cheap t shirts $3.13 cheap print t-shirt   $9.57 Product price  $2 - $150 per piece

Garage door parts garage door remote  $2.10 garage door controller $3.10 Product price $10 - $50

Lawyers lawyer New York  $27.41 car accident lawyer $167.61 personal injury lawyer  $100.39 Hourly rates $100 - $600

Business consulting business startup consultant  $50.20 it management consultant $36.47 Hourly rates $50 - $300

What is the cost per sale?

We have listed a few examples of keywords in various industries and their price per click. You might find them surprisingly high. The question to be answered is - can a new business use a PPC campaign and be profitable? The answer is not that straightforward.

Let's do some math first. Assume your conversion rate being 2%, which for a new business is quite optimistic. That would mean you need 50 clicks to make a sale. If you sell products, the gross profit is usually between 30 - 50%.  

Consider the cheapest keywords from our list again and assume you need 50 clicks for one sale. You will spend $100 - $130 for ads to make a sale. We can even assume an average person buys more of them at once. It is clear that you invested more money into a single sale than the profit is. This is not sustainable. You can choose any kind of product or service and do your own math. Consulting services are even more expensive. A new consultant can hardly afford $300 - $5000 to make one sale.

What are other options for driving traffic and making sales?

envelope with email iconWe have to make the math working for us. It is clear that we cannot run advertising and generate one sale from 50 clicks. This would ruin our budget very quickly. What can we do?

1) We have to consider "Lifetime Customer Value". Are your clients loyal? Do they repeat their purchase? How long would it take to make a profit on this customer? This is very hard to answer if you are a new business. You don't have any actual data. You can only predict. However, no matter what your predictions are, you would keep spending a lot of money on ads just to find out what works and what doesn't. Most startups do not have a budget big enough.

2) We assumed the conversion rate to be 2%. That means 49 people out of 50 who clicked on your ads did not purchase anything. We have to understand this traffic a little better because we already paid quite much for it. Who are these people?  Are they potential clients? Did they buy elsewhere? Were they just searching for information? Did they find everything they needed to decide? Are we able to contact them again?

If you pay $10 per click, wouldn't it be great to have a contact for some of those people and reach out to them later for free? If you collect 10 email addresses out of 50 clicks, you just have saved $100 on advertising. Actually, it might be even more. If you have a quality content for your subscribers, you will not lose them. You have an opportunity to turn the email list into loyal clients.

PPC does not build relationships. Employ #marketing and know your clients.

Collect email addresses and build relationships

The question is, how to motivate people to share their email address with you? You have to offer them something of real value. We all deal with email pop-ups on many pages. We don't want to sign up for every newsletter; many of them just bother us. Think of creating valuable content, significant discount, free service or something your subscribers can actually use. Do the math for your own industry. Do the clicks for your website cost $50? Then, it is a must to collect emails. Invest into a free product or a piece of valuable content in a form of a video or an ebook. You will not only build authority for your business, but you will save a significant amount of money on advertising.

Remember, creating an ad is very easy. Optimizing the ads for a better CTR is easily possible using A/B testing and higher bids. Low conversion is the place where it all fails. Many businesses just replace the marketing/advertising company even though it is their own fail.

Contact us to have your marketing communication analyzed. We will help you find new ways for making a profit from the traffic channels you have. Share this post if you liked it.