I talk to a lot of people who can’t imagine the idea of a 5 figure monthly Digital Advertising budget. They think this is the realm of large, multinational corporations or Venture Capital backed startups. The truth is, the average small business spends between $9,000 and $10,000 per month on Google Ads! How do these businesses afford to pay this much for marketing? The answer is ROI.
For every small business, the first thing they should think about when running any type of marketing campaign, digital or otherwise, is the Return on Investment (ROI). When you’re just starting out, leave “brand awareness” to the more established businesses, and think about how much money the campaigns are making you. The good news with Digital Marketing is that these metrics are available with precision unparalleled in traditional marketing channels.
A good Google Ads Campaign should have conversions set up in such a way that you know exactly how much money you are making for every dollar you put in. Let’s use a hypothetical case study of a divorce lawyer in the United States to demonstrate this.
Hypothetical Divorce Lawyer Case Study
Jane is a lawyer who has begun running Google Ads this month. When she takes on a client, her average case value is $2,000 (a standard number for a lawyer in the United States). She spent $3,000 this month on her campaigns, and has gotten 30 conversions (not a great result, but the exact numbers are irrelevant). For her, a conversion is someone filling out a form or calling the number listed on her website.
If Jane closes 1 out of every 10 contacts from her conversions, she will get a return of $6,000!
Average Case Value * Conversion Rate * Conversions = Profit
2,000 * 0.1 * 30 = 6,000
This means that for every dollar that Jane puts in she gets 2 dollars back! This makes it a profitable campaign, and Jane can consider scaling up her ad spend in order to capitalize on the profitability of her ads.
As well, a conversion rate of 10% on the leads received from Google Ads is actually very low. This is because of the very nature of Search Engine Marketing! The people clicking your ad and calling are actively searching for the good/service you are selling.
With the above example you can see how quickly this can scale. If Jane spent $6,000 the next month, in return, she would get $12,000 back from the case load! There are two limiting factors to this scalability:
Jane only has so much time in a day, and cannot take on more than X cases every month. A solution to this is hiring more lawyers/paralegals to take some of the caseload.
The Search Volume
This is one of the biggest bottlenecks in PPC and Search Engine Marketing in general. The number of people actually requiring Jane’s services every month is limited. There are definitely ways to maximize your reach, such as running retargeting campaigns specifically designed to capture people who visited your site and then left without converting as well as many others which we will cover in a subsequent blog post.
However, the nature of PPC is that there is a limited number of clicks you are competing for a month, and this is what is called a “hard limit,” that is there is no way around it except to expand your breadth of work.
As you can see, it is not so far fetched for a small business of just one or two people to be spending upwards of $10,000 per month on Digital Marketing! In fact, if you have profitable campaigns running and could still handle more clients/sales, then not increasing your budget is actually going to cost you more in missed revenue.