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Pricing Value in Google AdWords

Key Objection for AdWords

The biggest objection we some times get before a customer has had the opportunity to try Google Ads out is them looking blindly at the cost of sending one visitor (Google’s Cost Per Click (CPC)) to their website and being frightened by the expense. R10 for one click to my website- wow that is super expensive.This is a mind set that you need to change as you will see in this article. Adwords is not a cost – it’s an investment in buying new clients for the business

We have worked with many clients in the past and the discussions we have before hand when they show interest in Google Adwords is usually the same. It’s simple maths and I thought i’d share this with you to perhaps clear up a couple of question you may have and to give you an idea of the mindset you need to acquire when investing in marketing for your business.

Please note that we always use average numbers when referring to income, clients, etc when calculating this formulation and I prefer to calculate it at an extremely low conversion rate which is unseen when advertising on Google Ads but this shows you even at little response or feedback from this campaign you will still receive a good return on investment if not a extraordinary one.

For the purpose of this exercise – I will use a hairdresser as an example.

A Conversation with a prospect will usually go along these lines:

Me: So what would you say the value of the average purchase would be for a new clientat your business?

Prospect: Probably around R200 – for a haircut and blow dry

Me: Great – ok of that R200, how much would be profit to your business

Prospect: Maybe R100.

Me: Awesome – ok and your clients would be pretty loyal to you right? I mean, they don’t come for one haircut and never come back?

Prospect: No way – we are really good hairdressers – our clients always come back again

Me: Cool, that’s what I thought. So on average – how many years would an average client stay with you?

Prospect: Probably around 5 years I reckon. It could be more, or less, but would be around 5 years.

Me: Ok cool – so your “average” client then would stay with you for 5 years and let’s say, get 10 haircuts per year. Does that sound reasonable?

Prospect: Yeah that would be close.

Me: Great and at R200 a haircut, and R100 profit on average, that makes a lifetime REVENUE value of an average client R10,000 (R200 x 10 x 5) and a lifetime PROFIT value of an average client R5,000 (R100 x 10 x 5).

Prospect: Yeah cool – I see how that works.

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So at this point we have enough information from the client to do our keyword research and to find out more or less what a cost per click will cost the client according to the industry they are in. Remember the more competitive a industry the more a cost per click will be because your competition is also aiming for those keywords. If they use Google Adwords that is which a lot of businesses still don’t do.

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After our research the conversation continues:

Me: So I have done some analysis, and using AdWords we can send people to your website for about R10 per visitor

Prospect: Wow – that seems expensive, why so much?

Me: Well let’s look at it first properly to see if it’s expensive or not. Do you mind if I run some figures by you to see?

Prospect: Yeah sure, please do

Me: Ok, so when people call you at the salon having found your phone number on Google, how many of these people do you think you convert into clients? (Through my experience business owners are always proud of their sales skills and tend to always overestimate this so I tend to do the calculation below their estimation)

Prospect: To be honest – almost all of them. Once they call, we get them in for a haircut.

Me: Wow – that’s a really great sales conversion rate, not many business are that good at closing new clients. What I am going to do then is really under-estimate the value of this advertising for you. If you are almost going to close all the inquiries that come through, you’ll build a lot more business than this calculation will work out.

Prospect: : Great – let’s go then

Me: Ok cool. Let’s say you used Google AdWords to send 100 people to your website. At R10 a person that’s an advertising spend of R1000.

Prospect: Ok got it.

Me: Now – Google advertising is pretty specific – we know we send people to your website who are already looking for what you offer – so if your website does its job, we will get a good proportion of people from this traffic, who will then call you or email you – so let’s say 10% of these visitors – 10 people – call the salon.

Prospect: Ok good. That sounds very low, but ok

Me: Ok, now you said you’d convert almost all of these 10 people into new clients, so maybe 8 or 9 of them. But for this conservative estimate, I am going to say only 3 of the 10 turn into clients.

Prospect: Ok got it – it does seem too low so I’d definitely get more clients from the 100 seeing they where all looking for a hairdresser

Me: That’s cool, it just means you’ll earn more profit from the advertising than what we calculate here. Now we worked out before, that your average profit per client over the 5 years they stay with you, is R5,000. Do you see where this is going?

Prospect: I am starting to (with a grin)

Me: Excellent – so the R1000 we invested in Google Advertising brought 3 clients worth R5,000 each for a total gross profit of R15,000

Prospect: Cool, minus the R1,000 cost and we make a net profit of R14,000

Me: Exactly – and if you want to look at it another way, every R10 you spend with Google AdWords, by this calculation earns you R140 of profit. The R10 cost per visitor to your website does not look that expensive anymore does it?

Prospect: No, it definitely makes more sense now and sound like a good investment.

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This is a simple scenario to show you the real value of a click to your website and as you can see I was very conservative on the calculations and even at that it was still a brilliant business investment.

Should you have any enquiries regarding our Google Adword Services please feel free to get in touch with us at +27-82-484-4905 or email us at sales@biohost.co.za.

For more info on Google Adwords checkout our page: https://biohost.co.za/google_ads/

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