Conversion And PPC: Can You Start Small?

July 13, 2008
By Robbin Steif

While some customers (and friends!) are ready to go out and spend gobs of money on their pay per click campaigns, I don’t usually hear that. More often, I hear, “I’d like to start very small, learn what works and what doesn’t, and then roll out in a large way.” It sounds like a great idea, but it doesn’t usually seem to work — in my opinion. Traci Scharf, our pay per click (PPC) specialist, disagrees, so after I write, she is going to do a rebuttal (and you’ll get to see both sides of the problem.)

Robbin’s opinion: It’s hard to start small with Pay Per Click:
So you want to start small with your pay per click campaigns and roll out after you know what works? Here has been my experience:

To make the numbers easy, let’s say that a click for the customer we are working with is $1.00, and his conversion rate for visits to the site is .5%. May be he wants to spend a million dollars eventually, but up front, he is starting with $100/day. He starts wtih 500 keywords and multiple ads.

If a click costs $1.00, and his budget is $100/day * 30 days, he has a monthly budget of $3000, i.e. 3000 clicks/month. With a .5% conversion rate, that’s 15 orders.

Those 15 orders will be spread over many keywords. There may be two keywords that got three conversion each, and three keyword that got two orders each, and another three keywords that got one each. Some of those may be branded keywords, too, like “LunaMetrics conversion rate.” When someone does a branded search, they are already looking for you (a topic for a different post.)

So what can we learn from this? My answer: just about nothing. We don’t have enough data to be able to say, “This keyword does well,” or “This keyword does poorly.” If everything is coming from the same AdGroup or campaign, we may be able to learn more there, but my experience has been that we generally learn what we already know — which products, or which areas of the site, draw the most visitors. Which products tend to sell the most. Whereas real learning would be, “When we use exact match on these five keywords, we have a higher quality score and get better conversion for less money, but on this AdGroup, we can’t get the kind of traffic we need with exact match, and so we need to use a different kind of match” (for example.) Or even, “These keywords suck!! We have to retool this whole campaign.” Now, that’s learning.

OK, Traci, your turn.
Traci’s Opinion: It’s Really Important to Start Small with PPC
I’ve always felt that limiting your initial spending in a PPC campaign is a smart move for most businesses. Let me give you a little analogy:

Say you want to lose weight, and someone says to you, “Hey, you can lose a lot of weight on the peanut butter diet.” You might be willing to give it a try, but probably don’t want to invest too much of your time and energy until you know whether it works for you or not. A rational decision, then, might be to try it just for three weeks, and then get on the scale and see whether your weight went up or down.

When client companies say they want to learn small, this is in effect what they’re proposing. They’re saying, “Let’s spend a set amount of money, and see if our investment is getting a positive ROI.” Because, just like a diet (“Are you losing weight or aren’t you?”), PPC is pass/fail (“Are you making money or aren’t you?”). Maybe you know that, given where your initial budget is set, you need 15 conversions to break even on your PPC campaigns over the course of three weeks. If you find that your campaigns are getting 30 conversions over the course of three weeks, you’ve learned one big important piece of information: “You’re making money – so go ahead and increase your budgets.”

But probably the most compelling reason I encourage companies to limit their initial ad spend is because they’ll want to have enough money to act on what they learn. Consider the company that runs PPC campaigns for three weeks and finds out they are getting, on average, three conversions a week, but need to be getting ten/week in order to break even. Well, assuming I’ve done my job in setting up their campaigns to drive qualified traffic to their site, we will want to look at what is going amiss with their landing pages. That will mean doing a best practices analysis on their landing pages, and then creating and testing alternate versions so that we can transform their conversion rate. However, if they’ve already blown their whole PPC budget, there is no place to go from there, except to cut losses and admit defeat – not the best strategy for getting ahead!

So the bottom line is, be leery when anyone tells you that you have to spend a lot of money in the beginning months of your PPC campaigns. Exercise the same caution you would with anything else, and remember that you can’t just throw money at PPC and expect success.