Would you pay $15 for someone to look at your website? Apparently, some companies in the bar code business are doing exactly that, paying $15 or more for a single prospect using pay-per-click (PPC).
Here is what Google reported as necessary to be in the number one spot for various keywords. The Keyword is the word(s) a user searches on in their preferred search engine. Some keywords produce better results than others, some are searched more than others. The prices are all the results of companies bidding for those keywords and how much a prospect is worth to them.
Keyword - cost per click for top slots (note that these will vary by day/week/month)
Thermal label printer - 9.75
Barcode System - 4.50
Barcode tags - 6.25
Barcode labels - 5.25
Inventory tracking software - 10.00
Asset tracking software - 16.00
Asset tracking system - 14.00
Barcoding inventory - 9.50
Direct Thermal Labels - 16.00
Thermal transfer labels - 8.50
Bar code readers - 3.00
Barcode label printers - 5.50
Thermal label printers - 9.00
Thermal labels - 16.00
Does it makes sense to spend that much?
One very simple formula for calculating how much to spend on PPC is to figure out what percentage of leads are converted to sales and then to calculate the average gross profit per sale. You will then know what to spend to break-even in getting more prospects.
Example - if 5% of people who come to your site from a search engine are converted to a sale, and the average sale is $1,000 with a gross profit of $300, then you might choose to spend up to $15 per click for a good keyword. 100 click-throughs will cost you $1,500 and on average, five of those people will make a $1,000 purchase and you will have a gross profit of $1,500. That is breaking even.
(Two caveats: I am defining gross profit as the selling price (net of freight) less the cost of goods, which includes any manufacturing or assembly costs. This may not be the right formula for your business. If there is a lot of customization for each order, then your numbers will be different.
I am also ignoring the lifetime value of a customer, re-order frequency, and many other variables for the sake of this discussion. If the average customer reorders five times a year, then you may well decide to spend $40, $50 per click to capture a customer. Labels/ribbons/consumables are an example of products that get frequent re-orders. Companies that sell monthly subscriptions for their software will also value their customers differently.)
Typically, the top 3 listings on a search engine page will get the bulk of the clicks - over 50% - however, whether that number is relevant is an entirely different story - after all, how many clicks do you want to pay for? If your company has an unlimited marketing budget, or you are attempting to gain market share, you may choose to spend more heavily. But for most companies in the bar code industry, their profit margins are not that extraordinary.
A lot of companies try to be shown as number 4,5 or 6 on the page - spending much less to get a prospect to their website.
One strategy is to price your bid much lower than the top listings, and wait for their budgets to be used up. Many companies will fix a daily spending limit and when they hit their limit, their listing stops showing up in search results. Other listings move up. It doesn't always work and is not necessarily the right approach for every company. It requires trial and error and constant monitoring.
If your daily budget for PPC is used up in position 5, I would argue it doesn't matter whether you are in the top spot. If it is not being used up - but you are already spending the maximum amount you can for customer acquisition on a per-click basis, then you might want to explore other less expensive options for prospect acquisition. Read on.
Here at The Bar Code News, you can get click-throughs at a cost of just 30 to 70 cents each, with a listing in one of our product categories (see the menu on the left hand side of the screen). Our basic listings are just $30 a month. For $60 a month you can get a "Featured Listing" that will show up in the Upper right hand corner, on various pages including the home page - over a thousand times a month.Why are our prices so much lower?
a) We're too small to be on the radar of the major advertisers that have the big budgets
b) Our clients have a wide range of profit margins - 18% to 80% - and for now, without our own bidding system by keyword, we are priced for the lowest common denominator
Our traffic is over 550,000 visitors a year, so we can't offer you the tens of millions of potential users that a Google, Yahoo or Bing can - but our traffic is obviously focused (why else would they be searching around barcode.com?) and the cost per click has averaged about 50 cents.
The Bar Code News has grown 500% in a little over three and a half years. Our advertiser base doubled last year, but we are not at capacity. Our client retention rate is around 90% and we'd like to keep it that way. Next year our prices will probably rise, but we will make sure we are cost effective.
Like PPC, we do not require a long term commitment. We bill monthly and you can cancel at any time. We only want happy clients, so we do not try to lock our advertisers into long term contracts.
By the way, we also run banner ads - find out about that and other advertising options right on the website. Scroll down to the Footer Menu on any page and click on "Advertising". :)
Could this make sense for your company? Please pass this on to your VP of Sales/Marketing.
Do you have any interesting experiences with PPC that you'd like to share? Please tell us about it.