Will Google AdWords Work For My Type of Business?

Ever since we announced our live training this month will be about How To Create A Profitable Google AdWords Campaign, a lot of people have emailed me this question:

Will Google AdWords work for my type of business?”

That’s a fair question, and I’m sure many more readers are wondering the same thing. So I’ll address that question in this article.

(More specifically, I’m going to address whether or not the Google AdWords Search network, i.e. advertising on Google.com, is a good option for your business. To learn more about all the different options with AdWords, read last week’s article: Guide to the Google AdWords Universe.)

Here are the 3 questions you should ask in order to determine if advertising on Google.com is right for you…

1. Are Your Prospects Searching for You?

The most important question to answer is, are your prospects searching for you in Google.com? If not, then there’s obviously no point in setting up an ad campaign.

To answer this question, I recommend you use Google’s Keyword Planner Tool.

It’s free and fairly intuitive to use. Basically, you’ll type in a few phrases you think your prospects might search and the tool will tell you how many times per month the phrases are searched. Plus, the tool will suggest some additional, relevant phrases that you may not have thought of initially.

Use it like a thesaurus. Then keep an eye on the number of searches. If you see that all of your relevant keywords have less than 10 searches per month, then that’s a bad sign. That would tell you that your prospects are not using Google to find your products or services, which means you’re not going to be able to generate leads or sales from Google ads.

At this stage, if you do see that your relevant keywords are searched hundreds or thousands of times per month, then AdWords Search might be a good option for you.

Let’s dig a little deeper to make sure it’s a good fit…

2. Do the Numbers Make Sense?

Google’s Keyword Planner Tool doesn’t just show you the number of searches per keyword phrase. It also shows the estimated cost per click for each keyword. Since Google AdWords Search is a pay-per-click ad network, you only pay when prospects actually click on your ads.

It doesn’t matter if your ad was displayed a million times. You only pay for clicks on your ad.

So the cost per-click, or CPC, is what you need to know if you want to make sure the numbers are going to make sense for your business. By that I mean, will you have a good shot at a positive return on investment (ROI), or are your ads destined to fail (e.g. lose money)?

Let’s take a look at an example where the cost per click of your target keywords is about $5. That would mean every time a prospect clicks on your ad, it’ll cost you $5 bucks. And let’s say on average a new customer is worth $500 in profit for your business. That would mean in order to break even on the ad campaign with these numbers, you’ll need to convert 1 our of 100 clicks on the ad, or 1%, into a customer. That’s reasonable.

Now, let’s change the example a bit and say the cost per click is about $10 and a new customer is worth $100 in profit to you. Well in that case, you’ll need a 10% click-to-sale conversion rate, which is asking a lot from an online ad campaign. In my experience sales conversion rates are not going to be more than 5% for most businesses.

OK, now we know people are searching and it looks like there’s a chance the ad campaign can at least break even.

Now let’s see if you have the budget to run a fair test…

3. Do You Have the Budget to Test?

By now it should be obvious that everyone who clicks on your ad is not going to make a purchase. I wish every visitor would purchase, but it’s just not going to happen. As I said earlier, a good rule of thumb is that 1% of clicks will convert into a sale.

So if we assume 1% sales conversion rates, then it’s likely we could get 99 clicks without a sale. Then on that 100th click, a sale would come through the door, and all would be right again in the world. :)

Think about that for a minute. We’re dealing with small percentages like 1, 2, 3, or 4%, which means it’s normal to get lots of clicks without sales. But over time everything evens out. So, if you know the numbers make sense (see Question #2 above), then you shouldn’t be too stressed out.

With that said, you need to be prepared with a big enough Google AdWords budget to test your keywords. Using the same example above, 99 clicks on a $5 cost per click keyword would be $495. Then on the 100th click, you would generate that $500 sale to cover the cost of the ads. Ideally, you’re shooting to be profitable rather than break even, but I think you get the point.

In this case, you’re going to need at least $500 to test this one keyword. If you try to test with less, then you’re not giving it a fair shot and you could easily end up with no sales. If you assume your conversion rate is 1%, then you’ll want enough of a budget to get at least 100 clicks (per keyword) to test effectively.

Note: if you’ve got a limited budget, don’t spread your budget too thin across tons of keywords. Instead, focus your campaign around just a handful of keywords that have the highest likelihood of converting clicks into sales.

Now that you’ve answered these 3 questions, you should be able to confidently answer the main question at hand: Will Google AdWords work for your business?