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Pay Per Click for Targeted Results

Jerry Kenefake, Founder and President, Mypromostore.com

When I made the decision six years ago to move my business from what had been primarily a regional company to a model almost exclusively focused on online merchandising and sales, I knew I needed a new marketing strategy to support that change.

Mypromostore.com is a one-stop shop for almost any promotional product you can imagine. Because many of the items we sell are commodity-like—the sale of which is strictly price driven, it becomes difficult to truly grow our business on sales of those items. A high level of personal attention and value-added services have set us apart from most of our competitors and helped us win in price wars. However, our real goal has been finding a way to leverage the enormous customer base available through the Internet—identifying niche customers within that vast universe who are seeking our higher-margin products, driving them to our site, and converting them into sales.

Enter the world of sponsored links and pay per click advertising.

In our realm of products, if we can't advertise it, we can't sell it. Pay per click advertising is proving to be a very effective way to spend our advertising dollars to reach our niche. Internet sales are up 325 percent this year, and our average order size has doubled.

Most of our target customers are small- to- medium-size companies with some amount of marketing budget (either formalized or not). They are not as concerned with price as they are with such issues as delivery times and the quality and appearance of products. Many don't want sales calls at their office. If they need something for a trade show twice a year, they want to handle it online and with a phone call—not with a pesky salesperson banging on the door. For us, spending advertising dollars on sponsored links is a much more appealing way to reach our cutomers. And, it's much more effective than "dialing for dollars" or trying to get an appointment with the decision maker.

The other tough part is we don't really know whom to target. We can reach out to a marketing person, but it may be the vice president of sales, the presiden'ts assistant, or the spouse purchasing the items. It varies a great deal from case to case. Pay per click works especially well because it helps us identify the customer—regardless of job title—who will buy our higher-margin products, such as computer bags, leather portfolios, etc. But there has to be enough margin in the sale for pay per click to make sense; you can easily eat up all of your profit in the cost of getting the customer to your site.

The cost of a new customer for us varies according to product category. But there is a rough formula we use to determine how much money we can or should spend on advertising to get the customer. For example, on a $10 item with 40 percent gross margin, we immediately know that we don't want to spend $4 to advertise that item. As a general rule, we want to spend no more than 10 percent (or one dollar on a $10 item) for advertising.

With sponsored links, we have 6,000 key phrases for which we advertise, and all are bid independently. With the available tracking software, on a keyword-by-keyword basis, we can know who came into the site; of those who came in via a certain keyword, such as "imprinted coffee mugs," how many pages on the site they visited; which visits are turning into phone calls, e-mails, and orders; or who just browsed. As such, our online advertising has turned into a great lead-generation tool. Every day our customer list grows as people contact us for product information. If we can get someone in our niche category to contact us personally—by phone, e-mail, or sample requests—we know that we can convert 25 percent of those inquiries into sales.

Conversely, if we're advertising for a key phrase but not getting people to our site through that phrase, or getting them to the site but not converting them to a sale, we can track that too. Over time, the cream rises to the top and you can analyze and adjust dollars accordingly to areas yielding the greatest results. And, you can determine why a particular area is not doing well. Is the price out of kilter? Are the graphics inferior? Typically, you can zero in on the problem, determine what's wrong, and cut spending on low-producing phrases. You also can look at average sales for a product category in relation to advertising dollars spent to see what's worked better, perhaps adding more of a particular product or different types of similar products.

For the best results, we've also discovered the importance of making our pay per click advertising as accurate as possible to attract the customers we want. We may only have one chance to impress a potential customer enough to make a purchase. We try to keep our site attractive and user friendly, our products current, and the prices right. For every dollar of revenue we get through pay per click, we've determined that we'll get anohter fifty cents the following year—half as much again through repeat business that we don't have to pay for. That's how the business is really going to grow.

© 2006 Ewing Marion Kauffman Foundation. All right reserved.

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