Limitations of PPC

I’ve written many other times about PPC, but it bears writing about here as well. You should know at the outset, that I have no use for it – but that is primarily because it has never been something that would have worked for one of my clients! I’ll explain why:

1. They all had very low marketing budgets. PPC requires that you invest a certain amount just to figure out what will work, then fine tune, then, IF you can find a successful combination, you can profit from it.
2. Most have had low “profit per order” averages. With average profit per order of less than $10, PPC will never work (some quick math shows why). It is hard to make it work unless you have a fairly healthy profit per order.
3. They could get far more bang for the buck, with long term momentum, from other forms of marketing.

PPC is easy to do the math for. By doing some quick math ahead of time, you can figure out pretty fast whether it is going to be even a possibility:

First, calculate your average profit per order. If someone comes into your jewelry store and orders a necklace and two bracelets, which cost a total of $75, and you make a 10% profit from that (remember to calculate actual profit, not just retail minus wholesale), then you made $7.50. If that order amount is average, you are out of the running with PPC, you don’t even need to go further because it is less than $10.

If the average is more than $10, then go to step two – calculate your average profit per VISITOR. That is, divide the amount of profit for a specific period by the total number of site visitors over the same period. If that is less than $.5, you are dead in the water – if it is less than $.50, then it is going to be VERY hard to make PPC work – and may still be impossible for YOUR particular industry.

Next, find out what the average keywords are going for in your market. Some are priced higher than others, so if you are in a highly competitive field, you may have to spend a LOT to get traffic. If you are in a less competitive field, you may get away with less. NOTHING goes for less than $.05 per click, but many go for MUCH higher. Base your math on a low average.

If the low average cost per click is higher than your average profit per VISITOR, then you won’t be able to make it work. At all.

You must compare it with average profit per visitor, because only a small percentage of those clicks are going to even result in sales.

There is another factor also – and that is Quality. For many small businesses, the quality of visitors from PPC is lower than from organic traffic. Some of this has to do with the quality of the ad, some of it has to do with the fact that the psychology of people who click ads is different than the psychology of people who click on organic links. But I’ve seen a PPC campaign where traffic came, but no one bought, in spite of tweaking, and that is not uncommon.

Think about it for your particular business and industry. Do the math first, and you are less likely to get burned by a neat sounding idea that wasn’t ever going to work.