More on Adwords.. What’s your customer worth?
December 16, 2007
I attended an SEO program put on by Network Solutions and Constant Contact. The seminar was $49 and hosted here in Richmond. I figured for the cost it would be worth checking out and I had hoped that since I was paying it wouldn’t be a pure sales pitch.
I have to say for $49, I found the information very good as it pertained to SEO and Adwords. The guy teaching the “class” was extremely helpful and provided some valuable insight into how it all fits together and I was surprised, no sales pitch.
There really is a lot that needs to be considered when embarking on an adwords campaign or I’m sure you will lose money. The class brought up some basic principles of setting goals and getting some good strategies for getting started. So for today’s exercise let’s discuss our adwords strategy. First we need to what what it’s worth to us, or better yet, what is our customer worth to us.
Now if your one of those people that are using adwords to get traffic to an affiliate site, this may not work for you. For those people that have eCommerce sites or websites that will drive traffic to your brick and mortar this should help.
What is the value of your customer? To get started you should determine the average lifetime value of your customer. Do you sell services to customers? If so, how often will they come back or have previous customers come back? You may not know this answer if you are a new business, but you should estimate it. Your hope is that your customers will return over and over. In our baby boutique our average sale is $90.00. Most of our customer that come in have newborns and we carry products up to 24 months. I hope that they will come in at least 1-2 times a month and spend at least that. In this case, I’ll use at least 1 time per month @ $90. $90 (First Sale) + (90 *12) = $1080. So $1080 is the average amount of revenue a new customer is worth.
Now, how many new customers would you like to gain each week through your online marketing campaign? I’d like to get at least 3 per week.
Finally we put it all together to detemine the estimated lifetime value of new customers from online marketing: $1080*3 = $3240 * 52 weeks = $168,480. Wouldn’t that be great to generate that simply from bring in 3 new customers per week from online marketing?
Conversion Rates: Now that we determined that we would like 3 new customers a week we need to find out how many visits to our website, or clicking on our ad, it will take to make them a customer, or convert them into a sale. This will vary per business, but we’ve found that for every 40 people that visit our site, 1 will buy something. That breaks down to a 2% conversion rate 1/40 = .025. We then divide the number of new customers we want by this conversion rate and that provides the number of leads our ad needs to generate. 3 (new customers per week) / .025 (Conversion Rate) = 120 Leads. 120 Leads seems like a lot, but that’s per week. We really need to get about 17 people to the site per day. That translates to 17 quality clicks on your adwords ad.
Tomorrow will will discuss what we need to do to get those 17 quality clicks and what you should pay for them.
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