Increase Your Conversion Rate Before PPC Search Advertising Prices You Out Of The Game
By Sage Peterson
July/August 2004
What is your website’s conversion rate? This one question will be central to your ability to compete and win in pay-per-click (PPC) search advertising programs like Google AdWords, Overture, FindWhat and others. Fair warning, while determining and valuing each of your website’s many conversions is sometimes the most beguiling question a Web marketer has to answer, improving your conversion rate often is unimaginably difficult.
Your ability to compete in PPC search advertising may, in a few years, be dependent on your ability to answer this question, and your ability to increase your conversion rate in excess of your competitors. You are probably hearing already how some keywords face such competitive bidding pressure that they are too expensive for many marketers to purchase. Ads for “mortgage refinance” can exceed $10 per click, “life insurance” is also a $10 per click, and the infamous keyword “mesothelioma” is being sold for $80 per click when last we checked.
Your competitors are, right now, bidding on and buying keywords in Google AdWords and Overture, and learning how each keyword converts. They are learning how much to pay for each keyword to keep their campaigns ROI positive, and they are learning how to increase their website’s conversion rate to allow themselves to bid more for each keyword – the longer you wait to get involved, the harder and more expensive it will be to compete.
Each time a competitor discovers a way to increase their conversion rate, they can increase their bids while remaining ROI positive on their search advertising campaign. As the PPC market state increases in cost, the more you will have to pay to “learn” which keywords convert, and how your website performs in terms of its conversion rate.
The math is simple. A particular keyword has 20 bidders and the top three bids are near or about $2.00 per click. You sell a widget valued at $1,000 with $100 of profit. If your conversion rate is 1%, then for every 100 clicks, you sell one widget. If you paid $200 for those 100 clicks, you will have earned $100 in profit – or in this case a $100 loss when considered against the spend required to make the $100. At this rate, you will need a government subsidy or an infusion of venture capital in a few weeks’ time.
However, if your conversion rate is 2%, for every 100 clicks you sell two widgets earning $200. Break even. Not great, but at least your not losing money.
Assorted studies place the “typical” website’s conversion rate at between 1% and 2%, depending on who you believe. But let’s say you’re one of the lucky ones. Your site enjoys a 4% conversion rate. For every 100 clicks, you sell four widgets, and earn $400 profit for every $200 you spend in PPC fees. Your website is a money making machine – right?
Now, enter a competitor with a 10% conversion rate and similar pricing and margins. They can bid upwards of $9 per click and remain profitable. Suddenly, you’re out. Others increase their site’s conversion rate, and suddenly, you cannot compete on an entire universe of keywords.
Three years ago I gained a few pounds and I became very worried. I had always been thin, and I had never known anyone who lost weight and kept it off. I honestly didn’t know if it was possible to actually lose weight and keep it off.
Chances are, you have no idea how to increase your website’s conversion rate. You’ve heard about a number of strategies, but have never really known anyone to have had more than moderate success. Keep your chin up.
I made up my mind, hired a personal trainer, watched my diet, shed the extra pounds, and have kept them off to this day. Like me, you need to make a commitment. By committing your organization to a formal “conversion enhancement” process, you can increase your conversion rate continually and keep it going up. Others have done it, you will too.
Recognize that conversion enhancement is an iterative process – it has to be constantly refined as people change the way they interact with websites, and as your website evolves. Take comfort in the knowledge that it is possible to increase a website’s conversion rate, and that it can be done in a consistent, intentional way when organizations commit to a “conversion enhancement” process.
However, waiting to increase your website’s conversion rate could be a very costly mistake.
