Online Marketing Costs

Especially in tough economic times, the cost of online marketing can be quite a concern for business owners.  If you’re a small business owner, this can be especially troubling.  How can you justify a $5000 pay per click budget, when you’re having trouble making payroll?

The short answer to that is, if your online marketing isn’t showing a direct contribution to your bottom line, you can’t.  However, the ABSOLUTE BEST THING about online marketing, especially pay per click marketing, is that you can track it down to the dollar.

Let’s take my favorite example, a local family owned plumbing service - we’ll call them “John Smith and Sons Plumbing.” Well, ole John doesn’t know much about PPC, and blew through $1000 in a couple months, and decided to get stop advertising.

Instead, he is spending $500 on Yellow Page ads, and another $2000 a month on some remnant radio time.  He’s doing ok, but he’s not really sure how many of the calls he’s getting come from his website, much less how many come in as a result of his Yellow Page or radio ads.

He’s throwing $2,500 into a void.

The neat thing about John’s business is, he doesn’t need leads, email opt-ins, or someone to purchase online - John needs PHONE CALLS.

Did you know there are CHEAP services out there that let pay per click managers like me track phone calls, down to the keyword?  Instead of throwing money into ads you can’t track - why wouldn’t you want to put an ad in front of people searching for “local plumbers?”

I can tell you right now - I can deliver phone calls to your service business for less than $20/call (that includes my profit margins) - do you think your business could turn a profit on those kind of numbers?

Let’s make some assumptions in John’s case….he’ll turn 35% of those callers into customers, at an average revenue of $300/customer, at a $175 profit margin/job.  So, if he gets 125 calls from his $2500 ($20/call), he’s going to get 44 new customers (35%).  At $175/customer, that’s $7700 in profits.  Remove the marketing spend ($2,500), and you’re left with $5,200 in pure profit.

Let’s go one step further and say John retains about 30% of his business for future jobs.  Those people hire him back at the same profit margin, approximately once per year.  Since I talked him in to setting up a monthly email newsletter, there is no cost associated in closing these guys again.  So, for every 44 customers, he gets about 14 repeat customers the next year.  For 12 months, that turns in to 168 repeat customers.

So, in year one, John spent $30,000 online, and netted $62,400 in profits after it’s all said and done.  (that’s not revenue, that’s profit).  Because of his repeat business, in the next year, he netted another $29,400.

You can imagine how this could compound year after year…right?  If you’re interested in how using a system like this can help your business, just let me know in the form to the right!

Tags: Online Marketing, PPC Cost, SEO Cost

13 Jan 09 | Business, Finance, Online Marketing, Pay Per Click, Search Engine Marketing, Search Engine Optimization, Social Media Marketing | Comments (0)