Imagine you have a boutique. Imagine you can pinpoint who among the passersby are more likely to enter your boutique. Imagine you can identify who among them are more likely to buy a dress from you. Now, imagine that you can do just that on Google AdWords. Ask any online marketing agency, and it will tell you how useful enhanced cost-per-click (ECPC) feature is, that is, if PPC forms part of your optimization strategy.

This article will tell you how can you boost your search engine marketing’s (SEM)  profitability.

 

 

Let’s refresh a bit. Here’s a rundown of the terms you often encounter (in the simplest language possible):

Search engine marketing (SEM) – an Internet marketing strategy that aims to promote your website through increasing its visibility online on SERP through optimization (SEO) and advertising (PPC).

Search engine results page (SERP) – a results listing returned by Google and other search engines in response to a search.

Search engine optimization (SEO) – the processes involved in affecting website or web page visibility in Google’s organic search results.

Pay-per-click (PPC) – an Internet advertising model directing traffic to the website and where advertisers (usually, website owners) pay the publisher (usually, Google and other search engines) every time the ad is clicked by a user.

Acquisition – the process of converting a user to a visitor then to a customer.

Enhanced cost-per-click (ECPC) –  a bidding feature wherein advertisers can raise their bids for those clicks that most probably lead to a conversion.

 

Going back…

If you know who are more likely to buy from you, will you not be willing to spend more in acquiring these customers? Of course, you would be. Because of the features like ECPC, we cannot underestimate the power of PPC in converting a consumer into becoming a paying customer.

There remains the fact that PPC will not give you unlimited stream of prospects. This means focusing on the long-term value that PPC is helping you acquire in the first place.

 

Let’s take this for an example…

A conversion has an immediate financial advantage.

Average CPC: $3.00

Conversion rate: 10%

Transaction (cost/conversion): $15.00

Transaction amount (value/conversion): $30.00

Return: X2

Imagine that you can earn this much for every new customer. Now imagine if that customer has a lifetime value. When we say the customer’s lifetime value, the tangible factors are repeat sales, referrals, etc. while the intangible factors are loyalty and positive word of mouth, among others. Customers with lifetime value are what ECPC targets.

Customers are not created equal. This is a fact. Some customers will buy from you today and then disappear forever. Then, there are customers who will buy you today, the day after tomorrow, next month and so on. If you can identify which channels, ad groups and keywords to target these repeat customers, you would certainly want to invest more to these channels, ad groups and keywords.

You might think of this as an experiment, but it is not. Data showed that customers who were acquired through across various paid search terms usually differ in their lifetime value. And the difference is from 30% and up.

Put it this way. As a marketer, you should be targeting people with lifetime value, not only those who can give you immediate payback. If your SEM and thereby, SEO and PPC target only those with an initial value (first-time and one-off customers), you are leaving immense opportunities behind.

 

How can we optimize PPC for acquiring customers with lifetime value?

Initially, you need to track your customers’ historic spending. Compare each ad group based on this factor. Target and re-target those customer segments that have evident patterns of high long-term value. Invest more on these high-return campaigns.

Next, focus on customer-centric metrics and ditch the transactional ones. For instance, ask “who were acquired by this particular keyword?” and not “how much did I spend for and earn from this particular keyword?” Most indicators are quantifiable, but they usually give insights about both short- and long-term benefits.

 

Optimizing PPC around lifetime value is not without difficulties. However, you can use this in guiding your overall SEM strategy to boost acquisition and thereby profitability. Maximize every dollar you spend on bids by investing on the highest-return campaigns thereby driving long-term business value. When that time comes, you no longer have to imagine what it feels like having a league of returning customers.

 

Image credits: Creative Strategist | SAP | Next Level