Long Term Scale
The beauty of Google Ads is that it becomes a channel that you can scale both up and down quickly and easily.
Options for scaling your Google Ads campaigns.
The beauty of Google Ads is that it is very scalable, so you can go up and down to your heart’s content once you’ve built it as a cost per lead and cost per sale model. You can say “this month we’re too busy, so let’s scale it back” or “This month we’re too quiet, so let’s increase it”. Ultimately, you want to continue to grow and add more money to it. You want to add more money to it because you’re making more money. The formula should be: spend $10 to make $100, spend $100 to make $1,000, spend $1,000 to make $10,000 and so on as you grow.
2. Lifetime value
Lifetime value is the most important metric in your business. It tells us how much revenue you make per customer on average over their complete life with you. We want to then start managing Google Ads campaigns based around that lifetime value. It’s not so much about what’s that first sale you make with them. The first sale might be $100 and you might spend $10 to acquire that $100, but ultimately if you’re going to make $10,000 out of that customer over their life, you’re going to be prepared to spend a lot more than $10. You’d be happy to spend $1,000 to make $10,000. We need to factor in what that long-term value is so that we can make sure we make the most of this as a channel to market.
3. Cost per acquisition
Cost per acquisition, or cost per revenue, is one of the core metrics for longterm scale. We want to get crystal clear on what we’re prepared to pay for a cost per sale amount, which comes from our long-term lifetime value. A rough rule of thumb (depending on the sort of business you have and the margins you make) is somewhere between 5-20%. Once again, some are a little lower and some are a bit higher. If you’ve got a low margin business that is super competitive, then it’s commodity based, so you’re going to have a lot lower margin and be able to spend less on that acquisition.
On the other hand, a business that has a really high margin that has lower competition can spend a lot more money to acquire customers. Software is a good example of that because software companies are generally prepared to spend a lot more to acquire a customer because they have lower servicing base costs to do that. They could be closer to 20% or 30%, but basically somewhere between that 5% and 20% is a good starting point. Ultimately, spend between $5 and $20 to make $100 in revenue.
4. Cost per lead
We can then start working backwards to develop our cost per lead metric. For example, say we’re converting one in four leads, and we’re happy with a cost per acquisition of 10% i.e. I sell my widget for $10,000 and I’m happy to pay $1000 to acquire that customer. Therefore, our conversion rate is 25%, so our cost per lead is $250. Thus our mandate becomes to manage the campaign at a $250 cost per lead.
5. Variable cost model
The ultimate goal of managing Google Ads is to make it a variable cost model so that it provides a guaranteed return on your investment because you are managing it on a cost per lead and cost per revenue model. Thus I scale up or down profitably no matter what is going on. It takes time and a lot of work to get it to this model, but once you do, it’s a beautiful model.
New products and services
Google Ads is a great starting point for new products and services. It allows us to get marketing in a manner of hours to see how well your target audience will take to this new offering. It can drive revenue quicker than any other channel. It will quickly tell you if you’re onto a winner or if it’s going to be a long road ahead.
7. Tests and trial
This is an amazing chance just to test and trial new things really quickly. Whether that be a new product, as above, or new messaging to see if you can sell more. Testing and measuring is crucial for all long term growth of your company. It’s quick, it’s effective and it steers you on the right path rapidly.
It’s time to do great Google Ads!
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