Scaling Google Ads Profitability

Scaling Google Ads Profitability

Effective digital marketing strategies often rely on mastering Google Ads, one of the most versatile and potent digital platforms available. Your ability to scale your campaigns, manage budgets, and optimise bids can be a game-changer in the digital marketing realm. Let’s delve into the essential components of successful Google Ads management.

Scaling Google Ads for Digital Marketing

The beauty of Google Ads for digital marketing is that they are very scalable, so you can go up and down to your heart’s content once you’ve built a cost-per-lead and cost-per-sale model. You can say this month we’re too busy, so let’s scale it back. 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:

  • Spend $10 to make $100;
  • Spend $100 to make $1,000;
  • Spend $1,000 to make $10,000:
  • And so on as you grow.

Lifetime Value of Google Ads

In digital marketing, 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 on 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 once again we can make sure we make the most of this as a channel to market.

Cost Per Acquisition

Cost per acquisition, or cost per revenue is one of the core metrics for long-term scale in digital marketing. We want to get crystal clear on what we’re prepared to pay as 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’ve got and the margins you make etc., is somewhere between 5-20%. Some are a little lower and some are a bit higher.

If you’ve got a low-margin business that’s super competitive, that is commodity-based, you’re obviously going to have a lot lower margin, so you’re going to be able to spend less on that acquisition. Versus a business that has a really high margin that’s got lower competition and can spend a lot more money on digital marketing 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’ve got a lot lower servicing base costs to do that. They could be closer to 20% or 30%, but basically somewhere between 5 and 20% is a good starting point. Ultimately, spend between $5 and $20 to make $100 in revenue.

Cost Per Lead

We can then start working that backwards to develop our cost per lead metric. Say for example 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 digital marketing campaign at $250 cost per lead.

Variable Cost Model

The ultimate goal of managing Google Ads is to make it a variable cost model so that it virtually 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 and 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.

Expansion: New Products and Services

Google Ads is a great starting point for marketing 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 tell you really quickly if you’re onto a winner or if it’s going to be a long road ahead.

Tests and trial

This is an amazing chance just to test and trial new things really quickly. Whether that be a new product, or new digital marketing tactics and messaging to see if you can sell more. Testing and measuring are crucial for all long-term growth and marketing of your company. It’s quick, it’s effective and steers you on the right path in the digital marketing landscape.

Digital Marketing Success with Google Ads Bids & Budget Management

Achieving success in the digital marketing space hinges on getting your Google Ads bidding and budget management strategy right. It’s a tailored approach that adapts to your business’s unique goals and audience. By embracing scalability, considering lifetime value, striking the right balance with cost per acquisition and cost per lead, and fostering a variable cost model, you can harness Google Ads to unlock digital marketing opportunities.

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