'Net Features : Lewis Bassett

Building a Customer Vending Machine

Administrator — Fri, 07 Dec 2012 19:32:00 GMT

By Lewis Bassett, Bassett Providentia Ltd

In the first article of this series, I explained how you could use Google AdWords to build a customer or lead vending machine and buy new customers and leads whenever you need them. I showed you how to estimate the cost of building the machine, and the approximate return on investment you can expect from every dollar you put into the machine. This is determined by the cost of buying a new lead or customer – cost per action (CPA) – and the value of each new lead or customer – value per action (VPA).

Then in the second article, I demonstrated why it was important to always be testing two Google ads against each other: it constantly drives the cost per click (CPC) down, which helps to reduce the cost of buying a new lead or customer.

Another way to reduce the cost of a new lead or customer is to reduce the number of clicks that are required to get one signup or sale. And you do that by increasing the conversion rate of the landing page.

Conversion Rate
When a searcher clicks your ad, they’re taken to your landing page. If the landing page does a good job of persuading them, they will buy something or complete a form for more information. This is called an action.

Not every person who clicks on your ad will complete an action. And that’s entirely reasonable; your offer won’t appeal to everyone. But a certain percentage will. We call this percentage the conversion rate. If 20% of the people who click on your ad complete the form on the landing page, the conversion rate is 20%.

Cost per Action
You can work out the cost per action by dividing the cost per click by the conversion rate of the landing page.

For example, let’s say you have a landing page that collects leads for a whitepaper. If it costs you $1 per click and the conversion rate of your landing page is 5%, then it costs you $20 to get a new lead. That means the cost per action is $20.

You can set up your Google AdWords account to calculate and display the cost per action for you automatically. I’ll come back to this later.

Crafting Your Landing Page
There are loads of different ways you can craft your landing page. And there are many different techniques for persuading people who click on your ads to take an action.

The most important thing – by far – is that you have a solid framework for measuring conversions and testing changes that you make to your landing page. After all, every question about how to craft your landing page comes down to the cost per action. Whichever method gives you the lowest cost per action is the one you should use, and you find that out through testing.

Content Experiments
Google Analytics has an excellent feature called Content Experiments, which allows you to run two versions of the same landing page side-by-side. It tracks the conversion rates for both landing pages and reports the results of the test once a statistically significant winner has been found. And it does all this automatically.

To use Content Experiments, you need three separate web pages.
- First, you need the original landing page. We call this the control.
- Second, you need a modified version of the original landing page. We call this the variant.
- Third, you need a conversion page. This is a page that is displayed to the visitor after they’ve performed the action. Regardless of whether that action is a sale or a signup, the visitor should be taken to a “thank you” page that is only displayed after an action has been completed.

Google Analytics gives you some scripts to insert into each page. When traffic hits the landing page, half of it remains on the control and half is redirected to the variant. And when visitors from either version perform the action, the script on the conversion page records that the action took place. So Google Analytics keeps track of how many visitors from each different landing page completed an the action.

After the experiment has been setup, you don’t have to do anything. Google will keep track of the recorded actions and alert you when there is a winner.

If the variant has a higher conversion rate than the control, make the variant page the new control. Then create a new variant to test something new. And if the control has the higher conversion rate, make a new variant.

Just like with Google ads, make it a golden rule to always be testing two different landing pages. That way, your conversion rate will keep improving. This means the cost per action will keep going down, and you will be able to buy customers or leads for less.

The Most Important Elements of a Landing Page
Usually, when a visitor arrives on your landing page, they’ll look at the headline. They need to see keywords and a message that matches the search they made and the Google ad they clicked on. This lets them know you’re continuing the conversation you started on your ad.

If the benefit (or implied benefit) of the headline is strong enough, their eyes will move to the call to action. This is usually a button or a short form. And if the call to action is strong and congruent with the benefit of the headline, they’ll complete the action that you’re asking them to do.

So these two things – the headline and the call to action – are usually the most important part of a landing page. When I’m crafting a landing page, I put most of my effort into finding a headline and call to action that work together, and are strong enough to inspire the desired action on their own. I fill the rest of the page with “lorem ipsum” text. I only enter the real text after I’ve found a strong headline and a call to action that work well together.

These are the two things that you should concentrate most of your tests on. Experiment with different headlines and calls to action that communicate different benefits and offers.

Traffic
The more traffic you can send to your landing page, the quicker you’ll be able to complete these tests and improve your conversion rates. So it is very important that you are willing to spend money buying as many clicks as possible at this stage.

By increasing the click through rates (CTR) of your ads, you can purchase more (high quality) traffic for less. So a high CTR really helps with maintaining a good testing velocity.

When you first begin building your machine, the click through rates of your ads are going to be low, which means that less traffic will be hitting your landing pages and tests will take longer to complete. As you make progress, your testing velocity will increase. You can also increase testing velocity by spending more.

Cost per Action vs. Click Through Rate
Earlier, I mentioned how you can use AdWords’s Conversion Tracking feature to keep track of actions that are performed when searchers reach the landing page. Google AdWords provides you with another script, which you put on the conversion page (keep the Content Experiments script in place too).

AdWords will count the number of actions that take place for each of the two ads that you’re testing, and will automatically calculate the cost per action for each Google ad. This information is gold.

Different Google ads attract different types of people to your landing page. And these different types of people will convert differently, because their mindsets are different.

As your landing page becomes more efficient, you will find that the Google ad that brings the traffic often has more effect on the conversion rate that the landing page itself. This is why it is so important to measure the cost per action for each ad, as well as the click-through rate. The better ad is the one that provides customers or leads for the lowest cost - i.e., the one with the lowest cost per action. That might not necessarily be the one with the highest CTR.

Compound Testing
If you are always testing two versions of your Google ad and two versions of your landing page, the amount it costs you to buy a new customer or lead will keep going down. (This is because the cost per click is always going down, and the conversion rate of the landing page is always going up. And these improvements multiply together.)

After a few months, you should be able to buy a new lead or customer for significantly less than you make from them. When this happens, you effectively have a customer vending machine. You can buy new leads and customers whenever you need them, and at a fairly stable price.

Eventually though, your progress will slow and it will take you increasingly longer to improve the cost per action. So what happens if progress slows right down, before you’re breaking even? Does this mean the market is not viable? Not necessarily.

Value per Action
This article has been concerned with only one side of the marketing coin: buying customers as cheaply as possible.
The other side of the coin is increasing the value of each customer, by getting the average customer to spend more with you over their lifetime as a customer. This means you make more profit from the average customer, which means you can spend more to buy a new customer or lead. (When the average customer is worth more to you, the average lead is too.)

You can increase the value of your average customer to you by building deeper relationships with them, and providing them with more value. In my opinion, this is the more powerful side of marketing. But it’s also the one that gets the least attention. But increasing customer value is a topic for another day.

Building Your Customer Vending Machine
These principles – measuring cost per action and using testing to drive that cost down – apply to any method of generating new leads and customers. This includes direct mail, social media and print advertising.

This method of acquiring new business is both sustainable and scalable. You’re limited only by the volume of your market.
If you need more customers, you just increase the amount of money you put into the machine. And when you want less, you just ease back. And if you’re making more money from each customer than it costs you to acquire them, you’ve effectively got a license to print cash. You can spend $1 in marketing and get $2 back in profit.

For part 1, click here.

For part 2, click here.

About the Author: Lewis Bassett is an online marketing consultant and speaker, and helps companies to increase their revenue. Bassett Providentia Ltd is his consulting practice.

How to Build a Vending Machine for Customers or Leads (Part 2)

Administrator — Wed, 05 Dec 2012 22:30:00 GMT

By Lewis Bassett, Bassett Providentia Ltd

In the previous article, I explained how you could use Google AdWords to build a customer or lead vending machine. It will give you the ability to buy new customers or leads – however many you want, and whenever you need them. This can be one of the most valuable assets your business will ever have.

We examined some techniques for finding one single keyword to focus on, and for determining whether or not that keyword represents a viable market. If you’ve followed those steps, you should have a reasonable idea of how much you will need to invest to build this customer/lead vending machine.

You’ll also know have an approximate idea of how much it will cost you to buy a new customer, and how much a new customer is worth to you. And you can use this to determine the return on investment (ROI) you can expect from any money you put into this machine – once it has been developed.

In this article, I will show you how to build the Google AdWords part of the machine. You’ll also learn how to use real market data to refine your ads and make them more efficient. This helps to lower the cost of buying a new customer.

(This article is not a beginner’s guide to AdWords, though no previous knowledge is assumed. If you require step-by-step instruction on how to use Google’s features, please refer to Google’s own help pages.)

Setting up Google AdWords

Open a brand new AdWords account. Google uses previous account history to help calculate the price you should pay for each click. And the chances are, if you’re like most AdWords advertisers, you have a sub-optimal history. For the purposes of building this machine, it’s best if you start with a clean slate.

Create one single campaign, which we’ll use for the whole customer/lead vending machine. If you want to create additional machines in the future, create separate campaigns for them too. (Once you’ve accumulated a good track record for your AdWords account, it makes sense to leverage that for future projects. So don’t create another new account; just create a new campaign instead.)

Within a campaign, you can create multiple ad groups. For now, just think of ad groups as a way to group related ads and keywords groups.

Create a single ad group, for the one single keyword that you’ve decided to focus on. If you want to expand your machine later to include other keywords, you can create additional ad groups for groups of related keywords. For now, we just need one.

Creating Your Ads

When you’re creating the ad group, you’ll need to enter one ad. Use the following formula to guide you.

For the headline, enter the search keyword. For example, “Tooth Whitening Kit”. This will stand out to the searcher as relevant, and Google will also display it in bold because it matches the keyword the searcher entered.
The first line should contain a key benefit of the product or service that you are offering. This benefit could be a positive (e.g., “Get White Teeth within 10 Days”), or a negative (e.g., “Never Repulse Women Again”).
Use the second line to communicate one or more key features of your product, service or the offer itself. For example, “Daily Paste. 100% Guaranteed.”
Enter a descriptive URL – preferably one that includes one or all of the keywords – into the display URL. This URL has to resolve to a page on your website, although it doesn’t have to be the actual landing page. For example, “www.ToothWhitening.com/Kit”.
Finally, enter the URL for the landing page that searchers will be taken to if they click the ad. For example, “www.ToothWhitening.com/landing/january-offer”.

This is a good formula to use when creating your Google ads. There is plenty of scope for testing different benefits and features, but the structure will keep you on track.

The landing page URL should absolutely not point to your homepage. You need to create a specific landing page for the offer that you are advertising. Either the searcher buys something on that page, or they complete a short form and sign up.

Entering Your Keyword

To complete the setup of your ad group, you will need to enter your keyword. You should enter the exact match, phrase match and broad match versions of the keyword.

Exact match is the keyword in square brackets, and is used to display your ad whenever someone enters your search phrase exactly as you’ve entered it (or very close variations). For example, [tooth whitening kit] is an exact match for “tooth whitening kit”, but not “tooth whitening” or “organic tooth whitening kit”.

Phrase match is the keyword in quotes, and is used to display your ad whenever someone enters the exact same keywords (or close variations), but with other keywords too. For example, “tooth whitening kit” is a phrase match for “organic tooth whitening kit”, but not “organic tooth whitening”.

Finally, broad match is the keyword without and quotes and brackets, and is used to match all other searches that all the keywords appear in, but that are not exact or phrase matches. Variations and related terms are matched too.

If your keyword is “tooth whitening kit”, you should have the following entered as keywords in your ad group.

[tooth whitening kit]

“tooth whitening kit”

tooth whitening kit

The reason we enter all three versions of your keyword is so that we can track metrics for all three different types of matches. In the future, this information will help you make adjustments so that your advertising is more efficient. These adjustments are outside the scope of this article, but it’s a good habit to get into right away.

Complete the creation of your ad group.

Click-through Rate (CTR)

Google keeps track of how many people click yours ads, out of all the searchers it was displayed to. This is displayed as a percentage, and is called the click-through rate (CTR). The higher the CTR, the more people thought your ad was relevant and clicked on it.

For various reasons, it’s in Google’s best interests to display ads that are more relevant to searchers. Therefore Google rewards advertisers that display relevant ads. If an advertiser’s ads are more relevant than their competitors’ ads, they pay less to display their ad in the same position.

This means that the higher the CTR for your ad is, the less you’ll pay for each click. You calculated your numbers in part one of this series, so you know why that’s so important: your cost per customer will go down.

You need to make it your mission to always be improving the CTRs for all your ads. And there are two ways you can do this.

First, constantly improve the ads themselves. You do this by creating an additional ad in the ad group. The second ad should be identical to the first, but with just one aspect modified. For example, communicate a different benefit or feature. Then set up the ad groups so that all ads are rotated evenly. (This ensures that every ad gets the same number of impressions – roughly.)

After some time has passed, you will see that one ad is getting more clicks than the other – even though the number of impressions is very similar for each. When one has significantly more clicks than the other, you know that it is more relevant than the other ad.

Discard the inferior ad, and replace it with yet another ad with a new modification to test. There is loads of scope for testing new things. Keep repeating this cycle constantly, and you will see the CTR for your ads increase gradually. And this will reduce the average cost per customer from your vending machine.

Make it a rule to always be testing two ads against each other.

Testing Velocity

The more clicks you are paying for, the quicker you can complete these tests and make progress. This is why it’s so important to be willing to spend money developing your machine. You need to get the CTR as high as possible, as quickly as possible. The more tests you can get through quickly, the faster you’ll increase the CTR for your ads.

Negative Keywords

The other way to increase the CTR for your ads is to stop them from being displayed for searches that are not relevant to what you are offering. Regardless of what you are offering, I can guarantee that there will be some searchers who will never be interested in your offer.

Even though they’re not clicking on your ads, the ads are still being displayed to them. This reduces your CTR score for those ads, which means Google charges you more per click.

You need to stop Google from displaying your ads for particular search terms. For example, if your keyword is “tooth whitening kit”, you do not want to display your ads for searchers that enter “free tooth whitening kit”.

You can do this by entering negative keywords into the ad group. Just enter the keyword, pre-fixed with a minus sign (e.g., “-free tooth whitening kit”). Google will not display your ads for those searches.

Additionally, you can view the CTR for each actual search term that your ads were displayed for. Look for search terms with CTRs that are much lower than other keywords. They’ll stand out. These are the keywords you need to enter into your ad group as negative keywords.

Again, make it a habit to regularly check what actual search terms your ads are being displayed for, and the CTR for each keyword. Regularly eliminate bad search terms by entering them as negative keywords into the ad group.

Over time, the cost per click Google charges you will go right down, and the volume of relevant traffic going to your landing page will increase.

You’ll recall from the previous article that cost per click (CPC) is one figure that affects how much an action (a new customer or lead) costs. The other figure is the amount of clicks required for each action – your conversion rate.

In the final part, I’ll show you how to systematically increase the conversion rate of your landing page. And we’ll setup a way to automatically measure the real cost per action for your customer/lead vending machine.

For part 3, click here.

For part 1, click here.

About the Author

Lewis Bassett is an online marketing consultant and speaker, and helps companies to increase their revenue. Bassett Providentia Ltd is his consulting practice.

How to Build a Vending Machine for Customers or Leads (Part 1)

Administrator — Tue, 27 Nov 2012 16:00:00 GMT

By Lewis Bassett, Bassett Providentia Ltd

Imagine if you had a machine that allowed you to buy customers or leads. You put some money in, wait and then a new signup or sale appears in your inbox a few days later.

That would be a huge asset to your business. You could spend more time helping clients and working on your business. And each month, you would acquire new customers, according to your quota, like clockwork. And if you needed more customers than usual, you’d just put more money in. And if you needed less, you’d just ease back.

If you’re willing to spend money building this asset, I’ll show you how to do it – using Google AdWords and a Web page.

If you can afford the development expense, a customer or lead vending machine is one of the greatest assets your business will ever have. You’ll be able to control deal flow just as you can control the flow of water from a tap.

In this three-part series, I will show you how to use Google AdWords to purchase search traffic and turn it into customers and leads. This isn’t an introduction to Google AdWords, though no previous knowledge is assumed. And I won’t be exploring all the individual bells and whistles either.

Google AdWords and the other tools I mention are always changing, but the principles remain the same. And since this article concerns strategy and principles, I won’t be providing any step-by-step instructions or screenshots. (The official Google help pages are more than adequate for that.)

Throughout this three-part series, we’re going to be focusing on converting search traffic from one keyword only. This allows you to focus ruthlessly on the core essentials, though you can expand to other keywords later when your machine is profitable.

Finding Your Keyword

Imagine a customer that is ready to buy whatever it is that you’re selling. You don’t need to educate them, and you don’t need to persuade them to accept the concept. If you sell golf insurance, this person has made up their mind to purchase golf insurance right now. And they’re using Google to find a suitable provider. Now put yourself in their shoes.

Make a list of the most likely keywords that they would enter into Google. Depending on your product or service, there may be just a few, or there may be many.

Enter each keyword into Google to get a sense of what sort of information people who enter this keyword are looking for. Google does a good job of matching a search term to what searchers want to find, so this exercise is worthwhile.

Give each keyword a percentage rating for how well it matches the profile of your imaginary ready-to-buy customer. For example, if you search for the keyword and see a listing of different companies selling the exact thing your ready-to-buy customer is looking for, give it 100 percent. If you don’t see a single relevant site, give it 0 percent.

This exercise is highly subjective, and that’s OK. Market research isn’t an exact science, and at this stage we’re just investigating the viability of each keyword.

Before we make any decisions, we need to know how much search traffic each keyword gets. A keyword that has a relevance of 60 percent and 1,000 searches per month is more viable than a keyword that is 100 percent relevant but only gets 500 searches.

Use the Google Keyword Tool to estimate the number of searches that each keyword gets per month. Depending on the nature of your business, you may want to use the global or local figure. (If you use the local figure, make sure you’re logged in. Or at least let the tool know what country you are in.)

Now you can work out the volume of relevant search traffic for each keyword. Just multiply the monthly search volume by the relevancy percentage.

For example, suppose the monthly search volume of the keyword “tooth whitening” is 201,000. And suppose that you consider it to be 20 percent relevant to your imaginary customer, who is looking to buy a tooth whitening kit. The relevant search volume is 40,200.

Before you can choose your most viable keyword, there’s one last step you need to take.

Use the Google Traffic Estimator to determine the highest amount that other advertisers are willing to pay per click. Enter the keyword and run your mouse over to the far right of the line on the graph; the “Max CPC” value is displayed in the label that appears. Note this figure down.

This isn’t the amount you will be paying for all your clicks. But for most markets – particularly competitive ones - it indicates the amount that other competitors are making from each click.

Multiply this figure by the number of relevant searches a keyword gets per month. This is a crude way of determining how much money there is in a market. But for our purposes, it allows you to determine which one keyword you want to focus on to begin with. (You want to focus on keywords where there is money to be made. This best indicator of this is if other competitors are already making money.)

For example, suppose the highest cost per click shown is $22. If there are 40,200 relevant searches, then the estimated value of all that monthly traffic – for our purposes of choosing the right keyword to build our machine on - is $884,400.

Estimate Development Costs

I mentioned at the beginning, you have to be willing to invest money into developing your customer/lead vending machine. This means you’re going to be paying for clicks that will not convert into customers, at least to begin with – possibly for a few months. We need those clicks for testing. So it’s essential that you estimate how much investment is required.

Again, use the Google Traffic Estimator to determine how much you will probably need to pay per click to display your ads at position four. (You don’t need position one. In fact, position four most often converts better than position one.) After you enter the keyword into the tool, you’ll need to enter a “Max PPC” figure into the tool and see what position Google estimates you’ll get. Revise this figure until you get to position four. This is a rough estimation of how much you will need to pay per click.

Your ads are not going to get clicks from every person that searches for that keyword. We’re aiming for 3 percent of relevant searches. To determine how many clicks that is, multiply the total number of relevant searches by 3 percent. That is the number of clicks your Google ads are likely to get, once your machine has been developed.

For example, suppose the keyword “tooth whitening” gets 40,200 relevant searches. That means you can expect your ads to attract 1,206 clicks – once your machine has been developed.

To estimate the cost of those clicks, multiply that figure by the new cost per click we just estimated, for position four. That is the total amount of investment required, if you want to get your machine up and running as quickly as possible.

For example, suppose the estimated cost per click for position four for the keyword “tooth whitening” is $4.28. The total cost of 1,206 clicks would be $5,161.68.

Realistically, you’re going to get a return on your AdWords investment within the first month. And there’s a good chance you’ll start to make a profit before the end of month two. But plan pessimistically. Can you afford to invest the amount required for three months without any return?

(If your budget is tight, you can spend less per month, but it will take you longer to develop your machine. Likewise, once it’s developed, you can ease back your monthly spend if you require less customers or leads.)

An automated machine that puts sales or leads on your desk – according to your own required deal flow – is a very valuable asset. If you want your business to grow, you need a strong supply of new business. Can you really afford not to make this investment?

As you carry out testing and enhance your ads and landing pages, the return on your AdWords investment will increase – quite sharply. Once it’s generating more profit than your spending, you’ve reached breakeven. Within the limits of the search volume of your chosen keyword, you now effectively have a license to print cash.

Estimating Return on Investment

Just because you can afford something, it doesn’t mean it’s a sensible investment. Before you can make a choice about whether or not to build your machine, you need to have some idea of the estimated return on investment (ROI).

First, you need to know what a customer or lead is worth to you.

The starting point is to know the average or estimated lifetime value (LTV) of your average customer. You should know this, or at least have an estimation of it. There are many different ways to calculate or estimate this figure, and it’s essential that you have it – even if it is only an estimation .

If you will be selling a product or service straight from the landing page of a Google ad, the LTV of your average customer is all you need to calculate ROI.

If you will be using your landing page to generate leads – for longer or more complex sales cycles – you will need to work out the average value per lead. Simply divide the LTV figure by the number of leads required for each new customer – on average. This is average value of each lead.

For example, suppose an average customer is worth $50,000 of profit to you over their life. If one out of five leads convert into a customer (on average), then the average value of a lead is $10,000.

From here on, we’ll be referring to a lead or sale as an action. So whichever of the two figures above is appropriate to you is the value per action (VPA). To calculate the ROI, we need to know the cost per action (CPA).

Again, I must stress, this is not an exact science. Real market research comes from being in the game, not from being a spectator. At this stage, we’re only estimating your costs and returns. As you collect real data, you can refine these figures and adjust accordingly.

To begin with, assume that 1% of your clicks will purchase something from your landing page, and 20% will complete a short form – once your ads and landing pages have matured. So divide your cost per click (CPC) by the appropriate figure to estimate the cost per action (CPA).

For example, suppose you will be selling tooth whitening kits straight from your landing page. If a click costs $4, the estimated cost of each sale is $400.

If instead you were giving away a free report to collect leads, the estimated cost of each lead is $20. (It takes less commitment for someone to enter his or her email address, than to buy something.)

Hopefully, the value per action (VPA) is higher than the (CPA). This indicates that you can expect a positive return on investment. Reduce that ratio down (or increase it) so that the CPA is $1. This basically says that for every $1 you invest in Google AdWords, you’re effectively getting back $x.

For example, for every $400 you spend, you get a new customer. And the average customer brings $800 dollars in profit over their lifetime as a customer with you. So for every $1 you spend, you’ll get $2 back.

That is your ROI – the most important metric in marketing, and the one that almost everyone ignores.

After completing these steps, you should have two metrics.

First, you should have an estimation of how much it is going to cost you to develop the machine. This is the monthly cost of the relevant clicks you can attract, multiplied by two or three. (I think it’s better to plan for the worst, but aim for the best.)

Second, you should have an estimation of what the return on investment is going to be for every $1 you invest into your machine buying customers or leads.

You now have enough information to decide whether building a customer/lead vending machine on your chosen keyword is viable and worth your while. Use your own subjective judgement to help you with this decision.

In the next two articles, I will show you how to actually build this machine.

For part 2, click here.

For part 3, click here.

About the Author

Lewis Bassett is an online marketing consultant and speaker, and helps companies to increase their revenue. Bassett Providentia Ltd is his consulting practice.