Pay-Per-Click Marketing: How to Waste Your Advertising Budget

A well-oiled pay-per-click search engine campaign can land hundreds of highly targeted visitors on practically any website within a matter of days. That isn't new information. Most experienced online business owners already know it.

But pay-per-click advertising is also one of the quickest ways to lose money, if it isn't done right. At the surface level, the process appears to be as simple as writing an advertisement, bidding for keywords, and waiting for traffic and sales to come rolling in. Nothing could be further from the truth, especially in the midst of today's heated competition for top keywords.

So, for a few minutes, let us play the role of devil's advocate, as we explore some of the common downfalls encountered by hopeful but inexperienced pay-per-click advertisers.

1. - Making Advertising Decisions Based on Emotion

The excitement of tapping into a new market, and the much anticipated thrill of watching click counters working overtime, can and often does lead to a hasty decision making process. Add to this a pressing need for a cash infusion, plus a bit of the gambler spirit, and a framework for failure will emerge.

2. - Overly Generalized Keyword Selection

Keywords that are too broad in scope can inevitably lead to an excess of non-profitable clicks, driving an otherwise profitable campaign into the red.

For example, a website selling athletic shoes should omit the simple term "shoes" from the keyword list. That term alone may generate a massive number of click-throughs. However, a good portion of the resulting traffic will likely be looking for sandals,dress shoes, or some type of shoe other than athletic designs.

3. - Poorly Worded Advertisements

Pay-per-click ads are notorious for restrictions on allowed word count. While the headline and ad body should contain as many prime keywords as possible, every single word in the ad should be weighed and measured for effect. A vague or loosely related advertisement may pull throngs of curious visitors, but the ultimate value of each of those visitors must also be considered. The point of a great ad is to attract only those who have a purchase already in mind.

4. - Failure to Calculate Bid Value

An untested ad leaves much of this process to theory, but even a theoretical profit model is better than none at all. Otherwise, the urge to bid simply for top positioning may ultimately spell an overall loss of profit.

Three critical points to consider are:

- product pricing
- an acceptable profit margin per sale
- a realistic clicks to sales ratio (CSR)

Let's say a modest CSR of 1% may be expected, meaning one out of each one-hundred visitors will order immediately. The product is priced at $69 and a 50% profit margin per sale is acceptable. Given these factors, up to 50% of the product price ($34.50) can be spent to achieve the sale and deliver the product.

For the sake of this example, consider that delivery costs are nil. Therefore, $34.50 divided by 100 clicks = $0.345 as an absolute maximum bid per click. There are only three ways to increase the bid above $0.345 while maintaining the integrity of the campaign:

- raise the product price above $69
- increase the CSR above 1%
- accept a lower profit margin per sale

5. - Failure to Track Results and Manage the Campaign

Once the advertising campaign is set in motion, results should be tracked and analyzed on a daily basis. Many pay-per-click search engines now provide in-depth analysis and reporting tools that greatly simplify this process. In addition, specialized pay-per-click tracking software is widely available, and in the absence of a workable alternative, will prove to be a wise investment.

However, based on this writer's own experience, no two selling days are alike, even on the Internet. We suggest that no fundamental changes be made to the campaign until at least five-hundred click-throughs have been gathered, or until the campaign has been live for several days.

Those suggestions are, of course, only rules of thumb. Any campaign found to be creating a cash hemorrhage should be discontinued immediately and thoroughly reevaluated.

6. - Failure to Enable Follow-up Marketing

An inexperienced pay-per-click advertiser might expect to begin turning a profit immediately after the ad goes live online. However sweet a dream that may be, it is often not the case.

Without follow-up capability, the profit potential of any pay-per-click campaign is severely reduced. A majority of prospects will not buy on their first visit, and may not return to buy later. As a result, the entire campaign may register a net loss on the initial run.

However, even a money-losing initial campaign can be turned into a winner over time, if the campaign is focused not only toward making immediate sales, but also toward producing a mailing list of interested prospects for later follow-up.

The mechanics of the follow-up tactic are beyond the scope of this writing. We invite the reader to visit the link below and investigate a series of articles on follow-up email marketing and the effective use of autoresponder systems.

Dan B. Cauthron is a 30 year direct marketing veteran and has been successful on the Net since 2000.

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