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. 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. Once again, it’s spend $10 to make $100, let’s spend $100 to make $1,000. Let’s 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 campaign 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 once again 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 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%. Once again, 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 that we can spend a lot more money to acquire customers. Once again, 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 that five 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 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 campaign at $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 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’s 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 tell you really quickly if you’re onto a winner or its 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. Test and measure is crucial for all long term growth of your company. It’s quick, it’s effective and steers you on the right path rapidly.
It’s time to do great Google Ads!
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