A great webinar about SEO, 50 minutes long.
Courtesy of Stephan Spencer.
It’s always a tricky part for the small ecommerce site owner. How much should I spend on advertising?
I’ve been doing some work in the last few weeks for a client, setting up some advertising for a client’s ecommerce site. A part of that was Google adwords. He’s operating in an extremely competitive niche, you need to pay at least $5/click to get in the top spots, sometimes more. Ouch!
So, at $5/click, is it worth even running the campaign at all? It’s pretty easy to work this answer out. Well, kind of.
The biggest question you need to ask is: how much is a new customer worth? For some sites, this is relatively easy to work out. If you are selling a subscription, or your customers tend to be single purchase (no repeat business) then you can probably work it out easily enough. If you do get repeat business, then it becomes a bit trickier. What’s the life time value of your customers? There’s books written on this subject, so I’m not going to attempt to tackle the subject. One thing to bear in mind: don’t assume that the first transaction with the customer should be profitable. If you average customer buys 5 times a year at average $100 each, and an average margin of 20%, then your customer is worth $100/year. You should be more than comfortable spending at least $20, if not a lot more, to buy each customer.
The other big question is how well are you converting? For my client, let’s say we work out we can afford to pay $150 per customer. At $5/click, that means we need to be converting at 3.3% to be profitable. So the other big thing to focus on is conversions – how can you increase the number of customers actually buying? Fortunately there’s many ways to do this.
The higher your conversions, the more you can pay on advertising, the more customers you can get, and the faster your business can grow.
The “Software and Information Industry Association” have published the catchy named “Top 10 Most Significant e-Commerce Developments of the Last 10 Years“.
- Google (Sept. 1998)
- Broadband Penetration of US Internet Users Reaches 50 percent (June 2004)
- eBay Auctions (Launched Sept. 1997)
- Amazon.com (IPO May 1997)
- Google Ad Words (2000)
- Open Standards (HTML 4.0 released – 1997)
- WiFi (802.11 launched – 1997)
- User-Generated Content (YouTube 2005)
- iTunes (2001)
- BlackBerry (1999)
The top 5 I have no argument with. They are all pivotal to e-commerce. Open standards are great in general, but I’m not sure how HTML 4.0 is such a boon to e-commerce, more so than any other website. There were HTML standards around before that.
Having said that, I’m not sure what I would put in such a list. When did 128bit SSL come out? Maybe that was more than 10 years ago? What do you think belongs in that list?
I saw a link to “Boffins tout formula for e-commerce” which of course got my interest. Some amazing new measure? A fresh look at integrated analytics? I was intrigued.
I started reading with
Alpar and Donthu used ‘data envelopment analysis’ to obtain a performance benchmark for a range of internet shops.
And was even more interested. Then I read on:
They claim that early measurements focusing only on the number of visitors to an e-shop, plus the click-through rates or the conversion rates, can help provide insights only into whether an advertising campaign has worked.
Such metrics do not, however, take into account the efforts associated with creating and running the sites, and offer little information about the economic success of the sites.
I re-read that about 3 times. “little information about the economic success of the sites”? There’s this thing called “profit”. There’s this really neat group of people called “accountants” who can help you work it out. Heck, there’s probably even an “accountant” in your city! Honestly, check it out!
Am I missing something here, or are they totally missing the point? I’m all for better measures, I don’t think we’ve seen the best measure yet, but I can’t see that these guys have cracked it.
As promised a while ago, I launched my new site on July 1 – www.ecommercespot.com.
Where as this site, shopping cart reviews, is aimed primarily at people first getting into the market, and looking for shopping carts, etc, to enable their business, Ecommerce Spot is aimed at those already in the market, who want to take their site to the next level.
I’ve seen lots of people who launch their site, go along for a few years, but get stuck at a certain level, not able to move on, not able to grow their business. They make enough money to keep going, but not enough to do well.
Well, I want to help them to breakthrough to that next level. Check it out, and drop me a note with any comments.