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Small profit products, what to do?
minimum cpc
edd1




msg:1131324
 1:36 am on Aug 24, 2005 (gmt 0)

If I sell a product and the profit is only about $5 but the recommended bid per click is $3, is it the case that adwords just isn't going to work. I could bid 20c and get a low number of clicks but extend the budget and hope I convert one in ten or something, just not really sure what to do, I think most of the advertisers at the top must have much more expensive products to sell.

What do you do if you only have a small profit on each product, ideas very much appreciated.

 

PatrickDeese




msg:1131325
 2:02 am on Aug 24, 2005 (gmt 0)

You try promoting items with higher profit margins and "upsell" your visitors the cheaper products as well.

OTOH, not every product is going to work with a profit margin that low. Even at 20 cents a click, you'd need a 1:25 conversion rate just to break even - and 1:25 seems extraordinarily unrealistic.

Maybe the best thing to do is look at the people who are outbidding you and try to figure out how they can afford to pay $3 per click on a low profit item.

Dr_X




msg:1131326
 2:48 am on Aug 24, 2005 (gmt 0)

Hi Edd1.

I have the same problem. I didn't mind so much when the min cpc was 5 cents. Plus, my little 7 dollar widget is in 3500 stores across the US, so if I break even, I'm happy to have put it in some ones hand that might not have noticed the little booger at the store.

So really, my reason for using Adwords was to make new customers. Not necessarily to make the profit from the sale.

But since the new system has been implemented, it just hasn't been working out. Some of my best keywords that had 3% ctr at 5 or 6 cents have gone up to .50 and even a dollar. I'm hoping the system is learning and maybe the cost will come down. I've noticed one of my keywords that jumped up to 5 dollars has dropped to 1 dollar over the last 3 days. I hope it's a trend. It's click through rate was 2.5 and I'm wondering if I go ahead and bite the bullet and pay the dollar, it may rush it back to it's original price of 6 cents just because the ad is there and being clicked (Not good to be on the last page. Not seen = no clicks. No clicks = no reduction in cpc and no increase in ctr).

Since you're asking for ideas in general, one thing I have noticed that has helped me is the fact that my product is a consumable. It makes sense for the customer to purchase more than one. Before, I was nervous about what I might do to sales in stores (wishful thinking I guess), so I had limited the sales to 'One Per Customer'. Lately though, I have taken to allowing the customer to select up to the maximum amount that we can package without raising the shipping cost. I was surprised to find so many chose the max amount. For example, my widget normally sells for 6.99 at retail stores. So I started off with that. Sold ok (so-so). Then I tried "buy 2, get 3rd free". That did about the same as full retail, maybe a tiny bit better. Then I found that the shipping cost of 1 widget was exactly the same as for 6 widgets in the same carton. I tried different combinations from buy 1 get 1 free to buy 5 get one free. I get the most sales from the 2 for 1 deal @ 6 per customer. The different combinations up to 6 gave varying results, most of which met my desire to at least break even. Some passes that expectation. I don't think Adwords will ever replace the 3500 stores at this rate :-P but I'm glad that people who didn't know about it are now coming back for more via our regular site (no cost for the click) and they now notice it at their local stores and buy it there. I've gotten plenty of comments on our web site saying "Found you on Google, now I buy it at [can't say the store they mention]. Great product, glad I found you" ... things like that. Those are aside from the comments like "why don't the store sell it at 2 for 1" but I can live with that. :-)

I hope you get an idea. No telling if you're product sells elsewhere so I'm probably no use to you. But maybe the specials offer can help. I still don't know what to do about the high cpc. I'm working on it though. AWA has some advice. Maybe it will work for you?

Good Luck.
-Dr.X

AdWordsAdvisor




msg:1131327
 8:10 pm on Aug 24, 2005 (gmt 0)

If I sell a product and the profit is only about $5 but the recommended bid per click is $3, is it the case that adwords just isn't going to work. I could bid 20c and get a low number of clicks but extend the budget and hope I convert one in ten or something, just not really sure what to do, I think most of the advertisers at the top must have much more expensive products to sell.
What do you do if you only have a small profit on each product, ideas very much appreciated.

edd1, I am just posting for a few minutes between meetings, but I wanted to jump in with a short answer at least, in addtion to Dr_X's suggestions.

Essentially, when you are advertising a low profit item and you find that your preferred keywords are too pricy - the best strategy is to explore other keyword options, probably using very specific and targeted 2-word or 3-word keywords, rather than very general one-word keywords. (i.e. instead of keywords like 'software', use keywords that are very specific to what you have to offer, like 'widget grading software'.)

Then, be sure your ads are optimized too. That is to say, make sure the ads are about exactly the same thing as the keywords, and that they are well written and informative.

You might want to take a look at these links for more ideas:

How do I optimize my ads?
[adwords.google.com...]

Lots more info on Minimum Bids:
[adwords.google.com...]

Hope that helps.

AWA

edd1




msg:1131328
 8:47 pm on Aug 24, 2005 (gmt 0)

Thanks everyone,

I have tried lots of different things but my worry is that the margins just aren't there. Even at 20c per click, is it realistic to convert 1 in 15 of those to a sale? I am hoping to have the conversion tracking tool working soon so will hopefully be able to answer my own question there.

There must be a profit margin at which adwords in theory starts to become effective. For instance if you make 20c profit on a sale then it just won't work and if you make $1 on a sale then probably the same. I have been through the adwords tutorials and read lots and am working hard at it, but in the back of my mind it is feeling like a big gamble which could be an expensive way of proving what I suspected anyway. Maybe not though!

AdWordsAdvisor




msg:1131329
 12:58 am on Aug 25, 2005 (gmt 0)

I have been through the adwords tutorials and read lots and am working hard at it, but in the back of my mind it is feeling like a big gamble which could be an expensive way of proving what I suspected anyway. Maybe not though!

edd1, the key to success here is to have some method of tracking your conversions and ROI (Return on Investment). Otherwise you're just guessing, and yes, you are right - it is entirely possible to lose money this way, especially when working within a very narrow margin.

I'd suggest scanning past threads on this Forum for information on the topic of conversion tracking and tracking ROI. It has been discussed, in one way or another, quite often indeed.

In the meantime, I'd suggest only spending what you are comfortable with, and trying to optimize the heck out of your ads so you are paying less per click.

The honest truth is that AdWords does take work, and lots of folks on this Forum have lost money before they started making it. But, believe me, people do make money with AdWords.

Best of success to you.

AWA

edd1




msg:1131330
 1:04 am on Aug 25, 2005 (gmt 0)

Thanks again. I'm a bit frustrated with the tracking at the moment because the third party ecommerce site are having problems putting the code in the thankyou page but once it's done I look forward to giving it my very best shot.

mark1111




msg:1131331
 9:35 am on Aug 25, 2005 (gmt 0)

AWA, you've been rather elusive lately when people here would really have liked some answers about the new system, but since you mention it, perhaps this is the place to ask about the matter of relevance.

the best strategy is to explore other keyword options, probably using very specific and targeted 2-word or 3-word keywords, rather than very general one-word keywords.

I don't see anything to indicate he wasn't already doing this, but based on my own experience this past week, I can say it doesn't seem to make any difference.

As far as the incessant drumbeat about ad optimization, Google's goal seems to be to force everyone into the Procrustean bed of pedantic, unimaginative ads that all use the keyword (preferably more than once) and such terms as "Get, Join," or "Register" (according to one of the instructions).

This approach is so grubby and pedestrian and so antithetical to any whimsicality, humor, or allusiveness that it frankly repels me.

For example, an ad like the following would probably have a high "quality" score and low keyword prices (although it's been observed repeatedly in another thread that relevance does not seem to be any assurance of a higher ad position):

Buy Golf Clubs
Brand names, wood & steel
Best golf club prices on the net!

Whereas something like this would probably not be considered as high quality and would have higher keyword prices:

How's Your Swing?
Looking for some help? How about
Cushioned grips & steel shanks?

The second one doesn't even mention golf clubs, and not once does it say "Buy, Get, Join," or "Register."

I don't know that it would necessarily do better--it depends on the product and the audience--but I'd like to be able to try that type of ad without Google foreclosing the option with higher keyword prices.

AdWordsAdvisor




msg:1131332
 8:59 pm on Aug 25, 2005 (gmt 0)

...This approach is so grubby and pedestrian and so antithetical to any whimsicality, humor, or allusiveness that it frankly repels me...

I don't know that it would necessarily do better--it depends on the product and the audience--but I'd like to be able to try that type of ad without Google foreclosing the option with higher keyword prices.

Mark1111, believe me, no one over here at AdWords is suggested boring cookie-cutter ads. What we are suggesting is really targeted ads.

So, what's the best really targeted ad? Well, thatís a matter for testing, as it always has been. I'd suggest testing multiple ads in your Ad Groups, to see which copy really flys. You'll be glad to hear that the system will calculate your minimum bid per keyword based on the best performing ad.

(Which again calls for making sure that all of the keywords in an Ad Group are about the same thing, which is (not coincidentally) the same thing that the ad talks about.)

Hope this info helps you to feel that you have leeway to be creative and to experiment. ;)

AWA

suzyvirtual




msg:1131333
 1:32 am on Aug 26, 2005 (gmt 0)

The bottom line is that some products just aren't suited to adwords advertising. However, there may be supplimentary money makers. For instance, maybe the $5 product draws people in, but they make larger orders while at your site. Or, maybe you lose money on that first sale, but your product gets so many return buyers that you make money on the customer in the long run. Or, you gather the email address of the customer at sale time and are able to make more money later with your newletter or whatever.
A of this requires good tracking to sort out. In the mean time, a good semi-universal strategy is to write a really well targeted ad and start with a fairly high minimum bid. Then, lower the bid to your comfort point. By now, the system should have noticed how relevant your ad was, and you may not really lose much position by lowering your bid. And, if you do, that's okay, because you want to be in your "money making zone" and position doesn't necessarily matter that much.

eWhisper




msg:1131334
 12:46 pm on Aug 26, 2005 (gmt 0)

You'll be glad to hear that the system will calculate your minimum bid per keyword based on the best performing ad.

If an adgroup has more than one ad, which ad is being used to trigger the min CPC for each keyword?

AdWordsAdvisor




msg:1131335
 12:34 am on Aug 27, 2005 (gmt 0)

If an adgroup has more than one ad, which ad is being used to trigger the min CPC for each keyword?

So - if the Ad Group has more than one ad, the system will calculate min CPC for all the keywords in the Ad Group, based on the performance of the best ad.

BTW, this is what I was getting at, in my earlier post, I said:

(Which again calls for making sure that all of the keywords in an Ad Group are about the same thing, which is (not coincidentally) the same thing that the ad talks about.)

In other words, this is yet another reason to make sure that all of the keywords in an Ad Group are about the same thing as the ad: because how well the ad does is dependent on the 'success' of the match between keywords and ads.

I heard someone call this a virtuous cycle - which I like a lot.

That is virtuous, not vicious!

AWA

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