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ROI on Campaigns that sell cheap products.
How to make some profit!
erickgamio




msg:4035733
 10:23 pm on Dec 2, 2009 (gmt 0)


hey guys!

I'm struggling to get some profit with my campaigns due to selling low priced products than can't compete on high priced niches. 15 clicks and I'm outta the game...

Example: My website sells make up products, and some of them are in the range of $6.00 - $15.00. I'm spending 3 - 4 bucks daily (CPC 0.60 aprox), and i cant make any profit (i have like 20 adgroups for different kind of products, thats why i have to spread my daily budget, leaving a few bucks per campaign).

Should I concentrate on just a couple of categories and have a $10 dollar daily budget for each instead of spreading the $30/day budget for ALL categories?

Any strategies on this niche, and to make some profit?

thank you!

 

pavlovapete




msg:4035790
 12:10 am on Dec 3, 2009 (gmt 0)

What are your competitors doing?

LucidSW




msg:4035794
 12:18 am on Dec 3, 2009 (gmt 0)

Unless your conversion rates are sky-high, it's very tough to use PPC to sell products under $20. You could try to up-sell or cross-sell, this might bring you into the black. Or obviously, bid really low at the expense of course of less traffic.

You say make up products? A site targeted content network campaign might work for you. I suggest you increase your budget however. And obviously, improve your quality score so that your cost per click gets lower.

erickgamio




msg:4036136
 1:16 pm on Dec 3, 2009 (gmt 0)

My competitors are actually HUGE websites that sell thousands of products and have big budgets, so i guess they can afford to make some PPC for cheap products. Their losses on the cheap products could be covered by the more expensive products... They're everywhere...

I'm using ONLY the Google Search (no content network, no search partners) because as my budget is limited i didn't want to get some worthless clicks from people that aren't on a buying mindset... is this OK? Or should I turn on the content network..?

LucidSW




msg:4036149
 1:54 pm on Dec 3, 2009 (gmt 0)

Use different campaign for the content network. Do a placement campaign, not automatic. Find sites that people visit who are more likely to be interested in your products.

Cross-sell with "you may also be interested in" links. Give them a reason to buy something else and a reason to buy from you again later. That's the value in using
Adwords for consumable products, getting the visitor to buy over and over. You must consider the lifetime value of the customer, not just what they buy today. That's why the CPC is high for a low cost item.

erickgamio




msg:4036211
 3:35 pm on Dec 3, 2009 (gmt 0)

Thanks LucidSW! I'll do a placement campaign!

erickgamio




msg:4036219
 3:38 pm on Dec 3, 2009 (gmt 0)

Would it be wise to start with an automatic placement and check the high CTR websites, and then select them and make a placement campaign?

pavlovapete




msg:4036507
 9:50 pm on Dec 3, 2009 (gmt 0)

My competitors are actually HUGE websites that sell thousands of products and have big budgets

OK so you have to differentiate your brand somehow from these big sites. And if they are using your type of products for "loss leaders" (loose money up front but make it up on repeat sales) you may have a bit of a battle on your hands.

Can you go deeper into your niche? Slice up the customers for your market and find a productive subset? I'm thinking something like customers who prefer only-natural, not-tested-on-animals widgets? (You get what I mean)

Cheers

erickgamio




msg:4036911
 1:07 pm on Dec 4, 2009 (gmt 0)

That's right pavlovapete! when having this kind of battle... i must choose another niche...

thanks again!

atwoz




msg:4042686
 12:02 pm on Dec 14, 2009 (gmt 0)

You should separate out the non converting/high CPA keywords in to a separate campaign and have only the top converting/low CPA keywords in the current campaign. Give the maximum budget to the top performers and the remaining to the low performing campaign.

Do a search query report and add more positive and negative keywords in to appropriate campaigns.

"Would it be wise to start with an automatic placement and check the high CTR websites, and then select them and make a placement campaign?"
No, look at the ad placement websites that is more related to your products and choose them only. CTR is obviously important but it should come from relevant websites, only then you would make some revenue out of it. Since you have a limited budget try spending some time on researching for relevant website instead of spending money elsewhere.

erickgamio




msg:4042766
 3:03 pm on Dec 14, 2009 (gmt 0)

Great advice atwoz!, specially on the placement issue... thanks again!

jecasc




msg:4043339
 10:41 am on Dec 15, 2009 (gmt 0)

In one of my shops I had products with a similar problem. The key to success was not to sell the single products but the solution they provided and to advertise them in bundles not as single products.

In your case this would mean:
Write down a list of problems people cover up with make-up. skin impurities, freckles, wrinkles, skin irritations... Then write a few texts about how they can use your products to cover up those problems and try to start advertising for those problems.

Also write some text with make-up tips. Different make-ups for different ocassions, business make-up, evenening make-up and so on and then bundle your products.

Do not sell one lipstick but sell a bundle of lipsticks for different ocassions together.

Do not sell one lipstick but a complete bundle: Powder, eye shadow, lipstick and what else you got.

Write some articles about how your products are used together and sell them togther. Using this method I did not longer sell a single product for 10 EUR but a bundle of seven or eight products for 70-80 EUR.

atwoz




msg:4043371
 12:02 pm on Dec 15, 2009 (gmt 0)

Absolutely right! Bundle package is always good and increases the Average order. Its high time now, Christmas! Try something like "Free Shipping on Orders over $50 or whatever that makes you profitable"

Green_Grass




msg:4043430
 2:09 pm on Dec 15, 2009 (gmt 0)

In my experience, it is the REPEAT business that makes customer acquisition at high price acceptable. 70% of my customers are repeat buyers..and that is the key to selling low prices products on the web. You need to offer some super service..

rj87uk




msg:4043440
 2:35 pm on Dec 15, 2009 (gmt 0)

On the products you sell you could ask them if they want to join your newsletter this should help you get more repeat business.

erickgamio




msg:4043506
 4:55 pm on Dec 15, 2009 (gmt 0)

great advice guys!
Implementing as we speak!

J_RaD




msg:4043573
 6:26 pm on Dec 15, 2009 (gmt 0)

google seems to have the most expensive traffic.

have you tried setting up camp at yahoo and adcenter?

Digmen1




msg:4043574
 6:26 pm on Dec 15, 2009 (gmt 0)

Hi Erickgamio
Congrats on getting your post on the main topics !
I think there is a lot of good advice here.
Especially
1 Try to sell multiple products on each sale
2 Try to get repeat businesses - this is in effect "free" as you sell cosmetics people will want to buy more when they run out. How about putting in a half page flier with each order for them to re-order next time.

I have the same problem as you, but in a different niche. I sell a low cost homeware/computer accessory that is new, so that Google Adwords does not work as nobody will be looking for it. I did try Adwords but only got about 10 hits ! I tried Facebook and got hundreds of hits as I was able to put up a small pic so that people could "see" my product. But the cost per click was way too high for me, so I stopped.

Digmen1




msg:4043579
 6:35 pm on Dec 15, 2009 (gmt 0)

Erikgamio
Getting back to your cost per click.
I think that all people are paying far too much just for a click !
60 cents per click is just ridiculous unless you are a lawyer advertising to run a class act against cigarette or asbestos companies where they pay $20.00 per click.
To my mind a click should only be a few cents.
And people need to wake up to this.
Too many corporate as just paying these higher rates but if they did the real maths they would find that it is too much.
The problem is that there are thousands of websites set up each week by someone who "thinks they will make a living online" by using Adwords.
So Google carries on with its ridiculously high income.

I am finding that banner ads may be better, and am looking for ones that I pay per month. Once again because they show a pic of my product.

wsmeyer




msg:4043622
 7:52 pm on Dec 15, 2009 (gmt 0)

I've never bought or sold any sort of make up product, but I know it's an extremely competitive market. My gut feeling is that no company no matter how big or small they are is making enough profit on a first purchase to cover the advertising costs of getting that customer.

That leads to the big question - how much is each new customer worth to you?

In other words, if CPC is costing you an average of $10 per sale that generates an average of $7 profit your net cost per new customer is $3. Now go back and look at your sales excluding each persons first purchase and get a rough idea of how much each customer is worth to you.

You might find that CPC is working for you, just on a larger picture.

William.

ogletree




msg:4043629
 8:09 pm on Dec 15, 2009 (gmt 0)

Do people only buy one of your product or could they fill up a cart and spend more. I would go after the people that want to buy more than one item. Seek out terms that will help you get multiple item sales. Write your ads in such a way that will attract people that want to buy more than one item. Don't be afraid to be number 5 or 6. You might want to play around with time of day. Do some tests where you only show ads at night. You can rank higher at night because competitors might be turning off ads at night. You can also focus locally.

When you have a low budget like that it is very important to not get too general. I would do fewer categories. You could also rotate which categories you have active. This can give you some extra data to help you fine tune your advertising.

Digmen1




msg:4043644
 8:38 pm on Dec 15, 2009 (gmt 0)

Also you should have entitled the thread "low cost" items not "cheap" items!

I hope your makeup is low cost - not cheap !

trinorthlighting




msg:4043650
 8:43 pm on Dec 15, 2009 (gmt 0)

Best advice, keep working on Natural SEO of the website. A number 1 organic ranking is the cheapest form of Pay Per Click on Google search. Once you are there, you are the 1-4th result and it does not cost you a dime to be there. We worked very had on that the past two years and this year we have not spent one cent in advertising in this year Adwords.

LucidSW




msg:4043684
 9:31 pm on Dec 15, 2009 (gmt 0)

trinorthlighting:
>> We worked very had on that the past two years and this year we have not spent one cent in advertising in this year Adwords.

Yeah, but how much have you spent on resources these last two years to achieve this? $50k? $100k? How much per click will it come out to in the next two years? This assumes no more spending on maintaining that position. So if you spend $50,000 to get 50,000 clicks in two years, that's $1 per click. If PPC costs $2 per click, that's a good thing. But if a click costs less than $1, your efforts were not cheaper.

Not saying not to do SEO, just that there is a cost and not everyone is able or gets to be number one or even in the top four.

Digmen:
>> I think that all people are paying far too much just for a click

It would be great if every click cost only a few cents. However, costs are based on the principles of supply and demand and what advertisers are ready and willing to pay for a lead.

It's no different in the offline world. Last summer I looked into selling an air filtering system. Part of the sales pitch is to get a prospect to fill out names of friends, family and neighbors for which the company pays $2 for each name. They pay $5 if the person agrees to a home demonstration. Let's say 7 names (they said that was average) which is $14 and two demos (again, about average) is $10 for a total of $24 for two leads or $12 each. I think that's a lot of money but that's the value to them. It's actually much higher when taking into account other incentives to demonstrators. So if they ever decide to do PPC, $2-3 per click will be peanuts to them and many other industries too like real estate and insurance.

trinorthlighting




msg:4043703
 10:01 pm on Dec 15, 2009 (gmt 0)

We hardly spent anything at all. We picked a few products to start with, looked at our competitors, expanded descriptions to beat the amount of text that the top few had and wrote on their landing pages for the result. Created some additional and useful DIY installation techniques/Photographs/Diagrams/Technical info for of our product and linked the pages from the product page. We did one product a week and it took about 2-3 hours a week per product at a cost of a $12/hr employee. So one product cost us about $36.

We did have to wait some time till it sank into the search engine rankings, but most people do miss that it is a very low cost investment. If you plan it right, you can budget it properly and that is what we did and are continuing to do.

ergophobe




msg:4044269
 6:06 pm on Dec 16, 2009 (gmt 0)

Two questions:

1. what is the lifetime value of a customer? This sounds like consumables, so presumably your customers might come back.

2. what are you doing to increase the lifetime value of a customer? In other words...

2.1. Are you capturing email addresses if possible? Do you have some "freebie" (free sample, free report, whatever so that non-buyers end up on your newsletter list?)

2.2. Do you have "autoship" possibilities? I have a few consumables that get shipped every two months from Amazon and another merchant. As a customer, this is great. I was always running out and this is a product that makes the difference between me getting a decent night's sleep or terrible night's sleep. I hate running out. I'm *grateful* to Amazon. Before subscribing, though, I usually bought these at the supermarket for the same price, but it's 1.5 hours to the nearest store that carries them and I was always running out.

Amazon has probably sold me $250 worth of this $10 product as a result.

Let's assume it took Amazon $10 to get me to make my first purchase. Then I was in their newsletter mailing and so it was basically free to announce the subscription service. And let's say there was no profit in my first purchase, and there's $1 in profit in each order for my subscription. Amazon has now made $25 off me for that initial $10. So they're $15 ahead, but it took maybe a year or two.

So if your lifetime customer value is high, you can spend a lot more to get them than you make on the first order, but only if you can stand the cashflow hemmorhage in the near term.

erickgamio




msg:4046964
 2:45 pm on Dec 21, 2009 (gmt 0)

Thank you all for the great advice. Thankfully, my Ad Costs are being almost covered with our sales, but if you add the product cost, we are on loss for now.

The thing is that this is a website that sells only 5 brands of 50,000 brands of make-up out there. Its very specific. So when talking to the actual owners of the website (to whom i'm doing my ad consulting) about CRM efforts, creating blogs on the website, social media strategies and everything, they freak, telling me they want to keep the website a low-profile one, as it may dissapoint make-up users when they find out we only carry 5 pro salon brands.

I personally think this is marketing suicide. How am I supposed to MAXIMIZE this website's ROI if they're telling me to practically keep it under wraps.

I'm doing SEO with a programmer and PPC with very specific campaigns, targeting the brands, not the category.

Funny huh? A marketing nightmare!

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