How to make millions with a terrible business

Imagine you have an unknown product, and your goal is to become the world leader within 4 years….

Even though you don’t have much money …

And your product really isn’t any better than your competitors’ …

And, on top of that, your product is twice as expensive as everyone else’s …

Do you think you could succeed?

The Pepsodent Story

In the early 1900s, the creator of Pepsodent was in exactly this position.

And, when he approached Claude Hopkins – the greatest ad man of the time – Hopkins thought the project was hopeless and turned him down.

However, after much cajoling, Hopkins took on the project – in return for stock options in the company.

And, four years later, Pepsodent was the world’s leading toothpaste. Eventually Hopkins cashed in his stock options for the equivalent of $13.7 million in today’s money.

So how did he do it?

The Success Strategy

The success was based on a simple set of principles…

#1: Research – Hopkins read countless books on dental hygiene, looking for facts he could build his campaign around.

#2: A big idea – The importance of a big idea was best summed up by David Ogilvy:

“You can do homework from now until doomsday, but you will never win fame and fortune unless you also invent big ideas. It takes a big idea to attract the attention of consumers and get them to buy your product. Unless your advertising contains a big idea, it will pass like a ship in the night.”

#3: Marketing knowledge – When advertising toothpaste, it’s tempting to focus on preventing tooth decay. However, Hopkins knew that would fail. He wrote:

“People will do anything to cure a trouble, but little to prevent it. Countless advertising ideas have been wrecked by not understanding that phase of human nature”

Hopkins knew this because he’d worked on hundreds of campaigns and measured the results. And, because he knew this, he was able to avoid a common pitfall.

So, instead of decay, his ads focused on an immediate benefit: removing unattractive film from your teeth.

#4: Testing – Hopkins tested literally hundreds of ads. Some worked, some failed. He later wrote:

“One series of ads which I prepared would have wrecked it in three months. Yet I had at that time spent nearly thirty years in advertising. I had learned from hundreds of campaigns.

What is the lesson? That none of us can afford to rely on judgement or experience. We must feel our way. New problems require new experience. We must test our undertakings in the most exact way possible. Learn our mistakes and correct them.”

If he’d just written an ad – and used only that ad, the campaign could have failed. Or it might have succeeded, but only on a small scale.

By giving himself hundreds of chances of winning – instead of just one – Hopkins swung the odds heavily in his favour.

So, rather than going with the first ad he wrote, he could use the ad that was the best out of hundreds.

No wonder they succeeded.

Summary

Hopkins referred to this approach as, “playing on the safe side of a hundred to one shot.” You could call that the casino strategy: Stack the odds in your favour and stay in the game long enough, you’re almost guaranteed to win.

In my opinion, almost any business would do better if they used this strategy. I don’t guarantee world domination, but I’m sure you wouldn’t be too unhappy if all it did was double or triple your sales.

Best wishes,

Steve Gibson

What I’ve learned from 10 years in PPC

When I was first introduced to AdWords in the summer of 2006, I was hooked instantly.

That’s because I knew about direct marketing and realised that AdWords was nothing more than a delivery mechanism for a direct marketing message.

Not only that, but unlike most forms of direct marketing, PPC was quicker,  simpler, more flexible, cheaper, and easier to measure.

What used to take months could now take days. You could write a new ad today, test it against your existing ad, and within a few days, have a clear idea of whether the new ad was better, or worse.

And that meant you could improve your ROI rapidly – and for almost zero cost.

Here we are 10 years later, and I decided to mark this anniversary by sharing 10 of the biggest lessons I’ve learned about AdWords.

Let’s start with that first lesson: Continue reading

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Why the secret to PPC success isn’t PPC

Let me let you into a secret: You could have the hottest hotshot pay per click manager in the world… and still not be able to compete in your market at PPC.

By “compete”, I mean be one of the top 2-3 advertisers that hoover up the vast majority of clicks.

Why not?

The reason… as the headline suggests… is that the true secret to PPC success has little to do with PPC. Continue reading

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Why SMBs Should Use AdWords

Last week, Matt Umbro wrote a post called, “Why SMBs Should Not Run AdWords Accounts”.

Before I give my response (Spoiler! I don’t agree), we have to define what an SMB is. Matt’s definition is a business that spends less than $500 a month on clicks. So let’s use that.

Now that’s out the way, here are the points I want to make:

#1: Spend is the wrong way to measure the size of an account

Which account is “bigger”,

(A) One that spends $1,000 a month and brings in net sales of $2,000 – profit $1,000

(B) One that spends $300 a month and generates net sales of $3,000 – profit $2,700.

I would suggest the latter. And, BTW, that’s not a crazy example, I’ve had clients who got that sort of ROI. (I’ll explain more later in this post.)

So my view is that, when judging the size of account, you look at the value of the traffic, not the cost of the traffic.

#2: The cost of AdWords management should be compared to net sales, not click cost

Matt gave an example of a PPC account that spent $500 on clicks, and $225 on management. That would mean that, of the $725 spend, 31% goes on management.

As Matt pointed out, by that measure, it’s hard to justify paying for PPC management.

But, looking at it another way … if the $500 brings back $2,000, the cost of management is only 11.25%. A totally different story.

#3: Why are they only spending $500?

There are four main reasons why a business may be using AdWords but spending less than $500/month.

One reason is that they’re testing AdWords, with the plan of rolling it out if it’s profitable. But I’m going to ignore those businesses because they won’t be spending $500/month for long.

A second reason is that they’re a local business where there simply isn’t much in the way of search volume.

A third group is niche national businesses. Again their products or services are so niche, there’s little in the way of search volume.

And the fourth is businesses who, because they earn so little from a visitor, can’t bid competitively. Their spend is limited because their ads rarely show, and when they show, they’re low down on the page.

For this fourth group, the answer is simple: they need a better strategy.

(I outlined what I believe to be the correct strategy in my book, “How to dominate your market with search engine marketing.” You can download a copy here: http://www.bothsidesoftheclick.co.uk/dominate)

For the local and niche businesses, margins tend to be high, and competition tends to be weak, so it doesn’t take a lot of expertise to manage it yourself.

Which takes me to the next point…

#4: AdWords is easy

Matt wrote, “AdWords is difficult”. I’m going the opposite way.

Although I agree with him that PPC has become increasingly complex, I still think it’s the easiest form of direct marketing.

You can read an introductory book in an afternoon and know 80% of what matters.

Try doing that with direct mail, or newspaper/magazine advertising.

And don’t get me started on SEO …

#5: Do you even need PPC management?

If your business is spending less than $500 a month, do you really need much on-going management?

As I just said, you can learn 80% of AdWords in an afternoon. That’ll put you ahead of most of your competitors.

So you might hire someone to set up your campaigns, or to optimise them, but by-and-large you can “set it and forget it”.

#6: Is Facebook a substitute for AdWords?

Matt recommended Facebook ads as an alternative because they “require less time and effort while being more cost effective.”

Again, I don’t agree with this. For three reasons …

First: it’s a totally different beast. As I wrote in an article a couple of years ago,

“Imagine this was 1995, how would you sell your product/service?

If you’d sell via shops or the yellow pages, then AdWords is probably the best fit.

On the other hand, if you would have used direct mail and/or telemarketing, Facebook probably suits you.”

Or, to put it another way: if Facebook doesn’t suit your business, it doesn’t suit your business. And, on the flipside, if AdWords doesn’t suit your business, you shouldn’t be using it.

Second: AdWords is a moving parade of prospects. The people searching on a keyword this month aren’t the people who searched last month. So, in uncompetitive markets, you can have the same ad running for a year, without seeing a drop off in click rate.

That’s not the case with Facebook advertising.

That’s because Facebook is demographic targeting, it’s the same people seeing your ad over and over. And that means your ads – and your offers – will fatigue quickly.

And when your ads fatigue, you click rate plunges and Facebook stops showing your ads.

So, in order to keep the enquiries rolling in, you’re going to have to keep coming up with new ads and new offers.

That might not be a problem for some businesses. But it’ll be a problem for most businesses. And, either way, it’s work. And that work is a cost.

Third: while clicks can be a lot cheaper, conversion rates are usually much lower. That’s because, unlike someone searching on Google, Facebook user isn’t actively looking for what you sell.

#7: What disadvantage?

Matt wrote, “Small businesses are still at a severe disadvantage when trying to run AdWords accounts.”

My question would be, “A disadvantage to whom?”

Small businesses tend to compete against other small businesses, not big companies with large ad spend. And all they have to do is be better than those small businesses.

It’s like the old joke:

Two men are walking through a forest. Suddenly they see a bear walking towards them. One of the men takes running shoes from his bag, and starts putting them on.

“What are you doing,” asks his friend, “Those shoes won’t help you outrun a bear.”

“I don’t have to run faster than the bear,” says the first guy, “I just have to run faster than you.”

Summary

Small businesses need to get traffic from somewhere. And, although AdWords is increasingly complex it’s still easy compared to the other options.

Not only that, but it brings in highly-targeted, ready-to-buy traffic that’s easy to convert.

So I still believe that SMBs should seriously consider using AdWords.

Best wishes,

Steve Gibson

Posted in PPC

Why I don’t fear ad blockers

Ad blockers are on the rise.

According to the Guardian (Nov 2015), 18% of British web users now  use ad blockers. That’s up from 15% just a few months earlier.

This stat has caused a lot of nervousness in the internet advertising world. But I’m not worried.

You might expect me to be. After all, most of my income – whether from managing PPC accounts, or from writing sales copy for websites – is linked to paid online advertising.

So why am I not worried?

Google makes 90% of its income from AdWords advertisers. That’s $59bn. $45bn comes from ads on Google search, and the remaining $14bn from ads served on other websites (as adsense ads).

So, at the most basic level, the reason I’m not worried is that Google’s not going to surrender $14bn a year in ad revenue.

Here’s what I predict will happen

If ad blockers reach a certain level of popularity, Google will push back, and ad blocker users will see a message that says…

“It costs us money to provide the best possible search results.

The reason we’re able to provide them for free is because we earn revenue from advertising.

So, unfortunately, as you’re using an ad blocker, we’re no longer able to allow you to access Google.

If you’d like access, simply add the following exceptions to your ad blocking…”

And you have a choice: accept the ads, or go elsewhere.

Let’s say you go elsewhere. Let’s say you respond by saying, “Screw you, Google, I’m going to start using Bing.”

So then you go to Bing. And you discover that Bing has the same block on searchers using ad blockers. Because, surprise, surprise, Google and Bing have no desire to cut each other’s throats.

Then you say, “Screw you Google, and screw you Bing, I’m going to start using Yahoo…”.

And then you stop. And you ask yourself, “Did I really say I was going to use Yahoo search? Seriously? Yahoo? Yah-ewww?”.

Does anyone want to block Google ads so much that they’d rather use Yahoo?

Exactly.

You don’t screw Google, Google screws you

Google has the whip hand because you need search engines more than search engines need you.

And that’s why, in recent research, the Internet Advertising Bureau found that,

“61% of those who were told ad blocking would mean some websites would have to begin charging for content said they would rather see ads in return for access, with just 4% saying they would pay.”

So, as I said, I’m not worried. Google has this one under control.

Steve Gibson

Posted in PPC

I Understand The Scepticism About This

After I published my recent book (get a free copy here), some people asked whether it was really possible for businesses to double profits in just a few months.

The answer is yes.

Let me show you how. Let me show how these gains come from applying just 3 simple principles – three principles that either work for your business, or against it.

And, when your business goes from being the victim of these principles, to benefitting from them, you can multiply your profits.

Principle #1: The Pareto Principle AKA the 80-20 Rule

The Pareto principle tells us approximately 20 percent of people control about 80 percent of the wealth.

Or, in business, 20% of companies control 80% of the market.

In the case of Adwords, the 3 ads at the top left get 10-20 times the click rate of the ads on the right hand side.

The Pareto Principle

The Pareto Principle

If we take the mid-point (15 times), that gives us:

3 ads at the top left with 15 times the click rate = 45 clicks
8 ads on the right with 1 times the click rate = 8 clicks

So the “Adwords Pareto” means 3/11 ads get 45/53 of the clicks.

Or, as a percentage, 27% of advertisers on page 1 get 85% of the traffic.

Not exactly 80-20, but close enough.

Why This Matters

By “jumping the gap” from 4th position (top ad on the right) to 3rd position (bottom ad on the left), you join the ranks of the “haves”, rather than “have nots” – and get 10+ times as much traffic… all for improving by just one position.

It’s this kind of improvement – growth measured in hundreds of percent, rather than a few percent – that my book is all about.

It’s about understanding what are the “big levers” you can pull that’ll double or quadruple your business in a short time.

Let’s move on to the second profit multiplier.

Principle #2: The Power of Compounding

Albert Einstein said, ‘Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.’

My ‘Adwords Multiplier Method’ harnesses the power of compounding by working on the following 5 things at the same time:

You don't have to be a genius

You don’t have to be a genius

1. Number of ad impressions
2. Click rate
3. Conversion rate
4. Profit Per Sale
5. Purchases per client

If you can increase all 5 of these by just 15%, you double your income.

15%. That’s all.

Increase them by 30% and you’ll quadruple your sales. And, as you’re about to see, quadrupling your sales will do extraordinary things to your profits…

That leads us to the 3rd principle of profit multiplication…

Principle #3: It’s not how much you make, it’s how much you keep

I published a case study of how I increased the profits of an 8 year old PPC account by 643% in just 7 months.

I didn’t increase their sales by 643%, I only increased them by 232%.

So why did their profits increase 3 times faster than their sales?

Let me show you…

Before I started, their cost per conversion was 79% of the value of a conversion. Or, to put it another way, they would spend £1 and get back £1.26 – a profit of 26%.

I combined (compounded) AdWords optimisation, increasing their website conversion rate, and using our friend the 80-20 rule.

And, after 7 months, their cost per conversion had dropped by 1/3. That meant, they were spending 67p to get back £1.26, a profit of £0.59 (88%).

So their profit per conversion more than doubled.

That’s what I mean by “how much you keep”: a 33% decrease in costs caused a 127% increase in margins. A ratio of almost 4:1. That’s why I refer to these techniques as “big levers”.

And that’s just the beginning

If you’re a company that’s spending 60% of your net sales on marketing, that’s not the only cost you have. You’ll have fixed costs: staff, premises, utilities, equipment…

That might gobble up another 30% of your net sales.

So the profit from 90% of your sales do nothing more than cover your costs – and all your profits come from the final 10%.

And, if you could increase your sales by 20% without increasing your marketing or business costs, you’d triple your profits.

And most businesses could get a 20% increase in conversion rate…

Or increase their profit per sale by 20%…

Or get customers to buy 20% more often…

Or a combination of these…

The 3 Factors Combined

I talked earlier about the power of compounding. What happens when you compound the 80-20 rule, compounding, and “how much you keep”?

Think about it…

If you join the 20% and get 10 times as much traffic – resulting in 10 times as many sales – then your fixed costs shrink as a percentage of sales, don’t they?

If they were 30% before, they’re now 3%.

Meaning, if you were keeping 10% before, you’re now keeping 27%… and that’s 27% of 10 times as much revenue. So, where you keep £10 before, you’d now keep £270.

That’s one way to benefit. Here’s another…

If you use compounding and increase your conversion rate by 10%, your profit per sale by 10%, and your average number of purchases per customer by 10%, that’s a 33.1% increase in the value of a visitor.
If you had been paying £1.50 per click to get a visitor worth £2.50 (so, as before, spending 60% of net sales on marketing), that £2.50 visitor is now worth £3.33.

And “how much you keep” more than doubles from £1 to £2.33.

Or you could bump your adwords bids by £0.83. You’ll make the same £1 profit per visitor, but you get higher ad positions, and might get 3 times as many clicks.

So your profit triples. Same profit per visitor… 3 times as many visitors…

Summary

I hope, by walking through the numbers for you, you now understand why this works.

We’re led to believe that super-successful businesses are successful because they do extraordinary things.

But that’s ususally not the case.

There’s often only a thin line between a business making £50,000, or it making £100,000 – £200,000.

It’s just about knowing what levers to pull.

So, if you haven’t already downloaded and read my book, please do. Because it’ll tell you how to do the things I’ve described in this post.

All the best,

Steve Gibson

PS If you don’t believe me about 10-20 times the clickrate, drop me an email. I’ll tell you where to find this stat in your own AdWords account.

Steal This Secret

I recently ran an Adwords split-test where the only difference in the ads was the 2nd line of text:

Ad #1: “40 years experience. Call today”

Ad #2: “39 years experience. Call today”

The first ad got a 2.50% click rate. The second was clicked on 4.42% of the time.

Changing 40 to 39 increased the click rate by 76.8% – even though, logically, 40 years is better than 39.

Why the difference?

For an explanation, we should turn to Claude Hopkins, often described as the greatest copywriter that ever lived. In his book, Scientific Advertising (1923), Hopkins wrote:

“Platitudes and generalities roll off the human understanding like water from a duck. They leave no impression whatever. To say, “Best in the world,” “Lowest price in existence,” etc. are at best simply claiming the expected. But superlatives of that sort are usually damaging. They suggest looseness of expression, a tendency to exaggerate, a careless truth. They lead readers to discount all the statements that you make.

People recognize a certain license in selling talk as they do poetry. A man may say, “Supreme in quality” without seeming a liar, though one may know that the other brands are equally as good. One expects a salesman to put his best foot forward and excuses some exaggeration born of enthusiasm. But just for that reason general statements count for little. And a man inclined to superlatives must expect that his every statement will be taken with some caution.

But a man who makes a specific claim is either telling the truth or a lie. People do not expect an advertiser to lie. They know that he can’t lie in the best mediums. The growing respect in advertising has largely come through a growing regard for its truth.

So a definite statement is usually accepted. Actual figures are not generally discounted. Specific facts, when stated, have their full weight and effect.”

(My emphasis. See http://www.scientific-advertising.co.uk/ch07-being-specific/being-specific-in-advertising-claude-hopkins/)

Specifics In Action

Let’s see how Hopkins used this principle in one of his ads:

hopkins-beans

There are a number of things I want to draw your attention to:

#1 (Bottom right):

“We could buy beans as low as 30c per bushel, yet we pay $2.10 for ours.”

A typical advertiser would say, “High quality beans”. That’s vague and could be an exaggeration.

Hopkins, instead, gives a fact. As he pointed out, specific statements like these are facts or lies. So it’s more believable.

#2 (Bottom right):

“We buy Michigan beans, because a certain soil there produces the best beans grown.

The choicest part of the crop is picked over by hand. so we only get the whitest, the plumpest, the fullest grown

Here Hopkins explains the method for selecting better beans.In copywriting, this is often referred to as “describing the mechanism”. You want people to believe your product or service is different? Then describe what you do that’s different.

(BTW, he’s also painting a picture of what sort of beans are used.)

#3 (Bottom right):

“No wonder your grocer has brands that cost him less, yet pay him a better profit.

This isn’t a specific, but it’s worth pointing out: Here Hopkins is giving the reader the idea that cheaper brands have a larger markup – and, therefore, are poorer value.

#4 (Bottom centre):

“We have spent 47 years perfecting this dish.

47 years works better than 50 years – the same way 39 worked better than 40 in my PPC ad. You believe “47 years”. “50 years” is almost certainly not true.

How To Use This

Look through your sales materials – whether it’s your ads, brochures, web pages – and pick out any general or unspeficied claim you make (e.g. better, faster, cheaper, longer-lasting) – is there a way to make it more precise?

If so, try changing it – or, better yet, split-testing it – to see if a more specific claim can boost your sales.

Steve Gibson

Which is your problem – Marketing or Capacity?

In 1984, a business guru wrote an interesting book. It was particularly interesting because the book was a novel rather than non-fiction. It’s called “The Goal” (by Eliyahu Goldratt).

The novel outlines a number of ideas about business organisation, particularly in manufacturing.

One of these is called “the theory of constraints” and deals with bottlenecks in factory assembly lines.

However, it’s relevant to all types of business.

But, before I explain how it is relevant to you, I’m going to explain it in terms of Continue reading

Long copy v short copy

“People don’t like to read”

“People have short attention spans”

“People don’t scroll”

“You need to keep it short, no-one’s going to read ALL that.”

These are the things you’ll hear when the subject of long copy comes up.

Yet, at the same time, direct marketers – people who measure the response to their sales messages say things like this:

“As a rule, good long copy will always beat good short copy.” (Drayton Bird)

So who is right?

Long Copy Put To The Test

A couple of months ago, I wrote a long copy version of a client’s sales page. This longer version had 1089 words, compared to the existing version’s 360.

Unsurprisingly, there was some resistance Continue reading

11 reasons why PPC is better than SEO

When I got into PPC in 2006, it was seen as SEO’s poor cousin.

At that time, that probably made sense – after all, the ads were just text ads on the right hand side of the search results page.

Nowadays, paid listings take up around 85% of the first fold of Google results. And that – combined with Google’s crackdown on SEO link building – has, in my opinion, turned the tables and made PPC the superior choice.

And here are 11 reasons why…

#1: Adwords Ads Get More Clicks Than Organic

A 2012 study by Wordstream showed that, for highly commercial search terms – the sorts of terms you’d SEO for – sponsored listings take up 85% Continue reading

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