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buddyblip:

The other day I was discussing the thought of SEM on $5/day with a few peers.  The general consensus was that $5/day is not really effective for generating leads on Google Ad Words, but after giving it some thought I was able to turn around the notion that the “SEM on $5/day” was outdated.

If you’re building a customer product/service that’s re-segmenting an existing market then chances are high that you are going to be running into a lot of competition.  You will often see valuable keywords for your ads with high Cost Per Click (CPC) bids.  When trying out Ad Words for Cupid’s Lab, I was seeing CPC bids starting at $5-$6 for keywords associated to dating. In other cases there were keywords that were a bit less costly, however they were still $1 CPC.  You’re not going to get very far on $5/day.  Or are you?

If your intention is to scale and bring in as many customers through the door, then $5/day is not going to work for you.  However, if you’re starting out and you really have no idea how users are going to react to your product then you should spend no more then $5/day.  If you are the latter, then you really aren’t in a position to scale in the first place.  So fight the temptation of increasing your ad spend to introduce more people to your product.

Do you know what the current conversion rate for your product is?  How many visitors do you have to your service before they become customers?  Do you have a solid number or do you have an assumed number? Assuming that 1% will automatically convert is not realistic unless you actually see 1% convert and understand why.

If you don’t know these numbers, then you the $5/day allowance is where you should start.  This allows you to begin the validation process of your assumptions by collecting qualitative data. From there you’ll be testing two things.

First you’ll be collecting valuable metrics about what users are responding to through your ads and whether or not you are targeting the proper keywords.  You’re going to spend a lot of time refining and increasing your Click Through Rate.  Don’t worry about the # of impressions your ads get, focus on the percentage of users that actually show interest in what you are selling by clicking your ad.  Your actionable data should be which ads and keywords yield the best click through rate.

Next you should be prepared to collect actionable data from the users that click your ads because the sale does not end there.  If you have a multi page flow for the user to follow, you need to determine the abandonment rate and why the user is dropping off through split testing your pages.

When it comes to this sort of testing you do not need significant data to find emergent behavior.  Having 100 visitors test your assumptions most likely will yield the same results as if you had 1000 vistors.  This where SEM $5/day works well, it helps you collect qualitative data without breaking the bank.

Once you have a clear understanding of how your customers are behaving you can begin to increase your ad spend and see if your assumptions are scalable.  Until then, stick with the $5/day until you can validate and tweak your conversion rate.