Often, we get inquiries from small businesses who know that they need to make the most of online sales, but have no idea how to do it.
While we strongly believe that almost any small business can see outsized gains by transitioning large parts of their revenue model online, it's a complicated subject and has the potential for many missteps, poor investments, and lost time. So there are a few questions we like to ask before advising a company to take the leap towards online sales.
Let's take these one by one.
If you're a products company (selling things like clothing, parts, devices, storage units, rentals) then this is a great opportunity for expanding online. Since your business model isn't limited to both a geographical area and your time, you can sell your products far and wide, and your margin is likely high enough to accommodate advertising and web development costs. If you're a services company (painting, graphic design, home repair, yard care) then you're going to find some inherent limitations with an online model. You can only advertise within a narrow physical radius, you can only sell a finite amount of services, and competition is high. The good news is that in many of these niches, an aggressive online strategy can put you far ahead of your competitors since service companies often lag behind in adopting new technology.
If you've got a high margin, this means that you can afford the costs associated with a digital advertising campaign, of setting up an ecommerce store, and of the infrastructure required to fulfill digitally. If you're operating on a low margin, it's going to be much harder to pay for the costs involved in going online.
And finally, we've found that if you're trying to go online to save a company that isn't doing well...it's not a good sign. This means there are other fundamental issues at play, and simply expanding something that doesn't work has a low likelihood of success. But if you're already doing well, and you want to capitalize upon your success, we think you'll find a great opportunity in moving to a digital space.
There are two ways to transition your company from offline sales to online sales. To put it bluntly, you can do it yourself or you can pay someone else to do it. If you can set up your ecommerce system, your website, and run your ad campaigns in-house, you'll likely have a lower initial cost of investment. But if this isn't your wheelhouse, you'll have to pay for this to be created.
We don't like to see people embark upon a major investment without a firm knowledge of the risks and upsides involved. And that's why we've found that it's better to warn people up front. It's expensive. And it takes a long time.
As you can see from the screenshot above, we implemented a campaign for a client selling parts and accessories for a particular niche. As we gathered more and more data, we were able to optimize the campaign based upon what worked and didn't worked, and in the end increase the performance over several months. But this requires an initial investment and level of patience in order to reach maximum profitability.
A common misconception is that if you build it, they'll come. Not necessarily. And that's where we come in: building and managing advertising strategies to bring potential customers and clients to your website. While there's a plethora of channels available, the most common and effective is AdWords, Bing Ads, and Facebook Ads. The cost varies upon scale, niche, and desired outcome. Generally, you'll pay on a cost-per-click basis. This means that you pay a certain price each time someone clicks on your ad. Eventually, get enough clicks and one of those people will be interested enough to purchase.
And that's why margin is so important. Say that your keyword costs $2.28 per click, and you've established a monthly ad budget of $5000. That $5k of ad spend gets you 2,193 clicks. Of those 2,193 clicks, only a certain amount will turn into leads/customers.
The conversion rate of people that click on the ad vs purchase your product varies by a few factors (quality of your website, competitiveness, type of niche) but in general it's assumed that 1-2% will convert. This number can climb to around 5-7% if everything is optimized to the max: a professional website, a good niche, and a competitive product offering). So let's use a baseline of 3% conversion at first. That means that for every 2,193 clicks, you'll get around 66 conversions. After several months of management and continuous optimization, and with a really successful product, you could possibly see 5-7%, which is 110-154 conversions.
So that means that 66 conversions needs to be worth more to you than the $5000 you spent on obtaining them. You've spent around $76 per lead. So your margin needs to be higher than that in order to justify the ad campaign.
The good news is that this sort of marketing can be much cheaper than traditional marketing, since it's narrowly targeted towards people interested in your service, something that traditional advertising doesn't do very well.
Say that you're a nursing home looking for new residents. A new resident is valued at $1500 in revenue a month for an average stay of 8 months. That means that each resident is worth $12,000...making it worth a hefty monthly advertising budget in order to gain new resident leads.
It's quite easy to track success with digital ads, and we encourage all of our customers to implement everything possible: especially call tracking and event tracking.
With Google AdWords, it's especially easy to do this. With only a few lines of code, we can track every phone call and form submission that's done by people who found your site by means of AdWords...and by narrowing down calls to things like area code, duration, and whether the call was answered or ignored, we can directly assess the efficacy of these calls. Event tracking is most commonly used on contact forms, but can also be applied to website behaviors to track how many users add products to their shopping cart, or how many click a certain button, or even more.
Tracking is so essential to the success of an ad campaign that we encourage everyone to employ it: it's the only way to truly assign a value to every dollar you spend on advertising.
Ultimately, everyone needs to transition online. But the level at which you need to transition varies. A B2B business might have no need for digital advertising, or selling online, and see great success by sticking with traditional methods of local networking and conferences. A small donut boutique might not need to spend money advertising. But someone selling auto parts might see explosive growth by transitioning to an online storefront...and that's what we like to encourage.