Home » 2015 » February

How Google Ads Work

A simple way to test out a business idea or product is to run an ad on Google to see if you can generate any customers.

Google Adwords is a platform that allows you to run ads on search result pages in Google. Don’t confuse this with Google Adsense, which allows you to host ads by other people on your website.

 

The how-to’s of setting up an ad on Google change as updates and improvements are made to the Google Adwords interface, but the general principles of how the ads work stay the same.

1. Ads are targeted to specific keywords and specific geographic locations (if necessary).
2. Ads are written. A headline, a line of text, and a link are provided.
3. A budget and “bidding limit” is set. The “bidding limit” is the maximum price you are willing to pay to get one person to click on your ad. This can range from several cents to several dollars.
4. Ads run.
5. Customers click your ad. You pay Google for each click, and the price can fluctuate with varying traffic, relevance of your ad to the search term, and ranking of your ad. You can set a budget, such as $10.00 per day, so that there is a limit to your expenses.

How the Ads Show Up In Search Results

Ads can show up above the search results at the very top of the page, or they can be in the margin at the top of the right-hand side of the page.

The topmost ad is always considered the most valuable, as these generally get the most clicks and cost the most.

How Ads Can Rank Higher

Basically, there is an auction going on for the ad space. The ads which are most relevant to the search term get some priority, and the ads which are willing to pay the most per click get some priority. The order in which the ads show up on the page is based on an equation including both of these factors.

Google looks at how relevant your ad is to the keyword that was searched by the user, how relevant your landing site is to the search term (the landing site is the site that is visited when somebody clicks on your ad), and how much you are willing to pay to have a customer click through to your site. This is set when the ad is created, but can be adjusted.

What You Will Pay

The bidding price is important. When you set up the ad you can allow Google to adjust your bid price to optimize for the most clicks, or you can set a hard limit to the price that you are willing to pay for each click.

For an example, let’s say you set a daily budget of $5.00 for an ad. If you set a bidding limit of $0.50 you can expect to get at least 10 clicks on your ad, but it may take a while because if any ads have a higher bid limit they will probably show up higher in the ad rankings.

It is entirely possible that you will get more than ten clicks. If the competition in your market is low you might only pay $0.25 per click, meaning you will bring in 20 people through your ad before your budgets runs out.

If you allow Google to choose your bidding limit it will almost always bid higher and bring in fewer people to your site, in my experience. Google may bid $1 or $2 or even more per click for you, meaning you might only get three or four clicks on your ad before your budget runs out. There is a good chance, however, that you will get these clicks very quickly.

In a recent campaign I let Google set my bids and it burned through my $10 limit in less than twenty minutes, bringing in eight customers. I then set the limit to $0.50 per click for another $10 budget and brought in twenty clicks over the course of about one day.

Recommendations

It is my preference to pay less and get more traffic over a longer period of time. This allows me to react and make adjustments to the ad or to my site if need be.

Different situations call for different tactics, though, and you may have a situation in which getting traffic to your site fast is necessary and worth the expense.

The New Phone Book

Getting the word out about your company can be tough. Really tough.

It is easy to pay for advertising, but advertising costs can quickly skyrocket without an equivalent boost in sales.

For local businesses it used to be easy enough to get business by placing an ad in the phone book. Those days are over. There is a new phone book in town.

The Old Days

When we first started Picnic Table Rental in the mid-2000’s it was simple enough to put a small ad in the local phone book announcing that our business existed. It drummed up enough business to get us started, and word of mouth really carried us from there.

These days, most people do not look at a phone book when they want to find a local business. They pull out their phone or sit down at the computer and do a Google search for the right business.

Why Google Stinks

Almost everybody searches via Google today. Google owns the search market by a wide margin. If we want our business to be found online, Google is where we need to focus.

The way that the Google search results are structured there can be some major disadvantages for your business, especially if you are in a crowded market.

  1. You have to be found for the right keywords. For your business to get found it needs to appear in the search results when a customer is looking for your type of business. To appear in these results your site needs to be relevant to the phrase that is searched.

As an example, your company may provide tent rental in Chicago. Your company website may mention “tent rental” and “Chicago” many times, which makes it more likely to rank high in the Google search results for the search phrase “tent rental in Chicago.”

The trouble is, your customers could be searching with a completely different phrase to find your service. If they are typing in “canopy rental in Chicago” it is less likely that your company will show up.

There are ways to research what terms are being searched in Google using the Google Keyword Planner, but it can still be tricky to find the best phrases.

  1. The top ranking search results get all of the traffic. We know that on average the #1 search result in a Google search is going to get clicked by about 40% of the searchers. The #2 result is going to get about 20%. The rest of the results on the first page of search results will get less than 10% of the search traffic each. The second page of results gets virtually zero traffic.

If your website does not rank at the top for relevant keywords you will not be found by most customers. In the phone book it was easy to open to the page with the service that you were looking for and scan all of the companies offering that service. This does not happen online.

  1. It takes time and effort to rank at the top. Even if your website is set up well and is optimized to show up in the relevant Google searches, it takes time for Google to find your site. It could be weeks or months before Google picks up your site and adds it to search results naturally, meaning you will have to buy ad space to get your business seen.
  2. It is difficult to stand out. In the phone book it was possible to buy color ads with logos and designs to make your ad stand out on the page. Google search results do not allow this. You can alter the wording that shows up for your site, but you cannot make it jump off the page when the customer looks at it.

Why Google Rocks

  1. You can easily target the exact customers that are ideal for your company. Somebody who types in “tent rental in Chicago” has a very specific need, and they are ready to make a purchase. You do not need to educate them on the necessity of tent rental. They are already looking for it. You can get your business directly in front of these “hot” leads.
  2. If you do a great job on your website Google will make sure you are found. Google rewards well-built sites that offer a lot of value in their field. If you put effort into making a great resource for your customers you will probably get rewarded for it.
  3. If you get to the top of the rankings you can get a lot of natural traffic without paying for ads. When Google determines that you are the #1 resource on tent rental in Chicago you are automatically seen as the local expert on that topic, and you will naturally get most of the search traffic for that topic. This all leads to more customers.
  4. If you buy ads you can quickly get targeted customer leads. Even if your website does not rank at the top it is easy to spend a few dollars a day on Google ads and get your business seen (and your website visited) by customers quickly.

Get Familiar with Google

It is worth your time to become familiar with the way Google does business and filters search results and ads. Google is a vital tool for customers, so it has become a vital tool for businesses.

In the coming weeks we will dig deeper into the ways we can leverage Google and other online tools to advertise our businesses.

Rental Biz Ideas: Picnic Tables

A market close to my heart, because I have built a business and watched it thrive there, is picnic table rental.

This is an idea that may sound strange to you at first. Picnic tables?

These are not your local park’s heavy wooden tables. These are tough, lightweight plastic tables with a metal frame to attach the benches and provide support. They fold up into a thin rectangle just a few inches thick, allowing you to transport dozens of them at a time in a standard auto trailer.

The Market

The anchor for business in this market is graduation parties, which keep the business hopping from May into July.

Other events that provide business for picnic table rental companies include corporate events, county fairs, family reunions, and outdoor wedding receptions.

The Costs and Prices

A standard six foot picnic table (which seats six adults) retails for about $270. Most parties will rent no more than three or four tables, so it is quite possible to start out with a small inventory and save up to grow over time. This is what we did, and within a couple of years we were managing an inventory of a couple hundred picnic tables in addition to other products.

Luckily, you can find these tables at big box store like Sams Club. Since it is a seasonal product it usually goes on sale at some point during the year. This is a great time to add tables to your inventory.

The other major necessity is a trailer (and a vehicle that can pull a heavy trailer). If you are starting out with a small number of tables (less than ten) you can actually fit them into the back of most pickup trucks. This requires some form of sidewall, which we built ourselves out of metal pipes and wood boards. For larger quantities of tables it will be difficult to do business without a trailer.

It is completely reasonable to expect somewhere in the $20-$30 range per day per picnic table rental. Even if you only work weekends you can recoup the cost of a table pretty quickly if you get it rented out for both Saturdays and Sundays. It should not be a problem to get at least two or three years of use out of a table if it is treated well.

Accessories and Add-Ons

Picnic table rental can stand on its own as a business, which is a beautiful thing. As the business grows it makes sense to add other products though.

The most natural product line to add to this business is stand-alone tables. Usually six-foot or eight-foot rectangular tables are useful as buffet tables at parties.

Stand-alone chairs are also important. Customers hosting indoor parties will find it preferable to use tables and chairs rather than picnic tables due to the size of the picnic tables.

Complementary Businesses

Tent rental is also a logical complementary business to picnic table rental, since the parties using picnic tables are often outdoors.

Any type of entertainment or dinner rental company will benefit from working together with a picnic table rental company. The parties serviced by picnic table rental businesses may require sound equipment, dance floors, linens, place settings, or any number of related items.

Considerations for Picnic Table Rental

You will have to provide delivery. Picnic tables are too big to easily fit in to most cars, so you will have to provide delivery and pickup for the tables.

Picnic tables are clunky. It is possible to carry these tables by yourself, but you will probably want a partner to help you. A pushcart is also a useful tool.

Picnic tables are easy to clean. If you bring a couple of towels and a bucket of soapy water you can easily clean tables when you pick them up and then immediately drop them off at another party.

In short:

Picnic table rental is a great market to get into. There is a lot of potential for business from a variety of sources so the company can grow and prosper over time.

Getting In Front of Your Ideal Customer

Are you trying to get your business in front of interested customers?

How are you doing so? Hopefully you are not wasting money on mass media like TV ads or billboards.

Mass media is not very effective for small businesses that serve specific niches. A billboard might get your company in front of thousands of people every day, but if your target customers do not take the road past that specific billboard on a regular basis your money is squandered on useless impressions.

Before you spend money on advertising, ask yourself these three questions to make sure your ad will be in front of the ideal customers:

Where do my target customers spend their time?

Is my ideal customer typically a fitness nut that visits a gym every day, for example? If so, can I find a way to advertise my company at gyms around town?

The fact that your customers work out at a gym each day might not even relate specifically to your business, but it may be a common trait of your customers.

What do my target customers do that is related to my business?

A party rental business that often works with graduation parties might make an effort to advertise at school events. For example, they might buy ad space in the high school basketball game programs.

Many parents go to the games throughout the year and will hopefully remember your business at the end of the year when it comes time to plan a graduation party.

What other companies work with my ideal customer?

Let’s go back to the party rental example. When I was a senior in high school I remember receiving information about buying my class ring. At the same time I received a packet of information about buying senior pictures, graduation invites, and so on.

This packet would be a great place to advertise a party rental business. You can imagine the student bringing home all of the information and going through it with their parents. As they put together all of the plans for pictures, a ring, and a graduation party it will be convenient to have the information for a trusted party rental company that can help them with their party.

How can you apply each of these situations to your business to find unique, targeted advertising opportunities?

Rental Biz Ideas: Dinner Party Supplies

Large parties are expensive, so more and more people are choosing to coordinate the details of their party on their own instead of hiring a party planner. The internet and the rise of specialized rental companies have only helped spur this along.

When my sister got married the entire wedding and reception was planned and put together by the family. The reception required the most work and the most rental products of anything we did that weekend. What surprised me most was that there were no companies in the area that offered all of the pieces necessary for putting on a large dinner.

We needed place settings, table cloths, napkins, centerpieces, and serving dishes but had to rent from multiple companies to get everything.

With the popularity of outdoor and do-it-yourself weddings it would not be difficult to start your business and make it known as the go-to company for putting together rental supplies for large dinners.

The Market

The market for dinner party supplies is anchored by wedding receptions, but it can also extend out to other gatherings including reunions, graduation parties, banquets, and fundraisers. Even large family holiday parties could require the use of these products.

Reception halls that host many of these dinners may or may not own all of the products for the use of their customers. You might be able to become their contractor for any needed supplies whenever dinner parties occur. At the very least, you may be able to become their recommended supplier.

Another place to look for referral business is with tent rental and table/chair rental companies. These businesses regularly work with customers who are planning do-it-yourself parties, and recommendations from them can bring in a lot of business for you.

The Products

As mentioned, great dinner party rental products included place settings (plates, bowls, cups, silverware, etc) and linens such as table cloths, table skirts, and napkins.

Accessories and Add-Ons

Table centerpieces are also a great option for rental. I can say from my own wedding experience that putting together centerpieces for dozens of tables to add some atmosphere to the reception was a time-consuming headache. I would have happily chosen a design from the offerings of a rental company and paid to use them for the night.

Serving dishes also make sense as an offering. There is an endless variety of options in this case. Coffee pots, water carafes, platters, utensils, and many other products can be offered.

The Costs and Prices

Aside from the cost of purchasing the products, you will need a way to transport sizeable quantities of the products safely. In most cases a pickup truck or SUV will probably suffice for space, but you will need a way to protect glassware.

The other problem to solve is the cleaning of the products. Most people that rent place settings are not going to have a way to wash large numbers of dishes and silverware, so you will need a system for transporting the dirty products and then washing them.

If you offer linen rental you may need an industrial washing machine and dryer to get the linens sufficiently clean between uses.

The acquisition cost of the party rental supplies will depend upon what supplies you are starting out with and what designs you get for each.

Rental prices for dinnerware start at roughly $0.50 per piece for a basic design (meaning that each of the plates, the drinking glasses, the knives, the spoons, etc, cost $0.50). Costs go up a little for choices in color and design.

Linens can actually bring a large return on investment. It is not uncommon to see linen rental prices listed near or at their purchase price. They do require a heavy-duty washing machine to keep them in pristine, rentable condition however. You company will also need to offer a variety of shapes and sizes for linens, and eventually a variety of colors and designs.

Complementary Businesses

Tent rental and table/chair rental are potential companies to work with for referrals, but it can also make sense for a dinner supply rental company to branch out into offering these products on their own over time to create a complete solution for the customer.

The “drink service” rental market also has promise. This can include portable bars and the supplies to stock them as well as bar tables and stools.

Finally, entertainment rental also complements this business given that the setting for much of the dinner supply rental business will include music or a DJ. Lights, speakers, and a dance floor could be in high demand among the dinner supply rental customers.

As always, the best way to find out what complementary products your customers want is to listen to them. When customers call you with questions or to book a rental they will ask about products that you do not carry. Over time you will see patterns emerge and it will be clear which markets to expand into.

Considerations for Dinner Party Supply Rental

You will need down time to wash products between rentals. You cannot simply wipe down the products offered in this market – dedicated time will be needed between each rental to thoroughly clean and sanitize dishes and linens. This may limit the frequency with which you can rent out the products.

Start out with basic designs on your products and add more designs over time. The colors and designs used on the linens and place settings are important and customers will have strong opinions about them. The best way to start is with all-white designs, adding selection over time.

Start out with a basic product line and add to your product quantities before widening your selection. It is a difficult temptation to resist, but in this business it will be better to have the capability to provide all of the linens for large parties than to only be able to provide a fraction of the linens and a fraction of the place settings. If you are starting small it is in your best interest to get really good in one product offering before adding other products.

In short:

Dinner party rental is a labor-intensive business that will require some effort after-hours to keep products in good shape, but the industry has promise for business throughout most of the year and can easily work as an evenings-and-weekends business run on the side from home.

 

The Problem with Discounts

There is no question that lowering prices can bring in more customers and increase your sales. In the long run, though, it will hurt your business.

How Are You Training Your Customers?

There is a local business that always offers a 20% discount to any person wearing team colors the day after the local football team wins a game.

This sounds like a great deal if you are a customer, and it is. If you plan to buy something from that business it is obviously worthwhile to wait and see if the football team wins.

It is easy to imagine the monster sales that happen the day after a victory. What about the rest of the week, though? Clearly this promotion deflates sales on the other days of the week. The sales after a victory may be substantial, but do they make up for the lower sales the rest of the week?

Consider the profit margin on a sale. Let’s say, for example, that after factoring in overhead costs like rent, employee wages, product costs, insurance, and so on the typical profit on a product is 40%. This is a totally reasonable number for many business.

This company, while offering a 20% discount, has to DOUBLE their sales to make up for the lost profit from the discount. And then they have to make up for the lower sales the rest of the week.

They have to do an awful lot of work just to get to the point where they are showing a gain.

This is all because the business has trained their customers to wait for a discount before making a purchase.

The Expectation of Value

If we are going to “train” potential customers to expect something from our business it should be the expectation of value rather than the expectation of discounts.

How often do you turn on the television and see an ad promoting a massive sale on fine luxury car brands? You cannot go a single commercial break without seeing one of these for low- or mid-priced brands, but rarely do you see a discount ad for a luxury brand.

The customers who buy the high-end cars are looking for the best in style, product, service, and reputation. They are willing to pay a price equivalent to the high value provided by the car. A discount may even cheapen the perception of the product and make it less desirable.

This is the way to position a business. Provide the best products in the best possible way. Treat people well, go above and beyond, and wow them. Do such a good job that the customers cannot imagine dealing with the cheaper, crappier competitor just to save a few bucks. These are the customers that will spread the word about your business and do your advertising for you.

Fewer Customers, Better Customers

High-end companies that offer great products and services (and charge higher, un-discounted prices) are going to get fewer customers. That is ok. They don’t need as many customers to make the same profit as the company who is discounting.

And let me tell you a secret.

In my years of managing a specialty running store, which sold running shoes for as much as $170, it was always the customer that came in asking for old models at a high discount who was the worst to deal with.

The customer who asked for a $20 pair of shoes was rarely satisfied if we did manage to find one. They were the pickiest about the colors and styles on the shoe, and they expected more performance and durability out of the shoe.

My experience talking to others in various industries has reinforced that this principle spans industries. The customers shopping for discounts are often the most difficult customers to deal with.

When Giving Discounts Can Work

With all of this having been said, there are certainly times that it does make sense to offer a discount.

Rare, Limited-Time Deals or Slow-Season Deals

Occasional deals or coupons that are only offered for a limited time can work well to increase business, especially during your slow times of year.

Most rental companies will have slow times of the year. Depending on your industry, it might make sense to offer a short-term deal (like a “Black Friday” deal), but it could also make sense to lower your prices to an off-season rate. The industry that you are in, and how much of a sales dip you see during the slow time of year, will affect the type of off-season offerings that work best for your company.

One-Time Coupons

A great way to reward customers is with a one-time coupon. In this case you would offer the customer a percentage off of an item or an order for signing up for your email list, referring a new customer to your business, or performing some other action that is favorable for your business.

These coupons are for one-time use and should only be used by the customers who earn them.

In Short

The right pricing and discounting strategy can set your company apart from the competition. What discounting strategies have you tried, and how have they worked out for your business?