Colin Nederkoorn

Google Adwords is not the best use of your advertising budget

January 26, 2010

In my first post, I mentioned I was helping a friend set up an online store. Well, she doesn’t mind if I blog about our progress. Right now the store is at, but we’ll be replacing her current site at soon

We set up Google Adwords to drive traffic to the store with our first focus on a designer perfume brand. Her margins were enough on the product so that we could spend some advertising dollars and provide a discount to customers. As long as we made a few sales, we’d be net positive.

What we found was surprising. As we expected, customers liked the offer and were buying the product. It’s not a huge volume of searches on google, and the product is priced at around $145. There have been about 6 sales in the 3 weeks of Ads. Not a huge amount of volume, but enough to test a theory. However, Google was taking a big chunk of the potential profit that was on the table. We ended up paying google around $30 per conversion.

I’m hypothesizing that in the long run when the store contains more products and is receiving organic traffic, overall costs will go down since people may have shopping carts with more than one item. And, as long as we’re net positive on every adwords sale, why not run the ads? These costs are cutting it close though!

What can we do about it?

Paying google $30 for a customer does nothing for customer loyalty. But, providing that discount to existing customers does.

Why not run a customer appreciation campaign that gives existing customers a good discount? They’ll probably tell their friends and family members and instead of converting faceless googlers, you’re reconverting existing customers and deepening their engagement. I recently saw the quote below in a presentation by Tony Hsieh, founder of Zappos

"People may not remember exactly what you did, or what you said, but they will always remember how you made them feel."

Whenever I receive a nice discount from a store I’ve shopped at, that makes me feel pretty good, right?

We’ll be experimenting with twitter marketing and email marketing to try to have a deeper engagement with customers (and thus more online sales). I’d like to try to translate the wonderful way Allison interacts with customers in the store into an online experience. If any readers have other experiments we should run, let me know in the comments.