More than once we’ve had discussions with clients about whether or not they are in a race to zero with Google their paid search campaigns. What do we mean by that and what do we advise to do when the Cost Per Click (CPC) of their Google Ads campaigns skyrockets?
What Is “The Race to Zero” in Paid Search?
This is a situation you might face if you offer a product with a very low barrier to entry, which is also not extremely unique, and your price point is not the most competitive. If you are in a similar market niche, often you see that competitors start lowering their prices, and/or new competitors entering the paid search campaigns.
The result – the increased competition is driving up the CPCs in Google Ads auctions, and both your and your competitors’ margins are eroding.
Why Are Your CPCs Getting Higher?
Another way to look at this is to consider your paid campaigns and their visibility as a pie – it’s relatively stable but not growing, so when there’re new market players coming in or your competitors put big budgets behind the bids, you get higher and higher CPCs and yet fewer goal completions.
The average CPC is driven up consistently over time, driving players to a very small profit margin – the smallest they are willing to accept before they just quit the auction. The profitability is getting diluted and it feels like you’re in a race to zero.
What Can You Do Before Your CPCs Skyrocket?
Paid search is usually the lowest hanging fruit for digital marketing campaigns and it delivers the fastest return on investment. In many cases, it can sustain your business for years.
Yet, if you are in an industry with a very low barrier to entry, and your product or service isn’t one of a kind, other players will eventually come in and undercut your margins. If you feel you might be facing a race to zero in paid search, you need to start seriously thinking about moving up the marketing funnel and investing some of your profit to support the user journey.
Here are the 3 things you’ll need to do to get your CPCs under control and protect your profit margins.
1. Invest in Your Brand
If you are in a very competitive paid search environment, you need to put some of your marketing budgets behind brand-building work. Currently, small to medium-size companies are simply not investing enough in building their brand for the long term. If you are in a similar situation, it’s about time to re-evaluate your digital marketing strategy.
You might be asking yourself: “Why invest in brand building if what I really need is to get more leads?”
Simply because brand bias or brand loyalty can seriously improve engagement and customer acquisition KPIs. Especially in crowded and competitive niches, the way to stand out from your competitors is either by being very price-competitive or by building your brand.
In digital marketing, brand-building generally involves creating content. See how:
2. Go Higher Up the Marketing Funnel
Nurture your audience – no doubt you’ve heard this before. Yes, it’s an investment and yes, you do not see results as quickly as you do with PPC. Still, if you want to protect yourself from the race to zero in paid search, you’d need to segment your marketing budget or invest some of the PPC profits into creating content for the top of the marketing funnel.
As Neil Patel puts it, using content helps you move through the process of fixing pain points, offering value, building a relationship, and earning trust, or effectively building your brand and promoting further action.
By providing the right content for users with weak commercial intent (early in their user journey), you can achieve two things:
- Expand your reach and create new remarketing audience groups, and
- Nurture prospects further down the user journey.
While crafting your content strategy, keep in mind video content has grown rapidly for the last few years and now dominates most industries and markets. This year, 92% of marketers say that video content is an important part of their marketing strategy, so try not to lag behind.
When investing in top-of-the-funnel content, avoid putting ROI goals on that marketing spend. You should consider tracking KPIs for reach and brand visibility, rather than focus on conversions only.
3. Focus on SEO
Another area you should turn your attention to is Search Engine Optimization. Make sure your website is technically sound and optimized for search engines and users alike.
SEO health monitoring takes a relatively small effort in terms of time, cost, and dev resources. Within 6 to 12 months, this investment will start bringing you a steady stream of reliable, organic, and free traffic from Google. What’s more, SEO results get better with time and your initial investment will continue to give back over the years.
Better SEO performance brings more traffic, which in turn provides you with more opportunities to build brand awareness and nurture prospects.
Besides, having your site rank organically on the Search Engine Results Page is twice as valuable – many users skip ads and trust only the organic results. Being present both in the ads section and in the organic results gives you a much higher chance of getting a click.
The Bottom Line
If you’re in a hyper-competitive PPC space with a low barrier to entry and not too diversified products or services, your paid search campaigns will inevitably start losing their profitability.
You should re-invest some of the profits you have generated from your paid ads to make sure you stand out from the crowd. Brand awareness, tailored content, and SEO are the 3 best ways to protect yourself from the race to zero in paid search.
By doing so, you will boost your brand visibility, expand your reach, tap into new audiences, and build a steady and independent stream of free traffic to your website.
Check our blog if you want to learn more about PPC strategy – we at Hop Online will make sure you get the best advice!