Many businesses turn to advertise agencies for their expertise and specialized knowledge. In particular, small businesses may not have their own marketing department and may need the depth of expertise an agency can provide. Here are Generating Solutions to Marketing Flaws and How to Improve it.
Analyzing Marketing Flaws and How to Improve it
We need to analyze what a company has done to develop the best marketing strategy for them. But most marketers and companies are focusing on the wrong things.
Companies are generating anywhere from one million dollars in yearly revenue to $291 million.
We avoid getting data from companies with less than a million in revenue because most of them weren’t doing much marketing. Also, companies generate over a billion in revenue because you wouldn’t replicate what they are doing.
As for the industry, we talked to companies in the B2B space and the B2C space. From eCommerce to lead generation to software as a service and everything in-between. Here are the Generating Solutions to Marketing Flaws and How to Improve it.
The first question that asked each of these companies was:
1. WHERE DO YOU SPEND YOUR MARKETING DOLLARS?
In essence, we got a breakdown of marketing spends by channel.
It was obvious that most companies spend their money on Google and Facebook ads.
Even if they didn’t share that data with me, you could tell by just looking at Google and Facebook’s market cap. They are worth $790 billion and $554 billion, respectively, because of paid ads.
Now let’s break down the data by company size.
2. DOES MARKETING SPEND BY CHANNEL CHANGE BY COMPANY SIZE?
When talking to these companies, we broke them down into three groups.
The first being under 5 million in yearly revenue (with a minimum of $1 million per year). The second group was $5 million to $100 million, and the third was over $100 million.
Do you see a trend? No matter what size a company is, most of its marketing budget is going towards paid ads.
When asked why the most common responses were easy to scale, you can see a direct ROI. See the Generating Solutions to Marketing Flaws and How to Improve it?
Now let’s look at the conversion rate per channel.
Conversion rate by channel
Before sharing with you the conversion data, out of the 208 companies interviewed, only 73 of them had the correct tracking set in place for me to get accurate numbers.
If you want to succeed as a marketer, you need to set up your tracking correctly.
You don’t have to pay for an analytics solution. You can use Google Analytics and set up goals and conversion tracking.
Here is the average conversion rate per channel:]
When looking at the conversion data per channel, you’ll notice that SEO and content marketing were combined because they go hand in hand.
The graph clearly shows paid ads convert better. And they usually do because you can control the landing page the traffic goes to.
Just look at these 2 pages below. They are both on page 1 of Google for the term “auto insurance.”
This one takes the top spot through paid ads:
And this one takes the top organic listing:
It’s obvious why the paid one converts better. The design focuses on converting a user into an auto insurance client.
The organic listing (the second one) has tons of text because, without the content, it wouldn’t rank high on Google.
But looking at pure conversion rates doesn’t tell the whole story because some marketing channels are more expensive than others.
To get an idea of how effective a marketing channel is, you have to look at the return on marketing spend.
Return on marketing spend doesn’t necessarily mean how profitable a channel is.
All it’s doing is showing the return based on marketing spend.
For example, although Facebook Ads don’t convert and Google Ads, they are much cheaper. Out of all the companies we interviewed, on average, they generated $3.04 in revenue for every dollar they spent on Facebook ads.
What’s interesting about this data is that it shows 2 things:
1. Facebook Ads produce a better return on ad spend over Google Ads – this makes sense because it’s much cheaper to advertise on Facebook, and it hasn’t been around as long as Google. Facebook Ads are quickly increasing in cost, and over time the return on ad spend will probably even out with Google AdWords.
2. SEO produces the best returns – assuming you have set up your conversion tracking correctly, SEO is very effective because you can focus on increasing traffic from the right keywords that are causing sales. SEO’s only problem is that it is a long-term play, and you won’t see results instantly.
So what are the flaws?
Well, nothing yet, because you don’t have all of the data yet.
1. PAID ADS ARE JUST INCREASING IN PRICE
It means you can expect to pay more for them each year.
Google generated $50 billion in 2012 and $160 billion in 2019. Yes, Google generates revenue outside of ads, but ads still make up 90% of their income.
2. THE MAJORITY OF USERS DON’T CLICK ON ADS
But still, companies focus their marketing budgets on ads. Did you know that only 2.6% of the searches result in a paid ad click?
Now, the remaining searches may come from the cause of clicks on organic listings.
34% of searches get no clicks because Google is solving many search queries through their knowledge graph. It means a user won’t have to click. Plus, people click on images, new stories, map listings, and whatever else Google decides to show.
You know ad costs are going to keep going up because they have over time. And users prefer to click on the organic listings, yet you still spend most of your budget on paid ads.
It does not mean that you shouldn’t leverage paid ads. It’s recommendable still to spend the largest portion of your marketing budget on paid ads because they are easier to scale, they convert better, and you’ll see an instant return assuming you know what you are doing.
3 Lessons to Apply
Here are 3 lessons for you regarding your marketing efforts and how you should invest your time and money.
LESSON #1: GET GOOD AT SEO
You’re going to struggle to keep your business profitable as your cost to acquire a customer is going to rise continually.
If you don’t believe it, look at Google’s revenue graph shared above.
And learning on-page SEO and link building isn’t enough. To do well these days, you’ll have to incorporate social media marketing and content marketing.
But here’s the beauty: If you get it right, your cost for SEO will continually go down over time compared to how much traffic and sales it’s driving.
2020 isn’t over yet, but costs will be lower than in 2019, and traffic is higher.
SEO is costly initially, but it generates one of the highest ROI because you don’t have to keep spending money at the same pace to generate greater results.
With paid advertising, if you stop spending money, your traffic and sales will stop. If you want to scale fast, it tends to cost more per visitor instead of less per visitor, like SEO.
Suppose you will max out your SEO efforts recommended. Ensure you know what is causing an ROI, or else you’ll waste time and money acquiring traffic that won’t ever convert into sales.
LESSON #2: UGLY IS CALLED THE NEW SEXY
Of the 208 companies, one simple question we give is: which marketing strategy has provided you with your biggest return on investment?
It was CRO (conversion rate optimization)!
The second runner-up was SEO.
If you already have traffic, optimizing for conversions is one of the simplest ways to grow. Assuming you can come up with tests that perform better than your control.
Interestingly, less than 1.7% of marketing spend was allocated towards CRO when you look at all companies as a whole.
We can understand why companies generating under $5 million a year in revenue don’t spend much on CRO because they don’t have as much traffic.
But if your company generates over $5 million a year, you should consider allocating more of your budget towards CRO.
Yes, it’s not as sexy as SEO or social media marketing, but it works. Check now the Generating Solutions to Marketing Flaws and How to Improve it? You can check the Generating Solutions to Marketing Flaws and How to Improve it?
LESSON #3: DO NOT FORGET LESSON NUMBER 2
Most marketers and companies want to be hip and cool. In other words, they want to spend more time and money on cool marketing channels.
When each company asked if, “Which marketing channel do you feel has the most potential” here are the responses:
What’s shocking about the chart above is that both B2B and B2C companies almost equally agreed Instagram and YouTube have the most potential.
Although Instagram is cool, ads are costly, and it’s hard to generate a positive ROI on Instagram.
Building up your Instagram reach organically is definitely doable, but it’s hard to drive traffic from Instagram to your site unless you have people swiping up.
As for YouTube, there is huge potential in it as long as marketers are willing to create videos. YouTube SEO isn’t competitive, and ads are still affordable.
But here is the thing, you can see from the data above that most of these large companies have been built off traditional channels like paid ads and SEO.
These newer channels are sexy, but the old ones still work extremely well.
And you haven’t even seen the maximum potential of both paid ads and SEO because most of you haven’t fine-tuned them.
If you want to grow your traffic, leads, and sales, here’s how you should prioritize your marketing budget:
- Spend more on SEO – whether you are a small company or a large one, SEO will produce a better return on your investment than paid ads in the long term. With all of the companies asked, less than 3% dominated the organic listings. But before you go all-in on SEO, you need to set up tracking correctly so you aren’t wasting your time driving traffic that doesn’t convert.
- Keep your SEO budget reasonable – Most companies should never spend more than a million on SEO. Yes, huge companies will, but when you max out your SEO budget, it’s nowhere near as expensive as paid ads. As for what the amount will be, it ranges a lot depending on the industry, how competitive it is, and how fast you want to grow.
- Invest more in CRO – if your company generates at least 5 million dollars, you should consider spending more money on CRO. Many of you don’t care for it based on the data above (plus, my CRO blog posts aren’t as popular as my SEO ones), but it will help tremendously. It will allow you to spend more on paid ads as costs rise, and it will increase your overall profit margin.
- Avoid the sexy marketing channels – you shouldn’t consider copying others when it comes to Facebook, YouTube, etc. if you haven’t figured out the basics yet. Spend more time and energy on what’s proven.
- When you’re small, test – many of you have businesses that generate less than a million dollars a year in revenue. If this is you, don’t follow the formula above. When you are starting, it is best to test 4 or 5 marketing strategies out simultaneously. Spend very little money on each of them, whichever one produces the best return. That’s what you should focus on in the short run.
If you are one of the rare marketers in which you’ve mastered all of the above strategies and already implemented them. The next step for you is to think outside the box and be a bit more creative. Generating Solutions to Marketing Flaws and How to Improve it.