My husband and I own a successful small business - the success is thanks to him. He works his tail off making it great, I give advice at dinner time.
Last week he told me about a meeting he had with a salesman selling online yellow pages and other online search placements- a common occurrence these days. The yellow pages sales person has an existing relationship, and that huge paper book is finally migrating online. A quick, easy way to get a good presence on the web by just checking a box for one annual fee. Not so fast.
For those business owners that don't take the time to look past the sales pitch and do the math, these deals can be deceiving. Here's what they were proposing:
12 months of listing in the online yellow pages plus a "click package" from "various search placements" (they would not specify where) across the internet for $11,500 annually. OK, so for alot of you e-commerce leaders and marketers out there, spending less than $12,000 a year sounds like chump change. But in the perspective of a small business, that's not a small amount of money. All of this of course came wrapped in the sales package of the "billions of searches" that are done ever month, and the "millions" of people that are out there searching for businesses like yours, waiting to find your listing.
Fortunately, my husband had the good sense to ask a few practical questions and press on some assumptions:
Question: "You mentioned the "billions" of searches that take place every month on the internet....doesn't Google get over 60% of those? So, how many searches do you get for my service in my town? Answer: (after an enormous amount of seat squirming and tap dancing) 6000 searches a year. So much for all of those billions.
Let's make some assumptions on how many of those searches are actually going to result in a click on my placement - so, if we said that 5% of those people were going to click on me, that's probably very optimistic, but let's use that as an assumption. That's 300 clicks a year. Let's then add to that the 3,000 "guaranteed" clicks that are thrown in as part of the click package. So 3300 clicks.
Now, let's say that 5% of those people actually pick up the phone and request a quote - again, probably optimistic given that most of those clicks are coming from "various search placements" and there's no accountability for the quality of the click. That's 165 leads at a cost per lead of $70.00
OK, now let's assume that 25% of those actually turn into an order , at my average order value of $500. Forget about re-orders and repeat business for now, this is just about acquisition. That's 41 orders and $ 20,625 in sales. The ad cost is $11,500, so about $279 for a $500 order. And that's comparing ad cost to sales, not REAL ROI.
AND we're being really optimistic on the clicks and calls. And this is a supposed to be a GOOD deal?
Now, all of this only gets better when you find out that this salesman boasted that several other similar businesses in a neighboring city were already signed up, they're having great response to the program!
When my husband walked him through the math, the salesman sheepishly shrugged his shoulders as if to say "I wasn't counting on you being this smart..."
Seeing online marketing from this perspective is both interesting and disturbing. Clearly, small businesses have an enormous amount to gain by having a presence in paid search and probably even in some of the online yellow page directories. But these are small businesses after all. Most of them - plumbers, hair stylists, print shops and the like don't know anything about direct marketing and are intimidated and mystified by the online world. They are being blindly led by an advertising sales process that is stuck in the dark ages, and don't understand that paying for performance and tracking results down to the sale and beyond is a critical component of making direct marketing work.
And, let's remember that local search has not been mastered yet by either the directories or the big portals. So you have a deadly combination of advertiser ignorance and salespeople who either a) are taking advantage of the ignorance or b) are too ignorant themselves to modernize their product and pricing models into truly accountable formats.
Darwin will take care of this eventually and the expertise on both sides will evolve - maybe. But small business owners have a very short attention span for new things. If the guys that sign up for this snake oil see that over the course of the year they aren't getting a return for their money, they're not coming back. Even if the deal is better, like a pay per call or true pay for performance model, all they will likely remember is that "The internet doesn't work for us. We tried it".
So, if you're in big business and you know someone in small business - help them out. Educate them, help them understand that there are easy options for them to have a presence on the internet that offer a reasonable return. Walk them through the math. Tell them to consider a more accountable and track-able model, like pay per call or pay per lead. And tell them to watch out for the snake oil salesman.
And if you're a small business owner, beware, but be brave. You can be successful on line - but find a friend (or a wife), not a snake oil salesman, to help you.
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