Solving the Low-Budget Online Marketing Dilemma

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Stop me if you’ve heard this one:

Your bootstrapped startup is finally off the ground. You’re able to spend $6000/mo on AdWords to drive leads. Sure the conversion rates could be better, and sure it’s not the best ROI on Earth, but on the balance it’s making money.

You don’t have a huge budget, but you can plough some of your winnings back into advertising.

You’ve heard banner ads don’t work well, but they’re cheap, so you start throwing $600/mo into an ad network and trust your web analytics to tell you whether it’s working. The jury is still out, but there’s been only two signups in the first month. Maybe your ads suck?

You’ve heard affiliate programs can work wonders, so you sign up with a cloud affiliate provider and figure you can afford to pay $50 per signup.  A hundred affiliates take the bait, but two months later, half of them haven’t sold anything, and most of the others have sold only once. Two are producing five signups a month, and it’s only cost you $1000 so far, so it’s not all bad, but it’s not moving the needle.

So now what? Should you work on optimizing AdWords since they’re working, or optimizing banner ads since they’re not working?  Should you cut off the affiliate program since it’s a waste of time, or redouble your efforts in affiliate management? Should you optimize these existing channels or try to find a new, more productive channel?

These aren’t hypotheticals — I talked to no fewer than four startups in the past few months (mostly at SxSW) in exactly this position, with these advertising channels, with about the same costs. And my own company WP Engine wasn’t dissimilar two years ago.

So here’s some assorted tips:

“Maximum inventory” is the answer to “Should I optimize?”

A common question is: “Should I spend more time optimizing AdWords? Or find more keywords? Or focus on another marketing campaign completely?”  A common — and unacceptable — answer is “It depends.”

I approach it as a matter of inventory. In advertising, “inventory” means “all of the available advertising space.” In a magazine, that means the total square feet of space allocated to the adverts.

In AdWords, that means the maximum clicks you can get across all relevant keywords.  If you’re the #1 spot for a keyword, you’re already getting the maximum number of clicks for that keyword, and therefore you’re occupying the maximum available inventory. (Of course there’s more inventory for other advertisers, but AdWords allows you only one slot, so this is the maximum available to you.)

So, look at how much additional inventory you think is available for you in AdWords.  If you’re in lower spots for most keywords you care about, or if there are other keywords you’re not yet bidding on, there’s probably a lot more inventory you could be taking. That implies it’s wise to optimize — there’s more sales for you there, and it’s easier and cheaper to optimize an existing campaign than to start up a new  one. You might even experience some cost savings (per signup) as part of your optimization — bonus!

If you think there’s 2x or more inventory you could go get, I say go get it.

However, that’s not the case for us at WP Engine.  At the instant of this writing, we’re the #3 spot on AdWords and the #3 organic spot for “WordPress Hosting” which is one of our most important keywords, and #1 for “Managed WordPress Hosting” which is perhaps our most accurate keyword.  And traffic on related keywords diminishes quickly and therefore improving on those is even less interesting.

We don’t have a lot of inventory left.  We believe less than 2x.  Therefore, even if we spent tons of money on human analysis and were willing to lose money on every sale, it still wouldn’t be an area of significant growth for us.

Once you approach inventory limits, you need to find other campaigns which can 2x your business.

No benefit of the doubt.

When you try a new campaign and it utterly fails, the temptation is to keep spend low and try to optimize. You think:

I might be just a clever turn of phrase or an eye-catching design away from changing that click-through rate from 0.1% to 1.0%, and then I can ramp up spending and have an important new advertising channel.

After all, this same messaging worked great on AdWords, so I know it’s reasonably well-tested. Something small is probably holding me back.

And I recognize my marketing prowess with this company is nascent, so of course campaigns will suck at first but improve with iteration. So let’s iterate!

I’ve found that this line of thought is usually wrong. I don’t have data to give you, it’s just been my experience.

Thinking about the 100+ campaigns I’ve been a part of in the past 11 years at Smart Bear and WP Engine, the ones that were bad out of the gate tended to stay bad.

Maybe it’s because by the time you get to the third campaign your messaging is pretty good, so an early failure means it’s a bad channel rather than a bad message. Maybe it’s because iteration gets you incrementally better but not drastically better and therefore can’t save a fundamentally bad channel. Maybe it’s because a failure is an indication that you don’t understand the channel at all, a condition that simple iteration won’t remedy.

In any case, cut out early and go find another channel.

Website trumps all.

Optimizations you do on your website are more valuable than those you do on individual marketing campaigns. The reason is obvious in retrospect: all marketing campaigns lead there!  So a 10% improvement in bounce-rate off your pricing page means 10% more revenue across all campaigns: paid, organic, and word-of-mouth.

It’s often true too that landing-page optimizations can at least somewhat be shared. The exact text can’t, but often you can cross-apply a layout that increases click-through rate, a form that captures an email instead of signing up directly, or a message to one customer segment that happens to be accessed by multiple marketing campaigns.

Often an early-stage startup has large-effect optimizations lurking all over its website. Maybe the testimonials or demo page is missing, or not compelling, or you realize testimonials need to be on all pages, or a long-scrolling, well-designed home page triples click-through rates, or you didn’t have a strong call to action, or the pricing page was confusing, or your main hook and product description was turning people away.

Only look for large effects.

When you’re small, almost no data you have is statistically significant.  Therefore, most variation you see is due to random fluctuations, not real results, even if you’re using one of those tools which supposedly helps you with the statistics.

I have a 45-minute talk on this topic which is too long to interject here, so you’ll just have to believe me.

The result is that you should only be seeking large effects, and only thinking you’ve “learned something” on that basis.

If you’re getting one sign-up a day, a “10% improvement” still means one sign-up a day.  You need two signups a day.  You’ll know if you get a change that drastic! Those are the only important changes.

Low-budget advice only!

Finally, as the title suggests, this is advice for low budget online marketing. Large budget marketing is completely different. You try as many channels as possible, as fast as possible. Find the ones that work as quickly, then immediately ramp to full inventory. For channels like affiliate programs where you can’t just “write a big check” and make them work, you develop an entire team to extract as much value as possible. The fact that you burn a lot of cash on things that don’t work out is exactly the trade-off you want.

Accelerated (cash) burning for accelerated learning. Good work if you can get it!

But if you’re cash-strapped, use inventory limits to decide whether to flog a channel, get out of bad channels quickly, optimize your website before optimizing channels, and don’t get excited by tiny, immeasurable results.

Please leave more tips in the comments!

  • Oli

    As someone who works mostly with small businesses and startups, this hits close to home.

    Often the best results I have in these situations is to spend time researching keywords that are 90% of the time going to be someone looking to buy – and then spend time optimizing the landing pages for that traffic, rinse and repeat, only focusing when i get a hit.

  • http://httpcolonslashslashwww.www.startupjerkfest.com StartUpJerkFest

    I was confused by the word inventory. I don’t like it. Inventory is internal based. You’re looking for external indicators of potential growth, i.e. how many points away from the perfect score.

    Doesn’t it also depend on how well you can improve your position, based on creative copy or strategy / tactics to take share away from the competition?

    • http://blog.asmartbear.com Jason Cohen

      You’re right that it’s confusing, however it’s not my word! That’s the correct term in the advertising industry.

      “Inventory” is the maximum available. So by definition it *is* the best position, best copy, etc.. Unattainable, and for online ads, theoretical. However, if e.g. you’re in the #1 spot already, you wouldn’t assume you can triple the number of clicks by changing copy. Whereas you might triple signups by better landing pages, website layout, adding other advert campaigns, etc..

    • http://twitter.com/n8ngrimm Nathan Grimm

      It’s inventory from the perspective of the people selling it. If you have a magazine or a radio show or a website, there’s only so many slots to fill and you’re tyring to sell out of your “inventory” of ads.

      • http://httpcolonslashslashwww.www.startupjerkfest.com StartUpJerkFest

        exactly. it’s from your vendor’s perspective, not your perspective. it’s not your inventory. but i don’t want to waste time with a rant on another example of incorrect terminology. I prefer headroom.

  • StBedeofBerwick

    Like the article – it covers off some of the dilemmas small businesses face in commercialising their work.

    We’ve used a blog to successfully drive traffic to our website and then we’ve created free assets – case studies and fact sheets – to bring prospects down the funnel. Collect prospect data on forms and then provide them with information and, when appropriate, offers to get them to sign up.

    Best,

    John

  • http://patrickfoley.com/about Patrick Foley

    Jason, when cash-strapped, how useful have offline activities been for you? Did speaking at an event ever drive traffic for Smart Bear or WP Engine? Have you seen online businesses where offline channels have been helpful at the beginning?

    • http://blog.asmartbear.com Jason Cohen

      Yes definitely. Print ads still work if it’s the right industry and product, i.e. in instances where products are still sold that way. I like tradeshows only if they’re cheap, like if they’re local to you so there’s no travel expenses.

  • http://blog.maxlytvyn.com/ Max Lytvyn

    Good thoughts for someone who is just starting out. I went through same process with several bootstrapped companies, and agree on many points. I cannot emphasize enough the importance of looking for bigger changes. A/B testing ad copy or landing page fonts is tempting, but unless you are seeing 20%+ effects early on, you could be as well playing farmville. You need big effect size just to get statistical significance and sufficient growth, so try big changes.

    Another trick for bootstrapping is start with charging a lot upfront to optimize for cash flow. Start without free trial and with big initial ticket price, even if it’s a bit suboptimal for conversion. Then each new client will give you enough cash to pay for driving 3-10 other clients right away, and with each cycle you will have more cash in the pipeline. Once the cash flow situation is clear, then start optimizing for ultimate conversion and LTV.

    Where I would disagree with Jason is about assessing SEM – it’s often not as straight forward. For example, exact matches for keywords that precisely describe our product are now only 4% of total SEM traffic (from 100% initially). Why? Because there are many ways to reach a user via search ads. If your direct keyword is too competitive or too few people search for it (often the case if you are offering something rather new), think of other keywords that correlate with the intent you are trying to capture – maybe things people do before or after they would need your product, or things they buy instead etc. There less direct keywords are often 1) cheaper and less competitive; 2) cumulatively drive much more volume.

  • http://www.decalmarketing.com/adwords-book/ Iain Dooley

    I love how $6,000 per month is “low budget” :) I work with businesses that spend $5/day!!

    The “only look for large effects” advice is golden. It’s so easy to get caught up in the “statistical optimisation” trap: ie. a/b testing when you only have like 100 site visits per day and a 1% conversion rate will get you nowhere. It’s often overlooked in advice given about testing and optimisation: data is a really scarce resource in the early stages of your business, and without the data you can’t make very well informed decisions except through radical redesigns/changes that will yield huge results or none at all.

    Another great way to choose “what to optimise” is to think about the “business blueprint” that Juan Martitegui talks about in his Mixergy Premium course.

    More often than not I speak to people don’t really have that big of a marketing problem, but more of a sales problem. As you pointed out: changes to your website (which I would count as being “sales”) can be just as important as changes to your marketing.

    So the 4 “strategic levers” that Juan talks about are:

    1) Prospects: people who are aware of you

    2) Customers: people who buy from you

    3) Frequency: how often they buy

    4) How much they spend

    You can get a gut feeling for which of these you should be focusing on by putting your current numbers into a spreadsheet and throwing out some “hypotheticals” like: if I were to increase my traffic by 10%, what would be the impact on my bottom line? But if I were to increase conversions by 25%, would that yield a better result? You can usually have a reasonable “instinct” about how hard each result would be to achieve, and then let that tell you where to focus.

    I think that what you’re talking about above mostly pertains to prospects: ie. people who you’re in front of who might buy from you. And if you’re finding that that’s the constraint in your funnel (ie. “our conversions are fucking incredible and people never stop spending! if only we had 10x the traffic we’d be minted”) then you should be trying to get investment to spend as much as you can on marketing.

    But in most cases for “low volume” businesses, especially those just starting out, they’re much better to focus their time on interacting with their customers to improve their messaging, doing lots and lots of email to get as many of their current prospects to buy etc. rather than casting about trying to get more traffic all the time, that is solving their “sales problem” rather than trying to solve both their marketing and sales problems at once.

    Also: unabashed and shameless plug here but Jason, depending on the match type for those keywords you’re #1 on, a little systematically performed “human analysis” could yield huge results for your business. You should buy my book while it’s still cheap ;) http://www.decalmarketing.com/adwords-book/

    • Ugh

      Is this spam?!

  • Jeannine Scarff

    Low budget is a really a problem. As a SEO agency, I wish $10000 is not so more.
    los angeles seo agency

  • http://www.incion.com/ profesional web design

    Excellent article you have presented here…

    • http://httpcolonslashslashwww.www.startupjerkfest.com StartUpJerkFest

      excellent spelling of the word “profesional”

  • Ramsay Leimenstoll

    I think this is great advice not just for the cash-strapped, but for the *personnel*-strapped, too. Some companies have a fair bit of cash to spend on campaigns and things, but not enough for a lot of salaries – so when you’re limited to only 1 or 2 people who can write your landing pages or Adwords campaigns, etc., this is a great guide to keep your employees’ investment at the most effective level. Thanks for a great post! It’s kind of a relief to read, actually, working in a teeny-tiny department myself :)

  • http://tropicalnomad.com/ Adam Finan

    “Your bootstrapped startup is finally off the ground. You’re able to spend $6000/mo on AdWords to drive leads.” Holy Shit, I wish I could spend that every month!!

  • http://Foodsworth.com/ Foodsworth

    We’ve found experiential marketing events work as well. We focus on providing the best experiences to the users we do have, so they feel compelled to share our service with their network.

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  • me d

    $6k a month is low budget? %@#!, I’ved had jobs that paid less than half that much per year. What startup is that and how can I get hired there?

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