There are so many cool ways to use Google AdWords to help grow your local business. Every day I try and come up with new ideas on how to use AdWords to help my local business clients. This week I thought of a cool idea I’m calling the Zip It and Clip It AdWords Strategy. This strategy will work great for local businesses like dry cleaners, dentists, and oil change businesses. Here’s how it works.
Target Your Zip Code In AdWords
The strategy is two-pronged. First, you target the zip code your business is in in AdWords. Set up a campaign with your search keywords and set the location as your zip code. For a dentist office you would target keywords like “dentist,” “I need a dentist,” and “dentist in Dallas,” or whatever city you’re in. Then the dentist would set the location setting as the zip code his office is in. This way he is targeting people very close to the business.
Offer A Coupon
After you set up a campaign with your keywords and the location set to the zip code around your business, you will add some ads offering a coupon to entice people to click on your ad and give your business a try. Create a simple landing page using instapage that offers the coupon mentioned in the ad. Instruct the customer to print the coupon out and bring it into your business when they come in to get the discount. Offering a coupon will entice people to 1) click on your ad, and 2) convert into becoming a real customer and try your business.
CPA < CLV
The reason this simple AdWords strategy is so powerful and profitable can be explained by a simple formula: CPA < CLV. These acronyms stand for cost per acquisition and customer’s lifetime value. The cost per acquisition metric is how much advertising money it costs you to acquire one new customer. And the customer’s lifetime value is how much money you make on average from one customer over the lifetime of them being a customer.
If a dentist makes $200 per visit and the average patient sees him two times a year for five years, then the lifetime value of a customer for the dentist is $2,000 ($200 per visit X two visits a year X five years). If your cost per acquisition is less than the lifetime value of a customer then your adversing budget is being spent profitably.
The beauty of this zip it and clip it strategy is that you spend a little money to acquire a customer one time, and then benefit from that customer’s business over and over for years to come.
Looking at the dentist example, let’s say it costs the dentist $150 to acquire a customer in his office’s zip code using Google AdWords.
CPA before coupon = $150
And let’s say the dentist wisely uses my zip it and clip it strategy and offers a $100 coupon in his AdWords ads and landing page.
CPA with coupon = $250.
So to acquire a customer using my zip it and clip it strategy it costs the dentist $250. Now let’s look at the customer’s lifetime value.
As stated above, the CLV for the dentist is $2,000. Every patient, on average, is worth $2,000 to the dentist over their lifetime as a patient. This CLV is much more than the $250 CPA, and since CPA < CLV the dentist is making money on his AdWords zip it and clip it campaign.
Always Think Long Term
In the short term this looks like a bad strategy. The dentist is spending $150 to get a new customer from AdWords, then he’s offering a $100 coupon. The AdWords patient pays the dentist $100 (normal $200 charge minus the $100 coupon). So the dentist is spending $150 in advertising and only receiving $100 in revenue. That’s a $50 loss in the short term. But the dentist is thinking long term and knows that on average, each patient comes in twice a year and stays a patient for five years. The dentist knows that the average patient’s lifetime value is $2,000. The dentist doesn’t care about losing $50 in the short term since he knows that each new customer is worth $2,000 on average. The cost to acquire a new AdWords patient is $250. And the average lifetime value of a patient is $2,000. So every time the dentist acquires a new AdWords patient in his zip code with the coupon strategy, he is losing $50 in the short term, but making $1,750 in the long term.
Local = Convenient
The zip it and clip it strategy works because it targets potential customers in your zip code who live very close to your business. Your coupon gets them in the door, but your location keeps them coming back. If someone finds a dentist, a dry cleaner, an oil change business etc. that is competent and conveniently located, then they will keep going back year after year. The zip it and clip it strategy takes advantage of this cycle and ensures that the cost of acquiring a new customer is going to be much lower than the average lifetime value of a repeat customer. And when CPA < CLV your AdWords campaign is going to be very profitable.
If you run a local business use the zip it and clip it strategy and let me know how it goes.