Lead Generation on Google

Author: Petra D.

If you run a business selling high-value services (education, consulting) or products (software, real estate etc.) then you need to get high-quality leads for your sales teams to drive revenue. Digital marketing has proven to bring relevant traffic to many businesses’ websites, but for many lead generation customers, it’s quite difficult to translate this into sales. For the purposes of this article, we’ll focus on Google Ads as the main lead generation engine, but the general principles should apply for any marketing activity. 

Google Ads for Lead Generation: Challenges

First, let’s explore why lead generation with Google Ads sometimes is not as easy, or at least not as straightforward, as other industries. Google ads has a very powerful algorithm, which looks at multiple variables to decide how much to bid and what the chances are of a click becoming a sale. For any company that has the sale happen on their website, Google ads can calculate the value as one of the many variables it uses. The more data the algorithm has, the better it works, so volume is also a crucial factor in how well the algorithm works. 

These two factors are what make lead generation more difficult for Google Ads: 

  1. The sale doesn’t happen on the website, but instead after a longer sales process. Longer can mean a few days or a few months, depending on the business.
  2. The volume of sales is usually much lower. Lead generation businesses tend to be lower volume and higher value transactions.  

Most of the companies struggle to get enough leads or leads with appropriate quality. Remember that Google needs at least 15 ‘conversions’ per month, but in reality it’s still making too many assumptions until it’s getting at least 50 conversions per month. 

Quality vs. Quantity: Picking the Right ‘Conversion’

On any kind of transactional website, a ‘conversion’ is pretty easy to define. It’s the action that brings in revenue from customers. Usually a check out basket or a hotel / flight booking. However, for lead generation, most websites consider a completed ‘contact us’ form or other kind of lead form their main conversion. 

The obvious challenge, then, is that Google is optimising for leads, with no consideration for lead quality. This means most metrics you can see within Google Ads have no real business meaning. It’s common for marketing to look at a lower CPA or CPL (cost-per-lead) and feel they’re doing a good job at optimising, all while sales complains that marketing sends them bad leads. Sometimes, optimising for cheaper leads means Google is actually bringing in much lower quality leads, so essentially adding negative business value by making the sales teams work harder for the same revenue. 

Getting enough high quality leads depends on many factors, but usually you need to identify your potential target group, set the right expectations and budget for paid ads, and outline your USPs (USPs should be features or services that your Top 3 competitors can’t claim to have) to call out in your creatives. It’s good to do some competitive research to see clearly how you compare to direct and indirect competitors services/products.

Calculate Your “Break Even” Point

When deciding how much to spend on Google Ads, it’s important to understand to set the right expectations and metrics for evaluating the investment. Too many businesses turn on Google Ads, spend some amount of money, then decide it doesn’t work for them. While in some cases this can be true, in most cases there wasn’t a clear understanding of exactly what the goal of the campaign was and how to judge if it worked or not. 

A simple exercise to plan any paid marketing campaign is to calculate your break-even point. We would usually recommend you take the value of your highest paid service or offering and multiply by three. For this example, we’ll assume a business sells a 10,000/year (EUR or USD) software + service package. We would then evaluated what their break even point is if they spent 30,000 (EUR or USD)

Assumptions:

  • 30% net margin on 10,000 offering, 3,000 net profit per sale (after all taxes and operating costs)
  • 3 month sales cycle, on average
  • 10% of quality leads convert to a sale

Calculation of Break Even Point:

  • You would need 10 sales to cover the 30,000 investment
  • You would need 100 quality leads to generate 10 sales (Cost Per Lead target of 300)
  • If you got 100 quality leads in the first month, you would see the sales come in month 4

Not every business is able to easily calculate their net profit, due to having larger fixed costs and somewhat complex or separated operational set ups. However, you should be able to provide some estimate for the purposes of planning your Google Ads campaign. This is also something our team is specialised in and can support you with. 

Defining your Lead Generation Strategy

Now that you’ve calculated your break even point, how should you define your Google Ads strategy? Our advice is to look at Google Ads as a mid-term investment for your business. If you’re already running Google Ads, this approach can be used to analyse if your investment to date was done correctly. 

First, you should decide how much to invest and for how long. In our example above, we have a 3,000 profit per 10,000 sale, and a 3 month sales cycle. The minimum that we recommend, in order to get a statistically significant test, is the following formula:

3 x (net profit) x (average sales cycle+1 month)

In our example, this would be:

3 x (3,000) x (3+1) = 9,000 over 4 months = 36,000

Now, the success of the campaign should be judged using the following approach:

First month you should aim to break even. This means you would need 3 sales from the first month, so if they were high quality leads, that would mean 30 leads / month. However, in order to ensure quality leads, we will also need to give Google the lead quality data from your CRM system, which we strongly recommend and can help implement this for you. This requires an understanding of your lead generation and lead-to-sales processes.

If you hit the first month target, then you can be confident that over the next three months, Google can bring down your CPL and bring in profitable sales. Also, even though we calculated a break even point, there is a halo effect with each new client in terms of potential referrals, repeat business, etc., so the business should be in a strong position if it successfully breaks even the first month. 

Before you start, there are a couple checks you need to do based on the above:

  • Is the number of leads a realistic target? 

In our example, we are aiming to get 30 leads / mo. but if you are only currently getting 5 leads / mo. on your website, that target may be unrealistic. In this case, the business may still be too small to invest in Google Ads. 

  • Have you done extensive keyword and competitor research? 

Lead quality is very much dependent on which keywords you’re bidding on and what the competitive environment is like in your industry. This is why search ads can be very expensive, especially if more and more competitors compete here for a constantly decreasing demand, just like in many industries at the moment. 

  • Can you produce good image and video creatives? 

It’s important you have your USPs clear in your ad messaging and use a variety of ad formats. USPs also are a key factor in getting the best quality lead quality, and this is usually done through creative messaging. If you only advertise in Google Search, you are only reacting to existing demand, but do not create any new demand. For most advertisers, it is necessary to expand their reach outside of Search to generate new demand and to reach potential leads before competitors reach out to them.

  • Are you capturing your leads correctly? 

With the current online privacy-first environment, many Google Ads campaigns are set up in a way that many of their leads get lost or are not tracked correctly. This is especially true in the EU, where GDPR and Cookie Privacy laws can be complex to follow for many businesses. 

In conclusion, utilising Google Ads as a quality lead generation engine requires some planning and expertise. It’s easy to waste money, as there are a variety of factors that need to be implemented correctly to drive the right kind of leads that result in profitable sales. 

Do you need a proven Google Ads Agency Partner to help you to build a successful Lead Generation Strategy with Google Ads? If you are planning to launch a Google Ads campaign for your business, or need help on your current Google Ads strategy, reach out to the MarketingLens team for a free consultation and audit.

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