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It's frightening how many contractors want growth, but aren't "all in" with pay per click (PPC) advertising and search engine optimization (SEO). But, what's more frightening is that the window of opportunity to drive profitable growth with strategies like PPC and SEO is closing - fast.

You see, at the highest level, Google is a real estate game. Depending on which study you reference, something like 80-85 percent of the available clicks (for a given keyword phrase) go to one of the businesses with a listing in the first page of search results. Most of those clicks go to the organic listings (likely 70-75 percent) with about 10-15 percent going to the paid ads (PPC ads - located in the highlighted portion of the page at the very top, along the right side and sometimes at the very bottom of the page). According to some studies, a staggering 30-40 percent of available clicks go to the top organic listing (read: so, if your business is listed fifth on the first page, it's worth continuing to fight to move up to the second or first spot)!

So, the more first page real estate you have, the more clicks, leads and sales you're going to get (and it's worth noting that PPC ads do not significantly cannibalize traffic from the organic listings). Are you starting to see the problem, and why the window of opportunity is closing? There are roughly ten organic listings (excluding the map listings) and ten paid (PPC) ads. How many competitors are there in your market? How many of them are investing in PPC and SEO? Out of those, how many really know what they're doing (or have hired someone that does)?

In most markets, there are far more contractors than there are first page organic or paid search listings. Two or three years ago, most contractors had no idea what PPC and SEO stood for, let alone how to execute an effective strategy for each. Even those investing in either PPC or SEO were doing so via their current or former yellow page rep (based on this sentence, you can infer how I feel about the effectiveness of this approach). The point is, in the past, even though there were more contractors than available first page positions, most contractors were either clueless or lightly investing in strategies like PPC and SEO.

Today, in most markets, things are far more competitive. As a result, the cost-per-click for PPC advertising has risen (don't believe Google's recent report that overall cost-per-click numbers are down... for the home services worth, the costs are going up, up, up - that's my prediction). When you have more competitors actively investing in SEO, the amount of SEO work needed to leap-frog them is going to increase. And this is exactly what has - and continues - to happen.

Take a look at these numbers:







These numbers are from a local residential plumbing
, heating and air conditioning company. They're currently investing $1,500 per month in SEO and (roughly) $3,500 per month in PPC. For them, $46 per direct lead (as opposed to a lead sent from a third party source like Service Magic) is fantastic! It's about a third or a fourth of what they'd be willing to pay (considering the percentage of inquiries they receive for replacement work, their lead-to-sale conversion rate and the average margin associated with the various jobs they do).

Their PPC budget is exhausted on most days and $1,500 for SEO is very low (relative to their larger competitors). With cost per lead numbers that are so favorable - and the willingness to grow - they should turn both dials UP. At the same time, they should continue to monitor their ROI very carefully. As more competitors enter the PPC and SEO market they'll need to make adjustments. For example, if they can increase their lead-to-sale conversion rates by training their sales reps, they will be able to (continue to) make money even with higher lead costs.

At some point, I predict that the ROI associated with with search marketing - PPC in particular - will decrease to the point that many contractors start seeking greener pastures elsewhere. Why? Because there are too many business owners that don't (accurately) understand how much they should be willing to pay to acquire a new sale, customer, lead, web visit, etc. When these folks enter the PPC / SEO game, you get this huge glut of people willing (because they don't know any better) to overpay for each click or focusing on increasing traffic when they'd be better served thinking about how to convert more visitors into leads. If this happens, PPC and SEO may become less profitable/productive. Savvy contractors will already be testing and moving their marketing dollars over to something new (maybe that will be PPC ads on other types of sites or more organic word of mouth efforts on social media sites, who knows).

Isn't this exactly what happened with the yellow pages? A whole bunch of contractors - mostly those that were accurately tracking the return of their ads - dumped their print ads altogether in favor of testing the web. Another group of contractors, mostly those that never accurately tracked their ads, stayed in the books. I remember one company telling me, "I can't cancel my yellow page ad because my competitor is still in there - if they're there, I have to be there." If I remember correctly, I think I almost started laughing and incredulously asked, "You're joking, right?" (they weren't joking). (Note: to be clear - in some industries and markets, print YP ads continue to work like a charm - the key is to track your ad.)

In conclusion, I track advertising for over 100 companies - the vast majority of which are home service contractors - so I can tell you that very few marketing strategies can rival SEO and PPC when it comes to measurable ROI. Over time, as I've stated above, I believe this will change. The more contractors that enter the search marketing arena, the harder it will be to make a profit and concurrently generate a decent number of leads.

So if you want growth and have the capacity for it, consider going "all in" with PPC and SEO. Track everything and grab as many new customers as you can. While you're doing that, don't forget to keep your eyes peeled for the next wave (cause this one ain't gonna last forever!).
 
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