Pay Per Click Ads or Lottery Tickets?

I have been struck by how many small to medium sized wineries readily invest in pay per click (PPC) advertising without examining their return on that investment.  Many actually lose money on them in both the short and long term.  By the end of this post, you’ll have the tools you need to check your PPC ROI and decide … more ads or more lottery tickets?

A number of external market forces work against small/mid-sized wineries when advertising on Google Ads, Facebook, etc.

‍First, a lack of a supporting brand presence makes PPC an uphill climb.  People rarely see a consumer ad and make a purchase after 1 “touch” or exposure.  This is critical because small/mid-sized wineries don’t have the marketing budget to generate a lot of exposures to their brand.  Experts provide varying estimates but generally agree on a range between 7 to 12 touches to get a customer conversion.  If it takes 8 touches to get a customer conversion (link stat), how many ad impressions will it take in combination with your organic exposure to get that conversion?  This means many of your paid clicks are “touches” along the journey to the conversion but unfortunately not the last touch before conversion.  With less brand presence, the % of paid touches goes up, working against smaller wineries that don’t have broad brand awareness.

‍Two, the small budgets risk customers taking a detour after clicking but before buying from you.  If your ad targets Napa Cabernet Sauvignon, you get John Doe to click on “touch 5” of their journey to trying a new wine.  However, they later search for the same terms, looking for the same “solution” and yet at the point of conversion, your ad doesn’t show up but some other winery does and John buys a new Napa cab to try, just not yours.  So you helped John get to the point of buying a new wine, but at the decision window, your ad doesn’t show and you don’t get the purchase.

‍Finally, the economics don’t work well.  Let’s say you pay $3 per click for your ad. In reality, it will range from $0.50 to $10+ depending on the platform, key words, and geographic restrictions.  For example, if you do a 20 mile radius around St Helena and “cabernet” or “wine tour” you’ll have a high CPC.  Let’s say your web conversion rate meets the average between 2% and 3%.  If we stick with a cost per click of $3 cost per click and a 3% conversion rate, you pay $100 in PPC ads to get 1 conversion.  Do you get a first order that nets over $100 in profit?

Ahh, but lifetime value of the new customer may offset this initial cost of acquisition.  Before you add in that complexity, check your ROI at time of conversion.  You may see a clear ROI on conversion that settles the question.  If the initial ROI looks close to a profitable client acquisition, you can model out the ROI over the lifetime to confirm.  To do that you’ll need to know the retention rate of customers acquired via PPC ads, average spend over three to five years, cost of retention efforts, etc.

To help with these calculations, here are two online PPC ROI calculators.  This first one does a simple ROI based on value on first conversion.  This second one allows you to treat the tasting room visit as a lead and value the customer off club sign up (and conversion rate.)

So two key things I’d like you to take away from this post.  One, measure your PPC campaigns to make sure you understand the short and long term ROI.  Two, most importantly, we have limited marketing budgets and these choices matter.  PPC ads are easy and considered a best practice but make sure it is the right investment for you.  Do you have your search engine optimization, your web experience, new customer email journeys all in a good place?  Make sure you have the supporting pieces in place to get the most out of any PPC campaign.  Otherwise you might be better off buying a lottery scratch off.

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