Katharine Shapleigh

How Much Should Your Service Company Be Spending On Digital Marketing?

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Are you considering implementing a digital marketing channel like AdWords or Facebook for the first time, or are you concerned your business might be spending too much or too little in your current campaigns?

As a service company, your digital spending is not as straightforward as e-commerce because your customers are usually completing a request for service form or contacting you via a phone call instead of completing a purchase in the moment.

If these questions sound familiar, you should spend the time calculating your Maximum Cost per Digital Lead.  This number will help you test new or current campaigns against the essential question – Is my digital marketing profitable?

Let’s start with getting to know your service company – Here are some basic inputs to use in our equation for you to determine you maximum cost per digital marketing lead.

Average Revenue Per Service: _________

Service Frequency (years): _________

Total Services over Lifetime: _________

Total Lifetime Service Revenue: _________

To get this number, just multiply the first three inputs together (Average Revenue per Service * Service Frequency (years) * Total Services over Lifetime.

Here are some additional inputs I’ll explain further.

Cost of Marketing: _________

This percentage varies by industry but is typically 10%. An example of how this differs is the construction industry standard is 5% because of lower margins.

Close Rate: _________

This percentage considers how often your sales team can close a high-quality lead.

High-Quality Lead Rate: _________

This percentage acknowledges the fact that we’re not dealing with referrals, here – This is digital advertising so not every person who fills out a form or calls you will be a high-quality lead. In determining this number, consider how effective you think this digital channel will be in engaging the right type of lead (e.g. how strong is the targeting capability, where in the funnel this lead will be, etc.).

Now that we have all of our inputs, we are ready to calculate our Max. Cost per Digital Lead in three simple steps.

  1. The first step is calculating your Max. Cost per Acquisition (Max. CPA). To calculate how much you can spend getting each sale, just multiply your Total Lifetime Service Revenue * Cost of Marketing.

Example: $265,000 * 5% = $13,250.00. Now I know I can spend $13,250.00 per acquisition to maintain a 5% cost of marketing and remain profitable.

  1. The second step is calculating your Max. Cost per Quality Lead. (Max. CPQL let’s call it). To calculate how much you can spend getting a quality lead, just multiply your Max. CPA (calculated above) by your close rate.

Example: $13,250.00 * 50% = $6,625.00. Now I know I can spend $6,625.00 getting a quality lead in front of my sales team and still remain profitable.

  1. The third step is calculating your Max. Cost per Digital Lead (Max. CPDL let’s call it). To calculate how much you can spend getting any old lead from the internet that matches the parameters of your digital targeting, multiply your Max. CPQL (calculated above) by your High-Quality Lead Rate.

$6,625.00 * 15% = $993.75. Now I know I can spend $993.75 getting what AdWords or Facebook will tell me is my Cost per Conversion, which for a service company is really a Cost per Digital Lead (someone who fills out my form or dials my phone number). Because my High-Quality Lead rate is 15%, I am playing it safe by assuming that only 3 of 20 leads I pay to attract will turn out to be of high quality.

How do I use this number?

This is the best part – Now you have done the work to calculate your Max. Cost per Digital Lead, all you need to do to determine if your digital campaign is profitable is to watch your Cost per Conversion on AdWords or Facebook. Anything below the number you’ve calculated means that your account is profitable. Anything above the number you’ve calculated means your digital marketing could actually be losing your money.

Selecting a Google AdWords bid strategy to achieve your company’s goal

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The first step in selecting a bid strategy for Google AdWords is to decide on your company’s or project goals.

Since bid strategies are set at the campaign level, you’ll need to decide on one main goal for each campaign. Do you want to drive traffic to your website or to a specific page within your site? Do you want customers to fill out an online form, complete a purchase, or make a phone call? Or perhaps, you simply want to increase your brand awareness and appear above your competitors in search results?

What is your key performance indicator?

After you decide on your goals, use this goal to select a key performance indicator (KPI) on Google AdWords. Your bid strategy will be based on this KPI.

• Focus on Clicks: Focus on clicks to drive website traffic to your site, or a specific page on your site. To focus on clicks, use Cost-per-Click bidding. CPC bidding allows you to set a Max. CPC (Maximum Cost-per-Click) for a campaign, an ad group, or an individual keyword.
• Focus on Conversions: Focus on conversions if you want your audience to perform an action, such as filling out a website form, completing an online purchase, or making a phone call. To focus on conversions, use Cost-per-Acquisition (CPA) bidding. CPA bidding lets you set a Target CPA, or the average amount you are willing to pay for a conversion. Google then analyzes historical conversion data to determine who should see your ad based on their likelihood of converting. You need to have installed conversion tracking and have received at least 15 conversions in the past 30 days in order to use CPA bidding.
• If you haven’t collected enough historical data for conversion tracking, or you don’t feel comfortable letting Google determine how much you will pay for a click, try Enhanced CPC (ECPC) biding. If that sounds easy-peasy to you, that’s because it is. Using ECPC allows Google the flexibility to raise your Max. CPC bid up to 30% when Google believes a sale, or a click, is likely. ECPC factors in real-time details such as device, browser, location, and time of day.
• Focus on Impressions: If your goal is creating greater brand awareness by simply appearing in the search results, or appearing above your competitor, reaching your goal has more to do with the keywords you use than a specific bid strategy. You should default to regular CPC bidding (and bid mostly on broad match keywords).

Bid adjustments for CPC and ECPC bidding

Bid adjustments allow you to instruct Google whether to show your ad more or less frequently depending on a particular factor. When deciding whether to set a bid adjustment, it’s important to keep in mind your goal. For example, mobile bid adjustments would work well toward getting more phone calls, while ad scheduling would help if people who shop on Mondays are more likely to purchase your product. Note that CPA bidding will override all bid adjustments.

Mobile bid adjustments allow you to adjust your bid -90% to +300% based on whether you want to target (or avoid) someone using a mobile device. You can set a mobile bid adjustment at the campaign or the ad group level.
Location bid adjustments allow you to adjust your bid -90% to +900% based on a geographic location. You can also use location extension targeting to raise bids for when someone is nearby. You can only set a location bid adjustment at the campaign level.
Ad Scheduling allows you to adjust your bid -90% to +900% depending on the time or day of the week you would like your ads to show. You can only set ad scheduling at the campaign level.


In order to select a bid strategy that aligns with your company’s goals, first decide on a goal and its respective KPI. If you decide to focus on clicks, use Enhanced CPC bidding and/or apply bid adjustments to help your ad reach a more targeted audience. Most importantly, make sure to measure your KPI to determine whether your company’s goal is actually being met.