For anyone that spends a decent amount of money on Google Adwords (specifically their search platform) to acquire new customers, this post is for you. Many businesses fail to realize that there is a massive difference between customer acquisition cost and something I call the “Google Search Tax”.
Allow me to illustrate the difference.
Customer Acquisition Cost vs. Google Search Tax
When you spend a certain amount on Google Adwords to acquire new customers, most business owners calculate their acquisition cost as follows:
(Amount Spent / Customer Conversions)
For example, for PureFilters, our acquisition cost on Google Adwords is roughly $10 per customer. So if we spend $1000 on Google Adwords, on average, we acquire 100 new customers. In an ideal world, after paying this $10 per new customer acquisition cost to Google, our new customers will continue coming directly back to PureFilters to make future purchases.
But what happens if, instead, our customers continue to go back to Google in the future to search for and buy products that we offer? Maybe they forgot about us or just want to compare prices or look at competitors/alternatives every single time (even if they ultimately end up buying from PureFilters).
All of a sudden, that $10 acquisition cost turns into a recurring “Google Search Tax”. So rather than paying $10 once to acquire a new customer, we would end up paying $10 on every single transaction (thus, why I call it a “tax”).
Many businesses don’t realize that what they believe is an acquisition cost is in reality a transaction tax.
How To Avoid Paying The Google Search Tax
Ultimately you want your customers to avoid going back to Google to search for products/services that your business offers. After they find you on Google Adwords and buy from your business for the first time, you want them to go directly back to your website to make future purchases.
Here are a few ways to achieve that:
Give them a mind-blowing experience the first time around
You really need to figure out how to “wow” your new customers. This will differ for each industry, but you need to provide such an exceptional experience that your customers will not forget your business. For PureFilters, we figured out what the 3 things our customers cared most about and went above and beyond to wow them based on those 3 things.
Communicate with your customers regularly
Out of sight = out of mind. Whether it’s through email, text or phone, you need to continue to communicate with your customers after the purchase (in this day and age, most of this can easily be automated). Maybe there is some news that’s relevant in your industry, or some advice/content your customers would appreciate or even just saying happy holidays, anything to stay in touch with your customers. For PureFilters, we give our customers content related to air filtration and home maintenance, as well as wishing them a Happy Canada Day each year.
Up-sell, re-sell, cross-sell
This goes hand in hand with the point above, communicate other products/services you offer. Your existing customers are much more likely to buy from you again, why not take advantage of it? An email that brings them directly back to your website is much better than having your customers go to Google to find your products/service and making you pay the Google Search Tax. For PureFilters this one is a bit easier for us, simply because people need to change their furnace filter every so often, so re-selling our existing clients is a given.
Differentiate your offering
I admit this one is really tricky, and a lot easier said than done. Peter Thiel mentions this point all the time, saying how you shouldn’t try to beat your competition, instead you should try and escape your competition completely.
What could you offer that is truly an “alternative” to competitors in your industry?
It is easier to explain this through an example. Websites like Hotels.com or Booking.com offer a commoditized product, people will continue to go back to Google to buy what they offer (in order to compare prices, other websites, etc) .They are pretty much stuck paying the “Google Search Tax” forever.
But what about Airbnb.com? After customers find Airbnb.com once, they typically go directly back to their site simply because going back to Google wouldn’t be very beneficial for them…Airbnb has no real competition. They are a true “alternative” to competitors in their industry.
Acquiring new customers is expensive and there is nothing wrong with spending money on Google Adwords to acquire new customers. However, you want to take steps to prevent your one-time acquisition cost from turning into a recurring transaction tax. Deliver an experience your customers won’t forget, keep them close to you and make it easy for them to continue to buy from you in the future!
Hi there! I’m Jay Vasantharajah, Toronto-based entrepreneur and investor.
This is my personal blog where I share my experiences building businesses, making investments, managing personal finances, and traveling the world.
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