The Paid Search Podcast | Episode 449: Why Businesses Don’t Grow from PPC
Release Date: February 10, 2025
Host: Chris Schaeffer, Certified Google Ads Specialist
Guest: Joey Bidner, PPC Expert
Introduction
In Episode 449 of The Paid Search Podcast, host Chris Schaeffer delves into a critical aspect of Pay-Per-Click (PPC) advertising that often goes unnoticed: the New Customer Acquisition Cost (NCAC). Bringing on Joey Bidner, a seasoned PPC expert, Chris explores why many businesses fail to achieve growth through PPC campaigns despite seemingly positive metrics within Google Ads.
Understanding New Customer Acquisition Cost (NCAC)
[03:46] Joey Bidner:
"We're going to be talking about specific metrics that directly relate to what should be our primary objective as Google Ads managers, which is growth for the businesses that we're managing ads for."
Joey begins by introducing NCAC—a metric not natively available in Google Ads but essential for assessing the true effectiveness of PPC campaigns. Unlike traditional metrics such as Cost Per Conversion or Return on Ad Spend (ROAS), NCAC specifically measures the cost associated with acquiring new customers, providing a clearer picture of campaign profitability and business growth.
The Importance of New vs. Returning Customers
Joey emphasizes the significance of maintaining a healthy ratio of new to returning customers. He explains that while remarketing to existing customers is beneficial, businesses must consistently attract new customers to ensure sustained growth. Relying solely on repeat customers can lead to stagnation, as "new customers are always worth more than repeat customers" due to their potential for future purchases.
[06:15] Joey Bidner:
"Google hides this number for us. And it's in Google's best interest."
He points out that Google Ads often prioritize bidding on returning customers because they represent lower risk and higher immediate conversion potential. This focus can misalign PPC metrics with actual business growth, as seen when an increase in ROAS doesn't translate to proportional business expansion.
Calculating and Benchmarking NCAC
Joey outlines a straightforward method to calculate NCAC:
-
Customer Lifetime Value (CLV):
- Formula: Average Order Value × Purchase Frequency × Profit Margin
- Example:
Average Order Value: $650
Purchase Frequency: 20% (1.2)
Profit Margin: 65%
CLV: $650 × 1.2 × 0.65 = $507
-
NCAC Benchmark:
- Threshold: Any acquisition cost below $507 is profitable.
- Consideration: Ensure that the NCAC remains below this benchmark to maintain profitability.
[10:30] Joey Bidner:
"Anything below that, you're profitable. If your cost to acquire a customer is above $507, in that case, you are no longer profitable."
He stresses the importance of not solely relying on ROAS but also considering whether the cost to acquire new customers aligns with the business's profitability benchmarks.
Tools and Strategies for Measuring NCAC
Joey recommends leveraging third-party platforms to gain deeper insights into NCAC:
-
Wicked Reports:
"They start at around five to $800 a month and they go up depending on the size of your business."
Suitable for larger accounts aiming to scale, Wicked Reports provides granular data on new versus returning customer acquisition at various campaign levels. -
Lifetimely:
"Lifetimely is a much cheaper app... in the $20 a month range."
Ideal for businesses seeking a more affordable solution, Lifetimely integrates ad spend data from multiple channels and compares it against sales data to evaluate NCAC effectively.
For smaller businesses or those not ready to invest in third-party tools, Joey suggests manual methods:
- Shopify Analytics: Utilize Shopify’s native reports to monitor new versus returning customers and correlate these metrics with PPC efforts.
- Manual Calculations: Export customer lists and perform calculations to determine NCAC using media spend and new customer data.
Host's Insights and Illustrative Parable
After Joey's comprehensive analysis, Chris adds his own perspective to reinforce the importance of NCAC. To illustrate the pitfalls of relying solely on repeat customers, Chris shares a compelling parable:
The Fisherman and the Aquarium
Imagine a fisherman who repeatedly catches the same fish from a magical pond, depositing them into an aquarium with a hole. Despite his efforts, the aquarium never fills, as the fish continuously return to the pond. This story symbolizes businesses that focus solely on acquiring returning customers, leading to stagnant growth despite apparent activity.
[19:21] Chris Schaeffer:
"New customer acquisition is so important for all elements of your entire digital marketing strategies, holistic growth."
Chris further elaborates on identifying campaigns that predominantly target returning customers:
-
Campaign Setup:
Following Google’s default settings often results in favoring returning customers. -
Consistent Metrics:
If key metrics like Cost Per Conversion and ROAS remain unnaturally steady, it may indicate over-reliance on returning traffic. -
Seasonal Variations and Competitor Actions:
External factors such as seasonal changes and competitor strategies can naturally influence campaign performance, making steady metrics suspicious.
Chris advises regularly monitoring NCAC and adjusting strategies to ensure a balanced acquisition of new customers, thus fostering genuine business growth.
Conclusion
Episode 449 of The Paid Search Podcast underscores the critical need for PPC managers and business owners to look beyond traditional metrics like ROAS. By understanding and implementing the measurement of New Customer Acquisition Cost (NCAC), businesses can ensure their PPC campaigns are not just cost-effective but also driving meaningful growth. Joey Bidner’s insights, combined with Chris Schaeffer’s illustrative storytelling, provide a comprehensive guide for optimizing PPC strategies to focus on acquiring new customers and achieving sustained business expansion.
Resources Mentioned:
- Wicked Reports: wickedreports.com
- Lifetimely: lifetimely.com
Connect with Joey Bidner:
Website: joeybidner.com
Services: Google Ads Management and more
Contact Chris Schaeffer:
Website: chrischaefer.com
Book an Audit: chrischaefer.com
This episode is a must-listen for business owners, digital marketing professionals, and PPC freelancers aiming to optimize their Google Ads strategies for real, sustainable growth.