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  • Writer's pictureJessica Redman

How to Limit The Law of Diminishing Returns in Performance Marketing

Ever wondered why, despite upping your PPC bids, you're not seeing the clicks you need?

Let's break it down real quick:

To drive Paid Search growth, you need to increase your bids and improve your campaigns (copy, landing page quality, etc.). 

Then eventually you'll reach a point where increasing your bids gets you little (if any) improvement.

See, it's the law of diminishing returns.

What is the law of diminishing returns?

It's a well-known economic principle where an organisation can continue to increase investment in something but then they'll hit a ceiling. For a while, more investment will drive more growth, but there will be a ceiling - at which point, the growth stops despite spending more.

This is a core principle that you need to understand when it comes to PPC.

You will find a 'sweet spot' where your spend increases to its max and your returns increase at a significant rate. As you start to see those returns slow down, you're reaching the zone of diminishing returns.

The answer in most ecommerce companies (and from Google) is typically along the lines of "spend more, keep pushing." But the well eventually runs dry. Sadly, the Paid Search team gets the flack for the slow growth, but it's not their fault - it is literally an inescapable principle.

So, what's the answer?

Successful PPC management needs a strategic approach that includes understanding economic principles, optimising bids, and aligning campaign goals with broader marketing and business objectives.

This is where the SEO team comes into the equation. Research by BrightEdge suggests that organic search is responsible for an average of 53% of website traffic, underscoring the value of SEO in driving sustainable growth without the need for continuous investment in ads.

You can maintain a flat spend for a year and see your return compound month-on-month. A case study by Didgeheads on the power of organic traffic revealed how a strategic focus on SEO led to a 206% increase in conversions for an ecommerce site within a year, without increasing spend. This demonstrates the compounding effect of SEO efforts over time.

How does SEO work alongside PPC?

To get the most from your paid search effort, you need to max out your PPC performance right at that threshold before the diminishing returns creep in, and you have your SEO and PPC team build a strategy where Organic can scoop up the keywords that have the highest CPC.

Integrating SEO and PPC strategies can lead to a 25% increase in clicks and a 27% increase in profits compared to isolated strategies. This synergy allows businesses to cover more ground in search engine results pages (SERPs), capturing both immediate clicks through ads and building long-term visibility through organic rankings.

Slowly but surely, you can peel back on your PPC budget as you become a more established brand, drive up your profit margins by keeping SEO activity stable, and come down on Ad spend.

If you've reached a point where PPC growth has stagnated - look into the law of diminishing returns. I promise it will all make sense. 

By understanding and applying these principles, your ecommerce strategy can evolve from merely competing to truly dominating in your market.

Get in touch if you’re ready to invest in the only channel that compounds. Or if you just fancy a chat about SEO.

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