• by Laurie Sullivan , Staff Writer @lauriesullivan, October 8, 2013

The typical small business spends $1,200 monthly on paid-search campaigns, but wastes 25% of the budget because it doesn't follow best practices, which leads it to make too many strategic errors. WordStream research released on Tuesday provides tips on increasing click-through rates and Google Quality Scores. It also tells marketers how they can win $25,000 to improve campaigns.

WordStream reviewed paid-search campaigns of 500 SMB clients and found best practices really do make a difference. When actively managing accounts, best practices can improve ad relevancy, mobile optimization, and return on investments.

To gain a better understanding of what 25% inefficiency means, WordStream Founder Larry Kim equates the loss into material assets and sets up the advice in two steps: problems and solutions.

Problems:  One in four small businesses only rely on broad-match keywords, six in 10 don't use modified broad-match keywords, and one in five don't use negative keywords in campaigns.

Depending on the industry, the WordStream findings reveal that these missed opportunities can result in 126 lost insurance quotes, 367 lost bed-and-breakfast inquiries, 569 lost product sales for retailers, and 157 lost B2B supplier leads.

High Google Quality Scores help to reduce the cost of paid-search campaigns. The higher the Quality Scores, the lower the cost per search campaign. Companies receiving a perfect 10 Quality Score receive a 50% discount on their cost per click (CPC), he explains, while companies receiving 1 -- the lowest score -- can expect their CPC to rise 400%.

Less than half of small businesses use conversion tracking for their landing pages, preventing those companies from measuring what works; and 95% of these accounts do not take advantage of call extensions on all campaigns.

Solutions:  Spend at least 20 minutes weekly optimizing AdWords accounts. Find the best keywords by analyzing long-tail keywords that are more targeted and specific to the product because they are less competitive, lower CPCs and produce more qualified clicks.

Since quality scores affect the CPC and cost per conversion, Kim suggests businesses need to write better text ads to improve click-through rates and Quality Scores. The average small business has a score of between five and 10.

Along with bad news highlighting losses revealed by the research, Kim will give away $25,000 in a marketing makeover. Entering the contest means filling out a form and generating an AdWords Performance Report. A link to the report sent via email will allow marketers who enter the contest to reference it often, providing insight that will help determine where to focus on optimization during the next 30 days.

WordStream will run a second report in 30 days to compare and check improvements. The marketer with the greatest percentage of improvements in the categories of search click-through rate and quality score wins.

"Small Business Owner" photo from Shutterstock.