Marketing Research Chart: Difficulty in execution of PPC tactics is not barrier to usage

October 4, 2011, Marketing Sherpa published a graph to illustrate the results of a study, which compares the degree of difficulty of various pay per click ad management tactics with the level of effectiveness of the tactics. We will refer to this chart throughout the series with an explanation of how the tactics we discuss are accomplished and why they are effective.

Step 1: Organizing Campaigns and Ad Groups

Far to the right (very difficult) and high on the chart (very effective) there is a large (very popular) sphere labeled “Highly targeted ad groups.” What PPC professionals have found is that it is well worth the time and effort to organize the account carefully into campaigns and ad groups that are highly targeted.

We advocate setting up an outline for the organization, with campaigns as the top level and ad groups as the secondary level. For an ecommerce website, this should not be difficult because your online store is probably already organized into categories, possibly sub-categories and products. Let’s take a women’s apparel store as an example.

Looking at the online store you find the following major categories:

• Shirts and Blouses
• Tees and Camis
• Sweaters
• Dresses
• Suits
• Pants
• Skirts
• Jackets
• Accessories

But there are a variety of products within each of these categories, so you can create product sub-categories as follows:

• Shirts and Blouses
• Classic Shirts
• Blouses
• Tunics
• Tees and Camis
• T-shirts
• Shells
• Camis
• Sweaters and Knits
• Pullovers
• Cardigans
• Shawls

and so on, until you have categories and sub categories for every department of the online store.

Of course, there may be special categories, such as “New Arrivals” and “Best Sellers” to work into the schema.

At this point you have your basic organization for your Campaigns and Ad Groups. It would be possible to organize your ad groups to the product level, but that may not be time worth spent. Better to experiment with that tactic later when we get into the discussion of optimizing landing pages.

The next step will be choosing the keywords for your ad groups.

Over the next few articles we will examine some of the tactics for determining an acceptable cost and managing an AdWords account to deliver results for an acceptable cost per action (sale, lead, subscription, etc.).

Part 1: Goal Setting

Step 1: Determining Your Desired Cost Per Conversion

In AdWords parlance you will be managing to a cost per conversion goal. From this point forward we will use the term cost per conversion to mean cost per lead or per sale.

First you need to have a goal. If you already know the average amount you are willing to pay for a conversion, then skip on to the next step.

There are several factors that go into what an appropriate cost per conversion might be. One is whether your sale is a onetime event, or whether a new customer represents a lot of repeat business. If the sale is not likely to be repeated, such as a wedding gown, then the cost per conversion is likely to be a small portion of the amount of the sale. If the sale is likely to be repeated, however, such as cell phone subscription, then the appropriate cost per conversion should be based on the projected income over the lifetime of the average relationship.

Another factor is whether the sale can be concluded online, such as ecommerce, or whether a sales person will need to spend time with the buyer in order to conclude the sale. In the latter case, the conversion is actually a lead. The total cost per conversion, then, needs to be small enough to allow for the selling time to complete the transaction.

There is no magic formula, you just need to set a goal that seems right for your business. It can be adjusted later if it seems that you could spend more or are spending too much.

Step 2: Translate the Cost per Conversion Goal into an Average Cost per Click Goal

For the most part it is not practical to bid based on cost per action (CPA) in AdWords. While that option is offered, your campaigns need to meet a minimum number of conversions and not have a lot of seasonal fluctuation in order for AdWords to successfully administer campaigns on a CPA basis. For campaigns that meet the criteria, it works quite well in our experience.
So in the process of setting up campaigns on a cost per click basis, it is beneficial to determine what the average cost per click needs to be in order to meet the cost per conversion goal. In order to determine what the average cost per click needs to be, you need to know the conversion rate (number of conversions ÷ number of visitors for the same period of time) for your website. If you are using an analytics program, you should be able to easily find the average conversion rate for your website. If you are already running AdWords and have that conversion rate information, that is even better.

To determine the average cost per click that will meet your cost per conversion goal hop over to the Cost per Customer Calculator. Click on the little arrow next to “Select a Function” and choose “Pay per Click Goal.” Enter your Cost per Conversion Goal in the box next to “Cost/New Customer” in dollars and enter your conversion rate as a percent. For example, if your conversion rate is 4.5% enter 4.5. Then click “Calculate” and your average cost per click goal will be displayed.

Now you have a cost per conversion goal and an average cost per click goal. You are ready to begin fine tuning your AdWords Account.

I was doing some manual searches on Google with a client’s name as the search term to see what the ad results look like. The client manufactures consumer products so we can expect competing ads on the trade name. It’s been a slow day so I started clicking on the ads to see where they would lead.

The first ad I clicked was to Ask.com. There I was presented with a similar collection of Google Ads that filled my screen. I would have to scroll down to see search results. Now, if I were looking for the company outlet I would probably click another ad. Kaching, Google gets paid again. (Really, advertising search results in search results?)

I ignored the Amazon ad for a book by an author whose last name is similar to the company name and the eBay ad from somebody selling a used product. The next ad I clicked took me to a comparison shopping site, where actual products were displayed! (Along with the same collection of Google Ads.) I still could not buy a product from this site, but a click on this product would take me to a site that actually sells the company’s products, so progress had been made.

This whole process made me feel like I was a critter in the Pocket Frog game I recently started playing on my Ipod. The frog hops from lily pad to lily pad in order to chase and eat flies. Clicking on the ad had me jumping from site to site before getting to the real results.

If you ignore the ads on Google, however, the top spot in the search results lists my client’s home page along with a selection of top tier pages. Is it any wonder that ads get a very small portion of the clicks from SERPs?

The joke is that Google uses a “quality score” to evaluate the ads for presentation in search results. The quality score has more to do with the relative number of clicks the ad receives than the usefulness of the actual page reached from the ad, methinks.

Ribbt.

Do you remember when a company called GoTo.com scandalized the Internet community by providing search results based on the willingness of people to pay a few cents per click to be listed? I’ll bet most SEMs have never even heard of GoTo.com. Remember when it morphed into Overture? And then when Overture was purchased by Yahoo?

I actually preferred the Overture bidding mechanism and there were cool bidding tools that allowed you to use real-time bidding strategies to place your ad where you wanted it in the results, not where the adverting platform’s algorithm determined that it should be.

But all good things must come to an end. Microsoft pulled out of the YSM network and decided to go it alone and build their own network. Did ya try AdCenter? Did ya love it?

And then YSM, who hadn’t made any real innovations to the Overture platform since buying it, decided that it needed a platform more like Google’s and came out with Panama. Remember making that transition with Yahoo? Remember the ad group mess that resulted?

It seems as though it has been a lifetime since Yahoo was the dominant search engine, even though it was really a directory. Remember when Yahoo dumped Alta Vista search engine for the new kid called “Google?” Remember when Yahoo bought Alta Vista to have its own search engine?

For many years Yahoo was the top property on the Internet due to all of their social networking and free services. (It’s true! There was online social networking prior to MySpace and Facebook.)

But all of that took place in the olden days of the Internet. And it makes me feel old that I can remember all of this, although it all took place within about the last dozen years. Internet years are like dog years in that regard.

Enough reminiscing. Gotta go make sure our AdCenter campaigns are up to snuff now that Microsoft search technology has become so great it is taking over Yahoo.

Share your SEM Memories with us. Let’s have a little YSM online wake.

Marketing Sherpa’s most recent COW (chart of the week) “How is PPC Perceived at Budget Time” demonstrates the lack of understanding of how PPC works among marketing executives. Basically the pie chart has four sections.

1. PPC is not on our radar, let’s keep it this way. (8% of respondents)
   This might actually be the most astute of the positions taken on PPC reported on this chart. As much as we love pay per click and successfully provide the service to our clients, it is not necessarily successful for every kind of business. There are many instances I can think of where it would be ridiculous to expect results from PPC advertising, even on the very effective search results pages.
2. PPC is producing measurable results. Let’s increase budget liberally for continuous improvement. (44% of respondents)
   (Sigh) I’ve worked with these guys. The fallacy of this statement is that there is a rule of diminishing returns to PPC advertising. Assuming the program is optimized to provide the target return on the marketing expense, adding money to the program will actually make the program more costly per measured action or conversion. More about that below, but let’s look at the next two pie chart sections.
3. PPC is a promising tactic and will eventually produce ROI. Let’s increase budget, but do it conservatively. (33% of respondents)
   In this case the program is clearly not optimized. If the program is not optimized, putting more money into it will not produce a positive ROI. The thought should be, “It’s a promising tactic; let’s hire a professional with a good track record to produce positive results.”
4. The value of PPC is unknown and something we do only as time permits. Why invest more? (15% of respondents)
   Doing PPC as time permits? The value is unknown? I don’t even know where to begin to discuss this concept. If the value of PPC, the most measurable of advertising vehicles, cannot be determined, I wonder how they are determining the value of other marketing efforts.

Here is a quick PPC tutorial for marketing executives of any size of company.
Pay per click advertising is simply placing an ad on a pay per click-through basis rather than on a CPM or placement price basis. You probably had that figured out.

Typically the best return for your PPC marketing dollar comes from ads in search results. The reason for this is that, if the PPC program is being run correctly, the ads are being shown mostly to people who are searching for the product or service being advertised. Advertising in search results is similar to printed yellow pages ads in that regard.

If your PPC program is being capably managed, the return you get is on target to the ROI goals you have set. If a capable PPC program manager cannot find a way to produce those results, then PPC advertising may not be appropriate for your product or service.

PPC and the law of diminishing returns. There are only so many searches being done on relevant keywords at any time. If the PPC program manager is maximizing the impressions for the given keywords, additional PPC budget must dilute the ROI of the program.

The PPC program manager has several options when funds have been added. The manager can

1. Increase the bids on existing search terms, which will push up the cost per click and also the cost per conversion from that click, lowering ROI.
2. Add less directly related keyword. The less directly related the keywords the poorer they perform in terms of conversion, increasing the cost per conversion and lowering the ROI.
3. Add “content” or “placement” ads, for example advertise in Facebook. PPC ads running in content other than search results typically have a much lower click through rate, but might have a very good conversion rate. However, it typically is not as good as ads in search results so increasing the PPC program by placing ads in non-search content can bring additional conversions, but typically at a higher cost per conversion.
4. Add “third tier” search ad engines. Third tier search ad engines serve the fringes of the search engine market. If the product/service being promoted appeals to all kinds of people at all income levels, it might have a big enough market to get results from these tiny marketplaces. If that is the case, the cost per click is substantially lower than for Google AdWords, and might produce a higher ROI, but it will consume a tiny budget.
5. Add comparison shopping sites. For most online retailers, this should already be in the PPC program. Again, the small size of the reach of these engines means that not much budget is consumed although the ROI might be quite good.

The bottom line is that unless your PPC program is being limited by budget or by advertising for only certain hours during the day, while adding more money can increase sales through the medium, it will most likely result in lower ROI for the program.

]]> http://blog.roi-web.com/?feed=rss2&p=105 0 http://blog.roi-web.com/?p=94 http://blog.roi-web.com/?p=94#comments Wed, 18 Aug 2010 21:16:17 +0000 Miki Dzugan http://blog.roi-web.com/?p=94 Yesterday I commented on the excellent article in MediaPost Search Insider, Negative is the New Positive by Todd Friesen. Todd patiently explains the three kinds of keyword matches used by Google and how to use “negative keywords” to try to filter out unproductive matches to your key phrases. For years it seemed to me that Google AdWords “broad match” has become ever more broad until “Des Moines plumber” matches “kitchen sink Fla.”

In my comment I indicated that Google should create an option to exclude synonyms from the “broad match” keywords — what I had in mind was another match type that was basically broad match that includes the actual keywords in the keyword phrase we have chosen, but not synonyms or “related searches.” And I asked if Google was listening.

Turns out, Google was listening and I got a response from a nice gentleman named Mark, who pointed out that Google had just added the very thing I was asking for and it is out of Beta. Don’t know how I missed it, but Google is adding features to AdWords at such a pace these days that it is hard to keep up even when you work with the interface every day.

Mark referred me to an article Broad Match Modifier in the Innovations section of the AdWords site. Sure enough, they have come up with a way to limit the match of your “broad match” terms to misspellings, plural forms, stemmings and abbreviations, but not synonyms or “related searches” (which is how plumber gets to match kitchen sink). If you go back as far as I do in pay per click ad management, then you may recall that this is the way broad match originally worked.

I hustled right into one of our client accounts to try this new capability out. It will take awhile to determine how well it really works, but man, is it a pain in the butt to implement for existing ad groups! What you have to do is to go through your keyword list and put a plus (+) in front of each word in your keyword phrase that must be matched in the search terms for every broad match keyword phrase in your ad group. That is a lot more work than just going through and changing the match type for each keyword.
And, of course, using broad match modifiers does not eliminate the need for negative keywords. We still don’t want our high-end J.W. Hulme Co. bags to be found on a search for “cheap leather briefcase.” That would be a waste of the searcher’s time and our money.

Google gives us better and better tools, which make managing the AdWords accounts better, but more work. Google giveth and Google taketh away, I guess.

]]> http://blog.roi-web.com/?feed=rss2&p=94 0 http://blog.roi-web.com/?p=88 http://blog.roi-web.com/?p=88#comments Thu, 05 Aug 2010 21:06:22 +0000 Miki Dzugan http://blog.roi-web.com/?p=88 J.W. Hulme Co.

All the Twitter twaddle and Facebook fancying can’t compete with one really good article in a major publication. This has just been proven one more time this week when the Wall Street Journal published an article about our customer J.W. Hulme Co. The article tells the tale of how a Minnesota manufacturer of canvas and leather bags with roots as a World War I supplier struggled to survive the current economic downturn. The article is inspiring for smaller companies trying to stay afloat in these difficult times. It shows creativity as well as dogged determination and commitment to basic values.
The story behind the story, is that the J.W. Hulme products have been enjoying a some great reviews and articles in the social media sphere. We notice the added traffic each time a well placed review or blog article hits the Web. What took place as a result of the WSJ article, however, was not only phoned in requests for catalogs and orders, but a spike in Web traffic that dwarfed anything we have seen before. Reports of the death of printed publications have been greatly exaggerated from what we are seeing.
]]> http://blog.roi-web.com/?feed=rss2&p=88 0 http://blog.roi-web.com/?p=71 http://blog.roi-web.com/?p=71#comments Mon, 26 Jul 2010 23:15:54 +0000 Miki Dzugan http://blog.roi-web.com/?p=71


Customer Referral vs. Affiliate Program

I read an interesting article today that described exactly how to create a group of spokespersons from your actual customer base rather than hiring celebrity spokespersons. What the writer was describing was a high quality affiliate program — he used the term “brand ambassador.” Social media marketing begs for sophisticated methods of encouraging our best sales force, satisfied customers.
On our ROI Chart, you will notice that we separate affiliate marketing from customer referral and have placed affiliate marketing in the “Advertising” section of the chart. There are many levels of affiliate marketing ranging from a kind of rewarded customer referral, e.g. one month of free service for each new customer brought in that meets a certain criteria, to the kind of affiliate program made famous by Amazon, where people who may or may not be customers try to make an income from selling another company’s product on their website for a commission. And don’t forget “partnering” programs where one company adds value to the product of another as a referrer, e.g. an accounting consultant that installs a particular accounting package and trains people in its use.
A few years back, affiliate programs were as hot as “social media” is today. It ran out of steam when disillusioned affiliates learned they could not make millions just putting up a website full of affiliate links. And affiliate program managers discovered that very few of their affiliates were worth the cost of running the program. Many marketers learned how and when to use the tactic and the programs that remain work pretty well. Most internet marketers threw the baby out with the bath water and turned to search engine advertising instead.
With the focus marketers now have on social media, it is to be expected that there will be a renewed look at how customers might be incentivized to promote products and services to their friends, family and fan base. It will be interesting to see what new kinds of incentives marketers might come up with. It will also be interesting to see which efforts pay off in increased revenue for the companies. So far what we have seen from Facebook pages and sympathetic bloggers is an elevation in traffic and, maybe a bit more name recognition. At this point the additional traffic has not been paying off in additional sales.
What pays off is a customer telling a friend where they found that great product, so current efforts are being applied to that “Customer Referral” tactic at the top of the ROI chart.
]]> http://blog.roi-web.com/?feed=rss2&p=71 0 http://blog.roi-web.com/?p=67 http://blog.roi-web.com/?p=67#comments Fri, 23 Jul 2010 19:29:00 +0000 Miki Dzugan http://blog.roi-web.com/?p=67 If you have come to bid on a condo in Colorado, we are sorry, but bidding has closed.
]]> http://blog.roi-web.com/?feed=rss2&p=67 0 http://blog.roi-web.com/?p=59 http://blog.roi-web.com/?p=59#comments Mon, 19 Jul 2010 23:14:55 +0000 Miki Dzugan http://blog.roi-web.com/?p=59 The Rotary Club of Sedona has received a week in the GRAND TIMBER LODGE at Breckenridge, Co. to auction off to the Rotarians of Sedona. Click on the “Read more” link below to open comments fields. Place your bid by leaving a comment. Please include the amount you are bidding so that others can see the bid they need to beat.

The two bedroom Condo is available for August 6 – 13, 2010. Bidding will end at noon, Friday, July 23. Good luck!


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