Blasphemy you may think. How can he make such a crazy statement? Isn’t Google trading at $500+ bucks?
A journalist recently asked me what I though was a brilliant question to ask in an interview “What gets written about all the time in your space that makes you cringe every time you read it” took me a split second to answer.
I can’t stand the one-size-fits-all online marketing strategy idea. You know what I’m talking about; “Spend as much as you can on search, display ads don’t work as well, and test into everything else.” Sound familiar? “Oh by the way don’t forget to buy yourself and island on second life” at this point I puke.
Let me play out a scenario for you in hopes I can make my point. I’m going to use Banking as a point of reference as an example because I know the business well, but if you work for a bank don’t get too exited, put your pen down I wont use any real numbers, or divulge anything you can use to benchmark. The name of this fictional bank is “Purple Bank” consider it a household name.
Lets take a new checking account for example, it generates $150 in revenue every year, therefore we decide we are willing to spend up to $50 in marketing to acquire each new customer. Again these are NOT real numbers.
We refer to that $50 as our target CPA (Cost per acquisition). After reading every book, article, blog, and napkin about online marketing we decide to test paid search first.
We take those $10,000 we begged and pleaded for and decide to buy a few carefully chosen brand related keywords like “Purple Bank”, “Purple Checking”, or “Purple Account”.
Results come in and….drum roll. We are heroes 200 accounts at a CPA of $25 bucks. The boss is pleased, pats us on the backs and says “get me more. How much money do you want”. At this time he also coaches you on the fact “the brass does not really get too excited about a few accounts, They want volume. BTW we don’t get extra credit for coming in under $50, they want scale”.
Now we take $100K and sign up for 2,000 accounts. Is this starting to sound familiar?
We quickly realize there is a limit to how many people search for these terms, so we have to expand the list to include category specific keywords like “checking”, “checking account”, and “online checking”. Those terms come in at an average of $75 which is over our CPA target, but who cares when you average the whole program we still fall in at $40 and remember it’s all about volume.
Boss is pleased, his boss gets excited and they hand us more money and an even bigger goal to hit.
We proceed to expand our list which now includes more random keywords like “pay bills”, or even misspellings of some other high performing words. This stuff is much less efficient We even employ new agencies, tools, technologies etc. Reality fall upon us, we have hit and exceeded the $50 wall.
Many experienced online advertisers find themselves sitting in this very position. I believe they are victims of their early success.
Here is my argument. We have proven that if you stopped paying for all branded search terms i.e. in this case “Purple Bank” you would still capture 96% of the acquisitions through a combination of natural search, site traffic and other channels. Consider the above mentioned scenario without the benefit of those brand keywords, and the ROI completely falls apart. In essence you are paying big bucks just to track what your brand is already doing for you, and the search guy is getting the credit for it. It is important to understand the differences between a directory listing, demand harvest, and demand generation. I’ll offer an old school example. Consider the differences between the white pages and the yellow pages. If you were looking for “car rental” you would find a number of paid ads and listing from various car rental companies. This is category demand. Tracking the ROI on that ad makes sense. If you as a consumer were looking for the number or address of the Avis location near you on Elm Street you would already be inclined to shop that particular brand. This is a directory listing. What drives this traffic: Brand equity (reputation), or Advertising (demand creation). Search is not the best vehicle for building brands, or creating demand. It’s a great way to track it.
It’s time to reconsider the interdependencies between that Yahoo banner ad, your paid and natural search, site traffic, and eCRM program. I beg you to find out how much the demand and awareness created by that Yahoo home page ad affected your other programs. I’m confident once you see the forest from the trees on this one you will cut your paid search budget by at least 40%
Comments (2)
As stated in the final paragraph, the reality is that paid search is and should be considered as part of the overall marketing mix. Unfortunately, this has not been, and in most cases, unfortunately, continues not to be, the case.
Here's an excellent and very relevant article taken from "Search Engine Watch" May 31, 2007:
Search Engine Watch
In the Mix: Search in the Overall Marketing Mix
May 31, 2007
I am responsible for deep, data- and analytic-centric decision support for our paid search campaign managers. In this role, I can't tell you how many times I spot startling trends in our paid search tracking reports – "Sales are way up!" Or "Traffic is way down!" For one of our clients, the conversion rate rose over 50 percent from the previous month and (more importantly, because of potential seasonality) year over year. "Wow! Conversion rates are soaring!"
Findings like this are then immediately followed by the question, "What did we do?"
Most of the time, of course, there is a direct explanation. It may be the fruit of a carefully designed plan of bid adjustment, ad copy testing, etc. But sometimes the good (or bad) news creates a great deal of head scratching ... "Hmmm. Our bids did not change, and our position in the search results did not change either. Budget? Ad copy? Nope." In other words, "We did nothing."
In those cases, the next steps are to check the data again, then call the client – maybe their Web site went down, or they changed their landing page content without telling us. Then even more troubling questions start to surface – "They didn't change their prices, did they? I saw a new ad for them on TV last night; I wonder if they're launching a new TV campaign?"
You know the story, and the second-guessing that goes on, which inevitably leads us to ask, "Why don't they tell us about that media campaign/Web site adjustment/etc.?" Of course, we know the reason: they're busy and haven't thought about it, or it's not their responsibility/silo.
But as those questions and non-answers swirl around, I'm stuck with the original problem of figuring out what happened. And how can we best do our job – planning and implementing effective paid search campaigns – when we don't know what the client is doing with its other media? The short answer is that we try our best, but recognize that it's not the best situation.
What's In the Mix?
Without knowing the full media mix of TV, radio, newspaper, circulars, DM, etc., we're limited when it comes to optimizing paid campaigns. So, what can be done to improve the situation?
First of all, we need to gather as much information about the client's historical and future media plans as possible. In what media is the client active, and where? How much effort – gross rating points, reach, distribution, etc. – is being put into the campaigns? When are they starting and stopping? What is the message? Is there a new product launch? Is the price changing? Whew. That's a lot of data (and pleading with the client for the information). And did I mention the bewildering number of formats the data comes in? But it's a start.
When we're armed with at least some of this historical data, we can begin to explain the mountains and valleys in those paid tracking reports. We'll be able to see that click-throughs sky-rocketed because of a 2-week TV blitz, or that impressions and clicks increased on branded terms because of a direct mail drop at the beginning of the month. But it gets even better...
As everyone should know, it's important to at least consider the impact of future media plans on your paid marketing campaigns. Should we be increasing our budgets to accommodate higher volume? What new keywords should we buy in anticipation of the product launch? How should our ad copy be adjusted to accommodate the new marketing environment? These are basic questions we ask ourselves, and which should have straightforward answers.
Woe and tribulation for any paid search campaign manager without an interest in those basic answers, because money is sitting on the table (sales for your client and commissions or kudos for your agency). Our account managers, of course, are all over this. Things like holiday and seasonal promotions, keyword expansions, bid adjustments, or campaign fine-tuning are their bread and butter. For special promotions, we oftentimes add in excess of 1,000 keywords, and do daily bid and budget adjustments to accommodate the volatility of the marketplace. It goes without saying that our paid search campaigns are adjusted to a basic business fact – change is the name of the game.
But can we really say those upswings in search activity are proof that other media do, indeed, cross over into the search channel? Was it because we boosted our paid search budget and bids? Or were our efforts really just a side show, and essentially just "tagging along" on a surge in activity that would have happened even without more search resources? These are the hard questions that make someone in my position, as the leader of our analysis and decision support efforts, sweat a little.
Giving Search Its Proper Credit
Maybe that increase in the conversion rate occurred because we raised our bid and position, and not because it "helped boost" the effects of the direct mail campaign. Maybe that upward trend in impressions is the result of better budget allocation, or maybe it's the incremental roll-out of a TV campaign. Which is which? And how can we identify the pivotal role of the paid search campaigns?
Here's where I reach into my toolbox of statistics and predictive modeling. (This is heady stuff, and not meant for the faint hearted.) But here's what I do: Using the historical media mix to build a forecasting model, and given "inputs" or leading indicators of media activity, I identify the anticipated movement in search metrics. With the right data, I can tell the client, "If 2.5 million direct mail pieces drop at the beginning of the month, impressions will increase by 14 percent, the click-through rate by 5 percent, and the conversion rate by 4 percent."
Furthermore – and here's where things get really exciting – I can "play games" with the forecasting model by inputting different bid and budgeting scenarios, and finding the best combination to work in the context of the upcoming media mix. I can tweak the numbers to determine what would lead to the best results, and find out, for example, that if we increased our budget to accommodate the surge, and also increased our bids by 5 percent, we could expect clicks to increase by 11 percent and our cost-per-conversion to drop by 6 percent.
At that point, it's "plug and play" – compare a range of different scenarios, and select the best one, taking into account budget limitations. Now that's what I call smart paid campaign management.
So, when you're designing and implementing your paid campaigns, be sure to remember, "it's all in the mix."
Posted by Stan Grzelewski | June 20, 2007 4:06 PM
Posted on June 20, 2007 16:06
Coordinating Search with External Media: Can Less Be More?
For the sake of brevity, here's the link to Part 2 of the aforementioned article "In the Mix: Search in the Overall Marketing Mix"
http://searchenginewatch.com/showPage.html?page=3626276
... the "1+1=3" effect...
... Increasing budget + increasing bids + increasing clicks + lower conversion rates means exploding costs per conversion and declining ROIs. What explains this phenomenon?
Simply said, the media blitz oftentimes drives brand awareness to less "qualified" leads...
Great stuff!
Stan
Posted by Stan Grzelewski | June 27, 2007 5:13 PM
Posted on June 27, 2007 17:13