eSearchVision Official US blog » PPC

CPA vs ROI Optimization…What’s The Best Practice?

eSearchVision — Fri, 12 Mar 2010 16:06:42 +0000

Whenever I’m asked to audit a PPC account, my first question to the client is: how do you measure performance? It’s a simple question and the usual response is CPA (cost per acquisition) or ROI (return on investment). If the answer is CPA, then there are some follow-up questions: how many products or services are offered? And if more than one, then do they cost the same, or are they worth the same to the advertiser? What I’m getting at is that CPA is usually is a limitation of tracking – the advertiser cannot associate true revenue with the conversion. Managing to an ROI, and moreover, managing to maximize profit margin for each keyword will open up new doors for PPC efficiency.
Clients that manage to CPA generally have several products or services. To see the underlying issue with CPA optimization, consider the situation where we have two possible conversions: one worth $20 and one worth $40. If we optimize to an avg CPA of $30, we may be only selling $20 products and losing money. With ROI optimization, this is not a possibility. If CPA optimization is the only possible route, then there are a few best practices to find a good CPA to set as a goal. If the transactions occur online, then calculate the average order value and subtract the avg variable cost to the advertiser – this is the max CPA. If the online conversion is a lead which requires offline sales, then multiply this CPA by the average offline conversion rate to define the eCPA (effective CPA).
But the advertiser is probably calculating a return on ad cost…so why not put the tracking in place to actually manage the PPC account to the required return? In fact, revenue tracking is available for free in Google Analytics and can easily be merged with AdWords to provide ROI within the AdWords interface. While CPA optimization is a good way to get off the ground, it goes to another level when revenue dollars are brought into the equation.
The first step in ROI or ROAS (return on ad spend) optimization is to define the ROI goal. It will become abundantly clear which terms are ROI profitable versus which are not. With the ROI goal set, we can manage individual keywords, keyword clusters, and the entire account to a goal ROI using basic logic. But we can take optimization one step further by combining CPA optimization logic with an ROI model to manage to gross profit margin.
Each keyword has a unique average order value (AOV) and it’s logical that any advertiser wants to maximize sales on keywords with the highest AOVs. Simply shifting budget towards the terms with the highest AOVs should maximize ROI. Taking a quick trip back to Into to Microeconomics, at some point marginal cost will become greater than marginal revenue. The goal is to identify the point of diminishing returns for each keyword. While this statistical model may be impossible to perfectly produce due to statistical noise, it lays out the groundwork and process for fundamentally sound gross profit margin optimization.
The backbone of a successful PPC account is business intelligence. The more data that can be associated and merged with search engine data, the better. In the end, the less business intelligence an advertiser has, the more money they are wasting. Why waste money when the solution is free?

Benny Blum

Tagged: Audit, PPC, ROI, SEM

The Search for Great Account Managers

eSearchVision — Mon, 01 Mar 2010 23:04:22 +0000

In a dynamic industry full of young talent and raw ambition, we’re in constant search for great account managers. So what makes a great account manager and what skills and attributes does such a person possess? As someone who’s hired and trained account managers for a while, I have a few thoughts on this topic.

The responsibilities of an account manager will differ from company to company so I first need to define my expectations of an account manager in the search industry. At its highest level, the role of an account manager is to keep both the client and the agency happy with an account, focusing not only on their client relationships but also maintaining excellent internal relationships with all those who touch their account. For relationships to be successful they need to be built on solid business grounds and that means profit for both sides.

A great account manager is likable, smart, positive, passionate, dedicated, inquisitive and entrepreneurial. They must have skin thick enough to withstand the pressures of having multiple demanding clients. They also must have a finely tuned political antenna, have a strong understanding of their client’s company culture and be able to empathize with different types of people. They must be good at developing trust and be able to diffuse conflict and disagreement quickly. In terms of knowledge, a great account manager is well-rounded: they need to understand the PPC industry, their client’s industry and their client’s overall marketing mix. They must be good writers, have excellent presentation, facilitation, time management and analytical skills. They must be organized and efficient, possess a strong focus on quality and have a high level of attention to detail.

A great account manager ensures their client is happy by listening to their objectives and goals, making appropriate strategic recommendations and ensuring their account runs smoothly. They will know when to bring other resources (bosses, tech team, etc.) into the equation and when to tell the client that they are right or wrong. Of course, being buddies with the client doesn’t hurt either. A great account manager is not only a fantastic manager of clients but also a good manager of people, with the ability to effectively develop a team.

It’s tough to find one person that has all the qualities I’ve mentioned above. My advice is that if you find someone who does, hang on to them, just like we do at eSV!

Jacqueline Calderon

Tagged: account management, esearchvision, online marketing, PPC, SEM

Biases as a Barrier to Good Business Decisions

rnathan — Thu, 18 Feb 2010 14:47:00 +0000

It has come to my attention that when selecting a PPC provider, a good amount of marketers have what I would refer to as a “blind bias”. The blind bias refers to comments such as “we like Agency X because they seem to be an industry-leader” or “we want to work with Agency Y because we are familiar with them” or “we really like Company Z because they really dominate the PPC space.” I have to wonder, what do these comments even mean? While there might be something to be said for the idea of familiarity as it invokes a certain amount of trust, there isn’t much to be said for allowing basic hearsay to drive crucial SEM decisions. I call this type of bias blind because that’s what it is. There are no numbers or authentic experience attached to these claims, yet they seem to drive the PPC selection process for many advertisers.

In his recent article A Guide to Choosing your Paid Search Management Tool, Josh Dreller reviews the basics of selecting a PPC vendor as well as providing some strategic tips for how to choose the best fit vendor for your specific business. Not once does Dreller mention using what you have “heard” or who the “industry giant” seems to be to influence the selection process. In fact, he advises the opposite: “Don’t just go with the first guy. Do your due diligence.”

If you still don’t agree that non “industry-leader” vendors shouldn’t be ignored, consider this logic:
PPC is one of the most cutting-edge advertising industries in existence. Naturally, in an industry this fast-paced, new and strong players are going to pop up all the time. In order to compete with the aforementioned “industry-leaders” who spend hundreds of thousands in marketing dollars to be perceived as such, the newer and smaller players must be extremely innovative and advanced in both technology and customer service.
Therefore, as it turns out, the smaller and less well-known SEM solutions providers may actually be the ones who will drive the best results for your business. Advertisers who resort to blind biases will truly end up missing out on key PPC opportunities.

Tagged: agency, PPC, RFP, sales, SEM

PPC vs SEO

eSearchVision — Wed, 20 Jan 2010 18:58:55 +0000

Why pay for clicks when you can get them for free?

This question often comes up when facing relatively inexperienced advertisers deciding between PPC and SEO. While I cannot refute any argument based solely on this logic (organic clicks are free and paid clicks are not), I can make a case for PPC even when SEO is at its best – which certainly is not the case for the majority of sites out there.
There are three distinct advantages that paid listings have over organic listings, and as a result these are the three most compelling arguments for integration of SEM into any marketing scheme:

1. If you don’t use SEM, your competition will poach your traffic. The competition has always been able to bid on your terms, but since AdWords changed its trademark policy to allow competitors to actually use these terms in their ad copy, it has never been more important to claim the real estate that is rightfully yours.

Consider the following query for [iphone]. In the first instance, both AT&T and Apple are in premium positions:

Now imagine if AT&T owned the entire premium position, without Apple:

In both cases, Apple SEO is perfect in placing Apple.com at the top of the organic listing. However, in the second search, where there is no Apple ad, my eye is drawn to the AT&T ad instead of the Apple organic result. If I am specifically looking for the Apple website, I may click on the organic link. However, it’s inevitable that many users will click on the AT&T ad because they will see it first.

1. SEM allows for customized messaging, whereas the text for organic links is determined by the search engine. While several factors can help to control the text in the organic link (including but not limited to the page description, title and header tags) it’s a significant process and requires some technical knowledge. Ad copy can be changed almost instantly using paid ads, allowing marketers to create and rotate in unique messaging for sales, promotions, product launches, and so on. Furthermore, marketers can test which ads work best, optimizing for CTR and conversion rates by optimizing landing pages.

Consider the following query for a Sony Bravia TV:

While the organic link is relevant, Sony is running a promotional offering of a PS3 or Blu-Ray player with a TV purchase. This efficient and enticing offer might sway a consumer who was intending on purchasing the TV from Best Buy to click on the Sony ad and purchase directly.
Of course, ads can be tailored for more than just promotional purposes…

3. SEM can be optimized for the consumer buying cycle. In their highly regarded book, Search Engine Marketing Inc, Mike Moran and Bill Hunt conclude that all search terms can be classified as: informational, navigational, or transactional. Informational queries are for research [best flat screen tv], navigational queries are for getting to a specific website [sony.com], and transactional queries show user intent to purchase [buy bravia xbr8 hdtv]. How is this relevant to SEM? Because ads can be customized for different types of queries, SEMs can create ads that are tailored to users in different stages of the buying cycle.

A consumer typing in an informational query is researching a product, idea, service, etc. Calling out this notion in the ad copy and driving traffic to an informational page where the consumer can learn about the product(s) in question will build trust and allow them to make their own way down the sales funnel. Consider the query [plasma or LCD TV?]. This query indicates the consumer does not know which kind of television to purchase. Driving the consumer to a product page for a particular TB will not yield a sale, whereas driving the consumer to a page describing the benefits and drawbacks of plasma versus LCD may yield a sale. Whether or not the sale is made in that session, the consumer is likely to trust the source of unbiased information when moving forward and purchasing the TV.

Following the same logic, building ads that are relevant for navigational and transactional queries will have positive ramifications. Understanding and classifying various keywords as informational, navigational or transactional is a significant step to understanding consumer behavior. Studying post-click consumer behavior using an analytics package (such as Google Analytics) will give insight into how effectively consumers can work their way through the sales funnel within your website – channeling those informational clicks into transactions.

Benny Blum

Tagged: marketing, online marketing, paid search, PPC, query, SEM, SEO, Trends

It’s your Algorithm!

eSearchVision — Fri, 06 Nov 2009 21:42:42 +0000

Most SEM professionals will agree that a solid SEM program strategy is multi-faceted. The program should focus not just on bidding, but also on Quality Score, data gathering and reporting, and aggressive testing of all aspects of the program. That being said, the great promise of bid automation remains a viable, debatable, and important topic.

There is no doubt that autobid algorithms are important to a well-rounded SEM bidding strategy but they can also be detrimental. Success with autobid depends on a number of factors. Obviously, one crucial factor is how well constructed the algorithm is. Perhaps more important, though, is the level of customizability made available by the algorithm. Does it treat core and long-tail terms similarly, or is it specialized for success with a particular kind of keyword? Is it customizable in terms of defining quantity of data analyzed, statistical relevancy, convergence speed, and data tolerance leading to a bid change? Can you influence bid security, day parting, data aggregation?

Algorithms can be a powerful part of your bid management arsenal, particularly when tweaked and managed intelligently. As all businesses have different needs, if the algorithms you are working with are not customizable, you run the risk of algorithms being unable to respond to your unique business conditions. Be sure to ask what your customizability options are so that you can take advantage of algorithms that fit your requirements!

Josh Krafchin

Tagged: algorithm, customizable, google algorithm changes, internet marketing, pay per click, PPC, SEM, technology