"Cheap" and "Free" Keywords: Not Always a Bargain

One of my mentors, Ron Masini, was formerly VP of strategic projects and programs development at Avis Rent A Car System. The fancy title hid the fact he was actually responsible for customer loyalty research and execution for the brand. Ron’s research into loyalty behavior was the basis of a service that helped Avis win the prestigious Brand Keys Award for the most loyal brand in the U.S. three years running.

Ron frequently lectures on why customers defect from a brand. One category of defectors is consumers who only buy from the lowest-priced provider in any market. He asks the audience, “And what should we say to these customers?”

The answer is, “Bye-bye.”

There’s no loyalty from shoppers who buy only from the lowest-price provider. The moment a competitor lowers its price below yours, the customer leaves. There’s such cost and effort associated with acquiring customers that in many service industries, customers only become profitable in the relationship’s second or third year.

Spending acquisition dollars to attract customers who defect the moment a cheaper option is available is short-term thinking.

Intuitively, I know this rule must apply to search engine marketing (SEM) and keyword bidding for paid search advertising. There’s been anecdotal evidence to support this. But as Gary Stein of Jupiter Research (and ClickZ) once said, “The plural of ’anecdote’ is ’data.’”

Now there’s some data, at least in a few vertical markets.

In an ongoing paid search advertising campaign, a large insurance company expressed interest in appending some of its keywords and keyword phrases with the words “cheap” and “free,” as in “cheap health insurance” and “free insurance quote.”

We tested these phrases and noticed some trends. Keywords and keyword phrases with solid conversion rates plummeted when “cheap” or “free” was appended onto them.

Specifically, conversions were 25 percent less likely when the word “cheap” was appended to any of the company’s search terms.

This occurred in the insurance industry. Other verticals may experience different results.

A second phenomenon is the relationship between longer keyword phrases and higher conversion rate. We expect a specific query to convert at a higher rate than a broad keyword would. Not everyone grasps the greater benefit: More specific, longer phrases are often less expensive than broad keywords. Again, the plural of “anecdote” is “data.”

Here’s a study we conducted of Overture keyword bid prices:

Watch what happens when we plot a business-to-business (B2B) client’s conversion rates:

The longer the keyword phrase, the higher the conversion rate. But often, longer keyword phrases aren’t queried with the same frequency as shorter phrases. The trick is to identify as many of the longer phrases as possible. Google’s new AdWords Automater system could be a powerful tool in increasing marketers’ ability to identify more long, specific keyword phrases that can be purchased at lower rates to increase volume on these higher-converting, less-expensive keyword phrases.

Back to that earlier point: Though appending “cheap” or “free” to a keyword phrase makes the phrase more specific, consider the long-term benefit of attracting and paying for clicks from bargain-hunting customers.

With only anecdotal evidence and gut instinct on which to base this hypothesis, I’d posit even if customers searching on “cheap”- and “free”-related queries were attracted at a significantly lower CPC and converted profitably on their first site visit, they’re more likely to defect when your competitor targets that phrase and offers a lower price.

The answer in SEM, as with all marketing, is test and measure.

Do you have information on keywords that convert higher than others? Have you noticed an effect of certain verbs, adjectives, word stems, or shorter or longer keyword phrases? Share your experience, and I may feature your data in an upcoming column. I’d love to hear your keyword-specific success or failure stories.

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