Maximizing SEM Revenue in the New Year, Part 2

Last week, we explored the strategies a fixed-budget marketer might use to maximize revenue, given a particular fixed annual marketing budget allocated to search engine marketing (SEM). This week, a very different challenge: maximizing revenue when you’re a pure-play direct marketer with a specific customer acquisition cost (cost per order/action, or CPO/CPA) or return on advertising spend (ROAS) “allowable,” but without a cap on monthly or annual budget.

Pure direct marketers ascribe to a self-funding marketing strategy. The challenge is to hold to an allowable and do a volume (therefore revenue) maximization. This is based on an ever-shifting marketplace. Only some variables are under your control.

In most cases, the CFO and/or marketing VP set a specific allowable customer acquisition cost or ROAS. This allowable is determined by data that indicate paying more than a specific amount to acquire customers/sales or generate a lead results in loss. If the finance team did the math correctly and you have a good site, an attractive offer, and effective landing pages, your allowable is high enough to run a serious campaign against tough competitors.

The goal of a pure direct marketing (DM) search campaign is to maximize acquisition volume within the parameters of the allowable (e.g., cost per customer, percentage of sales, even ROAS expressed as percentage of net contribution margin). Your return on investment (ROI) goals expressed as an allowable become the core campaign strategy and maximize volume efficiently.

Campaign Control: Eliminate Waste

The trick to maximizing volume, given a specific allowable, is to eliminate waste. Waste is any and all campaign areas exceeding the allowable. In a paid-placement market, such as Google or Overture, that means measuring, analyzing, and controlling listing position by keyword. Waste cloaks itself in averages.

Campaign control requires understanding the keyword mix that actually comes in on a broad match listing at Google or Overture. A broad match listing delivers traffic for a basket of keywords, not just one.

If a broad listing generates good volume on a particular phrase, that phrase should be a new standard match listing in Overture or its own new Ad Group in Google. By breaking out phrases into their own listings, you can manage bids and traffic flow more precisely. At the same time, you improve search experience by adjusting landing pages.

Write creative for new listings to address the needs of searchers who type in the phrase. Don’t use broad, generic creative. Similarly, eliminate poorly performing keywords from a broad match listing (through negative matches). It improves that listing’s efficiency. You remove waste and can bid higher without exceeding the allowable. Higher-position bids mean higher volume, revenue, and profit.

Another way to improve listing efficiency is to eliminate less-efficient traffic by daypart or day of week. Identify and concentrate efforts on the most efficient times. You’ll maximize volume during the efficient times and still hit the target ROI.

During less-efficient times, a bid or position that makes money the rest of the day can actually lose money. That’s why average ROI data is sometimes insufficient for planning and executing the highest volume campaigns. Can you get a campaign to meet its allowable using averages and manually setting bids and positions? Sure. But you leave a huge volume untapped and waste budget.

The Search Experience

Direct marketers seeking to maximize ROI and fixed-budget marketers looking to maximize revenue mustn’t overlook the importance of search experience. From the moment a searcher types in a query (or clicks a link in a directory structure), that searcher expresses a need for information. The desire is expressed as clearly as they can articulate it. Don’t squander this opportunity. In addition to a broad keyword list to capture a wide range of searchers, scrutinize the experience:

• Is creative compelling? Does it accurately describe what a searcher will find? If not, test different executions. Bear in mind the editorial policies of each engine. Understand how Google rewards compelling copy and brand use.
• Deliver each searcher as close as possible to that stated objective, keeping your own goals in mind. If you have a listing for “coffee grinder,” test your coffee grinder category page (with a selection of coffee grinders) and your top-selling coffee grinder page (preferably with links back to the category page). Which better serves the searcher’s needs and your own? Test, or you won’t know.Which landing page layout works best: the one with a picture of the grinder or the one with a picture of a person drinking steaming coffee with the grinder in the foreground? Test and see. Never stop testing and improving.

If you can test and optimize to improve search experience and improve conversion by 30 percent (no, not unheard of), you can afford to bid significantly more for traffic. You’ll drive more efficient volume and maximize revenue.

For direct marketers, revenue maximization is a surgical procedure. Identify waste with granular analysis, smarts, experience, and appropriate technology use. Then, eliminate waste with precision so the rest of the campaign can grow and thrive.

Waste elimination isn’t a one-time task; it’s an ongoing assignment. SEM changes constantly. Remain vigilant. Devote the appropriate resources to the task to maximize revenues and profits.