There are lots of ways to manage a PPC campaign. Recently, I’ve heard a lot about different campaign management strategies. One management technique is “Portfolio Campaign Management.” It’s a good time to cover portfolio-style campaign management, particularly given my recent column that compares the PPC auction marketplaces to the stock market; and another that highlights the best strategy for determining when to drop a keyword from your portfolio.
What’s portfolio management? In stock markets, a portfolio diversifies holdings to reduce both volatility of its value and investor risk. Some individual stocks are stable and somewhat predictable, others are very volatile and swing wildly, based on current or predicted future financial results of a particular company.
The idea of a stock portfolio is to smooth the rough ride while maintaining good returns. The more stocks in a portfolio, the more likely it will behave like the overall market (and hopefully beat it), but at lower risk. Obviously, if you knew with certainty which one stock would be a stellar performer, you’d buy only that stock.
For keyword campaigns, the primary goal is not to lower risk, but to maximize opportunity. Variables that impact performance of a keyword campaign are visible historically and in real-time; there are no Enrons, Worldcoms or ImClones here. The goal of any keyword campaign is to maximize the results across keywords and engines, subject to specific ROI objectives. You have a considerable advantage over hedge fund managers and stock pickers. By looking at the right data and keeping your pulse on a paid search campaign’s performance, you can predict to a fairly high degree of certainly where your ROI, volume and profit will be on a portfolio of keywords.
The larger the list of keywords in a campaign, the more likely you’ll decide to use some level of campaign automation to lower the risks of having a keyword in an unprofitable or non-optimal position. For many marketers, a broad keyword list running across many engines simultaneously can and will add volume and ROI to a campaign. Will additional keywords add stability and reduce volatility? That depends on your industry vertical, business, and your competition’s actions. Some industry verticals have power keywords that both drive volume and can be very volatile in pricing. Sometimes, the bid landscape for these power keywords will shift several times an hour, particularly in Overture, where there’s a direct auction. Google has less volatility due to their CPC/CTR AdWords ranking system.
To manage a PPC campaign against any ROI-based objective, the objective must be quantitatively defined. Your ROI objective may be a simple cost-per-order (CPO) or cost-per -action/lead (CPA). The metric may be more sophisticated, such as a return on ad spend (ROAS) or ROI, where the “return” is either revenue, contribution margin or lifetime value.
Even brand marketers often use a combination of branding metrics such my BEI score, awareness scores or recall scores to add quantitative structure to a campaign. No matter what ROI metric is used, management likes to see simplified reports from the internal team or the ad agency. These simplified reports indicate how the campaign is doing in comparison to ROI objectives set forth by management. Reports presented to management reflect campaign averages. Most portfolio campaign management techniques also manage averages, but in different ways. To use portfolio management techniques for maximum corporate benefit, you match the technique to your business.
Improperly executed, a portfolio-based campaign management strategy can cause damage. Even worse, the marketing team may not know the damage occurred if portfolio averages look “OK.” Properly executed, strategic portfolio campaign management can provide a search engine marketer with the flexibility to build volume through intelligent use of power keywords and an ROI-volume profit tradeoff analysis. Unfortunately, many marketing teams, providers and agencies don’t know the difference between a well-executed portfolio and a horrific one.
In Part 2, we’ll examine methods for managing large or small keyword portfolios in the search engines by looking at different ROI metrics, including average ROI, break-even ROI, and optimal ROI.
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