Paid-search Marketing: Answers to Eight Key Questions

1. What is paid-search marketing?

It consists of placing ads for your products/services on Internet search engines and content sites. These ads typically are small snippets of text linked to your merchandise pages. You pay when someone clicks through to your site from the ad. Cost-per-click (CPC) fees range from 5 cents to several dollars per click, with an industry average near 30 cents.

Leading search-marketing channels include Google, Overture and Inktomi. Additional smaller channels and new large channels are expected to appear soon.

2. What sort of catalogers benefit the most from paid-search marketing?

Catalogers with fair pricing, good Web sites and strong brands do best with paid search. It also favors e-tailers with a tightly focused merchandising strategy, because it increases the odds they’ll win the click and that the click will yield an order.

Consider two recent ads on a Google search for “wine glass.”

On www.bestwineglass.com:
Stemware — Free Shipping
Bohemia, Riedel & Ravenscroft. Wine glasses, barware and decanters.

And on www.potterybarn.com:
Pottery Barn Entertaining
Find all your home essentials & easy home updates at Pottery Barn.

Pottery Barn is a great company — I’m a satisfied customer. For this search, however, the lesser-known brand appears more credible. Their URL and focused copy suggests Bestwineglass.com lives and breathes wine glasses. Of these two ads, Bestwineglass.com likely enjoys the higher click-through rate.

Furthermore, a visitor to Bestwineglass.com will find 47 glass options vs. 12 at Pottery Barn. Because of this four-fold advantage in selection, it’s likely Bestwineglass.com enjoys higher conversion on this phrase.

Pottery Barn’s overall merchandising strategy makes sense: broad selection garners more business overall than niche merchandising. But for paid search, merchandising depth beats merchandising breadth.

3. What sort of products sell best at paid search?

Products with sufficient Web search traffic and margin dollars work well in paid-search ads, as do products that can be sold via short text descriptions and products that customers understand.

Consider the niche category of pet oral hygiene. The phrase “dog toothbrush” gets fewer than two searches per day (as reported by Overture), and these items sell for less than $10. While such products may participate in a larger campaign, dog toothbrushes never will play the starring role in any search-marketing campaign.

Paid search also is a poor choice for introducing new products that consumers may not yet know a lot about. Here’s an example of what I mean: One retailer shared his excitement about a novel, polarized sun visor for car windshields. This unique product includes a small disc that the driver aligns to block the sun. The item sells well via its catalog presentation, where a photo, diagram and copy block illustrate its advantages. But like the dog toothbrush, the sun visor is too unusual to be a paid-search hero product.

4. Do buyers acquired by paid search have good lifetime values?

Catalogers report search-acquired buyers have somewhat lower future values compared with non-search-acquired buyers. This is probably because search-acquired customers are more Web-savvy and likely to comparison shop than typical direct buyers.

Try placing search-acquired names in distinct key codes when preparing mail tapes for your merge/purge and carefully track future sales into these cohorts.

Larger catalogers who commonly acquire customers below first-order breakeven should use more caution when allocating paid-search acquisition spending. Don’t bet that typical future purchase rates will hold; be sure you gain a sufficient return on the first order.

5. How should you track and monitor paid-search campaigns?

Running paid-search campaigns without solid tracking capabilities in place is like flying an airplane blindfolded. Your tracking system must be able to track every click, order, revisit and subsequent order at the most granular level of detail. Good tracking systems also reconcile the click counts for which you’re billed against the visits your site actually receives.

Tracking extends beyond your online systems. Try providing your phone agents with a dedicated catalog code to assign when callers indicate they found your company via Web search. While callers won’t (and shouldn’t be asked to) recall the specific placement or wording of your ad, you can allocate this generic spill-over revenue proportionately across your tracked results.

Good reporting systems offer simple dashboards to monitor your overall marketing effort, as well as detailed reports supporting in-depth analysis. Look for reporting systems that offer flexible categories and subcategories for summarizing results. Advanced systems support easy A/B testing of ad copy and destination URL, and provide statistical confidence estimates to distinguish testing signals from noise.

6. Should you leave search marketing to your affiliates?

Some retailers delegate their paid-search efforts to their affiliate marketing partners: a simple, no-fuss solution. But this strategy suffers from the following weaknesses:

• It inserts two levels of intermediaries between you and the search advertising channel — the affiliate and the affiliate network — both marking up the true cost of the advertising to generate their profit margins. You or your search-marketing manager can buy the same advertising directly from the search venue at cost.

• Affiliates often have no interest in sharing marketing insights with e-tailers. Rather, affiliates aim to buy advertising low and sell it high, and they have no incentive to say how they’re driving sales. Indeed, when e-tailers dig into the details of their affiliate programs, many find their affiliates are driving much of their sales via advertising on the merchant’s own brand name, a monstrous exploitation. The “black box” nature of affiliates’ campaigns deprive you of valuable marketing insight.

• E-tailers don’t control their affiliates, and thus can’t execute campaigns or tests at will. E-tailers managing search internally or working with a search-management firm can drive the marketing effort to support corporate goals.

7. Should you handle search internally or outsource it?

Merchants with small search campaigns typically manage them in-house, because small programs don’t generate enough earnings to justify outsourcing them.

E-merchants running medium- to large-scale search-marketing programs find maximizing the channel requires two key ingredients: smart technology and smart people.

You can develop tracking and reporting technology internally, rent systems from application service providers or use a platform offered by your search-management firm. The right choice for your company depends on the availability of your IT resources, functionality and ease-of-use desired, and relative costs.

A smart analyst can bring huge improvements to a search campaign. But this person (or people) must understand your merchandising, value proposition and economics, as well as be skilled in the nuances of online marketing and various search venues.

Strong reporting systems empower analysts. They should earn their salaries by thinking, analyzing and discovering, not by wasting hours chiseling out crude reports using dull tools.

When choosing whether or not to outsource the analysis work, the right choice for your catalog depends on the availability of in-house online marketing talent, the incremental return gained via better marketing, and the relative costs of in-house salaries vs. management fees.

8. How much should you spend on paid-search marketing?

Search marketing is an ideal direct marketing medium. It supports low-risk tests and aggressive rollouts of profitable campaigns. Many e-tailers start with a small test of a few thousand dollars. After a successful test, they generally seek scale. That is, they then ask: “How much advertising can we buy while still meeting our ROI target?”

Once you determine your tradeoff between advertising cost, sales and profits, you can scale up your marketing spend and still meet your marketing goals. Some large retailers spend hundreds of thousands of dollars on search advertising monthly, and do so while hitting their ROI targets.

Conclusion

Paid search is one of the most exciting customer-acquisition opportunities for catalogers available today. If you’ve yet to use this channel, run a test to see if paid search can work for you.

Alan Rimm-Kaufman, Ph.D., leads the Rimm-Kaufman Group, a professional services firm providing online marketing services and technology to leading catalogers and e-tailers. He may be reached at alan@rimmkaufman.com.