Sep 162015

Considerations for Paid Search Budget, Holiday 2015 and Beyond

Every way you slice it, digital is growing relative to offline, and mobile is growing relative to desktop.

The National Retail Federation shows Ecommerce share of retail sales at 7%, doubling since 2008. Our most recent Quarterly Digital Marketing Report shows smartphone paid search clicks up 35% year over year for Q2, while desktop and tablet traffic are actually flat.

RKG q2 paid search growth by device

However, advertisers have long struggled with how much to invest in mobile as the conversion rate is much lower for most sites, with paid search phone revenue per click just 42% that of desktop in Q2 of 2015.

In light of this, I hope to provide a framework for how advertisers should be valuing mobile, and paid search in general, in determining budgets, particularly during the busy holiday season which can make or break the fiscal year for many retailers.

Additionally, Merkle|RKG will be hosting a webinar tomorrow, September 17th, at 1 PM ET to walk through holiday tips and tricks, including advice on how to approach mobile. You can watch on demand any time.

In diving into the impact of paid search and your strategy surrounding it, there are two important themes to consider: being present in the different moments your consumers are using their devices, and properly measuring the value driven by your ads.

Be There for the Moments

The research process is now more fragmented, with consumers interacting with brands more frequently and more briefly. Smartphone dominance is now extending our digital lives, creating opportunities for touch-points that did not exist previously with desktops and even laptops.

This means more opportunities for you, and your competitors, to connect with your customers. More “opportunities” translates to more places where you need to be, and many of those are not free.

Cross-screen behavior is a reality of today’s consumer. A Forrester Research study showed that the average American internet user now owns more than three devices with which to access the internet, and research shows that simultaneous device usage is becoming a common occurrence.

Average American devices

Thus, there is a need for consistency in presence and experience if you want to fully interact with your customer base. You need to be there in the moments when your consumers are looking for you.

There are, of course, paid and organic sides of this coin, and there are actually recent developments in each space that are changing the status quo a bit and resulting in increased investment from advertisers.

Rising Brand CPCs

As we’ve recently reported in our Q2 Digital Marketing Report, rising CPCs are becoming quite a nuisance for advertisers. Smartphone CPCs are still lower than desktop and tablet but are rising and are affecting the ability to properly support both brand and non-brand.

For advertisers with strict budgets, these increases are stealing funds from non-brand, which is the major driver of new customers. Still, our previous studies and industry research have shown an incremental lift in site traffic with both paid and organic listings present, so marketers must still find a way to be present on smartphones, especially with recent changes to the mobile Local Pack…


Google Local Pack Update


Google’s change in the placement of the Local Pack on mobile devices at the end of August, has caused sharp declines in organic traffic, as the map and local listings now push organic to below the fold. Ads still remain above the local pack, making advertising on mobile even more valuable if you have store locations or are competing with brands that do.


As a marketer, you look for smart ways to capitalize on shifts in consumer behavior. The way customers shop during the holidays has changed, so you need to change your strategy to capture incremental sales on key days. Some of the important trends this year are the increasingly promo-driven marketplace, and consumers using their phones more for online and offline purchase research.

Holiday Sales Occurring Earlier

For the past eight years, we have seen holiday shopping continue to move up and be more consolidated in the Thanksgiving-Black Friday-Cyber Weekend time period, which has also begun a day earlier each year over that time frame. This not only pulls some of the shopping forward, but also creates a longer window for people to search and spend more money (a reality of human nature!).

We also see shopping continue to move earlier in Q4, pre-Black Friday, which means that you might need to fund holiday or awareness terms earlier than you have historically. You might also want to maintain higher positions on your evergreen keyword list beginning at the start of Q4.

Showrooming Becoming More Common

Already, 50-70% of consumers use their phone for “showrooming” purposes, which incorporates most actions related to researching a product while in a store. Search interest in "near me" searches (words like "near me," "closest," and "nearby”) has increased 34X since 2011 and nearly doubled since last year. The vast majority come from mobile—80% in Q4 2014.

Showrooming and local searches will be even more pronounced during the holiday shopping season, due to the increase in volume of shoppers. Smartphones become a major component for the droves of in-store Black Friday shoppers, before and during the shopping moment, and those who choose to avoid the crowds and shop online.

The opportunities extend beyond this key week to the weekends in December and especially the weekend before Christmas as online shipping cut-offs go into effect. We’re seeing Google underscore the importance and success of supporting offline with online as they continue to develop and prioritize their Local Inventory Ads product, which has shown good success for our clients.


How will your brand react to these changes in consumer behavior? Will you have enough budget to sustain your desired visibility goals online during this time, when CPCs become increasingly more cut-throat every year this event becomes more vital? Do you have a strategy for local spend?

You might also consider concentrated spend in radius of store/combined with display. It takes time and effort to smartly fund stores with an online budget, but it does pay off. One of our retail clients with 100 stores across the US has tested strategic increases in spend around certain stores for two years and have seen those stores increase to expected performance for both years.


Properly Value Interactions Across Your Program

As mentioned earlier, the directly measured revenue per click on mobile devices lags behind that of desktop. However, there have recently been a couple of changes aimed at increasing mobile conversion rate for advertisers.

Purchases with Google

Purchases with Google (formerly known as the “Buy Button”) has certainly been a hot topic over the past two months. As brands adopt this, they will likely see improved performance on mobile with regard to revenue tracked directly to mobile. This will likely translate to increased investment as the “value” of mobile is more easily proven and apparent to those who looking only at face value (which is the majority of the industry at the moment).

Instagram Shop Now Button

Outside of the search landscape, Instagram will also now have a “Shop Now” button, as they are testing more direct-response formats. From an ad, users can now directly buy a product, sign up on a website, or download an app, and Instagram has also recently teamed up with Facebook for more improved targeting methods.

What is your strategy for advertising on Instagram? Is it where your user base spends time?

If so, and if you’re not already there, consider it for this holiday, whether it’s for awareness or direct response. Across more than 400 campaigns measured globally with Nielsen Brand Effect, ad recall from sponsored posts on Instagram was 2.8x higher than Nielsen’s norms for online advertising.


These advances in trying to drive better direct response out of mobile are great. However, as I recently advocated in a webinar on the New Era of Mobile, the proper investment requires appropriate valuation of mobile. Not just face value, direct response on mobile, but considering that mobile is not primarily a transactional device.

Identifying and tracking secondary conversion metrics can be just as informative in defining mobile’s value, which might be things like email sign-ups, white paper downloads, store locator searches, etc. Know the value of these actions across your business.

How is your analytics set up? Do you have a conversion pixel on all of the primary conversion metrics, and secondary? Setting that proper foundation allows you to be in the right place, at the right time to reach customers, and to do so efficiently and effectively.

Aside from the foundation of tracking, it’s essential to consider the following in determining the full value of mobile, and what digital investment is required:

Cross-Device Conversions

Cross device interaction is a reality of today’s world, and we are under-valuing if we're not capturing those conversions. We are seeing cross-device conversions have a larger impact on our clients’ paid search programs up to 21% on mobile devices, which is more than double the lift that tablet and desktop get from including these interactions. Not including this leads to inaccurate bidding and reporting that doesn’t tell the full picture.

Paid Search Cross Device Lift

In-store/Offline Measurement

For most brands with a significant store presence, online is just the tip of the iceberg. The game changes considerably when you introduce the offline impact. This includes in-store conversions and phone orders.

Tools like Google’s In Store Visits beta and In-Store Transactions beta, which we were among the first to pilot, help make these insights achievable. We observed a 16% overall lift when including in-store transactions across the programs tracking them during the 2014 holiday shopping season, and that lift is even larger on mobile devices for many advertisers.

Also consider phone tracking, either through Google Call Tracking or some other method, as this is a significant piece of the pie for some companies. Also consider tracking email sign-ups and store locator searches as secondary conversion metrics which can indicate the volume of offline impact.

Overall, with measuring offline spillover, the data is more directional but it helps to get to an improved valuation, because it’s certainly not zero.


Properly Valuing Key Holiday Shopping Days

Look for more from my colleague, Laura Scott, on this topic soon, but this is also an important component of spending when it really matters. Unfortunately, this is often overlooked because most third-party tools do not have access to the data that shows the impact of the click date, rather than just when the sale takes place.

You need to be spending when the clicks are most likely to drive a conversion, not pouring money onto a day which looks strong from a last-click sales perspective. Spend some time with your data from last year and understand your click to order curve leading up to the key holiday shopping days.


In Conclusion

During the holiday shopping season, it's critical for digital marketers to develop and execute intelligent, data-driven strategies that will deliver optimal performance across all device types as well as in offline channels.

Watch Merkle|RKG's Holiday 2015 webinar on demand to learn strategies for making the most from your holiday plans for mobile, local targeting, search, display, and social. You’ll leave the webinar with actionable tactics to:

  • Leverage insights into offline and cross-device shopping behavior
  • Capture new customers with proximity targeting and "near me" searches
  • Properly value key holiday shopping days
  • Capitalize on shifts in consumer behavior, including the increasingly promo-driven marketplace
  • Incorporate inventory fluctuations into your digital strategy
  • Take advantage of new opportunities like Purchases on Google, Yahoo Gemini, Local Inventory Ads, and Facebook Custom Audiences targeting

Whether you watch live or save for later, signing up for the webinar will also give you access to future recordings and the ability to share with your team as you finalize your holiday planning.

The holiday shopping season can make or break a retailer’s entire year. With so much on the line, it is critical for digital marketers to develop and execute intelligent, data-driven strategies that will deliver optimal performance both online and off.

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