RKG Logo

What should you be getting out of your paid search program?

This is a surprisingly difficult question to answer. The CEO can see that Acme.com ads are higher than yours on the page or on his Hitwise report, but he can’t tell whether they’re flushing money down the toilet to get there, or whether their underlying economics are just as good as your own only on a larger scale. Most CEOs will assume the latter and take the marketing manager to task for not getting more out of search.

We’ve blogged extensively on how to assess the quality of your PPC program., but we thought it might be helpful to provide some other potentially useful data from what we believe to be “well regulated” programs.

Business Models and Brands

Traffic on your brand name and trademarks behaves differently from traffic on competitive search phrases. Costs are lower because there isn’t much competition and conversion rates (CR) are much much higher. These are loyal customers with credit cards in hand, ready to shop and declaring their intent to buy from you.

This difference manifests itself in interesting ways depending on your business model. For Catalogers, brand traffic converts at 7 times the rate of competitive search traffic! Not only that the orders tend to be larger as well. The non-brand AOV is only 85% of the Brand AOV. This makes sense. The folks who search for you by name know you and trust you, and may even have your catalog in front of them. Folks who are sniffing around on competitive searches are clearly less likely to drop big money with you as they don’t know you that well yet.

Take a look at the same numbers for other business models:

Brand vs Non-Brand Conversion and AOV

A couple of observations:

  • Internet Pure-Plays have a markedly lower conversion differential between brand and non-brand than catalog firms. Perhaps this is the difference between having catalog in hand and not? Perhaps greater brand power, trust and loyalty developed over time? Other ideas?
  • Brick and Mortar retailers’ brand conversion rate is only 50% better than competitive search phrases!?! Fascinating stuff! Compare to the catalogers numbers! The natural conclusion has to be that many of the folks searching for brick and mortar retailers by name are either using the store locater to then find the closest store, or are simply researching products online with no intent to buy online to begin with. The critical question remains: how much retail spillover comes from the competitive search phrases?

This conversion rate differential is important to bear in mind when assessing other programs as well. If your affiliate traffic conversion rates look like your brand traffic conversion rates that should send a strong message. Similarly, I’ve heard folks talking about natural search saying “only half my organic traffic is on my brand name therefore half of my untracked sales are from non-brand organic traffic.” Not a chance.

As the chart below indicates, for catalogers non-brand keywords account for 83% of the traffic from PPC ads. Because they cost more per click they account for 94% of the PPC Cost. However, because of the conversion differential they represent only 46% of the PPC Sales.

Non-Brand Traffic-Cost-Sales

Notice again, and not surprisingly, the remarkable power of retail and catalog brand names when compared to pure-plays. Our friends at Amazon, Ebay and Overstock.com may be exceptions to this rule!

Unfortunately, much as we love it, we can’t do much to generate more brand traffic. The good manager focuses on what s/he can control. We recommend focusing on two ratios to assess the trends in your program: the fraction of PPC Sales driven by competitive non-brand search terms, and the percentage of total site sales attributed to those competitive terms.

Obviously what those ratios are depends on the power of your other marketing channels as much as anything. The more powerful the brand the lower those two numbers will be, but watching the trends over time can be useful.

Below are medians for our clients — half above, half below — these may be useful as benchmarks, but the trends are the key.

Non-brand sales as fraction of site

If those ratios are growing, and your non-brand cost to sales ratio is where it needs to be, your program is headed in the right direction…or the offline efforts are heading in the wrong direction :-)

Tomorrow, I’ll send around the same metrics looking at how the numbers shake down by different product categories.

If you like this post, consider subscribing to our RSS feed. You can also have new posts sent to you via email.

Share this post (via email, Digg, Delicious, etc)

Similar Posts

Trackback

http://www.rimmkaufman.com/rkgblog/2007/10/10/ppc-benchmarks-how-does-your-program-stack-up/trackback/

Blogs Citing This Post

  1. Pingback: HELM, WHM/cPanel, Windows, Linux and SEO Blog » Blog Archive » SearchCap: The Day In Search, October 11, 2007 on October 12, 2007
  2. Pingback: Weekly Round Up - Stories you might have missed… » Hybrid Search Engine Marketing | SEO Consulting to Help Rank Better on October 12, 2007

Your Comment

We "do-follow" links in comments. This may help your search rankings. Learn more...

Email Updates

Categories

Recent Comments

  • George Michie: Thank you for your insights, Mark! It's good to get different perspectives.
  • Mark Pilipczuk: Thanks for taking the time to look into my model and commenting back, George. I re-checked my model to make sure there were no...
  • SYP: I am honored to be mentioned in such esteemed company. Thank you. Virtual single malts all around. :) --So Young.
  • Web Design Zoo: Thanks for that. Already had Dan Cederholm's book, may use my amazon vouchers and get a few of these titles.
  • George Michie: Interesting idea, Mark, but I'm not sure I agree with your analysis. I thought of this the following way. Let's say the AOV is $100...
  • Martin Botťánek: Very interesting and well written article. Thanks. Actually, I believe almost everyone in marketing understands that spending...
  • Mark Pilipczuk: Very useful. I hope folks take the time to read and understand this. I played around with the numbers on my own because I asked...
  • George Michie: Hi Ankur, We think these are important questions, but we don't think the answer is the same for every company. Not every company...
  • Ankur Mody: Hi Alan, This is like advanced PPC from a statistician point of view. I feel you are posing a question and answering at the same time...
  • Capitol Hill Condo: This is some very interesting information about how real estate will be advertised on google.
  • Mark Pilipczuk: The inability for a lot of companies to hire within 120 days for senior level positions is a problem that, like Harry, I find far...
  • Simonbike: I love your blog...really. Did you already hear about water on mars? :)
  • John: Like I expected Google has lost money due to the recent 'slap' of 1th April. Hopefully they learned from this that there is a good...
  • j: thank u so much! i think this saved me from the recurring orders that proactiv kept sending me. i even called them to cancel and it wasn't...
  • James: 13. Tom, February 22, 2008: When I do row B, it gives an “The formula contains unrecognized text”… And so when I paste the values,...

Blog Stats

  • Posts: 723
  • Words: 319,515
  • Comments: 1,104

Administration

Close
  • Social Web
  • E-mail
Powered by ShareThis