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Monday, March 17, 2008

Improving Return on Equity with Pay per Click Marketing

The mark of an exceptional company is the ability to generate ever greater returns on equity. For instance, if your company has $1 million of accounting equity, and you generate $200 thousand in earnings (profit), then your return on equity is 20%. Your goal for next year, then, might be to generate a return on equity of 25%. This kind of analysis is particularly relevant to public companies, but it is also valid for private companies as a measure of performance.

One way to increase your company's return on equity is to invest in things that will increase sales and that can be measured so you know how much they are increasing sales. These "things" consist of advertising and other forms of marketing. Unfortunately, most forms of advertising make it very difficult to track how much business you are actually generating in return for your advertising dollars. But you and I know about a form of advertising that does not suffer from this weakness.

Paid search, or pay per click.

Pay per click lets you know exactly what your return on investment is for all of your keywords, ads, and landing pages. Over time, as you generate data and do more split-testing, you should be able to make your return on investment from paid search improve. Improving the ROI on your advertising improves the return on equity for your overall business, all else being equal.

So if you are looking to improve your company's financial performance, look to advertising platforms that are cost-effective, easy to implement, and provide complete transparency with regard to return on investment. Paid search is your best bet.

If you could use some help with your pay per click management, contact Work Media at 888-299-4837 or email Info@WorkMedia.net.

Labels: internet marketing, paid search, pay per click, pay per click management, ppc, roas, roi, search engine marketing, sem

Monday, May 07, 2007

Search Engine Marketing: Not All Keywords Are Created Equal

We have given advice on numerous occasions about using an ROAS (Return on Ad Spend)-based approach in setting your initial bids. In other words, don't just GUESS what your opening bids should be - use some logic to set a bid that will allow you to make a profit, assuming some minimal level of conversions. But once your campaign is running, you need to re-evaluate your bids on a keyword-by-keyword basis.

Over time, you generate solid data that you can use to adjust your bids. But until you have enough data, you need to use some common sense to make your adjustments. The main question you need to ask with regard to each keyword is: what is the likelihood that a person using this keyword will purchase my product or service? If the keyword is a broad, generic one related to your industry, the likelihood of any one person converting who visits your site from an ad triggered by the keyword will be very slim.

However, if the keyword is more specific, that would indicate a higher likelihood of a conversion because the person might be further along in the buying cycle. Therefore, that keyword is worth a higher bid.

Here is an example. Let's say you sell refurbished laptop computers online. A keyword like "computers" or even "buy computer" is very broad. It is also probably going to be very expensive. You might bid on the keyword to cover your bases, but you would probably bid low and really wouldn't expect a whole lot from it. But a keyword like "refurbished HP laptop" is much more specific. That would indicate a person who has already decided what he wants (a refurbished HP laptop) and is looking to buy it. For that keyword, you would want to bid more aggressively because of the higher chance of making a sale. Finally, a keyword like "refurbished HP Pavilion ze2000 laptop" would be the best of all because of its specificity. If you happen to have that model of laptop for sale, it might be worth bidding very high on the keyword because of the high likelihood of generating the sale.

If there is anything we can do to help you with your pay-per-click keyword bid management, please contact us at 888-299-4837 or email Info@WorkMedia.net.

Labels: bid management, internet marketing, pay per click, ppc, roas, search marketing, sem, sponsored search, web marketing

Friday, February 09, 2007

Pay-Per-Click Marketing Analysis: Another Look at the Numbers

When preparing to begin a pay-per-click (ppc), or sponsored search, campaign, it really helps to go into the situation with an idea of what the numbers look like. By "the numbers", we mean what kind of return on your investment you can expect assuming different bid levels and different conversion rates. Following is a chart that is an example of one we might create when beginning a ppc campaign to give the client and ourselves an idea of what he might expect his return on ad spend (ROAS) to be. It also helps us establish a benchmark average bid.

These numbers are reflective of a company selling a fairly high priced item. We have used a range of conversion rates from .10% (1 in 1,000) to 2% (2 in 100). For a high priced item, we would expect a low conversion rate for online sales, possibly 0.25% (1 in 400). Assuming a 0.25% conversion rate, the $.50 bid makes more sense than the $.75 bid because it generates a ROAS of 548% (or $5.48 in revenue for every $1 spend), versus 416% for the $.75 bid.

However, at the $.50 level, you are going to receive fewer clicks to your site. If the ROAS at the $.75 level is acceptable, you may want to use the higher bid to generate more total revenue. In this example, the $.75 bid generates $42 thousand in revenue, versus $31 thousand for the $.5o bid.

The question of how much to bid may also be determined by your budget for the campaign. At higher bids, you are going to burn through your budget quicker. If there is so much keyword inventory related to your business that you are able to use up all of your budget regardless of what you bid, then it makes sense to bid lower...if ROAS is your main consideration.

If there is a branding component to your online marketing, then you may want to bid higher for higher positioning on the page. Another consideration is that not all sales are made immediately. If you position yourself as the leader in your category (high on the page), you generate more immediate traffic and more potential future business from prospects who visit your page but don't immediately do business with you. This branding component is not reflected in the kind of analysis we displayed above.

An analysis like the one above can easily be prepared using a spreadsheet, and we highly advise you perform this kind of analysis to get a feel for your numbers. Use the sponsored search control panel for whatever search engine you want to use to get an idea of what bids for keywords in your industry look like, along with how many clicks you can expect to generate at different bid levels. Using this information, you can estimate how much revenue you could generate assuming different conversion levels. Then you can calculate ROAS at different conversion levels. Doing this for each of the major search engines will also help you determine the best place to spend you money.

If you would like some help preparing to begin your own paid search marketing campaign, contact Work Media at 888-299-4837 or email Info@WorkMedia.net.

Labels: Google Adwords, internet marketing, MSN, paid search, pay per click, pay-per-click, ppc, roas, search marketing, sem, sponsored search, web marketing, web site marketing, Yahoo Search Marketing