This is my third post in a series about SEM tac­tics that lead to greater ROI from search cam­paigns. (The first focused on online/offline data inte­gra­tion and the sec­ond on key­word assist or cross visit par­tic­i­pa­tion (CVP).

A report just released from Omni­ture revealed a major chal­lenge search engine mar­keters are cur­rently fac­ing: it seems most search mar­keters strug­gle with get­ting to the deeper, more insight­ful data that will have a big­ger impact on rev­enue. They’re mak­ing impor­tant busi­ness deci­sions based on super­fi­cial met­rics such as click-through rates and cost-per-click. Those met­rics are valid and have an impor­tant place in over­all mar­ket­ing ana­lyt­ics, but there are more valu­able met­rics that mar­keters are ignor­ing, at sig­nif­i­cant cost to their companies.

By look­ing at cost-of-goods-sold, and get­ting a true pic­ture of return on invest­ment (as opposed to return on ad spend), SEM mar­keters can stop leav­ing money on the table.

Tac­tic 3: Cost of Goods Sold

Most mar­keters look at the cost of a search mar­ket­ing cam­paign and at rev­enue returned from the cam­paign. So when they talk about return on invest­ment (ROI) what they’re really look­ing at is return on ad spend, rather than the return on total invest­ment. That’s because a true mea­sure of ROI takes into account the mar­gin and prof­itabil­ity of the company’s products.

Say, for exam­ple, that a retail site has a big box, $2,000 item that weighs sev­eral hun­dred pounds. Because the cost of get­ting that to the shop or ware­house, and then ship­ping it out again (for online orders), is much higher than that of a smaller item, the mar­gins are tighter. Now say that item comes with some acces­sories. Com­ple­men­tary items may be smaller in value but higher in mar­gin. Sell­ing more of the big-box item may result in more rev­enue, but at lower margins.

Know­ing the mar­gins of the prod­ucts can help retail­ers know how much money they can spend on key­words for one item ver­sus another.

This is a sim­ple process with Site­Cat­a­lyst, assum­ing you know the profit mar­gins of each prod­uct. (If you don’t know the mar­gin on your prod­uct, the infor­ma­tion on this tac­tic can drive a dis­cus­sion inter­nally.) Once you have feed the data into Site­Cat­a­lyst, you can begin opti­miz­ing for true ROI rather than just for return on ad spend.

You might dis­cover that you were los­ing money on cer­tain key­words with­out know­ing it. Or you might dis­cover you can afford­ably spend more money on cer­tain high-performing key­words. Either way, you’re cer­tain to improve ROI sim­ply by hav­ing the right knowl­edge at hand.

The next step is even more excit­ing: lay­er­ing this solu­tion with the online/offline data inte­gra­tion (also layer with Tac­tic 2 that I wrote about last month) and you’ll get an even truer pic­ture of ROI.

Next time, I’ll dis­cuss how you can improve mea­sure­ment, and ulti­mately improve ROI, for cross-channel mar­ket­ing campaigns.

In the mean­time, if you’re inter­ested in learn­ing more about the chal­lenges mar­keters face in effec­tively man­ag­ing search cam­paigns, see the Omni­ture Search Engine Mar­ket­ing Readi­ness Sur­vey.

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