By Ron Belanger, VP Agency Sales and Bill Mungo­van, Sr Direc­tor of Search Cen­ter, Omniture

The fol­low­ing post is an arti­cle that recently appeared as the cover story in SES Mag­a­zine.
Search mar­ket­ing has been one of the few adver­tis­ing chan­nels that has weath­ered the reces­sion with fly­ing col­ors. The account­abil­ity of search mar­ket­ing, espe­cially with retail and trans­ac­tion dri­ven busi­nesses, makes the return of the expen­di­ture eas­ily jus­ti­fied. But at the end of the day, what do your actions really tell your CEO about busi­ness per­for­mance? Sure, you have a report that says your expen­di­ture of $10,000 drove 200 con­ver­sions and it’s great to point to top line rev­enue growth. How­ever, what that report does not indi­cate is how many dol­lars and cents your efforts have dri­ven to the bot­tom line of the company’s P&L state­ment. Today’s cut­ting edge search mar­keters are doing just that.

We talk end­lessly in this indus­try about con­ver­sions being the holy grail of our efforts. Con­ver­sion rates, and increas­ing them, will occupy much of our dis­cus­sions here in San Jose this week. And this is cer­tainly a good place to hone our efforts. But with today’s ever dis­crim­i­nat­ing CEO, we need to do bet­ter. We can’t just indi­cate we drove 200 sales, as it may turn out that the sales we drove were not the types of sales we’re after. Not all con­ver­sions are worth the same to your busi­ness. In fact, some con­ver­sions will cost you money, while oth­ers will gen­er­ate rich returns.

Only by tying the online search activ­ity and result­ing con­ver­sion to our CRM and sales data­bases can we truly estab­lish a story around how prof­itable our search activ­i­ties really are. For exam­ple, it may turn out that cer­tain key­words are effi­cient at dri­ving con­ver­sions, but upon fur­ther analy­sis, we find that those con­ver­sions are of rel­a­tively low value due to high return rates, credit card fail­ures, small order size or low mar­gin prod­ucts being pur­chased repeat­edly. It could also turn out to the exact oppo­site sce­nario, in which case there may be a busi­ness case to jus­tify a higher CPA for cer­tain types of conversions.

Mar­ry­ing search data with sales and CRM plat­forms is not a futur­is­tic dream, but a real­ity today. We do it every­day here at Omni­ture for search mar­keters, and there are other com­pa­nies doing the same. We’ll lay­out a basic frame­work to fol­low should you think about tak­ing your search mar­ket­ing efforts to the next level.

Tech­nol­ogy

The first order of busi­ness when plan­ning to roll out a profit opti­miza­tion strat­egy is what will be required from a tech­nol­ogy per­spec­tive. Obvi­ously, you are going to need to estab­lish a way of feed­ing your tra­di­tional order ful­fill­ment sys­tems some para­me­ters around which key­word drove the sale, which engine it came from and how much you paid to acquire that customer.

Some rudi­men­tary ways of doing this are with cus­tom tags, unique phone num­bers and dynam­i­cally gen­er­ated land­ing pages. While these types of efforts don’t scale par­tic­u­larly well, it can get you started. In this type of sce­nario, you are flag­ging each sale with some of the rudi­men­tary search data that will be required for your analy­sis. For exam­ple, order 112 came from Yahoo! for the key­word “flat screen tv”.

A bet­ter way of solv­ing this need is through an auto­matic data sync, done with APIs. This allows for richer data to be col­lected and ana­lyzed in real-time. Some of the more com­mon plat­forms that have already been solved for include SAP, Ora­cle, and Sales​force​.com. This allows for the full power of the tech­nol­ogy plat­form to be lever­aged, along with the enhanced intel­li­gence brought to the sale through the acqui­si­tion parameters.

Report­ing

Get­ting sys­tems con­nected is impor­tant, but per­haps even more impor­tant is extract­ing action­able insights from the con­nec­tion. Today’s profit opti­miz­ers want to know which of the con­ver­sions are high value and which are low value, so that they may quickly make cru­cial deci­sions. It’s an extra data set to look at, for sure, and we all know how much data there already is to ana­lyze out there. This is why the reports need to be sim­ple, updated in real time, and most impor­tant of all, actionable!

Opti­miza­tion Tactics

Now that you have your sys­tems talk­ing and you’re get­ting good reports, what do you do next? From the reports, you should be able to do some basic seg­men­ta­tion work around strat­i­fy­ing your con­ver­sions into “high value”, “aver­age” and “low value”. Much like in tra­di­tional search mar­ket­ing, you’ll want to iden­tify out­liers, trends and com­mon­al­i­ties amongst the groups. For exam­ple, are cer­tain key­word cat­e­gories gen­er­ally dri­ving more prof­itable sales? Is there a way to expand key­word sets, and real­lo­cate bud­get in order to attempt to cap­ture more of the “high value” sales. Most of us deal with an annual bud­get allot­ment and we’ll want to make best use of that bud­get as the busi­ness year progresses.

You will also want to mod­ify your bid rules in order to cap­ture more of the “high value” traf­fic. Many bid man­age­ment plat­forms allow for com­plex If/Then bid rules which allows the mar­keter to incre­men­tally (and cau­tiously) get more aggres­sive with bid­ding, pro­vid­ing cer­tain per­for­mance cri­te­ria is met (order size, prod­uct skus, etc). This allows for true scale, and puts the power of bid man­age­ment into your profit max­i­miza­tion prac­tice, with­out risk­ing your daily bud­get with unproven tac­tics or black box opti­miza­tion sys­tems, par­tic­u­larly if those black box sys­tems are run­ning off of incom­plete, on-site-only data.

We are con­stantly amazed at how smart and aggres­sive our cus­tomers are get­ting in this space. One of our clients, Vin­tage Tub and Bath, uti­lized profit opti­miza­tion strate­gies in order to get much smarter about their search efforts. Essen­tially they tied their search mar­ket­ing efforts to their phone cen­ter, where most of the sales occurred due to the high ticket nature of the busi­ness (not a lot of peo­ple buy bath­tubs online, as you might imag­ine). This allowed them to dou­ble down on key­words that were pro­duc­ing the more prof­itable sales through their call cen­ter and min­i­mize those that were dri­ving small orders.

Our call cen­ter is respon­si­ble for a sig­nif­i­cant amount of rev­enue. If some­one is putting in thou­sands of dol­lars for an order, they want to make sure they’re buy­ing what they need,” explains Allan Dick, Chief Mar­ket­ing Offi­cer and Senior Plumb­ing Evan­ge­list for Vin­tage Tub & Bath, a top 500 online retail site. “We needed to under­stand our ad spend not just on the key­word level, but on the rev­enue and profit level. And we needed to under­stand how our online ad spend drove offline revenue.”

The abil­ity to con­nect offline costs and rev­enue with online ad spend, all the way down to the key­word level, has given Vin­tage Tub & Bath valu­able insight not only into which spe­cific key­words drive rev­enue, but which key­words drive profit.

While search mar­ket­ing remains an excit­ing and dynamic field, we are even more excited about profit opti­miza­tion. Those mar­keters who under­stand the bot­tom line results from their efforts are those that will be in the best posi­tion to win in these tough and try­ing times. We wish you the best of luck with your profit opti­miza­tion efforts.

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