How do you decide what to spend if your business is heavily driven by events? For instance, you may be a concert ticket advertiser planning for a major gig, or perhaps a sporting advertiser planning for the upcoming 6 Nations Championship (a major rugby tournament in Europe). Do you simply try to bid to as high a position as you can on your top keywords and hope that the impressions you gain will bring you sufficient conversions to make the spend worthwhile? But is it really worthwhile? How far will you be from your cost per order (CPO) goal? Will the average order value (AOV) be the same, lower or higher?
The challenge of events-driven campaigns
Events-driven advertising campaigns are challenging because:
(1) you know something is going to happen, but
(2) you are unsure the scale of the impact, therefore
(3) you are uncertain how to prepare for it, hence you implement the “spend and wait and see” strategy.
As a result, you may find your CPO fluctuates wildly indicating your budget had not been allocated in the most efficient manner (assuming constant AOV). The chart below illustrates such a situation. The red circles highlight the instances where events took place and the advertiser bid up to such a level that CPO was much higher than what it was worth. The green circles, on the other hand, highlight the occasions where no event took place and the advertiser pushed down the bids. As a result, the CPO was too low leaving demand to be exploited.
The myth of chasing impressions
The strategy many advertisers employ when managing event-based campaigns may simply be chasing the impression volume. When they can foresee there will be a rise in search interest they plan to spend more, by raising bids, to gain more clicks. However, we will argue that the value of a click is the key factor at play here instead. If the upcoming event only drives impressions but the conversion rate and the average order value (AOV) stay the same, then the revenue per click would remain unchanged and there is no value in raising spend. It is only when an event drives a change in conversion rate and/or AOV, where it is worthwhile to adjust bids to spend more.
So if we know the value of a click is the key, then how do we actually decide the budget on a given event-affected day? The answer is complimenting simulation with analogy adjustments.
As Will Senior, an Account Manager at Efficient Frontier, commented “to ensure you always pay the correct amount for each click, you need to accurately predict how upcoming events will impact click value. The easiest and most reliable method to predict a change in the click value is to use historical data from identical or lookalike events. The click value change could come in many forms, from a conversion rate shift to customer value adjustment.”
Best practice = simulation + analogous data
At Efficient Frontier we are proud of our sophisticated modelling and forecasting algorithms. We build click and revenue models on individual keywords and bid on them at the most efficient levels given the client’s business goal. Our platform’s simulations allow the advertiser to establish the spend level required to achieve the specific CPO or ROI goal based on historical data. When there are forthcoming events, whether a one-day sports event or the week leading up to a major music festival, we will also consider the previous similar (analogous) events and their conversion rates/AOV in relation to the average conversion rate/AOV. The latter ratio will provide us a conversion rate adjustment factor to build into the simulation that is automatically generated by our technology.
This could be illustrated by the graph below. Let us consider only CPO for now and assume constant AOV. The blue line illustrates what the simulation tells us for an average day about the relationship between spend and CPO of a campaign. When an event is to occur and similar past events suggest that there is a higher conversion rate than normal, the curve moves to the right (green line) so that we can increase the spend from just under $3,000 a day to over $4,500 and gain more conversions for the same CPO of $120.
This approach of combining simulation with analogous data gives the advertiser control in two ways for managing event-based campaigns.
First, the budget can be determined in advance and the advertiser simply sets the budget for each day of the coming week or month in the bid management platform rather than on the day.
Second, this reduces the daily variation in CPO from the target CPO. For our clients, on average, once this structured approach is implemented (from an intuition-based approach), the variation of CPO from target is reduced by 50%. The more similar historical events there are, the more you can refine your estimate of the adjustment factor used to build into the simulation.
Even if your current bid management platform does not readily provide simulations, using past similar events as reference to your forecasts for the upcoming event would still prepare you better than intuition alone does, as evidenced by academic research (e.g. Green and Armstrong (2007)).
Applying a more structured approach, your “spend and wait and see” strategy can be transformed into “analyze and anticipate”. You’re in control.
Dr Wing Lee, Business Analyst