Recently, paid search vendors have been an object of my scrutiny. In the process, I’ve been alarmed at the significant variation in capabilities between them as they make wild claims and in order to win business. One capability (or rather, incapability) repeatedly stuck out at numerous agencies; this angered me so much that I want to share this bit of wisdom with you to ensure you aren’t working with a bad apple.
ALL PAID SEARCH SHOULD BE PERFORMANCE BASED!
Is yours?
How are your paid search bids managed? Are you bidding on any terms by setting the CPC or position you desire?
Schedule a call with your agency now. Ask them why they are doing it that way and how quickly the can switch to performance based bidding.
Before I explain what set me off on this rant, let me clarify what I mean by performance based bidding. I hear some of you thinking (yes, I can hear you thinking), “I’m not selling anything so there isn’t an ROI” or “I’m just running search for branding and awareness” you in the back, I hear that “I’m only running a search program to be in the top position”
Give me your hand and let me slap it.
Every action that takes place on your website can be tracked and certain actions have greater value than others. Your job is to identify those actions (sales, registrations, newsletter sign ups, request for RFP, or even just page views, etc.) and assign them value. Those values should be associated with your revenue stream; if 10 newsletter registrations result in $100 in sales, 1 registration = $10 in sales. Performance based bidding is about automatically adjusting bids based on those results delivered. You aren’t bidding for position or setting your CPC, you are setting an expectation with your agency to deliver an ROI.
Notice, I haven’t said anything about what that ROI might be, in fact, I’ve only said you are setting an expectation for performance, a return on your investment in search. Performance based bidding guarantees you those results. You can’t go wrong and you are assured of making your stakeholders, your boss, happy. So how do you define that ROI? Well that depends on your business… if you are making $10 per newsletter registration, perhaps you are willing to spend $2 on clicks to get a registration. Driving $250 in sales, what are you willing to spend to acquire those sales?
The amount bid is automatically set relative to the volume of clicks required to deliver those results. If it takes 10 clicks to get a newsletter registration, bids would be set to $.20 (10 clicks costs $2 which is what you are willing to spend). If performance slows and it takes 20 clicks to get a registration, performance based bidding automatically lowers your bids to ensure your ROI (you start bidding $.10).
A conversation you should never have with your agency: What position you want to be in or the CPC you are willing to spend. You tell them you want a 5 to 1 ROI on newsletter registrations worth $10 and they set up the program to run accordingly. Want 10 to 1 on $250 in sales? They’ll spend $25 on bids to get you those sales.
So what set me off? I’m shocked at the number of agencies that have told me one of the following (with my color commentary in parenthesis):
- It isn’t possible (Hang up the phone now. They are either a: lying b: incompetent or c: incapable – whatever the reason you don’t want to be working with them)
- It can only be done with brand terms (I won’t be so harsh though I really want to again say, ‘hang up the phone now’. The reality is performance based bidding works on all terms, the catch is you have to adjust your expectations. More on that later so in this case you should at least be concerned. They aren’t lying or incapable as they obviously get it but they are incompetent)
- We can do that but can’t guarantee ROI (Hang up. I’m can’t do it, I can’t be gentle in any of these scenarios. The point of performance based bidding is that it guarantees your ROI. It can’t guarantee VOLUME because it adjusts to performance but it does guarantee ROI. Call them liars. Hang up. Send them a link to this post.)
So what of generic terms? What do I mean you have to adjust your expectation?
Keep in mind, search is a process with few people only searching once before acting (buying or committing to your service). The keywords at the top of that process, at the top of the funnel, clearly won’t “perform” as well. That doesn’t mean they can’t be managed on a performance basis, just that you have to adjust your expectations. Your profitable ROI may be 10 to 1 and that expectation works on brand terms or product keywords but on that broader generic term, adjust to 5 to 1.
“But that isn’t profitable!”
It is, if you look at the big picture and adjust your expectations. You need to bid more to appear prominently on that generic term which has far more volume (greater reach and more awareness) that expands your funnel and attracts more people to your brand when they are ready to act. To compensate, you lower your expectations for your better performing terms from 10 to 1 to, say… 8 to 1. Find the happy medium that ensures your program, overall, performs well.
Certainly, there are many more things to worry about but, top of the list, is your vendor taking care of your business or taking your money? A good search agency understands this and knows how to balance the entire campaign to deliver the most results, at a guaranteed ROI.
You are missing one thing from your equation and that is the ability of the web site to convert that paid traffic into an ROI. As a paid search vendor I might bring great traffic to your site, but if your text is boring and the calls to action are non-existent then the PPC plan will not succeed.
David
I think David raises a valid point, and that’s certainly something I’d expect a search agency to take care of for me.
But then there’s also copy writing, too!
Are all these services to be expected from the one agency, or individual parts of a more structured strategy across several agencies?
Well put! I’m surprised at how many people I see when I’m going to conferences who are from big companies, who are just starting, and this ought to be mandatory reading for them.
Paul, its been a while. In fact I don’t think I have ever posted to your blog. (although its preferred reading for my department!) Hope your doing well!
I think David & Josh’s replies are inaccurate to a degree. While yes its the site’s job to convert visits, it is still the PPC vendor’s job to manage the camapign to performance levels. If a site converts poorly, it just means the bids need to be lowered, creating less volume capability. A higher converting site means higher bids allowed, meaning higher ranking = more traffic = more revenue. but a good PPC vendor can help with conversions through landing page & funnel analysis.
P.S. Hope the new job is going well!
Love the article. I’ve been looking for something like this. In my experience, the paid search vendors love to inflate the ROI with branded search terms. This costs your company in terms of growth because you are paying for traffic you would be getting through natural search.
Should we be taking branded search out of the equation and look at an index that shows ROI based on incremental volume?
Thanks again. Great reading.
A few thoughts
Dave, I don’t think I missed that point. That isn’t relevant to the consideration of a vendor. Bottom line is the vendor can still manage a program on a performance basis, even if the site sucks at converting that business. Their recommendations then to improve performance grow the business? How to improve conversion.
Copy writing? Of course the agency should do that but if you are hiring for that you are making a mistake. Performance (aggregate performance) should drive copy and copy should constantly iterate based on results.
Ted, great to hear from you! Especially since you responded to David’s thoughts better than I.
Scott, careful with that perspective. I don’t think vendors are inflating the ROI with branded terms. Branded terms have a different ROI which in most cases is better than generic terms but can perform worse (if your brand is unknown). I absolutely don’t agree with the opinion that branded terms should not be acquired because your are paying for traffic that would you get through natural search. I don’t have data that can be shared but I’ve run studies conclusively confirming that a greater share of voice on the page (paid and natural results) yields greater results. You can promote different things or reinforce your messages. Besides, users still follow the golden triangle and those top results are usually not recognized as “paid for” by search users. Lastly, you own your brand to box out the competition; two results (paid and natural) on the page kicks out someone else fighting for your business.
You should continue to use branded terms, set different expectations for them, and adjust bids and copy on those terms while monitoring overall performance.
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