As PPC Managers you have to know your clients business inside and out. What are the average order values for different products, what are volume products and what are value products. What are the margins associated with profit. These are all important questions when managing campaigns.
For example, a client may have a £7 per enquiry through PPC but only closes 1 in 10. With the average sale value being £120 then the client is only making £50 on each deal. This is a very simplistic model because some products may be repeat business. For repeat business, like ink cartridges for example, the cost per acquisition of first time buyers is not worth it because you are at a financial loss, however the average customer will order another 10 times more making it very profitable. It is important to know these things as this has a big influence on the way PPC account are managed. Here are a few stats that aid in managing ROI within the retail sector:
1. 89% of people regularly browse or research before buying offline. Only 7% of retail purchases occur online.
2. Online advertising drives in-store revenue.
3. For every £1 that is spent online through ecommerce, £6 is spent offline through bricks and mortar location.
4. Search advertising only increases the offline lift of revenue by 43%, and display advertising only lifts it by 15%. However the most effective method is combining both which leads to a 90% lift in revenue.
Overall, by doing display and search advertising, you will exponentially increase offline revenue.
Thanks to Yahoo Search Marketing for the research.
Healthy competition in any industry weeds out the inefficient. Capitalism, free trade, market forces…call it what you will, it is essentially survival of the fittest. Unless you’re a French farmer and you get regular subsidised handouts from the state to prop you up, its sink or swim. Either your company competes in an open marketplace or it dies. The situation isn’t as bleak as it sounds – liberated markets and open competition means low prices for consumers like you and me. Slothful, wasteful, unproductive firms who cannot control their costs go under. Streamlined, nimble, responsive-to-change firms stay afloat and pass on their efficiency savings to their customers.
The same principle can be applied to Pay-Per-Click (PPC) advertising. Type almost anything into Google these days – curtain poles, Indian black tea, karate kick pads, drill bits … whatever you want – and 11 sponsored link ads pop up on the first page of the search results … with 11 more on page two, three, four etc. Any Joe Six-pack with a credit card and the ability to think of a few keywords can create an AdWords campaign and have their ad appear alongside the ad of a billion dollar multinational corporation. There’s no discrimination here – the ads of Joe Six-pack and the billion pound multinational corporation will be exactly the same: 25 characters in the title, 70 characters for the two descriptions lines, a display URL and a destination URL. With almost every search on Google saturated with PPC ads from every Tom, Dick and Harry with a website, what will become of this advertising medium? Will anyone make a decent return in the desperate scramble for clicks?
The answer to these questions is simple. In the blood-stained, free-for-all fight for advertising space on Google, market forces will once again prevail. The last man standing will be those companies with a well-built, well-managed Google campaign. A business with a crude, poorly built PPC campaign that isn’t professionally managed will not last very long. Clicks will be too expensive; cost per conversion will be too high; and/or their quality score rating will be too low. The bottom line ROI (return on investment) from online advertising will not be good enough and such companies will be forced to pull the plug. Even if the company has very deep pockets, PPC is a very transparent method of advertising and, when it isn’t cost effective, there’s nowhere to hide.
