I have often gone on the record with my skepticism toward paid search campaign management software, and I have several reasons for being skeptical. My main concern has been that these tools over promise on features and under deliver on performance. They claim to replace the analyst by using algorithms to optimize campaigns, but in reality they replace the fun piece of the analysts job (improving results) and replace it with the tedious task of managing to get their campaigns to work properly in the software. I have been burned by this sales pitch twice and have written about this in a previous post called “Paid Search Bid Management Tools: Great Investment or Save Your Money?” – so feel free to read that post for more details.
One of the major promises of enterprise PPC management tools is that they employ bidding strategies that will save you all kinds of money by trimming down your cost per click through intelligent bid algorithms. These algorithms often let you adjust bids by just about any variable available in the AdWords/Bing API's (you can even create calculated metrics) and adjust bids according to these rules in order to reduce costs. What they usually don't tell you is the best way to set them up or provide algorithms to you that work out of the box. They give you the fishing line, but don't always teach you to fish. They are a tool, and what we need is a PPC strategy.
From my experience, you don't need complex algorithms to save money with paid search. You don't need a crazy PPC management tool to trim down costs for campaigns. You need only employ one of 3 core paid search strategies in order to succeed in your PPC campaigns: 1) Maximize your budget, 2) Improve Branding by showing up in a top position and 3) Maximize your profit potential.
While there are many variations of core strategies that you can apply to bidding, sticking to these 3 core principles of what we are trying to achieve with paid search.
PPC Strategy #1: The Maximizer
Many companies have fixed budgets for paid search. Whether it is $1,000 or $500,000 per month, you have a fixed amount that you can spend, and you need to spend that money wisely. In other words, you need to maximize your budget to get the most bang for your buck.
Depending on the landscape of advertiser competition, query volume and click prices in your niche, you usually have one of two options for maximizing your efforts:
- Lower Costs: When there is a near-infinite supply of search query impressions each month, your strategy is to lower your cost per click in order to drive more click (and conversion) volume to your website. This generally involves making use of keyword list refinement (match types, negative keywords) and lowering bids while keeping an eye on average position.
- Increase Clicks: If you have a niche site that has high quality scores and impression shares, but not enough volume to spend your budget, you will want to increase the traffic sent to your site while maintaining control over click costs. This can be done by increasing bids, expanding your keyword list, improving click through rates and refining ad copy. All of these items can be adjusted/improved upon to help reach your budgeted spend.
You may be wondering why these seemingly different strategies are included as one. The reason is that the strategy is the same: Getting the most out of your budget. The only difference is the tactics to achieve that strategy. Sure you may need to look at different metrics and dimensions of your campaigns to maximize your budget, but in the end you achieve the same thing.
PPC Strategy #2: The Frontrunner
Brands love to be front and center and who can blame them? Essential to becoming a well known brand is achieving awareness and name recognition, and well branded companies tend to do well at drawing in new customers. In the world of search, the best way to build your brand is by showing up in the top position of search results. Preferably you can do this for both organic and paid results, but at the very least you can often buy your way to the top of search results with a high enough Maximum CPC bid. You will also want to enhance your brand even further by adding Sitelinks to your account to showcase the depth of products and services you offer and occupy even more real estate in search results.
For branding campaigns, your budget is often not an issue. You may have a fixed budget or your budget may be seemingly limitless. It doesn't matter, because with this strategy the focus is on position; and in most cases only position #1 will do. This is often the easiest strategy to execute for paid search, but it's also inefficient. The reality is that bidding into the top position in search results is often a waste of money. Google has gone on the record as saying that conversion rates don't vary much by position, so in many cases all that the first position buys you in paid search is brand awareness (and vanity).
Still, brand building through PPC programs can often be one of the least expensive ways for a brand to receive impressions. While it may not be to the CPC efficiency standards coveted by most search marketers, it can be efficient for brand building.
PPC Strategy #3: The Profiteer
This is the paid search strategy that is deployed most often by search marketers and for good reason: it focuses purely on maximizing the profitability of campaigns. For most of us, that is the reason why we continue to spend money with search engines, and why the industry keeps on growing year over year. We manage campaigns to maximize profitability and we don't have to worry about budgets as long as it's profitable. Or at least that's what we hope will happen.
In reality, even profitability focused campaigns will have limits when it comes to budget, so our focus is often maximizing profitability within the budget we have allotted. This can mean bringing in fewer conversions at a lower cost per acquisition (CPA) and eliminating elements of campaigns that are under performing compared to your acceptable conversion goal. Mining search query reports, establishing negative keywords, bidding down on keywords with high CPA's or no conversions are all techniques we employ in order to maximize our profitability within the parameters given.
For many of you reading this post, you may wonder why these other strategies exist at all. Shouldn't people only be paying for clicks that directly impact their ability to generate revenue and ultimately profit? I struggled with this concept early in my career, but ultimately came to the conclusion that not every single marketing activity can be direct response.
Take Coca Cola and Red Bull for example. They have massive marketing budgets, and the majority of that budget goes into branding and (I am guessing) very little attention is paid to determining the ROI of each individual activity they sponsor. They just know that the more they can build equity in their brand, the more products they will sell. The result? They are some of the most recognizable brands in the world. They are also extremely profitable at the end of the year – they just achieve that profitability differently than what we are used to seeing as direct response marketers.
The Dangers of Mixing Paid Search Strategies
In and of themselves, each of these paid search strategies serve their purpose well, but when advertisers are deploying all three types of campaigns at the same time? That is when all rules are broken and chaos happens.
Have you ever tried to compete in a niche where your advertising competition appears to be throwing money away on clicks? Take Insurance for an example. Do you think it is profitable to generate a lead for Auto Insurance when the most expensive keyword costs $54.20? Most likely it is not profitable at all on a per click basis.
Then how can someone afford to pay $54.20 per click if it does not generate profit? The answer is simple: they are spending that money to build a brand and they are not focused on the profitability on that individual click; they are focused on profitability over time and they most likely have a budget assigned to building that brand. Not having to focus on achieving profit for individual click puts a company at a tremendous advantage for displaying their brand prominently in search results. It also makes it harder for profitability based marketers to compete.
What can you do to achieve profitability when the deck seems to be stacked against you? A few things, actually:
- Stick to your guns and only bid on keywords that help you profit
- Understand the lifetime value of your customers and consider paying more to acquire a customer now for long term gain in the future
- Don't go chasing the big fish (head terms) and instead fight another battle on a much more level playing field by going after the long tail. Most brand advertisers don't bother with the long tail.
You will likely run into some difficulties along the way, and you may need to develop a hybrid strategy to achieve your goals. For example, I have often broken out campaigns between profitability focused keywords and brand focused keywords in order to satisfy clients. This is especially useful when someone demands visibility for certain keywords but does not give enough budget to achieve that visibility. The same goes for balancing visibility and profit.
No matter what strategy you employ, just make sure that you align your expectations with those of your clients or company. Expectation management is usually the best strategy of all.
Understanding these principal strategies of paid search will help you survive changes like Enhanced Campaigns and whatever else may be on the horizon for the future of PPC.