Black Friday through Christmas are the top revenue and profit days for most retail companies. Imagine the hard work a business goes through to prepare for this season:
Now, try to imagine that this same business closed it’s doors daily at 1:30 in the afternoon with customers standing in line waiting to take out their wallets. What?!? It’s beyond comprehension! The results would be devastating to holiday sales.
This is exactly what online retailers are doing with their AdWords sales. You have the products in the warehouse, you have the staff trained and prepared, you have done all the work for your marketing and advertising programs to get the most out of the 2015 holiday season. Are you going to close the door at 1:30 pm every afternoon?
On average, Google AdWords delivers 25-40% of a online retail company’s revenues; you have it configured, setup and tuned so that you can generate as much sales as you can inside your cost constraints. The holiday season starts to ramp and you are seeing the payback from the hard work.
Then Cyber Monday came and by 1:30 pm your daily budget was maxed out. Your ads stopped showing. Your store closed for business on Google during the busiest time of the year! To make it worse, your competitors were still showing their ads and captured all the traffic and the revenue that came from it. Don’t let this happen through the rest of the holiday season!
From the time you give Google $1 for a click until you receive funds from your payment processor in your account from the corresponding sale, it takes 2 days in average. You turn your ad budget into cash from the profit in 2 days. Why on earth would any business owner chose to do limit their budget?
Here are the reasons:
1. We have a fixed AdWords budget; OK, but if you knew that for each additional $20 you give to Google you receive $100 back in profitable revenues… would that change your mind? If the owner of your company or the person approving the budget knew this they would instantly increase the budget so that the company could increase sales, increase profit and increase market share. Please show this blog post with that person.
This captures 95% of clients running out of budgets.
2. All the other reasons not relevant to leaving profitable revenues on the table.
It is our job to maximize revenues and profits for our clients on AdWords and it just kills us to see clients who are growth and performance focused practically lock their front door and shut off the cash register when there is a huge line of customers ready to buy. Act on it before the season is over!
Almost every Magento store is using Google AdWords Search and Shopping as a channel to generate revenues. For many, this is their largest channel and represents a dominant part of their advertising budget. AdWords may be the largest sales channel on the planet and it is instant; buy a click right now and potentially get a sale. Changes made by Google over the past years represent massive opportunities for Magento store owners - yet hardly anyone takes advantage of this opportunity!
Let’s take a step back; what is it that every Magento store owner wants? Sales, more Sales, and lots more Sales! I have not yet spoken with a Magento store owner that does not want more sales.
What stops them from generating more sales? A lot of different things:
Market reach: do they have the relevant keyword coverage to capture what their customers are searching for? The average Magento store owner we start working with has less than 30% of the keywords that can be pulled from their product catalog. As a Magento store owner you can benefit from a Magento Connector customized for Google AdWords to gain 100% coverage. In the upcoming webinar Finch will show how this is done, including keyword generation, ad copy management, dynamically managing a changing product catalog, and optimizing AdWords bids for these keywords.
Cost management: The biggest blocker for growth in an AdWords account is the wasted spend. In the upcoming webinar we will cover in detail how to detect the waste and how to re-apply it where you are making a profit. Managing waste is even more critical while trying to increase the market reach.
Profit: The benefit of a Magento store is that there is a standardized way of doing a lot of the processes that are complex and hard to do. The Holy Grail of online advertising is to “Know the profit from the next click, before you buy it”. This is possible and Finch will cover how to do this in the upcoming webinar. Not only is optimizing for profit good for your financial performance, but it is the ultimate competitive advantage in each click auction you enter with Google.
Quality Score: Quality Score is 70% of Google’s Ad Rank (which determines the position your ad is shown and cost). Quality Score matters more than anything else. Learn how the combination of keyword expansion, profit optimization and Magento-specific AdWords setup can drive massive improvements in your Quality Score.
Mobile: At Finch mobile revenues for our clients are up 56% in 2015, at the same cost as Desktop revenues. Capturing the mobile performance data in a granular structure enables programmatic execution the bid modifiers for mobile… for each keyword, match type, user profile, etc.
Programmatic advertising is going to change the advertising landscape rapidly over the next few years, as a Magento store owner you are in a unique position to take advantage of this early. Join us for the upcoming webinar to learn how and why!
There is still plenty of time before the upcoming holiday season to act and take full advantage of what this can do for your competitiveness and financial performance.
Hiring a PPC Agency? Renewing that contract you have had for the past year? Know the answers to these questions before signing on the dotted line.
It is the time of year where your contracts are coming to the end and you are looking to see if the there is a better option than what you have. Do not be the company that just goes through the routine of extending that contract and hoping you are getting what you should out of your AdWords campaign. If you know the answers to these following questions from your PPC Agency, then you should know if you are getting optimal performance from your campaigns.
Is there a long term contract? If you are in a contract, who does that benefit? A contract is in place to benefit the Agency. The performance should speak for the work that is being done in the campaign. If it is below what you expected, you should always have the option to leave at anytime. You can’t afford to keep losing money to a bad performing campaign because of a contract.
What other services do you provide? You hire an agency to do your Google AdWords campaign. You invest a big part of your marketing budget into the campaign. Why would you want a company that would have focus on something else besides your campaign? You need 100% focus on your Google AdWords campaign in bringing in revenue for you company. Don’t let an agency tell you the performance of other services and skim over the performance of your AdWords campaign.
What is your strategy for my campaigns? There shouldn’t be an agency that doesn’t have a roadmap in place and metrics to show you the performance of your campaigns. Unfortunately, there are many companies that will be very generic on their approach and give you best practices. Your roadmap should be detailed in what to expect in the strategy of your campaign growth. Ask for details of what is taking place and hold them responsible for the performance of your campaign.
How do you measure success? Are you in business to make money? You make money from selling products for more than they cost you (this includes fees to Google and agency). Your agency has to know these and the measure against this. It is easy to see if your campaigns are making money for your business. If this isn’t the measure of success to a campaign, you should quickly find another agency.
Why? You need to be like the 3-year old kid that will always keep asking “Why”. Why do they manage the campaign the way they do? The answer should always have a focus on your revenue and results, which will generate more profit for your business.
Here at Finch, we are looking at companies AdWords campaigns that have very little work being done to make it profitable for the company. Finch does a deep analysis that will walk through specific items in your AdWords campaigns that will improve your campaign. Reach out to Finch and see how they answer these must ask questions to any agency.
Programmatic Advertising is a up and coming buzzword for online marketeers. Originally it was used as a way to describe buying and selling blocks of display advertising, it has now changed and is increasingly gaining momentum in the marketing community. Programmatic advertising today is used to describe the process where clicks are purchased based on detailed knowledge about the specific click (keyword, match type, cost/revenue/profit history, mobile vs desktop, new visitor vs repeat visitor history, etc.). If done right, you know the cost of revenues or profit for the next click you are about to buy, before you buy it.
What does this have to do with Google Shopping?
I will use an example of a merchant with 5,000 products in their catalog. Each of these has different selling prices ($10 - $2,500) and a range of margins (3% - 70%). Would you pay the same for a click to a product that sells for $10 with a 3% margin as you would for a product you sell for $2,500 that has a 70% margin? Ok, it is an extreme example but it makes the point clearly.
Calibrating how much you pay for each click should match the price of the product, the margin of the product, the total amount the specific PLA brings to the shopping cart checkout, etc. That Max CPC then needs to be adjusted with bid modifiers (Mobile, repeat visitor/remarketing, etc).
The example I used above with a merchant having 5,000 products in their catalog wants two things from their campaign: (1) grow revenues as much and fast as possible, and (2) ensure that the cost is controlled very tightly for the growth. The amount of products and the number of variables that needs to be kept under control makes it impossible to do this manually.
The options the merchant has is to use an agency to manage this for them or use an internal team that has access to automation tools. Both these approaches requires a lot of coordination or a wide range of tasks; campaign structure, bid adjustments, product group exclusions, setting Max CPC for new products, updating Max CPC to reflect changes in performance and competitive metrics, updating to adjust for mobile performance, updating to adjust for visitor history (i.e. repeat visitor with abandoned cart history) conversion rate impact, and so on. A programmatic approach to the above keeps adjusting all these variables and keeps track of how each of these changes impacts the other variables.
In our upcoming webinar with Google Shopping next week we will cover in great detail how this approach can help your business and how it has helped others. We will offer case studies and show why Programmatic Advertising is such a big deal for advertisers.
Programmatic Advertising is a way to drive quality, accuracy and predictability for your account (think knowing the profit of the next PLA click before you buy it), it is not a matter of IF but WHEN you will utilize Programmatic Advertising for your business.
Bjorn Espenes, CEO of Finch, recently did a joint webinar with SEMRush explaining how expanding your keyword bank can enable growth revenue if done the right way. He talked about how many companies will experience growth stagnation in active keyword expansion of their AdWords account. Here are 2 major challenges he addressed in expanding your keyword bank.
Managing the growth of your keyword bank can be time consuming to research new keywords, add them to a campaign, and track performance. Trying to determine how much to bid on each new keyword will not only be time consuming as well, but will also increase the risk on money your company will spend on AdWords. At Finch, we have developed a tight way to handle this in an almost automated fashion by following these steps:
It is a difficult task to try and increase your keyword bank while growing your revenues/profit and managing your cost and risk. Finch can evaluate your AdWords campaign and do what every company wants with their keyword bank -- expand the keyword bank while growing revenues and decreasing costs for your company.
Recently Tim Ash, CEO of Sitetuners, did an interview on Conversion Rate Optimization. Tim is the guru when it comes to Landing Page Optimization and his company can make sure your landing pages are getting the best conversions possible. He said, in regards to companies running AdWords campaigns, that "You need to look at the man behind the curtain, it could be a Wizard of Oz situation. Some pay-per-click management firms in particular, I don't trust their technology, it's still a lot of account rep time. But, there's one specifically, especially for e-commerce.....Finch has really nailed that whole programmatic buying thing for pay-per-click on AdWords." (from the 18:35 mark)
While Landing Page Optimization is important, it is not the only optimization process you can look at in optimizing your AdWords campaign. Traffic, ads and landing pages are three key components in optimizing your campaigns. Traffic optimization is crucial because you want to limit your losses by reducing the spend on money-losing keywords. On the flip-side, you want to boost the the volume on higher converting keywords. This could be a difficult task for companies that have thousands of keywords and not enough manpower to adjust every keyword in the campaign.
The volume of impressions and traffic that is coming through your higher converting keywords will increase your opportunities to test your ads and then will push more traffic to make sure your landing pages are converting. All three parts of optimizing your campaigns work together. If you only are focusing on your landing page and not receiving the best traffic, you will have a difficult time understanding what is the best way to optimize your landing page.
Finch is the pay-per-click management company that has "nailed" the programmatic buying for AdWords. Our free audit will give you detailed information on which keywords are low or high performing and where you should start optimizing. We will tell you what should change and why.
The profit optimization model has the objective of maximizing the overall profit that comes from the Ad spend. The assumptions for this model is:
Each product has varying sales prices and profit margins, and the advertiser wants to maximize the overall profit from the ad spend.
Optimizing for profit is the holy grail of online advertising. It is the only model where you have all the information (product cost, revenues, profit, AdWords cost, etc.) which means you can predict the outcome of the next click before you set the bid for how much you are willing to pay. This outcome is Profit, and as long as your profit increases you are willing to fund the ad spend.
Here is an example:
A company is selling electronics on their web site and their objective is to generate as much profit as possible. They must track the margin (or revenues and cost) for each product or transaction (How to capture profit and link it to AdWords cost). In this scenario the advertiser will keep increasing the ad spend as long as the overall profit increases.
Here is the data to determine the Max CPC:
The Max CPC will be set for each keyword based on the profit history, the conversion rate and the historic Cost. The objective for managing a campaign with this method is to maximize the overall profit.
In a portfolio approach, if you have 1 keyword producing profit contribution at 10%, then another keyword may be producing profit at at 30%, both will gain increased Max CPCs, while a keyword with negative profit will get the Max CPC reduced (assuming all other variables are constant). Because the constant changes competitors for the same clicks makes it makes competing for the best clicks auctioned off by Google every time someone enters the search box to look for something exceptionally dynamic by nature. This requires constant elasticity testing for each keyword to stay inside an optimal range. Each change is measured by impact on profit, driving the decision making for bid adjustments.
This methodology is effective when you have MANY products with the VARYING margins.
Revenue optimization has the objective of maximizing the Revenues that comes from the Ad spend. The assumptions for this model to be effective is:
Each product has the same profit margin
Here is an example:
A company is selling electronics on their web site and their objective is to generate as much revenues as possible. They will either be using Google AdWords conversion tracking (Dynamically tracking the amount of each completed shopping cart with the Value variable) capture the amount from each sale and have that associated with the keyword, ad and ad group that captured the sale (for more info click here).
The company knows that in average they can spend 20% of their revenues on advertising (leaving 80% of the sale to cover product costs, order processing, overhead, etc.). Here is the data to determine the most you can pay for the next click (Max CPC):
Target cost of Revenues: 20%
Last sale recorded for given keyword: $300
Conversion rate: 5%
Max CPC: $3.00
The Max CPC will be set for each keyword based on the revenue history, the conversion rate and the historic cost. The objective for this way of managing a campaign is to maximize the revenues as long as the cost of revenues is 20% in average.
It is important to distinguish that the max CPC is set per keyword (ideally for each match type of the keyword, with bid modifiers for Device and Remarketing for Search profile) based on the keyword’s cost/revenue history, and not based on the price of the product the keyword matches. The reason for this is that once the keyword triggers the ad to display and the potential buyer clicks on it, once on the site the potential buyer may or may not purchase the matching product. He or she may buy something totally different or purchase a number of products. The only hard data you can optimize from is the cost, the revenues, and the conversion rate.
In a portfolio approach, if you have 1 keyword producing conversions at 10% cost of revenues, then another keyword will be allowed to produce conversions at 30% (assuming the revenue produced by the two keywords are the same, and because they usually are different it creates a complexity that is only practical to solve with automation software) . The average of 20% is what matters to maximize the outcome under this methodology. This is easy to illustrate through branded terms. The branded terms (your own company name, url, etc.) usually produces revenues in the low single digit percentage cost because you likely have a quality score of 10 (ad rank impact) and a very high relative conversion rate. That leaves a surplus (relative to the 10% cost of revenue target) that can be used to grow your revenues, market share and customer base for non-branded terms and still stay below your cost target. Alternatively, if you isolate the branded terms to enjoy the high profit those produce, the non-branded terms may all be above 10% cost of revenues and the result is that you leave all that business for your competitors to have.
This methodology is effective when you have MANY products with the SAME margins.
One problem with this model for an eCommerce company is when products have varying profit margins and prices. In theory you can successfully optimize a campaign for Revenues, but while the revenues may grow - the profit may turn negative in a worst case scenario. The solution to this challenge is presented in the next blog in this series.