All businesses spending advertising dollars on AdWords share typically interested in one goal: Profit. That needs an AdWords profit-driven marketing focus individual who knows what the goal actually looks like, your profits now, what profits can be, and how to optimize your AdWords campaign(s) to get there.
Marketers must strike a balance between your profit and your bidding.The individuals that steward company resources and turn them into higher profits will always be in demand. And this is what the profit-driven Marketer has the potential to do: double conversion rates and business revenue.
It Takes Broad & Bold Thinking to be a Profit-Driven Marketer
One of the chief benefits of using the Google AdWords advertising platform is that Marketers can measure just about anything they want: from the number of clicks, number of impressions, details on click-through rate (CTR), number of conversions, percentage of conversion rate, cost per click (CPC), cost per acquisition (CPA), etc. Many AdWords managers do a great job of keeping up with AdWords optimization by fine-tuning your keyword bids, negative keywords, Ad Groups and Ads copy at regular intervals for better ROI. Top-performing Profit-Driven Marketing Managers keep an eye on even more.
Businesses that succeed in gaining higher profits from paid advertising are often those that have a profit-driven mindset on Ad Spend to reach customers who are searching for their products. A good business practice has always been, is, and will be, about excellent service and wise marketing choices to let customers know about it. Use predictive data and personalized ad targeting to empathize with your customer’s frustrations, aspirations, and align solutions to answer their unmet needs. PPC advertising can powerfully offer products and user experiences that offer solutions.
RKG has long been interested in the questionof online to offline spillover. We’ve also long been critical of the sloppy, ill-conceived tests that have misled many advertisers on this spillover in the past. We’ve recently participated with a few of our retail-chain clients on more carefully designed studies to get a more responsible answer to this question.
The Conventional Wisdom
You hear numbers thrown around all the time about the online to offline spillover factor. I’ve heard that for every order tracked online there are 4, 6, 7 — I even heard 10 once — offline orders driven. All o these numbers are misleading and often are cited by people who have a vested interest in leading people to believe online advertising is even more valuable than it is.
It’s not that the numbers are made up — they just don’t mean what some folks imply that they mean. For instance, let’s say you’ve based your spillover estimates on customer survey data, in which x out of 10 people say they do research online before they shop in stores. We know from this survey that online activity impacts offline purchases — but let’s consider what we do not know.
The survey data do not suggest that paid online advertising specifically impacted their buying decision. Nor do we know if customers ultimately bought the brand they researched, or whether they bought it from the reseller of that brand on whose website the research was done.
So, how do we measure the online to offline spillover effects in a way that allows us to take meaningful, ROI-positive action? We’ll talk about two different approaches and the strengths and weaknesses of each.
Approach #1: Indirect Control-Test Method
RKG partnered with Access 2 Insight to research this very question for a large brick-and-mortar chain with a particularly strong regional history and footprint. For each test, Access 2 Insight created geographic test groups counter-balanced by control geographies with similar trends and levels of historical sales.
Together, we determined the scale necessary to be able to read results in a reasonable period of time (3 weeks of aggressive spending followed by 4 weeks of return to normal levels for the test group; 7 weeks of normal spending for the control group), and the appropriate level of incremental investment to generate that volume.
We carefully constructed 3 different tests:
- A geo-targeted push across all keywords looking for a lift in overall store sales
- A push across specific categories to look for category sales lift within the test stores
- A combined category and geo-targeted pushes targeted to the area of the country where they have widest store footprint, the longest history and hence the greatest brand recognition
Findings
Statistically significant lift over the control was found in the third test, but not the first two. The lift in the third test was generated cost-effectively when factoring in both incremental online sales and the lift measured in store, and balanced against the change in ad spend.
The other two tests showed no statistically significant lift. This may suggest the power of brand: greater familiarity, comfort with the brand and convenience of locations creating conditions necessary for material lift. Or, the lift created in the first and second tests were simply too small to detect given the size of the spillover sales relative to baseline offline sales numbers.
The smaller the lift, the more data required to identify the lift and separate it from noise. In this test, we did not drop spend in the control groups to zero, so we only measured whether paid search spend above and beyond standard levels generated incremental in-store sales.
Approach #2: Direct Measurement
POS coupon tests have long been used to try to gauge spillover, but the fact of the coupon incentive, and the fact that we have no way to estimate with confidence the fraction of the total that the coupon users represent, means these tests have sent signals that can’t be meaningfully interpreted. However, better mechanisms for measuring this effect are in the works.
Many of our clients have CRM and Loyalty Program partners with extensive databases of users and the ability to match browsers to human beings whose offline buying behavior they can see. For a few clients, RKG is partnering with the CRM partner to directly track users who clicked on ads to future in-store purchases. Through cookie matching, we can share a unique click ID with the CRM system, which they can then match to their knowledge of future behavior (within a defined cookie window).
Challenge: The CRM partners can’t tie every user to their database of people, so we only see a sample. However, the match-rate achieved at least gives us a reasonable upper boundary to understand the full offline impact.
Preliminary Findings
Retailer A
For every order online that is tied to a non-brand search ad, we see 0.083 offline order. The CRM partners can’t tie every user to their database of people, so we only see a sample. However, the match-rate achieved at least gives us a reasonable upper boundary to understand the full offline impact.
The match rate for Retailer A is about 25%. At most (and we’ll talk about this shortly) we could say we’re therefore only seeing 1/4 of the offline spillover, so multiplying by 4 gets us a ratio of online to offline orders of 1:0.33 driven by non-brand paid search ads. Interestingly, because the average order value offline is significantly higher, from a revenue perspective, the ratio is 1:0.5 online to offline. Really significant and cool!
Retailer B
For every 1 order online tied to non-brand paid search, there is 0.066 offline order measured. In this case, the match rate is 16%, so we can extrapolate the most generous ratio at this point to be ~ 1:0.4. We don’t have revenue figures in this instance, and this is the first cut of data. In the case of Retailer A, the spillover numbers strengthened as the data matured, so it’s early to say where Retailer B’s data will level out.
How Brand AdWords Campaigns Drive Profits
Some business focus all their AdWords account optimization around campaign structure, compelling ad copy, and keyword targeting; however, the one thing that is hard to observe is leaving money on the table when not bidding on their own brand.
Some key benefits of running a brand campaign include:
1. The ability to control the messaging that searchers view versus how an SEO listing will be rendered in earned search.
2. Building our with ad extensions will point prospective clients to other relevant web pages, highlight product features, reviews, or make it even easier for searchers to call your business.
3. Businesses can win best on their own brand terms before a competitor does. We have seen well-executed brand campaigns can that earn near 70% of a multi-million dollar business’s revenue from their brand campaigns. By not bidding on your brand terms, you may be leaving a lot of profits untouched.
4. It can help you show up immediatly in Google-owned real estate.
Our philosophy on paid ad spend is to not major on cost as much as gaining additional profit. It is easy to understand why the “cost-focused mindset” is natural as businesses want to know they can pay for it and the money will come back. Your online spend differs profoundly from the advertising sphere of the previous 5-10 years, which many professionals are most familiar with. Adopting fresh habits and mindsets doesn’t come easy for many individuals. Some AdWords Managers and agencies may take advantage of this and earn an income doing a lesser job for AdWords clients than we like to see.
This is why Hill Web Marketing believes that an informed client and transparent communications lead to both trust and your ultimate success. We want to build long-term relationships with clients who understand the power of what we do. Read up on search marketing termonilogy and QandA in preperation of expaning your market reach.
Simply put – we want to be a chief advocate for your business. Our success is when you see higher profit margins. Our focus is to best understand and establish your AdWords account by tracking the profitability of paid marketing investments and manage paid campaign activities to see you have more profit.
Our intent is that in the long-run our services pay for themselves and leave you with more money. Our AdWords management fees should be covered by profit from the advertising we manage, with you receiving a return on that investment on top of what you spend. While we, nor anyone, can ever guarantee that, we work hard to achieve it.
Gaining Higher Profits Requires a Relentless Devotion to Managing Your AdWords Account
Paid search requires an often relentless devotion to watching campaign metrics to see what opportunities exist to trim CPAs and increase ROI. Given what all that takes, a day can quickly pass with microscopic dives into minute details meaning, the clock runs out of day and it is too often that the most important factor of all – your total profits – was grayed in the shuffle.
The final result must be, higher profits for a successful business to have funds for future growth. So how do you make sure your AdWords campaigns achieve what really matters to your business? Increasingly, paid search advertisers are using a profit-based bid scheme to achieve the results clients want. To do so, it is best to optimize for total campaign profits instead of solely crunching CPA numbers or target ROIs. Only here can the coveted spot between volume and efficiency be attained. Then go a step further and better integrate your earned and paid search efforts to integrate your marketing efficiently with Google Maps.
Conclusions
What do these early tests tell us that can be generalized?
No sane person — particularly no one who calls himself a marketing scientist — would try to draw broad conclusions from such limited data. There is every reason to believe that spillover rates will be hugely category/vertical dependent, and that regional strength of brand and proximity to stores will have a big impact. No doubt device will impact this effect as well.
It does suggest to me two hypotheses for further testing:
- Online advertising can drive foot traffic to stores. The ratio of non-brand actionable spillover is not 1:0 (online to offline).
- The early data from our clients suggest that the ratio might be more like 1:0.5 or 1:0.4, rather than the 1:6, 1:7 and 1:10 which others have cited in the past.
It is important for every advertiser to measure this as best they can, rather than to trust “benchmarks.” Hopefully, given the importance of the topic and with the holiday season approaching, these sketchy benchmarks might be helpful.
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