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Paid Search Buying Cycle: More thoughts

RKG has developed a reputation for straight-talk. We figure if we provide a valuable service at a fair price, business will be good. And, it has been, and we can sleep at night. As part of this approach we've launched "truth campaigns" to debunk various myths that are propagated in the industry by those who follow a different business strategy. The PPC buying cycle is one of those notions we've tried to put in proper perspective. The buying cycle argument suggests that people first search for general product categories, then get more specific later as they get closer to placing an order. Its advocates then argue that the more specific keywords steal credit from the more general keywords that got the ball rolling, and that it is therefore a good idea to spend well beyond your efficiency targets on general keywords, because while it doesn't appear that they're driving enough sales to justify their costs, the sales those keywords drive are simply being credited elsewhere. There are two fundamental problems with this line of reasoning:
  1. This pattern is far less common than proponents suggest. Some less-than-scrupulous agencies have convinced their clients that changing the efficiency thresholds for these "early stage" keywords by factor of 200% or more makes good sense. We've seen instances where retailers with 30% cost to sales targets were convinced that a 300% cost to sales ratio (a 1000% increase!) on these keywords was acceptable.The reality is that even giving full credit to the first ad touched rather than last would rarely move the needle more than 10%. The highest we've ever seen is ~40%, which would mean moving the efficiency target from 30% to 42% on that KW.
  2. Here's keyword data we pulled for one of our clients (we're actually bidding to margin for this client hence the varied cost to sales values):
  3. Second, it's not clear how much credit early stage touches actually deserve. There are several grounds for questioning the value of that first touch.
    • In some cases, the initial search is in a completely different product category from the subsequent search (first search: "Cuisinart", second search "ipod nano 8 GB"). We investigated a sampling of these mismatches and in each case the purchase was related to the second search, not the first.
    • If, after the initial visit, the customer still hadn't decided where to shop, and was willing to see a wide range of retail offerings for the specific type of product he or she wants to buy, exactly what was the value of the first visit? Why do we care whether the initial process of narrowing choices happens on your site (and on your dime) or your competitor's?
Perhaps there is branding value to the initial, unproductive visit. Perhaps, people who shopped around on your site are more likely to click on your link when the do the follow up, more targeted search, than are folks who bounced around someone else's site. If we then are willing to give some credit (10%, 20%?) to the first PPC click how does that affect the math? Now we see that if giving all the credit to first rather than last only moves the needle 5 or 10% most of the time, giving 20% credit to the first click instead of 100% only raises your efficiency threshold 1% or 2%. In our example before the retailer could afford 30.3 - 30.6% on these early cycle terms rather than 30%. In our most extreme case giving 20% credit on the keyword that saw a 40% lift when all the credit went to the first touch, our efficiency target go from 30% to 32.4%. These micro tweaks are unlikely to have much impact on bids and positioning on the page, hence may have zero impact on traffic. Worth investigating, sure, but if someone tells you that a huge difference in efficiency targets is warranted and profitable based on the buying cycle they're either ignorant or lying. I'll take up the topic of branding value in a subsequent post. I'm wrestling to understand how branding is justified when tracking proves it to be unprofitable... Love to hear other thoughts, opinions and data on the subject!
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