As we wade into what is hopefully the feeding frenzy of the ecommerce holiday season, we should take a moment to consider bidding strategies. We've written extensively over the years about the importance of anticipating seasonal changes in user behavior, and of looking at that from the perspective of first touch, rather than last touch attribution. It's worth noting, though, that holiday season often combines both changes in consumer behavior (higher conversion rates, often lower AOV, usually lower lifetime values of new customers acquired), AND promotional events that both impact user behavior and change the underlying economics of search. Today, the focus is how we think about bidding during a promotional event in general. Promotions affect paid search in a number of different ways:
- Promotional Ad Copy:
- Increases Click Through Rate, improving QS and bringing in some combination of more traffic and lower CPCs
- Can pull in lower quality bargain hunting traffic that converts less well than average
- Promotional Deals on the Site:
- Increase conversion rates. Demand elasticity suggests that the same group of people will be more likely to buy when prices fall.
- Impacts AOV. Can increase the shopping basket size or decrease it. Your mileage will vary based on vertical and type of promotion.
- Lowers margin per sale dollar. Whether the AOV goes up or down, the marketing income per dollar of sale is reduced.
- Remember that promotions affect not only the AOV but also the margin per dollar of sale.
- Consider whether the goal of the promotion is to drive more profits, drive top line sales, unload inventory, or some combination of the above.
- Use historical performance data to anticipate these influences as best you can.
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