eMarketer reports that Marketers are still having trouble tying marketing to Revenue.  Because this is our job, we run directly into many of the reasons why this continues to be a challenge for Marketers and companies engaged in Online Marketing. Here are the Top Five Challenges we often have to overcome in making full-life cycle marketing optimization work:

1. Incomplete Tracking Systems:  The good news is most companies are now tracking something related to their marketing.  The bad news is that they are still very often tracking the wrong things or in the wrong way.  Tracking systems need to show aggregate site performance and individual user behavior.  Hint: most systems are not good at both.  You can use more than one.

2. Tracking Ends on the Web Site:  You need systems that let you feed sales/and revenue data back into the marketing program.  The good news is that most existing systems can be tied together.  You don’t necessarily need to invest in new systems, or expensive ones.

3. The “Bucket” Assumption:  Banish the assumption that every sale should be credited to a single marketing source.  People who believe that SEO, PPC, Display, Remarketing, Offline, PR, and nurturing programs work in isolation will make bad decisions.  Marketers working on multiple pieces of the marketing pie need a holistic view, and some forms of marketing (*cough Display!*) demand it for proper evaluation.

4. One-Way Data Flow:  Most installed systems that tie marketing to revenues have been purchased so that the C-Suite can generate marketing reports.  They are missing the value of these systems.  Data is *not* for reporting.  Data is for *action*.  You have to create feedback loops so that marketing campaigns can be optimized to improve results.  Take baseball.  Measuring a hitter’s swing let’s you evaluate good and bad hitters.  Capitalizing on that data in the training process makes for a whole team that can swing for the fences.

5. Online is Different:  Another challenge is to overcome internal assumptions about how marketing works.  In the old days you “dropped” marketing pieces, typically infrequently, that largely had a fixed cost.  You measured, if you could at all, on lift, and if not, on reach.  If you liked the numbers, wash, rinse, repeat.  Of course, the world has changed.  Online Marketing does not have fixed costs,  it is dynamic, and it requires constant optimization.  Campaigns can be driven by ROI, not evaluated by ROI.  Break the assumptions of old marketing and opportunities are everywhere.

Tying marketing to revenues does require work, but the payoff in reduced risk and increased profitability makes it well worth the effort.

Effective online advertising management is a specialized process that requires intimate— and current—knowledge of online marketing techniques and paid search optimization principles, as well as constant monitoring and adjustment. Pay per click advertising is one of the most dynamic promotional strategies you can use. As such, constant evaluation is a must if you want to enjoy maximum return on your investment.

Partially because consumer behavior changes so frequently and partially because competitors adjust their own advertising strategies on a regular basis, you can’t afford to let even a single day go by without assessing the performance of your PPC campaign and looking at what needs to change. It’s essential to pay close attention to what potential customers are searching for online, which keywords are delivering results and other forms of valuable customer interaction, and which ones are converting directly to sales or qualified leads. You need to how to assess and react to this information on a daily basis to run a profitable PPC campaign.

These are just a few of the reasons why hiring a professional PPC management service is a key to online advertising success. What worked yesterday may well not be effective today or tomorrow. Only true PPC management experts focused on ongoing optimization based on increasing your profitability can help you stay ahead of the curve when it comes to making the most of the money you’re investing in marketing your company to qualified prospects online.

One of the more interesting aspects of a new SaaS business is that lifetime value of a customer is typically unknown.  Since Cost-Per-Acquisition (CPA) targets are often based on customer value, how then do you properly price CPA targets for profit-driven online marketing optimization? If you keep these tips in mind, you will find it easier to think about how to evaluate your marketing effectiveness:

1. Profitability or Market Share?  In the face of unknown lifetime value metrics you have a choice in how aggressively you advertise.  Make this a conscious decision: How far beyond “known” value am I willing to go to obtain customers?  If you aren’t the business owner or CMO, and you haven’t had this discussion, have it.  Now.

2. Average Monthly Revenue?  If you have variable pricing (multiple packages or tiers, for example), optimizing on average value will hurt you.  When at all possible, tie specific sales value back to the most granular marketing source possible (think keyword).  This will help you not to overvalue, or (worse) undervalue, pieces of the marketing campaign.

3. Profitability and Payoff Time?  Know these numbers.  Optimize around a specific payoff time.  Control your cost of customer acquisition, don’t let it control you.

4. Continuous Re-calibration.  SaaS business models need to continually be re-calibrated in order to stay on top of shifting customer performance.  Don’t be the last to know that your customers are suddenly leaving before you hit break-even on your CPA.

5. Free Trials are Not Customers.  A Free Trial is not a paid conversion.  It might lead to one, but don’t optimize around Free Trials if you don’t have very consistent data showing these leads convert to customers.

Never (NEVER) evaluate monthly ad spend against monthly revenue for the current month.  In a SaaS model, your revenues this month largely did not stem from marketing that happened this month, so why evaluate them that way? Tie all customer revenue back to when the customer first landed on the site.  That is marketing effectiveness.

Do you want to get the most out of the time and money your company devotes to online advertising? One of the best ways to make certain that you’re maximizing your pay-per-click return on investment is to put your campaign in the capable hands of a professional PPC management service.

3 Reasons You Need Professional PPC Management Services

• Stay Focused on Your Business: Running an effective PPC campaign takes time and daily commitment. If you try to do this yourself, you’ll be taking yourself away from the core tasks of running your business. Using a professional service allows you to keep your efforts directed where they need to be: on building and running a successful enterprise.

• Ongoing Assessment: Pay-per-click campaigns have to be monitored closely and optimized continually to bring about the most profitable results. Even if you’re able to set up your own campaign, chances are you don’t have the time or expertise necessary to monitor the results and make solid data-driven decisions. An expert service can provide the ongoing management that’s necessary to enjoy success with this type of advertising.

• Cost Control: Quality keyword bid management is the key to getting—and keeping—the right keywords at the best price based on the profit they create for your company. Without an expert managing your online advertising every step of the way, it will be difficult (if not impossible) for you to both manage risk and stay on top of this highly competitive, ever-changing aspect of online advertising.

eMarketer recently wrote on industry studies measuring the effectiveness of online advertising.  Over 60% of companies in one study did not believe their current approach measured web strategy effectively.  In another study, less than 40% of respondents had complete confidence that they were measuring the right things.

Why is there so much confusion about measuring online marketing, ostensibly the most measurable activity in the history of marketing?

The truth is that tying online marketing to profits involves a fair amount of complexity, yet if tied to profits, people are very confident in their strategy and metrics.  Here are three reasons why people lack the confidence they should have, and what to do about it:

1. Traditional metrics are often about web server performance, and not about customers and profits.  If your company relies on “hits”, “unique visitors”, or “time-on-site” in its top-level marketing reporting, chances are it has a problem with its web metrics.  At best, these traditional metrics are only early indicators. At worst, they are completely misleading. Web site optimization needs to be focused on measurements of engagement, value, and revenue.

2. Tying marketing to revenue and profit requires ancillary data.  Companies may realize that marketing success metrics lie with revenue, but are unable to tie revenues to marketing because sales and profit figures live in different systems, databases, or departments.  Someone, and probably Marketing, needs to bite the bullet and take ownership of this problem.  The more that these data gaps are filled, the clearer the true measurements of success will be.

3. You need to factor in time. A very common problem in assessing marketing is forgetting to factor in time, whether measuring the time from first visit to action, or from lead to close.  Revenue generated right now should not be measured against current marketing cost because the revenue being generated right now stemmed from marketing done in the past.  Whether that was yesterday or six months ago will be critical in terms of how marketing strategy, tactics, and cost are assessed.  Companies that ignore the time factor will draw incorrect conclusions about cause and effect, will devise misguided strategies based on those conclusions, and will have a very difficult time optimizing their online marketing.

The good news is that companies don’t need to live with bad metrics or uncertainty about their online marketing. Smart metrics allow for smart choices.

Affiliates often advertise on the same search keywords as the companies they work with. In theory, this is a great way to keep products exposed and sales continuous, but also an effective way to drive up bid prices. An example:

The toy company Splash has launched a search campaign for their newest squirt gun, the ICE-Blaster. XYZ Toys is an affiliate that will bolster online ICE-Blaster sales.

Both company’s search campaigns include the brand term ‘iceblaster’. Considering the direct relevance to the name and the highly-targeted traffic the SERP will attract, the cost-per-click (CPC) should be relatively inexpensive.

However, because Splash never established affiliate bidding and position rules with XYZ Toys, both companies instinctively bid for first position, raising the competition of the term and inadvertently increasing each other’s CPC.  Worse yet, both Splash and XYZ are sending search traffic to the same domain, Splash.com. Google will only display one ad per domain on a results page. Because Splash is bidding less on the term, their ad is not being displayed, which creates inconsistencies in impression share, spending and sales.

Splash can avoid raising CPCs and losing impressions by implementing and enforcing strategies such as controlling affiliate keyword lists, coordinating affiliate position targets, and requiring the affiliate to use a separate domain.

A well-designed affiliate strategy can significantly improve your online presence and provide cost-effective sales, but requires planning and coordination in order to be efficient and to allow you to maintain control of your brand.

Successful paid search marketing in the legal vertical begins when profit is reflected in your keyword optimization. Assessing campaign data with the added conclusions of realized clients, case revenue and client cycle will emphasize the effectiveness of individual keywords by giving them a tangible value that matures through its lifetime.

Measuring keyword performance on cost-per-lead (CPL) alone begets misguided bidding strategies. Although top converting keywords may have a low CPL, resulting leads must produce paying clients in order to be profitable.

Tie case revenues to their attributing keywords, developing the quantifiable effectiveness of the keyword over time. However, keep in mind that knowing current keyword values is only part of the assessment process.

Because close rates vary, it is illogical to punish a keyword for poor performance if the leads it produced have not been given the proper amount of time to be realized. Define lead-to-client cycles to avoid penalizing keywords by reducing bid prices based on incomplete data.

Other factors to consider when optimizing performance on revenue generation include assessing value by case and division type, the value of repeat business, expenses (e.g., research and travel time), targeting ads to an audience looking to act rather than conduct research, geography, and performance targets by the various branches of law to account for differing revenue by the case types.

Large ad groups can negatively affect your performance. Poor performing keywords drag down the Quality Score (QS) of better performing keywords in the same ad group. This ultimately impacts impression share and raises click costs.

QS helps determine your actual Cost-Per-Click (CPC). Google assesses the relevance of your keywords, ad text, and landing content, as well as the click-through rate (CTR) of the keyword and ad group. Optimizing an account can be difficult to do with ad groups that include too many keyword themes. To help keep QS up and CPCs down, you will need to draw as straight a line as possible from search query to keyword to ad copy.

Try distributing keywords into smaller, more tightly focused ad groups. There is no “magic” number of terms per ad group, so organize keywords into new groupings based on logical themes. For automated assistance, use the Keyword Grouper tool available in Google’s free Adwords Editor, which can identify keyword themes, create ad groups, and copy existing keywords and ads into them.

Once tighter ad groups are developed, write ad copy focused solely on the keyword themes that include the keywords in the ad group. More specific ad text attracts a more targeted audience.

One way to optimize your Google AdWords Content Network performance is to monitor the domains you are being placed on. Knowing where your clicks are coming from and if they are helping you to be profitable will give you the upper hand in optimizing performance.

Google’s Placement Report shows which domains are hosting your ads and how the placements performed. Keep in mind that impression, click and cost data can be dangerously misleading without conversion data attributing accrued leads or sales to each of the domains.

If Google conversion tracking is installed, conversion data will be included in the report. If you use a separate conversion tracking system, pull a report that includes the referring domain.

First, identify domains not consistent with your service, company or industry. Next, identify poorly performing domains by calculating each domain’s cost-per-acquisition and projected profit. Keep in mind that the Content network often requires more flexible expectations than the Search network due to its lower volume. Block these sites immediately to avoid further wasted spend.

To block domains, head to Google’s Tools page and choose Site and Category Exclusions. There you can add the domains to exclude.  Your CPA should improve.

Here‘s how to leave profitable business on the table:

1. Ignore offline leads/sales

Most companies advertising on the web can accept phone calls, and often these calls result in the most valuable sales, partner relationships, or opportunities.  Ignoring this activity when evaluating PPC performance can lead to keywords that result in calls being poorly positioned and therefore unable to take advantage of the highest volume of truly profitable activity.  Track your phone activity and record the method of company contact in your customer/lead database. Use this information to help you evaluate your PPC spend.

2. Be literal about tracked leads or sales

There is always uncertainty in web marketing, even with highly trackable Pay-Per-Click marketing.  A percentage of people who see PPC ads won’t click on them, opting instead to visit the advertised site by typing in the domain name (this is “No Referrer”, or “Direct” traffic).  In a consumer campaign that number may equal 10%-20% of the tracked PPC traffic, however with a highly technical B2B audience, that may grow to 50%-100. Excluding No Referrer/Direct actions from your analysis means the PPC numbers will always be conservative; it also gives a false sense of the actual return on PPC spend.

3. Use average values

Average values are the enemy of a performance-based Pay-Per-Click program.  Evaluating your PPC program in aggregate, or by ad engine, means missed opportunities.  You are allowing low-performing terms/ads/networks to drag down the positioning of your best performers.  Be granular.  Unless you allow the best performing pieces of your campaign to be evaluated independently, you won’t tap into the high value and the higher volume that you get in high ad position on your best terms.

4. End assessment at the web site

The interaction with the web site is the beginning of the sales conversation, not the end. If you are not feeding post-lead or post-sales data back into your campaign optimization, you are likely missing opportunities to optimize on any number of things that relate to true profitability. Yes, it is hard.  Do it anyway.

5. Don’t stay in contact with leads/customers

You just paid X dollars to capture a lead.  Why only have one conversation with them?  Companies that lead the way in maximizing the return from their Pay-Per-Click investment nurture the leads that don’t lead to immediate sales.  Keeping in touch with them will keep your company on their radar.  A percentage of aged leads will convert down the road, which raises the return value of the marketing you have already paid for.