Soren Ryherd to Speak at SMX West 2015 – Conversion Tactics for SEM

Working Plant Co-Founder, Soren Ryherd, will be speaking at SMX West in San Diego on March 4th! As part of an exciting panel on Conversion Tactics for SEM, Soren will be focused on how embracing the complexity of user behavior can help in your conversion improvement tests. Soren will be introducing the concept of the “Interruption Curve” and what that means for the proper analysis and testing of your digital campaigns.

Soren will be joined on the panel by conversion guru, Tim Ash, as well as by Luke Alley and Matt Van Wagner. Catch up with him after the panel to chat and ask questions!

Bidding on Your Brand

Bidding on brand terms in search campaigns is hotly debated.  In one camp are those who argue that these are cheap conversions, so of course you should bid on them.  In the other corner are those who say you will get those conversions anyway through organic, so it is simply a waste of money.

They are both wrong.

You should bid on your own brand terms in order to raise conversions.

Brand terms are the end of a conversation that began somewhere else.  No customer wakes up suddenly aware of your brand, ready to search for you. Some education has happened, somewhere, at some point in the past.  If you are using multi-touchpoint tracking, you might have some insight into the attribution chain leading to that brand search, but often that will fail to provide any insight (if, for example, someone did research at home and searched at work).

At this point, you may not know anything about this prospect other than that they have heard of you and have some interest in your company and products.

What are you going to say to them?

Most companies have multiple messages that speak to their value proposition.  Some will be feature-based, most will speak to benefits.  How sure are you that your organic listing includes ALL the important messages for every audience that might lock in the sale?

Bidding on your paid brand terms gives you the chance to say something different.  You can alternate your message, say something new, provide an offer, or reinforce an ad campaign that might be driving brand activity, such as display, video, or traditional media.

But the important thing is to look at conversions.  If you are investing dollars, you need to get additional value out of it to justify the cost. For brand advertising, this should be measured in increased conversion rates, viewed holistically, with an eye to what is driving the brand conversation in the first place.

As always, it is not about clicks, CPCs, or competition.  It is about profit.

ROI and other Dangerous Metrics

Recently, I answered this question on Quora: “If the cost of PPC is £10, what is the ROI?”

A simple question, right?  But assessing ROI for PPC campaigns has hidden dangers, so I used the opportunity to not just answer the ROI definition question, but to point out some common misconceptions in optimizing to a pure ROI metric.  Here’s how that went:

ROI (Return on Investment) has a specific definition, but is often used fairly loosely to mean the profitability of a company or program.


ROI = (Revenues – Costs) / Costs

So, If you made £20 from your £10 investment in PPC, your ROI would be:

(20 – 10) / 10 = 1, or 100% ROI

This differs a bit from Return On Ad Spend (ROAS) which is a commonly used metric:

ROAS = Revenues / Ad Spend

For the same example: ROAS = 20/10 = 2

ROI is usually expressed as a percentage, and ROAS as a number. Note that an ROAS under 1 is unprofitable, while any positive ROI number indicates profitability.

Now, since you asked about PPC specifically, let me point out the DANGER in both of these calculations. So here is a question:

“Which is better, 100% ROI or 200% ROI? What about an ROAS of 2 or an ROAS of 4?”

Like most people, you are probably going to say “Well, Soren, that’s a dumb question, of course the higher number is better in both cases”.

And you would be right, as long as the cost number is equal in both cases.

The big danger with ROAS and ROI is that they are often used to compare situations that are not apples-to-apples with regard to cost. Volume is completely missing in these equations.

In PPC, optimizing to ROI as a percentage can put you out of business. Don’t believe me?

Here’s another question. “Do you want profit of $1,000,000.00 at 100% ROI or profit of $100.00 at 400% ROI?” No brainer. I want the $1M profit regardless of ROI.

The real goal is the total amount of profit, not ROI.

Unfortunately, this important point is lost on many CEOs, CMOs, and, surprisingly, CFOs when speaking to their marketing teams or partners. ROI can be a good measure of efficiency when used appropriately, but it is not the goal.

Creating Success in a Complex World

Marketing is about creating success. Why, then, are marketers so often reacting to the numbers, rather than using the numbers to create success? Here are some of the current challenges in numbers-based digital marketing, with an eye to solutions.

Low-Cost Eyeballs vs. High-Value Actions

Historically, media was sold by the eyeball. In a business model based on “reach”, there was little opportunity to optimize on the fly, so traditional media was negotiated only to achieve the lowest cost. This was smart. Giving limited opportunities to improve, you had the best chance of success in being profitable if your media cost was low.

Digital auctions changed all that. Today, going after low-cost media online simply means that you cede an audience to other advertisers who are willing to pay. In AdWords, the advertiser with the best ability to monetize will win. In order to compete, marketers have to highly value actions tightly related to sales and profits, and nothing else. Only then can marketers and advertisers can make intelligent decisions related to value creation, which is the point of marketing.

Action-Centric Advertising is Breaking

While smart marketers moved from eyeballs to actions, fundamental shifts in user behavior were simultaneously breaking the ability to measure actions with total certainty. Cookie-based tracking is falling short in a world of multiple devices per person. Better tracking of multi-touchpoint data and more sophisticated measurement of “influence” is revealing that strict action-based tracking is not wrong, but may be very limited.

The impact on advertisers is immense. Companies that thought they were smartly valuing only conversions are now finding themselves increasing uncompetitive and left to fight it out in the ever-smaller world of desktop-based search.

What Next, Then?

More sophisticated tools are opening the doors to opportunity, while creating new challenges in execution::

1) Holistic measurement. The days of isolated channel behavior, assessment, and budgeting are gone. Cross-channel and cross-device behavior mandates a different view of performance, but one still rooted in value creation. Get used to Venn Diagrams and flow charts. Yes, it is more complex, but it yields better results.

2) Proactive Optimization. Too many companies use their numbers for reporting up, rather than as action points for improvement. Smart companies will isolate key points of the customer story, and will focus on improving them. They will view things that don’t work as opportunities, while recognizing that moving the needle on the things that are working will be faster and take less time.

3) A Segmented View. Marketers need to recognize that behind every average value are the good and bad segments of that audience that can be addressed individually. Sweeping “black and white” decisions based on average performance should be challenged, so as not to throw out the part of that campaign that is working.

The Future

Marketing is evolving and becoming more complex. Media diversity, multi-channel measurement, multi-device behavior, and data overload all contribute to difficulty in crafting a strategy and executing it efficiently. But as difficult as tactical execution is, the core challenge is still in how advertising is viewed. Companies that view every day as a new test and every metric, page, and ad as improvable, and who root everything in the reality of sales and profit, will excel.

Case Study: Locally-Targeted Ads Drive Donation Volume Growth

Client:  Non-profit organization providing support to low-income families seeking home ownership

Overview: The challenge presented was to grow our client’s donation volume and donation value within a limited ad spend budget in an intensely competitive market.  We knew could find gains with a data-driven approach,  and by both maximizing the efficiency of their media buy and selectively delivering ad impressions to audiences where conversion and ROI are highest.

Analysis of a rich historical data set for nationally-targeted campaigns, including ad network data, conversion data from third-party tracking tools, and donation records revealed strong correlations between audience locations and donations. We also found that donation volume increased during periods when our client was actively working in a local area and soon after their work in that area was complete.

To leverage efficiencies observed in different areas of the United States, campaigns were created to more easily optimize around audience performance trends at the local level. Campaigns were also created to target ad delivery to audiences in locations where our client was currently working, or soon would be, and resource needs were greatest. Ad creative focused on the core values of the non-profit and featured the location targeted by each campaign.

Results: In the nine months since implementing local audience targeting and optimization strategies, overall campaign profitability increased by 10%, cost-per-donation improved by 6%, and donation volume increased by 15%.

Case Study: Closed-Loop Marketing for E-Commerce Business

Client:  Discount online retailer selling products in the home décor and furnishings space

Overview: Our client’s success is built on cost-effectively converting online visitors to their website into sales via their online store.  To help grow their web store activity and help measure and understand the efficacy of their paid advertising, we worked with the client to obtain granular margin information and detailed order reports. This combination of data allowed us to tie profit back to the individual keywords that generated those orders and to fold that data into our custom bidding model for ongoing bid optimization.  We  then crafted an expansion strategy using this data to rapidly drive our profit-focused optimization process.

Results:  Through our performance-based modeling techniques and other optimization efforts, weincreased conversion rate 36% from early baseline results and decreased ad spend as a percentage of revenue by 34%.

Case Study: Effects of Seasonality and Brand Traffic on Campaign Performance

Client: Non-profit organization relying on monetary donations to fund core programs

Overview: Our client is a non-profit organization that relies on monetary donations to fund their mission. Their success is built on cost-effectively acquiring donations through in-kind, dollar, and airline mile donations programs via online and offline channels.  In analyzing their historical data and in advising on better tracking of donor activity, we found that there were substantial areas for increased efficiency in new donor acquisition through their paid online marketing programs.  In particular, a better understanding of non-brand keyword behavior and how to better understand the value of their strong and established brand as it relates to new donor acquisition led to dramatic breakthroughs in marketing efficiency.

Results:  The understanding of seasonality and differing donor behavior and donor value by segment has allowed us to dramatically increase the efficiency in acquiring new donors, and to best budget and execute to take advantage of highly seasonal trends.  These insights combined with efficient execution of the digital campaigns will yield significantly stronger results both during and outside their seasonally strong peak season and will allow them to more comfortably extend their digital programs into new areas.