Retail Paid Search Guide

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RETAIL PAID SEARCH GUIDETen Advanced Tips for Driving More Revenue Through Paid Search

RETAIL INSIGHTS E-BOOK

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Internet Advertising revenue climbed to $32 billion in 20111, an increase of 22% over the previous year—and the growth of online advertising is showing no signs of slowing. The bulk of this spend comes from search advertising, which jumped 27%2. Paid Search continues to be a critical factor in driving revenue for retailers.

PAID SEARCH FOR RETAIL IS UNIQUERetail paid search is complex and requires a deep understanding of retail as an industry, the needs of specific retailers, and consumer behavior. Managing the different aspects of paid search, such as product categories, sub-categories, individual products, and promotions in real-time is difficult for many organizations.

We’ll explore ten ways retailers can drive more revenue in 2012 and beyond through paid search.

THE RISE OF PAID SEARCH

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At the heart of every paid search management platform is an algorithm—a set of mathematical equations that uses a variety of inputs to achieve your retail goals. Most search platform vendors take a one-size-fits-all approach in developing their algorithms. This would work fine if all types of online sellers, all products, and all customers were similar, but retailers have unique business structures and goals. An algorithm must be able to report on metrics such as; margin, marketing contribution, the cost to acquire a new customer, the total cost per order, and more. In nearly any complex retail scenario, a custom retail algorithm is essential.

The kinds of products e-tailers sell are very different than what travel agents, financial firms, and auto manufacturers sell online. Differences in product offerings lead to major variations in terms of how buyers of certain products types shop, which in turn dictates how their algorithms should be developed.

CASE STUDY: Jewelery Television Overcomes Paid Search PlateausAfter implementing a custom algorithm, Adlucent employed two principal strategies to help JTV drive revenue and improve efficiency.

1. Restructuring JTV’s online advertising accounts: Adlucent added 51,000 keywords, along with more than 9X as many campaigns and 10,000 more ad groups to better represent the quality scores.

2. More active bid management: Using its retail-optimized Deep Search™ software platform, Adlucent was able to make more frequent bid changes in response to real-time campaign performance data.

In less than a year, revenue from paid search soared 78% while margins improved 25% for JTV

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AN EFFECTIVE RETAIL ALGORITHM MUST:

1. Be Retail-CentricIt must take into account all of the retail-specific factors that affect paid search campaigns. This includes pausing keywords that advertise out-of-stock products, establishing the appropriate look-back period, adjusting campaigns for seasonality, and factoring in customer acquisition cost and lifetime value.

2. Be UniqueIt must be specific to the unique needs of the retailer, reflecting their product categories and sub-categories, their specific customers’ buying behavior, and their strategic business objectives.

3. Be AdaptableThe algorithm must be continuously refined to reflect newly-learned information.

4. Be Inclusive of Marketing PromotionsThe algorithm must be actively managed to coordinate with your changing offline and online marketing efforts. Conversion rates (CVR) change when retailers run promotions or offer discounts. Most search platforms are not “told” about these short-term events. As a result, their algorithms observe sudden spikes in CVR and falsely assume they will continue forever. And when the promotions end and CVRs fall, these platforms will over-penalize the involved keywords for dropping in effectiveness.

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GOALS FOR BRAND & NON-BRAND TERMSMost retailers do not manage their brand-related (trademarked) and non-brand (product-specific) keywords independently. This is a mistake and a missed opportunity. Non-brand terms are best for new customer acquisition. While brand terms assist in closing a sale, the customers most likely to encounter these terms are usually already acquainted with the retailer. Both brand and non-brand terms are important, but they need to be managed separately.

Brand campaigns typically have impressive performance stats including high click-through rates (CTR), high quality scores (QS), high conversion rates (CVR), low cost per click (CPC), and high return on ad spend (ROAS). These campaigns perform well because the customers clicking on these ads already know you — from a prior purchase, previously-seen ad, search result, or your general reputation.

The success of brand terms is indicative of the overall success of your brand marketing initiatives. Advertising your brand on search engines closes the loop on other marketing initiatives, but does little to acquire a new customer; which is the real value of search engine marketing.

We know 57% of online shoppers begin their shopping process from a search engine rather than going directly to retailers’ websites.3 Even if customers already have an affinity to buy from you, they are still likely to use a search engine and click on your branded ad to come to your website.

This means that with brand terms, you are paying for a click that was used as a navigation shortcut. It can still result in a sale but you should pay less for that click than one from a new customer.

The key is to manage brand terms separately from non-brand terms, with different cost of sales (COS, or A/S) goals. Your expectations for CVR and ROAS should be different as well—they’ll be lower for new customers, but it is typically worth it in the long-run.

THE PITFALLS OF BLENDED GOALSThe goal of paid search is to increase your reach and acquire new customers. By aiming for a blended COS, you are deterred from growing non-brand traffic. In fact, you cannot increase non-brand traffic without simultaneously increasing brand searches or you will disrupt your blended average. Since brand searches are influenced by awareness generated through a multitude of marketing channels, it does not make sense for you to use a blended average. The result of blending brand and non-brand targets is an overemphasis on navigational brand traffic and a de-emphasis of building long-term growth through non-brand terms.

“57% of online shoppers begin their shopping process from a search engine” – E-tailing Group

MANAGE YOUR BRAND & NON-BRAND KEYWORDS SEPERATELY

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THE HIDDEN VALUE OF BRAND TERMS:

1. Organic SearchBrand terms serve to drive repeat customers, but they are still valuable. Having a branded ad accompany organic results still drives incremental value. On average, for advertisers who appear in the top rank organic slot, 50% of ad clicks are incremental. This means that half of all ad clicks are not replaced by organic clicks when search ads are paused.4

2. MessagingTake a look at the products that are being sold through your brand terms. Is there adequate keyword coverage on them? Are you using them to test promotional ad copy and messaging? There are a lot of insights hidden here.

3. CompetitionBy purchasing your brand terms you are protecting yourself from affiliates and competitors who may be bidding on them.

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READ THE REVIEWS If you’re paying attention to how Amazon.com merchandises products, you might suspect that a product’s customer reviews can serve as a viable proxy for conversion rate (CVR).

The higher the ratings, the higher the CVR. This makes sense as positive product reviews are given to good products, and customers seek out products that are reviewed favorably by other customers.

Ratings & reviews on a website can boost conversion by as much as 10% to 40%.5

NO NEWS IS BETTER THAN BAD NEWSYou might be surprised by the impact of ratings and reviews on CVR. Adlucent studied a major online retailer with 67,000 conversions on 9,800 products with at least three reviews. The products were culled to try to isolate the effect of ratings and reviews from other factors, such as price competitiveness.

In the study, products with an average rating of 4.0 or higher showed a dramatic 65% higher CVR versus those with a rating of 1.9 or less. Adlucent found that products with no reviews actually had higher CVRs than

products with several bad reviews. In other words, it is better to have no reviews at all than a preponderance of negative reviews. Keep in mind that it is still important to have some negative reviews as they add legitimacy to the rest of them.

THE MAGIC NUMBERIn his article, “The Magic Behind Amazon’s 2.7 Billion Dollar Question,” Jared M. Spool suggests that the ratio of unit sales to reviews on Amazon.com is 1,300 to 1. If accurate, you could deduce how well a product is selling simply by counting the number of reviews it has received (e.g., two reviews = 2,600 unit sales).

The highest-rated, most reviewed products can then be promoted over the lowest-rated, least-reviewed products. Once actual performance data has begun to accumulate, reliance on predictive proxies can be reduced.

PREDICTING THE FUTUREWhen building campaigns for new products that have no historic CVR data or replacing an existing product with a newer model, you can use the review quantity and average rating as two elements of a scoring mechanism to predict CVR. The particular values will vary by retailer, category, product type, and several other factors as every retailer is different.

You can promote the highest-rated, most reviewed products over the lowest-rated, least-reviewed products. Once you begin accumulating actual performance data, you can reduce your reliance on predictive proxies.

A LENS ON THE BUSINESSRatings and reviews can help you improve overall business performance, beyond just driving profitable revenue growth through SEM.

First, you can match customer demand data derived from search engines with ratings and review data to find areas of opportunity. Research the ratings and reviews of brands, categories of products, and specific products that you do not currently carry. Products with favorable reviews tend to sell better, so consider adding these highly rated products to your catalogs.

Second, products with unfavorable reviews tend to have higher than normal return rates. By merging paid search performance data with ratings and reviews data, you can identify and resolve issues before they lead to margin erosion or customer losses. In many cases, you can rectify issues by improving the product descriptions, resolving delivery issues or fixing incorrect specifications.

USE RATING & REVIEWS TO PREDICT PRODUCT CONVERSION RATES

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“Ratings & reviews can boost conversion by 10% to 40%” – Bazaarvoice

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The two most important metrics retailers should focus on are customer acquisition and lifetime value (LTV). Understanding the measurements behind these two figures will help you drive a sustainable business.

WHAT ARE YOUR CUSTOMERS REALLY WORTH?LTV is predicting the future value of a customer and making the appropriate investments now to secure that value. Managing LTV well makes the difference between linear growth and exponential growth. Currently, only a handful of retailers understand this and use it to guide their marketing and pricing decisions.

Zappos does a phenomenal job of managing LTV. In 2008, CEO Tony Hseih released some striking data on Zappos’ success:

» More than 75% of purchases are made by repeat customers

» Over 50% of their customers purchase again

» Repeat customers have a 27% higher average order value (AOV) & will order 2.6 times more in the next 12 months (3.6 times per year)

» The 12-month LTV of a Zappos customer is over $300, 175% higher than their first purchase indicates

Figures like these explain why Zappos’ year-over-year revenue growth resembles a hockey stick–hockey sticks are pretty linear after the blade. Once Zappos acquires a customer, they use numerous tactics to increase customer loyalty such as their one-year return policy, free shipping both ways, and 24×7 phone-based customer service.

LTV AND PAID SEARCHWhat does this have to do with paid search? Well, knowing what a customer will be worth in the long-run influences what a retailer should be willing to pay to secure the position in search results necessary to acquire that customer.

Imagine if you knew that a customer was worth 3.6 times the value you believe they have today. In that case, you would be willing to bid much higher to secure a more competitive position because ads in the top positions capture significantly more traffic. If you are not optimizing campaigns based on lifetime value, you’re allowing another retailer to take future customer revenue that could be yours.

Retailers like Zappos and Amazon do not optimize their campaigns to obtain one incremental sale. Instead, they optimize their campaigns around obtaining one incremental customer. Most retailers do not know the LTV of their customers.

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In other cases, you can approach your manufacturer to share with them customer feedback and search performance data so they can make the quality control changes necessary to improve customer satisfaction.

Improving performance means understanding and delivering the products that customers want most. To that end, in addition to the number of reviews,

your merchandising division should be researching the ratings and reviews of brands, categories of products and specific products that you do not currently carry.

Ratings and reviews are just one way for merchandisers to uncover new opportunities and find the right product mix, but they are accessible and should already be included in marketing plans.

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Integrating paid search campaigns with product inventory can lead to dramatic improvements in marketing campaign efficiency and revenue growth. In particular, doing just one straightforward thing—pausing keywords for products that have gone out of stock, and then re-starting them when the product is back in stock—can boost marketing campaign efficiency by as much as 30%.

ONLY ADVERTISE WHAT’S IN STOCKConversion rates (CVR) approach zero when a customer discovers that the product they are looking for is out of stock.

After all, finding the same product from another site is often just a couple clicks away. Any campaign that drives prospective buyers to a product that you can not sell is a waste of your ad dollars. Ad budget that could have been driving immediate sales of in-stock products goes to waste. Worse, running ads for out-of-stock items provides a poor customer experience, eroding brand value, preventing return visits, and reducing a customer’s lifetime value.

ELIMINATE EXCESS INVENTORYRetailers are constantly adding new products and models, and discounting older items. Developing a strategy to reduce excess inventory and eliminate discontinued products is key.

Start by creating custom landing pages for these products and direct traffic to them. This strategy will often turn a non-converter into a customer.

AVERAGE CONVERSION RATES CAN BE MISLEADINGIn paid search terms, when a product goes out of stock, CVR drops dramatically but most bid management systems don’t adjust right away. Instead, their paid search decisions look at a rolling average CVR which lags behind the real-time CVR, and averages decay slowly, even though the real CVR may plummet. While waiting for the rolling average to catch up to the truth on the ground, ad spend goes to waste and revenue drops. A more advanced strategy would re-allocate paid search resources to a better performing campaign.

When an item comes back in stock, the problem is the same in reverse. Most systems, in response to rising CVRs, gradually “bid up” CPC ad spend, again based on rolling window averages thus under-advertising a hot item.

Eventually, CPC rates should reach a correct level, but when the product falls out of stock, the cycle repeats. Furthermore, the effects of these cyclic dips in inventory cloud the pool of historic data from which future CPCs are calculated, causing dramatic instability in a bid management system.

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It’s not always easy to measure, but it is important to get started. One way you can start is to integrate your financial databases (that contain pricing and cost of goods sold data) with your marketing andanalytics partners. By bringing all this information together into one place, you should be able to receive reporting and manage on LTV metrics at the keyword, brand, category, and retailer levels. This knowledge will help you to make more informed decisions about appropriate ad spend for new customer acquisition.

Managing Lifetime Value well means making investments today that will yield multiplier-effect benefits tomorrow. It is the difference between slow-growth and hockey stick growth.

THREE KEYS TO LONG-TERM CUSTOMER ACQUISITION:

1. Manage your campaigns for non-brand (product) terms and brand (trademark) terms separately. Spend more paid search budget on non-brand terms because they attract new customers.

2. New customers tend to have a lower AOV than repeat customers. To balance, set free shipping thresholds or other incentives a bit above your new customer AOV.

3. Do not use third party payment processors that will not share customers’ email addresses with you. Email marketing is the most cost-effective marketing and retention tactic available.

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INTEGRATING INVENTORY INTO PAID SEARCHA smarter approach integrates retail inventory with paid search technology.

When a product goes out of stock, paid search bids are paused and the portion of ad spend is re-allocated to other well performing campaigns. Efficiency is maintained, and waste reduced. Revenue grows dramatically as advertising dollars are spent on the best-performing keywords.

Inventory information should not just flow one-way. A search marketing division or agency should return business intelligence on which high-demand products are frequently out of stock or are on the verge of going out of stock, helping to match supply and demand.

A marketing team should also help identify a retailer’s most profitable products by factoring in the costs of goods sold (COGS) and advertising

expense. This modeling can be used to quantify the financial impact of not keeping the highest-margin products in stock.

THE EFFECTS OF LONG SHIPPING TIMESLike out of stock products, long shipping times also have a significant impact on conversion rate (CVR). From a customer’s perspective, if a product will not ship for ten days it might as well be out of stock if another retailer ships faster.

A marketing team must measure declines in CVR caused by extended shipping delays, then pause keywords accordingly. The ad spend can again be reallocated to higher converting products.

Marketing budget dollars are limited. Do not spend them to advertise products that you can not sell. Smart marketing management is also smart inventory management.

CASE STUDY:Buy.com doubles conversion rates and increases profitable revenue

Buy.com set ambitious annual ROAS goals. In order to achieve them, Adlucent focused specifically on non-branded, product-level terms and quickly expanded coverage across the entire Buy.com catalog. Adlucent leveraged its advanced retail Deep Search™ modules to optimize for revenue and profitability by predicting key factors, such as product effectiveness and competitive seasonal trends, and then integrated with Buy.com’s inventory activity to effectively manage bids based on product availability and sales priorities. The result? Conversion rates doubled and profitable revenue grew.

ADJUST FOR SEASONALITY06Seasonality is a term retailers use to describe the fluctuating demand for products. It’s also one of the most important factors that affects PPC conversion rates in online retail.

THE IMPACT OF SEASONALITYSeasonality influences conversion rates (CVRs) and average order value (AOV) changes during seasonal spikes.

Conversion rates often jump dramatically when traffic spikes occur–for some categories as high

as 300%—as customer urgency increases. For the marketer, PPC advertising is more effective when customers are more motivated.

Average order value often trends downward as customers become more focused on their purchases and are less susceptible to up-sells, cross-sells, and other point-of-sale recommendations. If their purchase is a gift, the price is often lower than what a person might spend on themselves.

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THE IMPORTANCE OF PREDICTION These dramatic shifts in CVR and AOV during seasonal spikes have a significant impact on how aggressively you should bid in your PPC campaigns.

The model that illustrates the relationship between CPC and CVR is:

If you are adjusting the CPC in response to shifting CVRs & AOVs, you are too late. Retailers need to predict seasonal changes and adjust proactively. Doing so involves modeling year-over-year changes in CVR and AOV, normalized by recent performance, then adjusting CPCs and building campaigns—all well in advance of the forecasted seasonal spike.

When modeling year-over-year changes, keep in mind that year-over-year doesn’t always refer to the same date of the year. Make sure to line up your dates correctly as customer buying behaviors vary by day of the week during the entire year and conversion rates trend upward during holiday seasons. Overlaying these factors on top of your predictive model improves your campaign performance.

FOUR RULES FOR SEASONALITY:

1. Identify seasons and micro-seasons for every product.

2. Predict changes in AOV & CVR based on historical sales data, day of week, year, & other factors.

3. Adjust CPCs proactively in anticipation of forecasted changes.

4. Plan for and measure the effect of roaming holidays like Easter and Mardi Gras on your traditional seasons and micro-seasons.

CPC =(AOV x CVR)

ROAS

Mobile has quickly become the next frontier for advertisers. Understanding the benefits and psychology behind its use is critical. If you have simply designed a mobile friendly website and copied your web paid search strategy, you are setting yourself up for failure. Your goals for online and mobile should be different.

Developing a paid search strategy starts with understanding the psychology of your buyer. It is no secret that shoppers today are spending more time doing research before making product decisions.

Let’s use an example of someone shopping for a flat-screen tv. This consumer is likely to start their search online, looking at various brands and features.

They may ask their friends which televisions they would recommend by posting the question on their Facebook wall. After narrowing their search, they may visit a local electronics store to see the tv in person. If they are still interested, the shopper will likely access their smartphone and conduct an in-store mobile search to compare prices and read customer reviews. Google named this process of product research the Zero Moment of Truth (ZMOT).

Mobile paid search connects retailers and consumers at the ZMOT by enabling them to serve personalized messages to shoppers during the research process. A shopper may not be ready to purchase at that moment, but a retailer becomes a part of an important branding opportunity that may result in a sale at a later time. This example shows why your mobile performance should not be measured solely on direct revenue, and should instead consider all potential facets of attribution.

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“Consumer behavior is a critical component of mobile planning”

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Whether on a tablet or a smartphone, mobile shoppers exhibit different behaviors. A person shopping on their smartphone may be searching for a local business in order to make an immediate purchase. A tablet owner may spend his or her evening browsing the Internet, their mobile searches influenced by offline advertising. Understanding your customers shopping behaviors on mobile devices is essential. Start by measuring the source of your traffic. Determine which devices are driving the most traffic and then optimize your mobile site or develop an app based on your buyers’ needs.

Once you have identified your target audience, it is time to optimize your customer acquisition strategy. What are the best methods to reach your prospective customers—paid search, mobile display, or both?

PAID SEARCHPaid search will account for 40.2% of mobile advertising by 2015.6 There are many factors to consider when developing your campaign. For example, keyword length should be shorter for smartphones as users will spend less time typing search queries. Also, make sure your creative is tailored per device and preferred action. Is your goal to drive an immediate online conversion or drive someone into a local store to buy? Bid more aggressively for the higher positions during the evenings and weekends as this is when mobile users are shopping on their couches, browsing for local information and searching for product information in stores.

MOBILE DISPLAYStandard text ads can be purchased on smartphones and tablets with full Internet browsers. If you participate in Google’s Display Network, your ads can be placed on mobile-enabled websites and

within apps. As with paid search, consider mobile users’ behavior to determine the right approach for developing and deploying mobile display ads.

Whenever you are employing a new strategy, start by testing a small sample of your current product line. Create separate campaigns for your mobile ads as factors like bids, budget, keywords, and ad creative will be different for mobile. Continuously monitor and refine your strategy to maximize performance. Once you feel comfortable, add additional products from your portfolio.

FOUR TIPS TO HELP YOU GET STARTED WITH MOBILE SEARCH:

1. Study Buyer BehaviorAnalyze how people are shopping for you now. Do they do a lot of research before making a purchase? What tools do they use?

2. Be Mobile FriendlyIt may sound intuitive, but only 22% of the IR 500 had a mobile commerce site or app last year.7 Determine whether you want to invest in a mobile-friendly website, an app, or both.

3. Optimize Your Customer Acquisition StrategyAre you going to use paid search, mobile display, or both? Manage your mobile and online campaigns separately and consider factors like bids, CTA, keywords, and ad creative.

4. Measure & OptimizeStart by testing a small portion of your products. Continuously monitor and refine based on performance.

STOP PROMOTING POORLY PERFORMING PRODUCTS08Why would you pay to promote a product with a high return rate?

Spending money on products that frequently get returned may sound crazy, but many paid search programs make this mistake. If you are basing marketing campaigns on gross sales

and ignoring product returns, you’re allocating dollars to the wrong areas and providing a bad customer experience. Analyzing returns data can provide valuable profit and loss benefits to retailers and their suppliers, and promote a positive brand experience.

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FOUR WAYS TO PROVIDE A BETTER CUSTOMER EXPERIENCE:

1. Improve Product MerchandisingLook for products, categories and sub-categories that are showing high return rates. Pause campaigns for those products immediately, then research the cause and take the appropriate action.

2. Provide Feedback to ManufacturersIt is sometimes necessary to involve the product’s manufacturer to resolve a high return rate. It may be a design issue, or something as simple as the product description or assembly instructions.

3. Allocate Marketing More EfficientlyRunning campaigns for products with high return rates represents wasted ad spend. Don’t compound these mistakes by extending their reach to valuable website real estate or an e-newsletter promotion.

4. Deliver a Better Customer ExperienceNo customer enjoys the returns process, and once they go through it, they may never purchase from you again. Make sure your website accurately describes the product you are selling and consider eliminating products that can not be fixed.

TAKE ADVANTAGE OF SEARCH ENGINE OFFERINGS09There are three key areas where you should get started—building out tight ad groups, rotating ads for testing, and using focused targeting. Focusing on these three opportunities will help you improve Quality Score (QS), lower the CPCs on your account, and increase your reach (impression share) on desirable keywords.

1. Building Out Tight Ad GroupsGoogle recently increased their campaign limits per account because they realized that advertiser’s had a strong desire to segment and target their keywords further.

Tightly themed ad groups with highly related keywords will allow for the highest ad text relevancy. Your ad text will have the maximum amount of bolding for any keyword in a given ad group, resulting in higher CTRs for each keyword, a better QS, and a lower CPC.

In contrast, inflating ad groups with thousands of keywords allows for simpler reporting and categorization of keywords, but often masks performance of single keywords, destroys CTR and quality score, limits promotional possibilities, and leads to higher CPCs in the long term.

In addition, because impression share is measured at the ad group level, separating ad groups by match type will allow you to see your true market penetration. Accurately controlling your reach and budget, all while working to optimize for lower CPCs, will give you a compounded advantage over time.

2. Rotating Ads for TestingRotating ads for testing is one of the most powerful search engine tools. A 10% improvement in CTR on an ad will result in a 10% increase in overall revenue on the account (assuming the same CVR and AOV) as well as improve overall CTR and QS. Incremental improvements in messaging can help retailers avoid the dreaded plateau in performance.

3. Using Focused TargetingIn addition to basic location, language and network targeting, both Google and UM allow for device targeting. Separating your campaigns by device will enable a host of bidding options, ad scheduling optimization, and ad text testing. Also, as mentioned earlier, mobile and tablet users generally behave differently than traditional searchers and should be segmented and optimized separately.

TAKING IT ONE STEP FURTHERIn addition to the traditional search engine options, Google and UM are constantly releasing betas and new features. These advances often lead to immediate increases in traffic, improvements in CTR, reduction in CPCs, and incremental revenue gains that can give retailers a leg up on their competition.

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RECENT BETAS INCLUDE: » Ad Extensions Sitelinks, Enhanced Sitelinks, Location Extensions, Communication Extensions, Product Extensions, Deep Links

These new ad formats have changed the CTR norms for search engine marketing over the past few years. One, two, and three line Sitelinks greatly improve the CTR of search terms as ad formats are optimized.

» Product Listing AdsGoogle added Product Listing Ads (PLAs) as a beta in 2009 and rolled it out to the public a year later. The program started with incredibly low CPCs that have now inflated astronomically in the face of rising competition for limited spots. While some worry that PLAs may cannibalize other paid search efforts or organic traffic, research indicates that revenue from these ads is largely incremental. Some of Adlucent’s clients have seen up to 20% of their revenue driven through PLAs.

» New Match TypesAfter Google changed their broad match algorithm in 2008, advertisers realized that broad match keywords were no longer as reliable as they should be and started migrating towards more exact match keyword types. Unfortunately, in order to capture the traffic of the old broad keywords, accounts have become bloated by variations like misspellings and plurals. In response, Google released the Modified Broad Match keywords in 2010 which helped advertisers regain some control.

» Near Match betaGoogle recently announced the launch of Near Match beta, a program designed to build more granular ad groups for positive and negative keywords to avoid triggering irrelevant traffic and paying for unwanted clicks.

Search engine strategies are constantly evolving and changing the search landscape. Retailers should continue to monitor trends, test their strategies, and participate in betas.

MONITOR KEY METRICS10Retailers should never become complacent when measuring paid search programs. While basic revenue, conversion, profit margin, and traffic metrics will satisfy your CMO, they will only provide a limited view of the true potential. Regularly monitoring your performance metrics will help you better optimize your search program.

Search Engine MetricsThere are a variety of search engine metrics you can measure. These include impressions, clicks, cost, revenue, and orders. Retailers can also analyze behavior before and after the click, or look at a combination of the two.

If you really want to take your PPC program to the next level, consider using the following metrics:

GROSS PROFIT PER IMPRESSION (GPI)GPI is measured at the ad level with the following formula:

Retailers can use GPI to determine which ads are truly delivering the most value to their program. These ads return the most profit per impression served. GPI is superior to CTR and CVR because it analyzes both before and after the click.

(Ad Revenue - Ad Cost)

Impressions= GPI

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THE RATIO OF % AD SPEND AND % AD REVENUE BY MATCH TYPEThe percentage ad spend is measured at the keyword level and then rolled up to match type. Exact match keywords are the most controllable and generally have the highest ROI. It is important to regularly monitor the ratio of spend and revenue (percentages) by match type in order to see if you are pushing an optimal amount of your ad spend through exact match keywords. An optimal amount will essentially put the ratio at one for all match types.

PRODUCT METRICSWe already know inventory, shipping, and ratings and reviews can impact the success of products, but there are a few other product related metrics that will help you understand and control the performance of your account.

» PriceThe price of a product can greatly affect the performance of your ads. Although higher priced items often convert at a lower rate than lower priced items, the more expensive items have a greater payoff. Retailers should analyze the tradeoff between ROAS and price. If products are priced too low, consider adjusting the CPCs.

» Product DescriptionsDoes the product have an accurate and helpful description? Does it have an image? Analyzing the effects that various attributes have on conversion rate will help to determine bidding and optimization strategies for new products.

» Cross Channel SalesHow is this product doing in other channels? Does it sell on CSEs? We’ve seen products with a high sales rank on CSEs have a much higher paid search CVR than the average product.

» Product Breadth and DepthHow many types of a single product do you have? Do you have each color and size? How do these factors affect CVR?

Each retailer is unique and performance goals vary. It is important to measure traditional metrics like revenue growth and return on ad spend, but also establish retail-specific performance tracking metrics. Always create separate campaigns for testing factors like match type, location, and devices.

ABOUT ADLUCENTAdlucent is a marketing technology and analytics organization based in Austin, Texas, focused solely on Retail and eCommerce. Leveraging its Deep Search™ analytics platform, Adlucent’s experts help the smartest retailers acquire new customers and grow revenue profitably through digital marketing. Launched with a decade-long relationship with Amazon.com, Adlucent’s client base includes multi-channel brands such as Anthropologie, Buy.com, Free People, Jewelry Television and Oriental Trading Company.

INTERESTED IN LEARNING MORE? [email protected]

Submit a demo request at – www.adlucent.com/#getintouch

These ten tips are intended to help you improve your paid search campaigns. Retail paid search is complex and requires a team with deep retail expertise and sophisticated automation software that responds to real-time changes in the marketplace. Adlucent offers predictive search and shopping analytics powered by its Deep Search™ platform that is personalized and curated by retail experts.

RETAIL PAID SEARCH GUIDEAppendix

SOURCES1 Google Shopper Sciences 2011 Macro Study2 Internet Advertising Bureau and PwC 20123 Etailing Group 20104 Google AdWords study5 Bazaarvoice client case studies6 eMarketer 20117 eMarketer 2011

DICTIONARY AOV (Average order value) Average dollar amount spent for each customer order

COGS (Cost of goods sold) The total cost of making a product that is sold

COS (Cost of sale) The purchase cost or inventory value of merchandise sold

CPC (Cost per click) The dollar amount you pay per click of an ad

CTR (Click-through rate) The number of clicks that your ad receives divided by the number of times your ad is shown

CVR (Conversion rate) How often a click on your ad resulted in a conversion, a meaningful action like a sale, lead, or sign-up

GPI (Gross profit per impression) Profit per impression served

LTV (Lifetime value) Cash flows attributed to the relationship with a customer

PLA (Product listing ad) Search ads that include richer product information, such as product image, price, and merchant name, without requiring additional keywords or ad text

QS (Quality score) How relevant your ads, keywords, and landing page are to a person seeing your ad

ROAS (Return on ad spend) How much profit you’ve made after ad spend has been factored in

ROI (Return on investment) How much profit you’ve made from your ads compared to how much you’ve spent on them

ZMOT (Zero Moment of Truth) The research a shopper does before deciding which product to buy

SHOPPING STATISTICS84% of those use online sources to guide them. Of those, 54% comparison shop for products online — Google Shopper Sciences 2011 Macro Study

On average, for advertisers who appear in the top rank organic slot, 50% of ad clicks are incremental. This means that half of all ad clicks are not replaced by organic clicks when search ads are paused — Google AdWords study

57% of online shoppers begin their shopping process from a search engine — Etailing Group

AD SPEND STATISTICSInternet advertising climbed to $32 billion in 2011, with ad revenue up 22%. At $14.7 billion, the bulk of the spend was made in the area of search advertising, a jump of 27% — Internet Advertising Bureau and PwC

MOBILE STATISTICSThe projected mobile spend will reach $4.3 billion by 2015, with paid search accounting for 40.2% of that spend.— eMarketer 2011

22% of retailers in the Internet Retailer Top 500 report having an m-commerce site or app, which is 110 of 500 — Internet Retailer 2011

43% of local searchers on mobile devices physically showed up at the business location with 22% of those users actually made a purchase. — AT&T study published in Search Engine Land 2011

70% use their smartphones while in a store — The Mobile Movement: Understanding Smartphone Users, by Google and Ipsos OTX MediaCT

74% of smartphone shoppers make a purchase, whether online, in-store, or on their phones — The Mobile Movement: Understanding Smartphone Users, by Google and Ipsos OTX MediaCT

53% of shoppers make a purchase after conducting a search, with 40 percent doing so at a retail store — The Mobile Movement: Understanding Smartphone Users, by Google and Ipsos OTX MediaCT