Decreasing Search Budgets: What now?

Got a great question from a reader:

We will have to cut our Paid Search budget in half for the first 6 months of 2009. The program includes branded terms, terms describing our product, as well as terms related to how our customers use our products. How would you suggest we reallocate funds given the budget cut?

It is well known that online media offers superior measurability and trackability in comparison to traditional tactics. Because every click is tracked, it’s possible to tell how your customers are finding you, what they’re doing when they arrive, and, most importantly, if they’re spending money with you.

When tracking methods are implemented correctly, display media, paid and organic search, email, social media, and all other online marketing tactics can provide a click by click scoreboard that can be leveraged to provide a precise ROI metric for any online channel.

Because of the ability to assign value to each campaign initiative, companies have the ability to test a wide array of tactics, evaluate which generates the best response, and then adjust the marketing program accordingly.

The old saying that “I know half my marketing dollars are wasted. I just don’t know which half,” is even more acute and painful in a down economy when advertising dollars are curtailed. However, the inherent cost, targeting, and tracking advantages of online marketing make it more likely to succeed (or at least able to minimize losses from a failed campaign). And when every penny counts more than it did a few months ago, this is the kind of assurance you need from your online marketing strategy.

We are expecting to see several commitment based trends arise online due to a decrease in marketing budgets:

A shift in dollars toward paid search marketing: Because of the literal on/off switch nature of paid search, ads can go up and down on a daily basis. Dollars will be flow when the response is proven to be most favorable.

More advertiser favorable out-clauses: With a surplus of online inventory due to decreased demand, publishers will be forced to offer extremely advantageous cancellation clauses to their advertisers, some as low as 48-72 hours.

Marketing budgets will shift toward increasing revenue from current customers: Through more frequent purchases, larger purchases or new customer referrals, companies will seek to make the most of current customer relationships as outbound budgets decrease.

Increased use of behavioral targeting: With a decreased budget, waste becomes a very important issue. Less marketing dollars means less room for advertising to customers who aren’t interested in your product. Publisher networks and portals offering behavioral targeting and retargeting placements will see increased demand as contextual relevance continues to drive more qualified traffic.

Additionally, as search marketers attempt to reach consumers in the middle of their purchase funnel the purchase of “long tail” keywords will become extremely prevalent as it is proven that being able to capture clicks on longer, detailed search queries correlate to increased purchase intent. The long tail strategy is likely to become more mainstream over time, but there is ample opportunity to take advantage of it in the retail financial services industry at this time.

Paid Search: Making the most of your decreased budget

Paid search marketing is likely to become the main marketing channel for many companies during the current economic slowdown. Many industry experts argue that companies that cut spending in paid search are potentially risking market share loss and a possible long term delay in resuming “normal” campaign performance levels. While we agree that market share could decrease during this time, we believe the effects are likely to be temporary for major brands. On the performance level risks, we believe that only completely going dark for an extended period would have prolonged effects on returning to normal performance. If done properly, decreasing budgets should not affect performance levels.

With decreased budgets, certain aspects of the campaign require additional attention:

Strong focus on SEO strategy

• Without a doubt, search engine optimization is a high impact, high value tactic for reaching customers online. Through keywords and tags, search engine optimization factors into many aspects of social media including video, audio, blogging, micro-blogging, along with being a highly effective tactic on its own. During periods of decreasing budgets SEO dollars are going to work harder than any other.

Clear economic goals

• Adjusted budgets mean that campaign goals should be extremely specific and carefully measured – less budget means more pressure for the remaining dollars to be put to work effectively

Strong bid management (tools)

• Every effort should be made to ensure that bid management is an exact science, completely focused based on rules created around attaining campaign goals at every bid update

Updated revenue targets

• Adjusted budgets are usually the result of changes in the economy – be sure to realistically update revenue goals accordingly

Keyword strategy

• Each keyword should be examined on an individual basis to determine its overall value to the campaign: individual CPA metrics should determine which keywords continue to be used when budgets are decreased to cut out wasteful ad spending
• Keywords must be found that can provide low-cost lateral build out opportunities to take advantage of the long-tail strategy

Online Affiliate programs

• Affiliate programs normally rely heavily on paid search, and when a company cuts budget, especially on brand terms, it may end up paying its online affiliates a higher CPA for a referral conversion than if they had just processed the conversion itself
• To counter this, companies may think of reducing their payout to affiliates when they cut budget. This move, however, may / will cause fewer affiliates to promote your offer and therefore your conversions will decrease further

Paid search strategy should always, and even more so in economic slowdowns, revolve around keywords that are driving actual sales related activities or conversions - it’s never an effective strategy to optimize on click-through rates, clicks or visits.

To develop the ultimate list of keywords, each keyword should be evaluated on an individual basis to determine its CPA, CPS, or CPL value. Only those which drive conversion activity at appropriate levels should be included in the list. This means that broad strategies such as discontinuing certain campaigns or keyword groups strictly due to budget cuts is not an ideal solution. Often times, the keywords that are driving the most conversions are spread across many different campaigns and are attracting many different types of users.

Done correctly, the keyword list used during periods of decreased budget should be an abbreviated version of the normal list, with emphasis placed on conversion metrics and historical performance of individual terms.

An abbreviated version of the normal list will lessen the effects of the overall budget decrease both in terms of click volume across the various campaign strategies, as well as softening the effects of a decreased share of voice in the search results. Fewer impressions will be served overall, but the campaigns will still have a share of voice for each of the campaign strategies that were present with the normal keyword list.

To further the recommendation that branded keywords should not be deleted from the paid search campaign during the budget cuts, research has pointed out that conversion activity increases greatly for keywords that provide results in both paid and natural search – which is the case for most branded terms.

“When appearing in both natural and paid search for the same keyword impression, clicks lifted 92 percent, actions lifted 45 percent, orders lifted 45 percent, page views lifted 44 percent, visitors increased by 41 percent, and time on site increased by 40 percent.” – MediaPost, 2007

This is in part due to the expanded real-estate which comes in having two separate results, but more so because of the control over the purchase funnel which comes as a result of being able to drive a user directly into a predefined purchase funnel after the click occurs.

Overall, the keyword strategy during a period of decreased budget must be grounded in the analysis of historical performance metrics. The final keyword list must be derived from the original keyword list but based on the actual sales activity that each keyword is individually responsible for. The keyword list should be viewed as a much fitter version of its regular self, with all of the terms that were providing impression share but no click activity, click activity but no leads, leads but no sales, eliminated from the list temporarily in order to make spending room for the most effective keywords possible. As the campaign runs the keywords should be monitored to be sure that the list continues to be the most effective combination possible, and opportunities for long-tail expansion should be leveraged and added to the campaigns where appropriate.

Related Posts

• Paid Search: The Basics

Tagged as: budget cuts, paid search in a slow economy, PPC, sem