Search Marketing ROI Improves, Costs Decline

By Jul 27, 2009

In a previous column, ”Making Sense of Consumers’ Recession Behavior,” I looked at consumer behavior in today’s economy and its impact on various industries.

But marketers can also benefit from understanding and responding to changes within various media channels. Particularly now, with costs declining and performance improving in some ad channels, marketing teams can considerably improve results by tracking trends, benchmarking their own campaigns, and discovering ways to invest media and marketing dollars more effectively.

Performics tracks and analyzes these trends in search marketing, based on data from more than 200 paid search programs under its management. This benchmarking data showed signs of a turnaround in search advertising in the second quarter and documented some important shifts within many actively managed campaigns. Some key findings include:
· Same store online retail sales (based on campaigns for the same set of advertisers) from search engine marketing (SEM) rose by four percent year over year (YOY) in May ‘09, a significant increase versus May ‘08 which was a relatively strong month
· In May, the average order value increased YOY by more than $5 a transaction among the retailers tracked
· From January to June, the average cost per click (CPC) declined by $.05, reflecting current market conditions and advertisers more focused on efficiency versus investment
· Search campaign ROI has improved four percent through June for same store online retailers

Marketers can use these and other findings as a barometer to gauge the success of their own search marketing programs and ensure effective and efficient campaign management. Those that find their search campaigns lagging behind these benchmarks should bear in mind that many variables impact what a campaign can achieve. Still, CMOs should check with their teams to ensure they have the resources they need for proactive campaign management. Other key takeaways from the benchmark data include:
· Cost containment strategies have begun to pay off for many search advertisers
· Promotions can help to increase average order value and overcome consumer reluctance to spend
· Opportunities exist to improve search performance while reducing costs
· Advertisers that effectively control costs can reinvest savings to generate growth

As a first step, CMOs should check with their teams and agencies to take the pulse of their own search campaigns, determine how their key performance indicators are trending and take stock of any efforts to optimize the campaigns. Consider asking these and other questions:
· Did the second quarter show any signs of an improvement in search advertising?
· What steps have been taken to reign in costs and boost efficiencies?
· How can we better leverage promotions and offers to grow average order value and maximize returns?
· Is it time to increase spending to generate more clicks and transactions?
· Which other media channels are ripe for the picking in today’s economy?

In this and any changing economy, consumer sentiment and advertiser demand for media can shift in an instant, along with the timeliest opportunities for ROI driven advertisers. Marketers that closely track their teams’ performance in search and other media, however, position themselves to make timely, informed decisions about whether to emphasize efficiency or investment across their marketing mix to best capitalize on opportunities presented in even the most unstable market conditions.

Michael Kahn (michael.kahn@performics.com) is senior vice president, marketing at Performics and a monthly contributor to Chief Marketer.