Turning Trust Into Dollars in Search Advertising

Why e-commerce businesses competing in paid search auctions must optimize all facets of their communications – not just keywords and bids.

In PPC these days, half measures simply don’t work.

E-commerce businesses competing in ferocious paid search auctions must be thorough in optimizing all facets of their consumer-facing communications – not just keywords and bids.

Click costs have risen to the point where ambitious and able “tweakers” are having an increasingly hard time turning a silk purse into a sow’s ear. The problem is: undifferentiated, unoptimized businesses don’t convert well to sales, get stuck with low average order sizes, and find themselves wallowing with lower Quality Scores and low ad positions that make iteration much harder. This isn’t just a fancy way of saying “brand matters” – there is more to it than that, and any business can do this “brandy” stuff no matter what their size – but that’s probably the most concise way to express it.

This theory was proven recently with hard numbers by an entrepreneur I keep in touch with. Enrique (not his real name) runs a popular pet accessories website (not his real vertical). Over the years, Enrique’s product line has grown immensely, and his brand has really caught on with new and repeat customers alike. That’s no surprise: the website is constantly tweaked for conversion improvement as well as the creation of a “real person” brand identity. It doesn’t look like a cart, it looks like a company. A company staffed by a bunch of fun people (and their pets).

Enrique noticed that the hemp dog collars, bamboo sweaters, and organic vegetarian kibble (all of these products are made up, too) were outselling the rest of his line and providing healthy margins. The do-gooders loved their pets more, evidently earned more, bought more, and spent more per order.

Why not launch a separate “Crunchy Granola Pooch” brand to double down and further take advantage of this hot sector?

Without the money and time to build a real brand up from scratch like he had done with his main business, though, Enrique figured you could just throw a website up there and run a test. Cherry-pick what worked, what didn’t, and make a little extra money on the side by flying under the radar, tweaking, and optimizing like crazy.

“Slow down, bro!” I opined. “Google’s got policies that may prevent this type of double serving, or at least discourage it. Your two businesses could show ads against the same keywords, so they would have to be very distinct to pass muster with their policies.”

“Moreover,” I went on (this dialogue is fake too, as who really talks like this?), “I’m not sure you’ve made the case for launching this business. You already learned with your core business, watching how much your undifferentiated competitors suck at it, that it’s either go big, or go home. Embrace your customer base with a big bear hug, or give up and go get a job down at the local big box.”

But launch it he did, having his cousin run the business. After many months of tweaking, data-mining, and effort, the plan failed. Read all the analytics books you want, but it’s faster if you just skip to the chapter about “Your Business Is Boring and Nobody Cares About You.”

More to the point, consumers are skeptics, living in a world heavy on pitches and short on trust. The brands that consistently win them over are transparent, friendly, and have a verifiable solid track record.

The original business has gotten to a point where it does a high volume across a huge product line, and the aggregate return on ad spend runs around 500 percent. That’s coupled with strong organic search referral traffic, word of mouth, and repeat orders. The 500 percent ROAS figure can be played with by optimizing more or less aggressive account strategies, depending on the stance Enrique and his partners wish to take on the growth vs. profitability curve.

Even nibbling in ad position seven, the generic business always lost more money than it made, with an ROAS hovering around 120 percent (an unprofitable level for this business); and it struggles to do any significant volume. Identifying a tiny number of opportunities for profitable segments, based on the bright spots in the data, simply wasn’t interesting enough to pursue, because there is overhead and time to consider. Why not just funnel that effort back into the core brand, which to its customers amounts to the Amazon of pet bliss?

Have we learned anything here?

Originally posted on ClickZ – Turning Trust Into Dollars in Search Advertising