Strategies for an eCommerce PPC model: Part one

The world of paid search becomes very interesting with eCommerce supported websites – one of my favourite types of campaigns to run. ECommerce gives instant gratification when you start to see those sales occurring on the site; but it can also become extremely complicated with a myriad of options available for eCommerce marketers. In this article I will discuss how you can leverage bidding strategies to enhance your paid search performance and improve your return on ad spend (ROAS).

Bidding is one of the most important elements of driving an increase in campaign performance. The goal is to grow revenue while getting the ROAS as high as possible; which means getting the right traffic to the site as cheaply as possible. There are three different approaches I will share:

  1. Know the value per click. The value per click can be determined by knowing the total revenue generated by the search program, targeting an ROAS goal (realistic), and the total number of clicks over the same specified period of time. Dividing the revenue by the total number of clicks will give you your revenue per click. Dividing the revenue per click by the targeted ROAS will give the highest you should bid on a keyword to maintain your ROAS at that specified level. This strategy, however, assumes that all keywords are equal; which we know is not going to be the case. However, it provides a good framework to determine your bid starting point and sets the foundation for more complex bidding programs once you have collected enough data.
  2. Bidding for specific position targets. If available impression inventory exceeds your budget, then lowering the ad position can lower the cost per click (CPC), translating into more clicks for your budget. The strategy assumes that the conversion rate is equal for a keyword in position 1 and position 8; however, careful testing and monitoring is required. This strategy requires careful attention to quality score, which is based on click thru rate (CTR). If your position is too low, CTR and quality score will start to drop which will increase your CPC in the long run for the same positions. For new keywords it’s important to bid aggressively to establish a good quality score before starting to lower your bids back down. By lowering CPC and generating more traffic, your campaign should be able to generate more sales at a lower cost per acquisition and therefore generate more revenue. The drawback to this approach is the ability to use ad extensions, which can improve overall campaign performance. Google is also experimenting with eliminating the right-rail ads and moving them below organic results, as seen in the image at the bottom of this page, which would dramatically change the effectiveness of this particular strategy.
  3. An automated bid management program. Bidding on a per keyword basis is the most effective strategy for keywords that have sufficient data. Knowing CTR, conversion rate, and projected CPCs you can begin to model keyword performance and start to experiment with where that keyword should be positioned on a search results page. This will drive the most effective result before the keyword dips below your targeted ROAS. The difference between this strategy and the strategies above is that you are evaluating each keyword on its own merits and being more aggressive with your top performing keywords to maximize revenue within acceptable ROAS targets.

In part two of this article I will share a few other elements that will dramatically improve the performance of your campaign if used correctly. Stay tuned…

For more tips and hints on running effective paid search campaigns, check out Mediative’s cheat sheets.

Strategies for an eCommerce PPC Model - add related