Most retail search marketers work with finite/limited search marketing budgets. They try to maximize the revenue they are able generate for this budget. The performance metric often used is “Revenue/Cost” (or, R/C). Revenue is a factor of number of sales (or, orders) and value of each sale (or, order). (We will not discuss “cost” here since the assumption is “cost” or “search spend” is pre-fixed).
NetElixir recommends using the Product ROI Grid to identify the products (categories) you need to focus on during holidays. Per our research number of paid search advertisers per retail category increases by 32% during holidays. This drives up the “cost per click” quite dramatically. Unless the retail marketers has a clear product focus, she may not be able to achieve “revenue maximization”.
The ROI Grid can be easily created by generating a category level dump of number of units sold and margin per unit (3 month data + prior holiday month data). Categories with minimal sales volume and low margins should be first taken off the list (unless you “have to promote” these categories, we would advice you to “not advertise for these categories” through paid search – it can get expensive and unprofitable).
Focus on the STAR products – high margin and high sales and then on CASH COWS – high margin, low sales volume. You may want to decide if you really want to promote your low margin, high volume categories (based on business objectives, competitive intensity, these categories being important in terms of leading to the purchase of another high value product, etc.)
You should have a single sheet that captures the categories you will be focusing on during holidays, sales expected, spend allocated per category, estimated R/C. Using these numbers, your SEM Manager needs to assign SEM spend per category, expected sales (add a 10% buffer on to the business targets), estimated CPC and clicks and finally this gets broken down into individual adgroups, keywords, ad copies and landing pages.
The above sheet needs to be shared with all stakeholders and everyone needs to be aligned to what your are trying to achieve. The final step is creating a progress tracker to ensure that actual results (revenue and spend) are in line with the plan.
Paid Search Strategy is a key driver of campaign success. It is at least as important (if not more) than actual execution. The strategy not only provides direction to the SEM team but also ties in search channel efforts with the bigger business goals.
- Udayan Bose