We ask this question all the time at NetElixir. A simple metric that we use for answering this question is “Revenue Per Paid Search Click (R/C)”. We calculate R/C for the various customer geographies – create a baseline per geo and use it to regulate paid search management.
It must be highlighted here that Revenue per Click is influenced by several factors such as:
- Strength of the brand in different markets: Conversion rates as well as average order values go up substantially in markets where there is greater brand awareness (and loyalty).
- Available (direct and indirect competition) choices for the consumer: The ability to anticipate relevant search queries (keywords) and advertise for these keywords becomes critical here.
- Ad message that addresses geo-specific nuances: We have found, interestingly so, that consumers living in different geographies may react differently to an ad copy.
- Product Assortment Preferences: We have observed the existence of geographical product preferences that impact the average order value.
- Presence of a brick and mortar store: In the geographies where the online merchant has stores, the revenue per click is normally higher. This may be due to a greater brand familiarity of local customers.
We recommend creating a baseline R/C per state against which actual paid search campaign performance should be measured. This is a great controlling mechanism for paid search campaigns and helps a more judicious allocation of paid search dollars.