Dec 01 2008
Your SEM Competitive Advantage
So what does it take to win the SEM war against your competition? Extensive keywords lists? Award winning creative? Clairvoyant bid management system?
Keyword lists, creative and bidding technology are all fairly well understood and relatively easy to deploy. So, if this is the case, what is to stop your SEM strategy deteriorating into a bidding war against your competitors where the choice is to either buy traffic at a level that is not profitable or have your ad pushed down into obscurity?
Of course you need to develop best practice keyword lists and creative and, where appropriate, deploy technology to assist in the creative, ad management and bidding processes. However you will only win the SEM war if you can gain a competitive advantage over your competition.
Your competitive advantage in SEM comes down to two key factors often over looked by advertisers, traditional agencies and technology driven SEMs. The two key factors are Quality Score and Site Conversion.
Let’s examine each of these factors in turn:
Quality Score
Originally, paid search engines offered a simple model where the highest bidder was ranked above all others. Google improved on this model where the popularity of an ad was also taken into account, so an ad with a high click through rate (CTR) could rank above a less popular ad even though it bid a lower maximum cost per click (CPC). Google has further developed this Quality Score over the last few years to take into account a range of other factors including; click through rate (CTR), relevancy, landing page quality and geography. Although search engines also use similar quality methodologies, and although not as sophisticated as Google’s system, the basic principals are still the same.
The CTR of individual keywords, your ads, the individual display URL and your whole account are all taken into account and, when placing ads on the content network, the CTR on similar sites is also taken into account.
Google even checks the popularity of your ad based on location and calculates the quality score for each individual executing a query. Google search, network search and content network sites also all generate different Quality Scores based on your performance on each channel.
The quality of landing pages is also taken into account and can have a big impact on your minimum Page 1 bid threshold set by Google. Key factors include page load time and page content.
Relevancy of individual keywords to the rest of the ad group and to the actual keyword query are important factors, but Google also checks the relevancy of your ad copy to the user’s query.
How Placement and CPC is Calculated.
So, in general terms, the Ad Rank = (CPC x Quality Score). The advertiser with the higher Ad Rank is placed first. They then have to pay 1 cent more than their competitor’s Ad Rank divided by their quality score.
| $ Bid | Quality Score | Ad Rank | Actual CPC | Position | |
| Smart Agency | $1.00 | 40 | 40 | $0.76 | #1 |
| Robot Agency | $1.50 | 20 | 30 | $1.01 | #2 |
| Media Agency | $2.00 | 10 | 20 | $1.81 | #3 |
| Other Advertiser | $1.00 | 18 | 18 | min bid | #4 |
The example above is extreme but it does illustrate the importance of taking into account Quality Score when grouping keywords, writing copy and designing landing pages. Your search marketing consultant should have a deep appreciation of Quality Score and should be devising campaigns that take this into account. They should also be running reports to identify any ad groups or keywords that appear to have Quality Score issues.
Site Conversion
The most effective way to gain a competitive advantage is to operate a site that has a higher conversion rate than your competitors, and to ideally make more margin per lead or sale as well. These conversion factors will enable you to bid more than your competitors while still making a sizable profit. You will find that competitors come and go launching aggressive, but ill conceived, campaigns that ultimately burn out as the poor ROI becomes clear.
Site conversion is a lot more that a flash landing page and a high initial conversion rate. There are a range of subtle factors that all need to be addressed to ensure that your online business truly has a comprehensive commercial advantage when it comes to bidding for keywords. These factors include:
- Targeting
- Pre-Qualification
- Bounce
- Site Conversion
- Incremental Conversion
- Margin
- Word of Mouth
We will review each in turn to understand how it plays its part in site conversation and how it relates to your paid search campaign.
Different keywords, sites and locations will all offer different rates of conversion based on how targeted the audience is to your core offering. It is therefore important to develop a detailed understanding of what works and what does not. Using a site stats package like Google Analytics, which has been configured to track conversions from all traffic sources, is an ideal way to develop this knowledge. This can then be applied to your search campaign.
Most search campaigns are focussed on increasing CTR to improve Quality Score and overall traffic generation; however it is also important to only pay for traffic that is likely to convert. To achieve this, ad creative needs to pre-qualify searchers by using the limited available text to communicate the offering and who it is suitable for, in as much detail as possible. By turning people away before they even click will increase overall conversion rates and will minimise cost per click fees.
The first conversion barrier to overcome is the “bounce”: visitors who click on an ad and then hit the back button when they do not like what they see. Minimising bounce rates comes down to the page load time and the relevancy of the content of the page to the users query. This often means that keywords, or groups of keywords, need to be linked to ‘deep’ pages within the site that cover the topics specifically. However simply being ‘technically’ relevant to the users query is not enough – the page must communicate that it is relevant through design and clear copy. As an extensive search campaign could link to hundreds or thousands of pages on a site, specialist landing page technology, design and consulting expertise is required.
The main challenge once a user has ‘stuck’ to the site (not bounced) is to persuade them to take the desired action. Landing page design and conversion process optimisation is a project in itself and it is vital that all the landing pages follow landing page conversion best practice. This should then be followed through as the user starts and finally completes the conversion process. In addition to an experienced internet marketing consultant’s expertise, there is also a range of landing page optimisation tools that allow pages to be tweaked and evaluated quickly in order to find the best configuration.
However, many sites can’t close the deal on the first visit and so a truly effective site offers a range of conversion paths that can spread over multiple user sessions. It can take days or even weeks to convert a prospect, but ultimately this more holistic view to conversion produces a site and campaign that generates more business value per click than other less sophisticated models. Users should be encouraged to download (via email) documents that will support their research and evaluation process. Users should also be prompted to register to receive personalised and relevant information from your company. This allows your conversation with the prospect to continue after the first visit, with the goal of ultimately driving them back to the site to take the final step in the conversion process.
As previously discussed, your search engine marketing consultant should also understand how your business makes money and which products or services offer the best margins or business value. By fully understanding what makes your business tick, search campaigns can be devised to push these high margin products and to minimise exposure by controlling marketing costs for less profitable products. Lifetime value and up-selling potential further increases the complexity of your search marketing strategy.
Finally, the best source of leads and revenue is not through your search campaign but is achieved by converting the customers you do get through search into repeat customers and advocates, spreading the word about your site and offering to others. Online the most effective way to build a brand is through happy site users and customers.
As we can see gaining a competitive advantage in paid search is a combination of understanding how the paid search placement and payment model works, and by implementing the fundamentals of online business best practice.
First Rate has built a team of internet marketing consultants who understand the search engines and how to use technology, campaign strategy and site design to allow you to gain a competitive advantage and drive leadership in your category online.
