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Mar. 27, 2007 at 8:14am Eastern by Alan Rimm-Kaufman
PPC And Your Good Name: Sales From Brand Searches Aren't Incremental
Hello! My name is Alan Rimm-Kaufman. I'm honored to be contributing a monthly column on paid search for Search Engine Land. The column will appear the third Tuesday of each month. My focus will be strategy, economics, and multi-channel.
About me: I run a paid search agency based in Charlottesville, Virginia. We serve about 100 clients, mostly B2C retailers. 25 employees. We manage bids using proprietary software based on portfolio optimization and statistical clustering theory. Prior, I was Marketing VP at Crutchfield, a $250 million direct retailer of consumer electronics. I did a PhD in operations research and stats at MIT.
Today's topic: the role of the advertiser's brand in paid search. Let me share assertions we've found to be true over the last four years:
1. Sales from brand phrases are not incremental
For many search advertisers, paid search ads on the retailer's brand name ("Brandname", Brand Name", BrandName.com") generate 20% to 50% of their search-driven tracked sales. Most of these sales aren't incremental. Brand-name searches are navigational searches, analogous to a customer finding the retailer's phone number in the White Pages. These searches are driven by brand awareness, store advertising, catalog mailings, TV, radio, word of mouth, and so on. Even though the click came through Google (and Google charged a few cents for it), Google had nothing to do with generating the demand. Ditto your SEM agency, or your in-house search team.
2. Sales from non-brand phrases are incremental
Well, not 100% incremental, but close. Searches on product categories and SKUs are analogous to consumers going to the Yellow Pages—they know they need a product or service, but don't yet know where to buy it. These are competitive searches. Even for loyal buyers (or in the case of catalogers, for active buyers on your 12-month house-file), a non-brand search means the searcher is surveying the field. The order is "in play"—if you win the click and the order, you've taken share from a competitor.
3. Success means growing sales and profits from non-brand phrases
Management should task the SEM agency or the in-house PPC team with growing revenues and earnings from the non-brand portfolio. Sales from brand phrases are non-incremental, and don't reflect the effort of the search team. A corollary is that it makes much more economic sense to compensate SEMs as a percentage of ad spend, vs. percentage of revenue.
4. Click-stream analysis doesn't change these conclusions
Some experts claim that a meaningful proportion of brand-phrase clicks which generate sales were actually preceded by non-branded searches, and thus are incremental. Wrong. In both '05 and again in '06, we studied this issue in some depth over a random sample of 5 million click-streams. We find the likelihood that an order-generating brand search click was preceded by a non-brand click (from the same machine, using a persistent first party cookie) is typically around 6%. That's a low number. For a few advertisers with tremendous brand equity, we've seen this rate climb as high as 11%. Either way: looking at click-streams holistically doesn't change the basic non-incrementally of brand searches.
Manufacturers: Ignore all this
If you're a manufacturer who also sells direct—Sony, Lego, Bose, Danskin—you can ignore this whole article. In these cases, as you're competing with your channels, your brand name is a competitive term, and so branded searches are incremental.
The bottom line
What's the take-away? Search marketers should clearly break out their results along the brand and non-brand dimension, showing sales, costs, clicks, and earnings for each side of the portfolio. Managers should charge their search markers to grow non-brand sales, and do so efficiently. And SEMs should base fees on ad spend, not revenue.
Alan Rimm-Kaufman leads the Rimm-Kaufman Group, a direct marketing services and consulting firm founded in 2003. The Paid Search column appears Tuesdays at Search Engine Land.
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By Alan Rimm-Kaufman
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See Related Stories In: Paid Search, Search Ads: General, Search Marketing: Branding
Reader Comments
Alan,
I look forward to your columns. However, I do have to respond to your main assertion. We have done testing for a client on this very subject and found brand PPC is indeed incremental when compared with not purchasing the ads.
While traffic from brand kw ads did not provide an incremental lift due to the ads, revenue and RPV numbers shot up across all three engines because of them. So while Google (and the others) had nothing to do with generating click demand, the ad had plenty to do with driving incremental sales vs. not having the ad.
The study is here:
http://www.optimizeandprophesize.com/jonathan_mendezs_blog/2007/03/buying_branded_.html
Cheers,
Jonathan
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March 27, 2007 9:32 AMHi Jonathan --
Thanks for your comment.
To clarify, we're NOT recommending NOT advertising on the brand (pardon the double negative there) -- a retailer's brand name will typically be ultra low-cost and super-high converting. Of course we run those terms and they do well.
What we're saying is that a customer searches for a retailer by name only when they've already opted to buy from that specific retailer -- and that prior awareness is due to prior marketing or prior brand exposure in other channels.
Yes, take the brand sales and enjoy the profits they provide, but evaluate your search term -- agency or in-house -- on the ability to grow the sales profitably in the NON-brand portfolio -- those are sales where the advertiser is seizing the click and the order away from the competition. And those are far more likely to be new buyers, the lifeblood of a direct marketing firm.
Cheers --
Alan
I also highly encourage to review a Performics study for multiple clicks before purchase. That study is totaly proving otherwise as well.
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March 27, 2007 12:52 PMAlan, I agree with your point, however, I have a few caveats I has hoping you could comment on.
First is NEED based products; Ex. Auto Parts, Medical/Emergency products. In my experience, branded AND non-branded keywords aren't incremental for these verticals. While this doesn't contradict your initial point on branded terms, it does seem to disagree with your bottom line.
Secondly, are content (non conversion or product based) websites. In my experience for sites that merely supply content, branded terms actually have the highly (and most frequent) visitor frequency - these visitors also spent a longer period of time on the content site. In this sense, I feel the value of branded terms IS incremental.
I think your point was a great one to make and if you have thoughts on the two points above - I'd love to know what you think.
Alan, in your reply (thank you for it) you stated: "What we're saying is that a customer searches for a retailer by name only when they've already opted to buy from that specific retailer "
I'm not so sure. There are certainly loads of navigational queries and no question brand performs better in every key metric but I think you may be undervaluing the searcher behavior of brand query use in the consideration stage.
In many respects it is easier to optimize conversion rates on landing pages and add incremental revenue off these branded terms turning folks that were coming as browsers into buyers.
So personally I do feel (and have seen) that contrary to your original post, sales from brand phrases can be incremental and can indeed (and should) reflect the effort of the search team. Especially one steeped in optimization.
Cheers,
Jonathan
Related post:
Like Travelocity, we believe the search "funnel" effect is overrated. See our 2006 study, "Clickstreams, Complexity, and Contribution: Modeling Searcher Behavior Using Markov Models".
Alan,
Glad to have another paid search author to read here at SEL.
I have to say I agree with your assessment that a "retailer's brand name will typically be ultra low-cost and super-high converting", however, an experienced paid search agency can improve ROI on these terms just as they would on non-brand searches.
Also, I've found that searching on a brand name doesn't at all mean the prospect has "already opted to buy from that specific retailer". On the contrary, brand name searches are often in the research phase.
For example, if I want to see how much a nikon xyz costs, versus a canon abc, I'm just comparing. This is not a 'layup' sale, and requires a combination of specific ad and landing page to convert the sale. All of which requires effort on the part of your paid search agency.
Good article, keep it up..
Jeff
The article could be construed as saying someone who typed in "Nissan" or even "Nissan Altima" is in a purchase mode. I can't tell you how many times I have searched for cars because I wanted to research them long before purchase. Not to mention, since I can never remember what Nissan's website is since they have that domain dispute issue, I usually will search for it.
I'm interested if your studies show the same for products that consumers research well in advance over.
I would assume the average consideration time for a consumer to take a cruise is months. I know the names "Carnival" and "Royal Caribbean", and will search on them both, but they haven't sold me yet.
Glad to have you writing, Alan. I just checked out your blog & articles - good stuff there. Haven't done as much with the B2C retail sector so I look forward to reading your future material.