December can be a tough month for paid search campaign managers.

On one hand, it’s a time to be tightly focused on hour-by-hour tactical engagement with our PPC campaigns to make sure we have a strong holiday selling season to make up for an otherwise lackluster year.

At the same time, this is also the time to finalize plans and budgets for 2011, a process that requires more strategic high-level creative thinking and imagination. Unbelievably, after eight years of increased ad budgets, our clients are still coming to us with the same question they asked each of those past eight years: how much more can we spend on PPC and how much will it return?

PPC has continued to be a proven winner for generating sales and profits, but after eight years of increasing ad budgets and the ever higher performance expectations that go with them, can we still find new ways of pulling a rabbit out of the hat to deliver for those same clients in the new year?

After years of working on the same campaigns for the same clients, is it even possible to get our tired brains to find new pockets of productive keywords? Where can we find the motivation to write new ads that outperform the hundred different versions we’ve already tried? How the heck are we going to make these mature campaigns meet another year’s worth of high expectations? What new ideas can there possibly be that we haven’t already thought of?

If you ever feel this way, (I know I do) I suppose it may be high time for a well-deserved vacation or a long winter’s nap. I know that many of us in the PPC world don’t get enough of either vacations or full nights of rest, but it is amazing what either of these options will do for your creativity and motivation levels. So, before you do anything else, get some rest and/or take a vacation.

After you’ve gotten your batteries recharged, I’d like to share with you an approach I use to open up my thinking and which, more often than not, leads us to new breakthroughs and directions for our campaigns.

Ishikawa Fishbone Diagrams

Ishikawa_ROAS

Kauro Ishikawa was a pioneer of management processes for Kawasaki shipyards in Japan and a leader in continuous process improvement. Ishikawa developed a method for diagramming the inputs to a process to help managers understand the factors and interactions that influenced production results. Because these diagrams look like a fishbone, they have become known as the Ishikawa fishbone diagrams.

We like to think of Google AdWords and Microsoft adCenter as machines that take inputs like keywords, ads and bids, and process them into search result outputs.

We use the Ishikawa diagrams to helps us think through our campaigns in a complete, logical and systematic manner. The diagram above shows an Ishikawa for a client whose primary goal is to improve return on ad spend (ROAS).

After we list all the factors that have influence on ROAS, we then consider each factor and assess our current campaign’s strength or weakness in that area. The fishbone diagram becomes a sort of auditing checklist for us and forces us to think about the entire input stream as it relates to ROAS. You could do the same type of diagram for increasing clicks, conversions or whatever you like.

In this example, we did not have any control over the client’s landing pages, even though website performance is perhaps the single most influential factor in an ROAS optimization. Unless a site is well-developed with users in mind and is working properly, and visitors are able to find what they are looking for quickly and easily, any attempt to improve ROAS only through PPC campaign management will be severely hampered.

So, in this case, our levers for influencing ROAS fell into two general categories: changes that reduce unproductive clicks and changes that reduce ad spend by lowering CPCs.

Ad Spend

Bids, budgets and targeting options exert influence on the total ad spend, though of these, bid price is usually the strongest influencer.

Budgets

Budgets do not affect ROAS. Budgets only affect whether or not ads will serve, but do not affect the quality or cost of the clicks. However, budgets do influence how many clicks get delivered and conversion volume, so they do impact total profits.

Bids

Often the first choice for improving ROAS is to find cheaper clicks by reducing bids. The challenge with this approach is that lowering bid prices usually has the immediate result of both lowering the CPC and the CTR. When CTR drops, the result is fewer clicks, fewer conversions and lower revenues.

Targeting

Geographic, time-of-day, day-of-week and demographic targeting can influence the volume, cost and the quality of clicks relative to the conversion action on the website in two ways. First, if you use raise or lower bids at certain times of the day or days of week, you can change the CPCs for specific clicks. Second, if you are targeting specific demographics and different times of day, you may change the mix of visitors coming to the website, which can exert a direct influence on the conversion rates, and therefore, profit and ROAS.

Demographic Targeting

Within adCenter you can add bid boost to search keywords to target your best demographic audiences. You can also target display ads on Google to certain demographics. Better targeting to your best audiences will have a positive influence on traffic and conversions, though unless there are strong gender or age biases in a target audience, demographic targeting typically has a weak impact on overall campaign performance.

Time-Of-Day and Day-Of-Week

You always have the option of taking campaigns offline during certain times of the day or days of the week to reduce unproductive clicks at odd hours. The risk is that you may lose potential customers, but if you are spending money at hours that show no performance, then reducing your bids or taking ads offline for certain periods will have a generally positive impact on your ROAS.

Geographic Targeting

If you know you are not getting orders from certain geographies, and tons from others, then tightening up geographic targeting is another way to improve your ROAS. If you don’t have a completely automated online ordering system, and you aren’t running reports on your performance by territory, you may be losing money by advertising in areas that never have been profitable. This can also lead you on to other business strategy discussions, such as how can you compete better in those non-performing areas?

Seasonality

Seasons change in the online ad space, and so it’s important to reassess the impact of seasonality from time to time. For example, this year, Cyber Monday shoppers went online earlier to look for pre-Black Friday specials. Do you know what your heavier selling seasons are and do you adjust your campaigns accordingly? What changes are you making to address slow times? Should you take your campaigns offline completely? All of these factors can weigh significantly on ROAS.

Competition

Your competition can certainly impact your ROAS by stealing customers away from you just when they were ready to buy from you. How often do your competitors change their ads? Are they always in the same ad position? What new offers and products/services are they offering on their website? How well do you engage in specific tactics to push them down the SERPs or push them off a page in the display networks? Have they changed their product prices? Made new offers or discounts? What should you do now to counter their latest maneuvers?

Recommendations For ROAS Optimization

Once we’ve been through the process of looking at each of your inputs, you can then prioritize your actions based on the relative strengths of the opportunity, and your ability to take actions. In this case, we created a working plan to improve our capabilities as shown in the highlighted areas.

Ishikawa_ROAS_focus

When you involve your clients and other staff members in this process, you will be amazed at the new insights and ideas you will end up with.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: SEM | Paid Search Column

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About The Author: is President and founder of Find Me Faster a search engine marketing firm based in Nashua, NH. He is a member of SEMNE (Search Engine Marketing New England), and SEMPO, the Search Engine Marketing Professionals Organization as a member and contributing courseware developer for the SEMPO Institute. Matt writes occasionally on internet, search engines and technology topics for IMedia, The NH Business Review and other publications.

Connect with the author via: Email | Twitter | LinkedIn



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