Will this year be the year when online holiday sales return to double digit growth? Or will the holidays once again deliver lackluster growth in the low single digits for online advertisers? While predicting how much consumers will buy may be difficult, predicting how they will likely behave is not. We recently conducted a study of paid search behavior patterns for holiday shoppers in the 2009 season. The results of this study provided some interesting insights that can be applied to the 2010 season.
We looked at month-over-month changes in key metrics for paid search campaigns from November to December 2009. As expected, search volumes and impressions rose over the holidays, resulting in more clicks and conversions for advertisers. More importantly, however, conversion rates showed a marked rise in the weeks leading up to the holidays, with overall conversion rates increasing an average of 42% between November and December for the retailers sampled.
With buyers not only clicking more often, but also converting more of the time, merchants see a tremendous lift in overall profits as a result of the compound effect of these behaviors. For advertisers building their holiday paid search campaigns for 2010, behavioral observations like these can serve as guide posts for planning budgets, bids, promotions and even management strategies.
Here are five tips from our research to help you get started.
Boost your bids going into the holidays
Conversion rates will rise going into the holidays, and as a result so will the value that each click is worth to you. You can anticipate rising conversion rates by increasing your bids to account for the full value that higher converting clicks will deliver. To do this, try trending your conversion rates in December of last year against a baseline day or week in November of the same year. By looking at the average increase in daily or weekly conversion rates against your baseline, you can easily put together a schedule for boosting your bids based on where you are in the holiday calendar. Our research shows that conversion rates typically increase anywhere from 25% to 50% over November in the four weeks leading up to Christmas. That implies a big boost in bids!
Adjust your budgets and max CPCs to handle holiday volume
Imagine planning a well thought out campaign, only to have your keywords turned off due to insufficient budget. The holidays typically show increased query activity, clicks and increased costs-per-click. Make sure to evaluate your holiday budgets and max CPC settings so that you don’t bump into a situation where you’re ads aren’t showing during key times of the month. Last year’s budgets are a good place to start your forecasting efforts. In addition to increasing budgets, monitoring budgets against plan on a daily basis can give you time to change course or justify additional budget if you end up in a situation with cost overruns.
Plan for break-out items
Every season, there are a few “break-out” products that shatter sales records. Clearly, it’s hard to predict which gifts will break out during a given holiday season, but you can plan to manage hot items as they arise. First, set alerts to identify groups or keywords that see large increases in click-through and conversion week over week. Once you identify your high performing products and terms, consider expanding your keyword buys around these products and terms by using search query reports to identify words that users are typing in to reach your site.
Pay attention to ground shipping cutoff dates
According to the National Retail Federation Survey, nearly 80% of retailers plan to offer free shipping promotions this year—and search marketers need to take note. While running a free shipping promotion can increase click-through and conversion rates, paying for free shipping ads past the ground shipping cutoff date can be costly. Our research found a dramatic decline in conversion rates for the final week before Christmas as shoppers were no longer able to get items shipped in time for gifting on Christmas day. Make sure you know when the last day for ground shipping is and adjust bids downward accordingly. Also, don’t forget to update ad copy once ground shipping cutoff has passed. Otherwise you may be paying for clicks you don’t need or end up misleading visitors.
Manage bids to inventory
Cost-cutting measures in recent years have resulted in leaner inventories for many retailers, making managing to inventory levels more important than ever. Search marketers should monitor (or automate) the process of checking inventory levels on items that are tied to keyword buys. Our research shows that conversion rates fall for items that are out of stock, as well as for items with limited selection available. Set alerts to identify dramatic drops in conversion rates which would indicate that customers are finding either low inventory or limited selection. Dampening or turning bids off wholesale when you reach a low inventory or limited selection situation will ensure that you don’t buy costly clicks you can’t convert.
With some careful planning and proactive monitoring, merchants should find themselves well positioned for the holiday surge in traffic and conversions. And by putting together your bid schedules and alerts early, you may just have time left over for some holiday shopping of your own!
Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.