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SEO Website Audit

How to Manage a Paid Search Manager

April 24, 2013

Ross Lasley The Internet EducatorIn web marketing land, paid search holds so much initial promise, but so frequently it becomes a pain in the butt.

First things first. For our purposes today we're defining paid search as any advertisement you buy with the expectation that people will visit your site and place orders. It matters not if it is pay-per-click (PPC) or a banner ad, or how exactly you bought it. Most people know of Google AdWords.

But there are lots of other paid search programs out there as well.

The second thing you need to be aware of is where paid search fits into the overall web marketing world. It's true that anyone can use it and get an okay return on investment (ROI), but the folks who are most excited about paid search are "low price leaders." That is, companies that sell commonly available products at a profit margin that reflects their lack of overhead. Those are the sites that are consistent long-term winners in the land of paid search. So if your site "guarantees the lowest price" and you really mean it, you'll be very happy about paid search.

With that preamble out of the way, let's get to the fun part -- the right way to think about paid search that will allow you to successfully manage the manager. (Feel free to try to say that three times fast, it's fun.)

Paid Search Should Be Creating ROI

Paid search is best thought of by website owners as a small black box sitting on their desk. On the front of the box there is a dollar bill accepter, just like on every vending machine you encounter. In the middle of the box is one thing: ROI (return on investment). On the back of the box there is a little slot where orders fall out.

Right about now you might be thinking, "I know all this simple stuff!" But take a second and ask yourself: What was my paid ROI last quarter? How about last year?

Do You Know Your ROI?

If you are aware of what ad versions were run, or know what the clickthrough rates were by product, but don't know your ROI number off the top of your head, you're not alone. Yet that is the single number that should come to your mind first when you think of paid search.

Know Your Products and Margins

To have a successful relationship with a paid search manager you must be able to discuss the profit each order generates. It is your job to know your average order profit (AOP) and to communicate it to your paid search manager regularly. It is even smart to designate that AOP number as a rolling figure. This way you can pull in that info for the orders that came in last week or for orders by product category.

The reason that AOP is so very important is that when a paid search manager is unaware that you put something on sale, they will view the orders received as equal to a "standard order." But it's not.

Know Your Paid Search Manager's Strengths

In the land of paid search managers -- just as with financial professionals -- there are lots of flavors and specialists. Many folks have made a business out of knowing a particular type of product very well and using that specialty knowledge in their paid search work. For instance, I enjoy gardening and have worked with lots of horticulture companies. In the land of paid search, knowing the scientific and common names of plants can be very important.

Some paid search folks do a great job at simple campaigns, such as those that focus on branded keywords. This is also known as buying your own name. While there is lots of debate about how effective this really is, there is no doubt it is the simplest type of paid marketing effort there is -- the words don't change much and the conversion rates are excellent.

Know Your Objectives and Scale

When it's time to pick out a paid search manager, you need to be aware of your overall objectives and scale. Are you doing something easy like a branded words campaign? Does your industry require specialty knowledge? How much would you like to spend, and over what period of time? It is a mistake to ask a paid search manager to help you with this part. That'd be like asking a car salesperson to help you figure out a good budget for your next ride.

When you get into a relationship with a paid search manager, he or she is trying to learn about you. Do you care about irrelevant stuff? (Lots of their clients do.) Will you mess with what they are doing on an ongoing basis and demand specific ad versions or keywords? I suspect that financial professionals ask themselves these same questions when taking on a new client.

The Numbers That Count

What you really need to do is give your paid search professional three "numbers": You're Fired, We're Good, and You Get a Raise.

The You're Fired number is as simple as it sounds: We're all friends here, but if the ROI falls below 2.5X for more than 3 weeks I have to wish you all the best and part ways.

The We're Good return of 3X is the minimum you need to achieve to expect ongoing work from me.

The You Get a Raise number is 5X or more return. It's where you can expect a bottle of good wine and a request that we scale things up.

To sum it all up, when it comes time to hire a paid search manager, here is what you need to do:
  • Think of it like a black box
  • Know your average order profit (AOP) in detail
  • Understand your objective and scale
  • Give them the three numbers: You're Fired, We're Good, and You Get a Raise

Ross Lasley is the Internet Educator, an experienced Internet entrepreneur providing web strategy and consulting services to businesses. Ross speaks frequently on web design, e-commerce, and Internet marketing issues and maintains a weekly newsletter, Web Enlightenment.
Post Comment

 Kevin Wallenbeck said:
There is much online about paid search similar to what is mentioned here. Most of it is related to products/services that are sold online with the click of a button.

However, there are so many products and services that are 'big ticket' items that for the forseeable future will not be sold online through a shopping cart.

So, where does the ROI come from? How many leads? I would suggest still focusing on sales but has anyone tried managing paid search for a big ticket client? We can easily track conversion to a phone call or email lead but the lifecycle of getting the sale information back from the client to compare is challenging and frankly daunting.

So, do we frustrate ourselves by focusing on ROI from the sale or do we focus on a different set of success metrics for these clients? Any thoughts would be helpful.
 Jayne Reddyhoff said:
I really like the three numbers! I think I might start asking my customers to agree those three numbers with us when we start to manage their campaigns.

I agree with the points you say a business should know before hiring a paid search manager. However, in our experience, we usually have to help our customers to work out their average order profit.
Today only about 15% of our customers really know this.

I wouldn't want to accept the three numbers unless I was sure our client really did know it and had set realistic objectives.

I agree with Kevin that this article is really talking about selling online.

However, while it is much harder, I believe you can help a customer to calculate ROI on an AdWords campaign for big ticket/long sales cycle products or services. It does require a commitment on their part to monitor what goes on and provide good feedback.

We have achieved this for a few clients who were willing to evaluate leads generated, identify high quality leads and help us to weed out low quality leads before the click. But it took more than 12 months testing and modifying both the camapigns and the website to get it right.
I believe it also requires willingness to modify the website if necessary to facilitate the generation of high quality leads.
 Jill Fielder said:
PPC is a lead generation activity. Its success depends, in part, on having a thoughtfully constructed website to close the sale.

This means that elements impacting sales conversion need to be in place before anticipating that PPC will drive profitable sales. These include: logical/intuitive product organization, well-constructed landing pages, a clear guarantee, a smoothly functioning cart, shipping information (cost, timing, options) and a way to allocate sales that come in by phone after prospects find the website using PPC.

The PPC manager can control the cost, timing, quality and other aspects of leads. And working with the website manager, the two halves of the sales process can improve conversion rates. Testing, reviewing results and finding ways to provide prospective buyers more of what they need to complete the sale will deliver ever improving results. Success is a team effort.
 Andrew G said:
- Those ROI/ROAS numbers are purely arbitrary. Campaigns come in many different shapes & sizes, and different keyword auctions have different upsides (competition isn't something you can wish away). Interesting guidelines, but ultimately this has to vary.

- Really? There are people who set the bar so low that they are "just good at buying branded keywords?" Or are you being a tad polite here?

- Who's managing the managers?

Go big or go home!

- Andrew
 Ross Lasley said:
Thanks so much to Jill for letting me know these comments were here - and thanks to everyone for contributing to the conversation. Please feel free to email me at Ross@TheInternetEducator or call me at 207-684-4000 with any geeky questions you might have.

Managing paid search, or any marketing for that matter, does depend on client cooperation and getting data from them. My advice is to try the best you can and setup your efforts so that when (as it might not be an if) they don't give you the data / feedback you can still proceed.

I think the best way to deal with “non-direct sale” items that are longer term / big ticket is to focus on the cost per lead – use the sign up as the “conversion”. Now while it is true that every business should be able to tell you how many leads they have and describe their funnel as it flows to prospects, warm prospects, and sales – as well as their average order profit - I truly do get that many of them don't/can't.

In those cases I think it makes the most sense to focus on what you can know and take a page from the web developers – smart web developers setup their agreements so that when the client never provides that last bit of about us text they still have to pay for the “completed” site on a schedule. Same principle here – it is great to have clients that truly partner with you and work together; but some just won't and smart paid search managers will anticipate that.

The point being made above that direct sale CPC equates to clarity and feedback very quickly but lead generation CPC often takes 6-12 months for good data I totally agree with.

In the land of having a decent site – no matter how good paid marketing efforts are they always provide some reasonable multiple of the sites natural conversion rate. Tis often smart to get that to a normal level first, or you are basically paying to increase distribution of a bad ad.

I agree these numbers are always arbitrary and vary – hence the advice for the three numbers from the client : You're Fired, We're Good, and You Get a Raise. Clients set those and either you can meet them or not – but it is reasonable to say that they are “arbitrary” for sure.

The reference to running branded terms campaigns does indeed contain a substantial does of politeness – the majority of Internet Entrepreneurs do not need professional assistance to make purely branded terms campaigns work solidly.

All the best,

 Dustin Stollberg said:
3x minimum (i.e. 33% max COGS)? Wow, that must be nice. I don't know what (uncompetitive) verts you normally play in but anything over a 1.5 is a win in my world.