April 2013

In 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.
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