Valuing Keywords Based On Their Role In Conversion
Are you valuing all keywords equally, assuming they all offer the same benefit to your paid search campaign? That may be a mistake. Here's a cautionary tale that shows you how to assign appropriate values to keywords based on their role in the conversion funnel.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…”
This famous opening line from A Tale of Two Cities accurately describes the life of two keywords that reside in two very different countries (paid search campaigns). These two keywords were identical twins separated at birth. One keyword moved to Country A, which followed the law of last click attribution. The other keyword moved to Country B, where they followed the law of attribution management.
“It was the spring of hope” for the keyword that moved to Country B; “It was the winter of despair” for the keyword that moved to Country A.
Let’s now examine why these two identical keywords live such very different lives. Each of these keywords are classified as general terms, such as “toys,” “furniture,” “office supplies,” “laptop” or “shoes.” Thousands of searches are done each day for each one of them, and very often, more refined searches, such as “outdoor toys,” “leather sofa,” “automatic stapler,” “MacBook Pro” or “black high heeled shoes,” will follow them. Like all general terms, they most often occur at the top of the conversion funnel, which we would classify as “introducers,” meaning they’re often the first step of a purchase path. We can also classify some terms “influencers”—the middle step(s) in the path, or as “closers”—the last step in the path or conversion funnel.
On the surface, each of these keywords has a very similar life, in terms of search volume, click cost, and where they appear in the purchase path. However, how they are valued by their countries is where they differ greatly. To highlight this, let’s look at some metrics for these keywords over the last 500 clicks:
|Keyword||Clicks||Cost per Click||Introducer||Influencer||Closer|
|Keyword||Last Click Profit||Profit per click||Attribution Profit||Profit per click|
As the chart shows, these keywords performed exactly the same. They each contributed 35 times in purchase paths (introducers + influencers + closers = total contributions by that keyword). When each keyword is valued solely on its ability to close, they too are exactly the same ($100 last click profit). However, in Country B, the land of attribution, they don’t just see value in a keyword’s ability to close, but also in the keyword’s ability to introduce and influence people to buy. Therefore, when Country B determines the value of a keyword, they also include the number of times it was an introducer and influencer into their value calculation. This is what is known as attribution management, the process of properly identifying and valuing the chain of marketing initiatives and advertisements that lead to a sale or conversion.
These countries both have the same goal established for every keyword in their country. In order for a keyword to be allowed to continue to live, it needs to achieve a $.20 profit per click. Based on the charts above, keyword A is currently generating $.20 of profit per click, and keyword B is generating $.50 of profit per click. Based on the established goal, each of these keywords should be allowed to continue to live today.
Each of these countries also calculates the maximum bid price they can afford (assuming its conversion rate remains constant) to pay per keyword while still achieving the $.20 profit per click. In keyword A’s case, they are currently at the maximum bid, which is $.10 per click, whereas keyword B could have a bid price of up to $.30 per click to still achieve the goal of $.20 profit per click (500 clicks x $.30 cost per click = $150 ad spend, producing $100 of profit. $100 profit divided by 500 clicks = the goal of $.20 profit per click).
These two countries share another similarity in that they apply more financial resources (ad budget) to keywords that are performing above the goal of $.20 profit per click. By applying more financial resources and increasing the max bid, they are able to get more clicks on that keyword, which in turn yields more profit for that country. Under this system, general terms in country B can often be among the top performing keywords in that country, but in country A, these general keywords may be stuck at a lower bid or even paused (killed).
As you can now clearly see, the lives of two identical keywords are incredibly different simply based on how their performance is valued. Keyword A is close to being killed, whereas keyword B is regarded as a hero, performing far better than expected. In the world of online marketing, if you are still using last-click laws to value your marketing, you have likely killed a lot of innocent keywords and rewarded other keywords that are not truly deserving of that honor.
In Country B, which has far more progressive laws for the valuing of keywords, they are able to identify the real value of a keyword by looking beyond just its ability to close. As a result country B can then move on to more sophisticated attribution models, like implementing law that excludes giving credit to branded terms that occur at the end of a purchase path, as they deem branded terms at the end of a path are only used for navigational purposes rather than contributing to a conversion.
In this tale of two keywords, Keyword B will experience “the best of times in the age of wisdom,” while Keyword A will live in “the worst of times in the age of foolishness.”
How to structure a proper attribution model
So, how can you make sure that your marketing campaigns experience “the best of times in the age of wisdom”? To start, here’s a low cost process that you can go through to see the impact of attribution:
- Determine the average number of visits per conversion on your website. You can get this information from any web analytics tool, including Google Analytics, which is free. If the average number of visits per conversion is much greater than one, then you know your average customer is requiring more than one visit to your site to convert. If you’re using last click attribution, you are giving too much credit to the last click and no credit to the influencers and introducers that are also integral to the conversion.
- Bucket your keywords into the following 3 categories: introducers, influencers and closers (do this for your paused keywords as well). This exercise is going to require some educated guesses, unless you have a technology that does this for you. An introducer would be the most general terms that describe your business, like “toys,” “shoes,” etc. Closers are brand terms, model numbers and exact product names. Anything that is not classified as an introducer or closer can be put in the influencer bucket.
- Count the number of introducers, influencers and closers you currently have in your active campaigns. Are you heavily favoring your closers and ignoring many introducers and influencers?
- Count the number of introducers, influencers and closers you currently have in your paused campaigns. Are you finding that the majority of these paused keywords fall under the introducer and influencer categories and very few are closers?
- Run a report that shows the number of times these closing keywords have converted each month over the last year, in order to establish a baseline.
- Of introducers and influencers that you have paused, select a large enough sample size that generates significant traffic and truly describes the business you are in, and turn them back on. For example, if you’re selling baby furniture and you have the keyword “baby furniture” paused, turn it back on.
- You’re going to have to measure the impact that these introducers and influencers have. First, count the number of conversions they currently receive under last click (just because a keyword is typically an introducer or influencer doesn’t mean it will not act like a closer some times), and more importantly, ask whether the keywords defined as closers now have more conversions, especially your branded terms, compared to the baseline report you created in step 5?
- While you’re studying the numbers above, you will likely recognize two things that could concern you:
- Your overall conversion rate has decreased
- Your cost per acquisition has increased.
This is to be expected. Why? As you invest in introducers and influencers and only measure by last click, your introducers and influencers will appear to not contribute to conversion rate. Because you are buying more advertising, you may find that your overall CPA does rise, but that is not always the case.
- Ask yourself this question: Is increasing conversion rate and lowering CPA the reason why you’re in business? No. The reason you’re in business is to generate profit. It may seem counterintuitive, but overall profit can increase even while conversion rate decreases and CPA increases. So, the real metric to look at is total revenue. How much of an increase in revenue did you receive by adding introducers and influencers back into your campaign versus not having them at all? If you see a healthy rise in revenue, then you can likely conclude that having introducers and influencers in your campaign has been successful.
Follow these steps and you’ll likely discover why more and more marketers are developing more sophisticated attribution models for their paid search campaigns, rather than simply crediting the last click in the conversion funnel.
Opinions expressed in this article are those of the guest author and not necessarily Search Engine Land. Staff authors are listed here.