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Brand Conversions in Google Adwords: Should I Count Them?

Conversion Conversations: Chapter 1 Brand In Your Diet

 

One of the challenging things about being a PPC marketing consultant or agency is that often your customers do not really understand what you do and can become confused.  Some unscrupulous agencies pick-and-choose data which tell clients what they want to hear, while other agencies actually try to focus on what value is being created for clients.

This article is for agencies and consultants interested in creating real value for clients and communicating it effectively.

 

AdWords Value Additionality

 

You hear the term “value added” in business all the time, and with good reason. To run a business well, you need to understand what activities add real value, and you want to have some idea of how to attribute what creates value.

 

One of the keys to understanding value creation is additionality.  Put simply, are you just documenting something that would happen anyway and calling it value, or are you creating sales and profits that would not otherwise have happened?

 

To illustrate this issue, let’s look at brand vs. acquisition conversions

 

Too Much Brand in Your Diet?

 

I bring up this example because of a client I was brought in to consult on about a year ago.

The client had been told that his campaign was profitable, but he was having a hard time getting more profitable traffic.

 

It turns out, the only thing the company was converting were folks already searching for their products by name, which converted at 10X, but anything that was introducing the product to customers in response to a search on the type of product rather than specific brand name was producing nothing.

 

Brand searches were producing value but the non-brand searches, those focused on product keywords, their best month the $3000 spend  yielded $259 in gross sales.

 

It was shocking to me that a company would report that the campaign was making money under these conditions. It was an unmitigated failure, but it was being hidden from the client, masked by cashing in on their existing customers, rather than adding new customers.

 

3 Types of conversions

 

To clarify with the client, we established a framework of three different types of conversions with different coefficients of value added.

 

  1. Brand conversions were assigned a low value add.  You still want to advertise to make sure you catch all the customers who specifically want to buy from you – and nobody “steals them” by advertising against your keywords when you aren’t.  Not everyone gets to the correct organic listing, so you do want to “double up” and do paid ads as well. Just don’t pretend these are acquisitions.

 

  1. Remarketing and upselling gets complicated when you get into RLSA, but fundamentally this category is about existing customers and other visitors who had already been cookied. You are reminding them of your product, so purchases are often those that customers might not have made. So a portion of this is value add.

 

  1. Cold acquisition of new customers is the gold standard.  Introducing potential customers to your brand and getting them to make a purchase for the first time reflects not just the initial purchase value, but the average lifetime value of the customer.  So these carry a value-add that is many times more than category A or even B.

Obviously this example is based on customers with potential for multiple reorders and significant lifetime value.  “One and Done” sales is a different situation.

 

Great, Let’s Double Sales, so Here’s Double Budget

 

Ethics aside, one of the practical issue in reporting brand conversions and acquisitions without differentiating.

 

If you have $50,000 of sales one month from a $5,000 spend, but most came from brand conversions, clients get excited and want you to do more of the same!  If they double the budget to $10,000, and you  show only $70,000 in sales, they become confused and frustrated.

So from the beginning it’s important to differentiate brand, and non-brand conversions.  Basically that $5k spend and $50k of brand conversions will be a constant.   The real numbers for the client to understand is the ROAS on non-brand “additional”/ “value-added” conversions based on actually growing their customer base.

 

Starting on the Right Foot

 

Early on in your relationship with clients, they are often paying more attention, both giving greater scrutiny, and trying to understand what you do.  This is the time you really need to lay out the framework so they can understand the dynamics of additionality and be prepared to make good decisions later once you’ve saturated the brand traffic.

 

To forge ethical and clear communications with clients, I’d suggest these tips:

 

 

  • Be clear up-front with clients about additionality.  

 

To be an effective partner for their business you need to educate them.

Sometimes, this can mean having uncomfortable conversations.  It is very easy for consultants or agencies to want to show good results in the early phase of working with a client.  You want to show ROI.

 

But if you hope to be a long-term partner, and you want to help them grow the business, you need to be very up-front and clarify what is additional.

 

If they spend $1,000 the first month, and make $20,000 sales, but it’s all conversion from brand searches in zero-competition conditions where they dominate the organic SERP, you cannot claim a 2000% ROAS.  Technically that is the number, but in terms of business strategy and integrity it’s not honest.

 

The issue is more than just ethical, though. It’s also practical.

 

Many business owners say “great, you got me $20,000 from $1,000 investment. That’s good, let’s double it.”

Then where are you?  If you’ve maxed out the conversions for folks already looking to order, your next $20,000 sales increase is going to be a HUGE amount more costly. If you don’t explain the difference to clients up-front, you are creating confusing and potentially toxic situations later.

 

Typically I’ll really put a stake in the ground on my first reporting cycles.  I’ll explain that we spent $1,000 and sold $20,000 BUT that is based on existing customers and prospects you already had.  It’s a good result, but the real value I will bring is when I can get you entirely NEW customers, or encourage existing customers and prospects to order more.

 

Then I talk about the margins and business model, and try to come up with a threshold number.

“It sounds like you want me to get any traffic as long as it is greater than 4X sales/ad cost ratio.  I’ll start by focusing on the easiest, more profitable sales, but we’ll keep cranking it up until we are not leaving much money on the table.

 

Frankly, this does not always work. Just this last month I had a client that wanted me to show a 4X ROAS and to not go higher than that on ad cost.  But the brand conversions were 10X ROAS and other conversions more like 3X ROAS (which still made them money based on margins).

I ended up just “going with the flow” based on my inability to get their controller to look at it from a profit maximization perspective.   It’s OK, and I’m giving them eight times as much sales YOY and 122 times non-brand conversion value YOY, but if they took a more holistic approach to allocation of fixed costs, they’d have had 3 times as many sales, AND a larger contribution of PPC profit toward fixed costs.

Next time, I’ll propose budgets based on lifetime value rather than month-by-month.  It may not convince them from a cash flow perspective, but they will at least see they are leaving massive value on the table.

 

 

  • Decide what framework you are using, and define the model

 

This means making strategic choices.  If you want to look at lifetime value of new clients you bring in, that’s one way to look at additionality.  But if you are also remarketing to existing clients and spending money there, you need to reduce the customer acquisition value by the amount you typically have to spend on remarketing.

 

You can’t  justify both marginal ROI on acquisitions AND full ROI on remarketing. You have to make decisions about where you see value coming from, and ideally test it. (like not remarketing to part of the list, and seeing the lifetime values under no-remarketing condition).



 

  • Accentuate progress on true value-added activities

 

While I encourage caution on reporting brand or low-additionality conversions, I encourage great enthusiasm in reporting on real value acquisition.  The numbers may  not look as good on the surface, but clients can be educated to see the overall value to their firm, particularly in the long-run as you build a larger customer base rather than just “working the list harder” of existing clients.

 

Even in remarketing you can focus energy on “upselling” and “cross-selling”.  Encouraging customers to try additional products and services, or upgrade, can create real additional value.  The benefit of these to the client should be clearly presented.

 

In the long run you will make them more money doing this, and you will be a more valued and trusted partner.

about Colin Donohue

Business strategist, Adwords manager, and student of Profit-Driven Marketing.

Comments
James_Clemens Top Contributor
August 2016

Great article, @Colin Donohue.

 

And a great quote, too...

 

To run a business well, you need to understand what activities add real value, and you want to have some idea of how to attribute what creates value. - Colin Donohue

Colin Donohue Rising Star
August 2016
Thanks! :-)
MikeJohnston Top Contributor
August 2016

Nice article, well thought out and obviously well informed.

Spencer_Wade Top Contributor
August 2016

Late to the party, had this open most of the day, just got consumed. 

The world of business, much like the broader world, is full of people who will use their specialized knowledge to turn information to their benefit. This is to be expected, and applauded, except in situations where the information is used to mislead and confuse rather to inform and provide clarification.

 

The point your article makes has been valid as long as there have been partnerships between entities in which one partner is in possession of facts that the other partner cannot understand alone. These circumstances have only grown more commonplace with the advent of the Internet and digital marketing. This is a medium where only those with the education and training can truly see the forest for the trees, so opportunities for the improper use of data abound today.

 

As you so eloquently pointed out, the strict adherence to a code of ethics is the only defense against the types of abuses some marketers are willing to commit. The industry as a whole is harmed when client information is misrepresented to artificially inflate the results of a campaign. Relationships, both business and personal, are based on trust, so when that trust is betrayed it taints the rest of us by association.

 

The tips and experiences you shared are an excellent starting point for readers, and give great advice on how best to deal with clients and campaigns. It also reflects well on your sense of integrity and full disclosure, and proves, beyond a shadow of a doubt, that not all marketers are the same. Each marketing agency may offer the same basic list of services, but it is the company’s team that makes the difference between success and failure; for the company and their campaigns.

Great article.... @Colin Donohue

Colin Donohue Rising Star
August 2016

Geez, thanks @Spencer_Wade!  

I sometimes forget that there is the "slimey marketer" archetype out there.   My passion is so squarely in the data-driven approach I forget the "smoke and mirrors" type. 

Don't give into the Dark Side ;-) 

 

Spencer_Wade Top Contributor
August 2016
Didn't mean to take us to the DARK-SIDE, Great post!
Julia_Muller Top Contributor
August 2016

Very nice thought starter, @Colin Donohue! Every Google Partner agency can benefit from reading this piece.

 

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