With pay-per-click search advertising, the billable event is, of course, the click. For business-to-business advertisers, getting the best results from each click can be especially challenging.
What is a click worth these days? According to Marketing Sherpa's Benchmark Report, the average click cost on Google in 2006 for a B-to-B service organization was $2.77. It's worth noting that this is more than double the $1.36 average cost for a consumer product click.
While $2.77 might not sound unreasonably high, keep in mind it is an average. Some B-to-B firms advertise in highly-competitive sectors where click costs are in the $10 to $35 range. To further complicate matters, many of these marketers must reach a very small and very specific group of potential buyers, as they are often selling a specialized niche product or service.
B-to-B advertisers know that when your universe of potential buyers is limited, and when each visitor comes at a significant cost, you must ensure that the right people are clicking. They cannot be content with reaching just any curious Web surfer, but need to focus on qualified and interested customers, suppliers or partners.
This is where ad copy comes in. Many marketers have learned through experience to be very specific with their search advertising text. Using a measly 95 characters, marketers must try to explain just who should -- and who shouldn't -- click on their ad.
Some ads should be designed to reduce response. For example, one of our clients provides loans to small businesses. In order to qualify for a loan, the prospective business must accept all major credit cards and have been in operation for at least one year.
This ad does not mention these requirements and generated a 17 percent click-through rate (CTR):
Merchant Account Loans
Business Loans. Fast and easy.
Low rates. Quick approvals.
When we added the two requirements, and presented ad copy with qualifiers, response dropped dramatically -- to around a 10 percent CTR:
Merchant Account Loans
Must accept Visa/MC. Established
1 year. Fast/easy approval process.
Many B-to-B marketers engage in this practice and perhaps this is why Marketing Sherpa reports that the average CTR for consumer ads was 3.0 percent in 2006 -- versus only 2.4 percent for B-to-B ads.
Qualification Improves ROI
Reducing an ad's response rate might seem like a strange marketing goal. But this approach ensures that clickers, and expensive Web site visitors, are actually more qualified. How do we know?
In the above example, the conversion rate associated with the second ad, with pre-qualifiers, was significantly higher than the initial, more generic ad. Not surprisingly, the overall return on investment (ROI) for the campaign improved dramatically.
Many marketers have found that targeting their ads by network, searcher location and keywords just isn't enough. The reality is, oftentimes ad copy is required to further explain an offering and qualify a searcher.
Penalized for a Sound Marketing Strategy?
Interestingly, the fundamental challenge for B-to-B marketers is that Google, Yahoo, MSN and other ad networks don't reward this type of behavior. In fact, they penalize it!
Current ad placement algorithms are based on some combination of maximum bid and Quality Score/Quality Index. A major factor in determining "quality" is searcher response, or CTR. So, today, the networks are rewarding popular ads, which is to say ads with the highest response rates. This "more is better" approach certainly increases total click charges and builds the networks' bank accounts, but it doesn't necessarily improve results for marketers. If clicks don't lead to conversions, ROI suffers.
However, what if your competition doesn't fully understand this? What if they are not measuring conversions or tracking cost/conversion? In this case, they are likely quite satisfied with lots and lots of visitors. And their high click-through rate is inflating their Quality Score, which is in turn giving them a competitive advantage over you -- better ad position for the money.
The Balancing Act
Today, B-to-B marketers must evaluate the pros and cons of maximizing CTR against the pros and cons of maximizing conversion rate. The current system forces a trade-off. Marketers can choose improved ad position and more visitors, but with a lower conversion rate; or improved conversion rate and lower cost/conversion, but with fewer overall visitors.
The trick is to test and measure. Test keywords, bids, ad copy and ad position. Measure results, and find the "sweet spot" based on your specific (and ever-changing) market. In short, the key is to ensure marketing costs are aligned with results.
This presents a major challenge, which won't go away anytime soon, for search marketers. The ad networks' premise that "high CTR = relevance" leaves out one critical factor: conversions!
As the networks evolve and improve over time, most of us hope their payment models will become more closely aligned with marketers' success criteria. Case in point: cost-per-action ad networks don't suffer from this dilemma, and as a bonus, alleviate most of the problems associated with click fraud as well.
A conversion is a good thing -- not just for the marketer, but for the searcher too. A conversion represents the ultimate measure of relevance and should be the foundation of how marketers pay for and measure results.
Patricia Hursh is president and founder of SmartSearch Marketing, a Boulder, CO, based SEM agency specializing in lead generation, customer acquisition, and brand building. Patricia is a columnist at ClickZ, a subject matter expert for industry publications, and a frequent speaker at industry conferences.
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