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Efficiency Levels, Not Spend Levels July 21, 2006

Posted by Bill in Search Marketing.
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At the MediaPost Search Insider Summit last week, my colleagues had the opportunity to sit on in the Insider’s panel. At the end of the talk, the floor was opened up for the crowd to request future articles they’d like to see. I hope to get to all of the topics that came up; for today, I’d like to tackle just one: the issue of how to know how much to spend in search.

It’s an entirely reasonable issue for marketers to look to understand. Since search is relatively new, it’s a new item for marketing budgets, as well–so there’s little precedent against which marketing managers can set the bar. Meanwhile, search metrics are phenomenally precise, placing a level of accountability into marketing that’s never been present in the traditional sphere. With that greater accountability comes more responsibility, at every stage of the campaign–including at the initial stages of spend allocation.

But as reasonable as it is to want to know how much you ought to be spending in search, the question happens to be largely irrelevant. After all, your goal in any business venture–search included–isn’t to hit a particular level of spend; your goal is to get the right level of return. If spending a million search dollars a day would bring in three million dollars an hour, you’d spend it, no questions asked; and if spending 10 cents a day brought in only 5 cents, then even 3 cents would be overpaying. It’s the profits you make, not the amount you’ve spent, that make a difference.

In other words, the focus on spend needs to be replaced with a focus on efficiency. Efficiency means getting the most powerful outreach you can, at whatever level of spend you’re working at; it also means being able to drive a greater portion of the traffic you collect into conversions. Efficiency means, for example, creating optimized ad copy that attracts the searchers you want to attract, and that sends away the ones who probably won’t convert. It also means delivering landing pages that are sticky and usable enough to drive visitors towards your shopping cart, registration page, or display ads that you’re siring on your content site. It also might mean applying behavioral retargeting, to deliver ads to the searchers who have come to your site and left–so you can pull them back in and drive them to a conversion.

The more efficient your campaign, the less relevant the question of spend level becomes. That’s because greater efficiency means greater net profit–which both improves your bottom line (the ultimate goal of your campaign), and gives you more money to reinvest on more advertising. Which means that $1 of efficient spend might be worth $3 of inefficient spend, and vice versa. The question of efficiency, in other words, changes the focal spend question from: How much should I spend? to How much is my spend worth?

Building your efficiency requires understanding your customers. The better grasp you have of issues like where your core market lives, what times of day they search, what kinds of messages they like to see, and what kinds of sites they go to, the better you’ll be able to reach out to them and build the architecture that drives conversions. Developing that understanding requires that your search management has the best client services possible, and the best analytics possible–both are necessary for building an accurate picture of your core market’s identity and behavior.
So back to the original question: How much should you be spending in search? The answer is that you should be spending however much it takes to make you efficient. Once you’ve hit the right level of efficiency, the search dollars you invest will justify themselves.

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