Posted by James Lee on 15th May 2014
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Your conversion data may be misleading you.

Conversion rate is one of the most commonly used and trusted Key Performance Indicators (KPI). However, I caution you against taking it at face value. There are many factors that go into calculating conversion rate and potential pitfalls when using it as an estimate for ROI.

First, depending on the type of conversion medium, actual returns can vary. For example, leads from phone calls vs. online form submissions vs. Facebook inquiries can have very different sales-win ratios. As a result, the value placed on a lead should reflect the differences between the conversion mediums. In other words, the sales-win ratio should be tracked by conversion medium and this information should be used in determining ROI.

Second, depending on the type of ad medium, conversion quality can vary. Let’s say you generate 10 leads from a search campaigns, 10 leads from a display campaign, and another 10 leads from a remarketing campaign. While they are all leads, the probability of a lead converting to a sales-win will vary by the type of ad medium. This lead quality by ad medium information should also be factored into conversion performance and ROI estimates for optimum search engine marketing.

Third, depending on the type of ad channel, conversion quality will vary. Many SEM managers find that B2B lead quality from Google is superior compared to other ad channels while B2C lead quality from MSN is often as good as or better than Google. Applying the same conversion value to each type of ad channel will not provide an accurate representation of the true lead quality and conversion performance.

Fourth, conversion tracking does not track the overall impact of a search ad campaign. While conversion tracking in search advertising can be a good KPI for keyword performance, search advertising can have a more far reaching impact. In fact, not advertising in search can have a greater negative impact than advertising has on a positive result.

Finally, keyword performance is only meaningful when keywords are of a similar type. There are brand keywords, general keywords, competitor keywords etc. Thus, managing ROI based keyword bidding with keywords of different types in the same campaign can result in unintended consequences such as the unintentional demotion of general keywords. Since brand keywords intrinsically have an advantage over general keywords in conversion performance, general keywords may get automatically demoted.
If you think your conversion tracking could be misleading you when it comes to estimating conversion performance and ROI, I offer three tips to help you avoid this trap.

First, add the effect of branding when promoting general keywords. When potential customers search on general keywords, they have not made a decision on the vendor/brand for the product or service. To add the effect of branding you can either increase the target cost per conversion or promote the general keywords with a visibility goal.

Second, manage keywords by keyword type in your campaigns. As mentioned above, it is better to group keywords by type and create separate campaigns for each group. This will help you optimize campaign performance based on the specific objective of each campaign.

Third, track lead quality by ad medium, ad channel, and lead type (or conversion medium). In order to obtain this type of information, you will need to deploy a lead management system that can identify lead source by medium, ad source, and lead type. Ideally your lead management system should also be able to track search marketing related information such as campaign, ad type, ad copy and keyword.
Some, but not all, lead management systems track this level of lead source detail for search engine marketing. Ideally, your lead management system is integrated with your pay per click management system giving you automated keyword bidding; the highest level of search marketing automation.

Think your conversion tracking could be misleading you into suboptimal decisions and your campaigns could benefit from detailed lead quality tracking integrated with PPC? Worried that it sounds difficult and expensive? Then, you’ll want to check out Varazo’s SEM integration solution; a simple, easy and affordable out of the box solution.

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