When looking to answer the question of how much, where and when do we spend online, it makes sense to start with channels with readily available metrics you can measure for primary attribution. Whether you are trying to establish an efficiency rating for your campaigns or calculating contribution margin from an online channel, search, because it is the most purpose-driven audience is often the bellwether for most of online spend. So which is more important in determining the budget allocation to paid search, a third party review and rating or internal ROI budgetary success?
A good number of online campaigns claim to “measure” ROI as part of their performance metrics package when in fact, they only include revenue generated by paid search. The more successful campaigns, however, typically deploy with ROI targets that include at least cost of goods sold or cost of service delivery as part of the metric.
For e-commerce this incorporates the efforts of merchandising and buyers; for service providers it includes staff and facilities. Whichever the case, including costs and fees when determining campaign ROI provides a more holistic view of paid search’s contribution to the operation. Over time, the CMO uses this metric to determine when search can be used most effectively as a standalone channel and when it may be time to throttle back on the budget.
Campaign Efficiency & Profitability Ratings
The more data-driven optimization firms can provide you with campaign or agency ratings for efficiency and profitability. In general ratings serve much the same purpose as a financial audit, with one significant difference. A comprehensive search rating will include tests to determine audience response rates and may also include determination of audience size and location. Furthermore, campaign ratings may also include market analyses that help to identify audience development opportunities on one hand, and help to flesh out the attribution model on the other.
Third party ratings bring the added dimension of using market-tested standards not just for campaign analysis in general but often for your industry or vertical. For e-commerce ratings, the better service providers will also incorporate unit margin and even shipping costs, depending on the granularity of your targeting and structure.
So, whether a CMO has been onboard for a while or is just coming in to the company, the findings from a third party optimization review or campaign/agency rating can provide previously unseen views of campaign performance and identify audience development and new revenue opportunities. And the results can be incorporated into your search campaigns with the goal of improving ROI and integrating more business intelligence into the management and reporting of your search efforts.
This article was first published in Executive Connections on September 30, 2013.