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Putting a Price on Paid Search: How Marketers Measure and Benefit From Sales Cycles

Written on
Jun 20, 2006 
Author
Adam Riff  |

Battling it out in the world of paid search is tough enough without knowing your average sales cycle. If it takes a month for your visitor to convert into a sale, your campaign cannot really establish its true profitability until that cycle is complete. By assuming that a paid search campaign can be measured in a day or even a week, many new PPC marketers give up and lose out on a possibly lucrative search campaign.

Your campaign could cost you $500 for a week’s worth of clicks, but if your prospects generally convert after a month of first engaging with the product, then you can only measure the success after the month is over. Otherwise, there is nothing to measure unless you just want to count site visitors for a branding campaign.

How do you measure the sales cycle?

Measuring your sales cycle for a search campaign involves setting a cookie and using it to record the click date and the conversion date. Once you have these dates, calculate the difference in hours and minutes. For example, if your offer is clicked on April 10th at 12:00 PM and the cookie records the conversion on April 12th, at 5:00 PM, your Sales Cycle is 53 hours or two days and five hours.

What are the benefits of knowing your sales cycle?

In the paid search arena knowing this number is essential when the cost of a campaign fluctuates every time a click cost rises or falls, which can be minute by minute for highly competitive keywords and verticals like debt consolidation, home loans and others.

To illustrate, let’s say we know that our eBook product takes five days on average to convert from click date to the time of purchase (the conversion). This tells us that we can run a small test campaign and although we may see a loss for the first 5 days of the campaign we can avoid prematurely judging the return and turning the campaign off early for a total loss. Knowing that it takes five days for the sale to happen, we can continue to push the campaign even at a loss with the confidence that it will convert on average within 5 days and become profitable.

Many new search marketers get scared when they see click costs take an upward leap and turn off or pause the campaign, but this is not the only course of action if you do not know when the conversion will occur yet.

We can also utilize the benefits of day and time parting (bidding on certain days and times of the day) more efficiently knowing on average when an offer will convert. The biggest benefit might be the ability to break down the Sales Cycle to the keyword level. For instance, if the keyword “widget biz op” takes 2 days to convert and the keyword “best widget business” take 8 days to convert, based on the cpc you are paying you’ll be able to predict if that keyword will be profitable.

While instinct plays a large role in a marketing campaign testing and analysis, especially online, rule it. Knowing your metrics is not only a way to stay ahead of the competition, it has become the norm. One of the strongest tools a search marketer has is metrics, and knowing the true sales cycle of an offer can be used to determine whether a campaign will be successful upon proper testing.





As the head of Search Marketing for Global Resource Systems, Adam Riff is an integral part of the planning and execution of successful search campaigns for GRS's pay for performance search clients.

Reader Comments.

Adam,
Great point on “click to purchase” latency and how this should be taken into consideration when managing campaigns. There are some general profiles we see that impact click to purchase latency:
1. Higher product price=longer latency
2. Complicated product=longer latency
3. B2B product (in general)=longer latency

There’s also a lot of cross KW and channel impact on what leads the consumer to purchase, beyond the initial click, which is discussed in some detail here http://johnrodkin.blogspot.com/2006/06/downward-spiral-of-search-marketing.html.

-eddie

Posted by Eddie Smith | 2:10 pm on June 21, 2006.

The article, Price for Paid Search, is
very insightful, well written, and Adam inspires
thought and action toward lengthening
ad campaigns for me.

Posted by Jo Fannin | 11:52 am on June 24, 2006.

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