Marketing is considered by many as a game of guessing, hoping, finger crossing and watching to see if there is a result, never really ever knowing what the return on investment truly is. The good news is, as the online pay per click model is being adopted by more and more channels, ROI for both intuitive and intentional marketing can well and truly finally be measured. Let's look at how to measure the returns and where the opportunities lie.
Search Engine Marketing or Price Per Click
Search Engine Marketing (SEM) is a very simple model where by you pay per click (PPC) for a set of keywords/search terms and the price per click is determined by how popular the search term is that you are targeting. A per day and per month budget can be set.
Now a days it is a stretch to call it SEM as the PPC model has now spread onto other arenas like Facebook and TripAdvisor. But no matter which channel you choose to do your PPC marketing, it is important to know how to measure the results.
We all know how to calculate return on investment but in the PPC world there are a couple of other measurements that are important; Conversion Rate and Cost per Lead.
Begin by knowing how to calculate your conversation rate; take the number of conversions (bookings) divide by the number of clicks and it equals your conversation rate. So for example if you got 29 clicks which resulted in 2 bookings your conversation rate is 2 divided by 29 x 100% = 6.9%.
The tourism industry has the lowest conversation rates as compared to other industries with an average of 1.45% whereby Internet/Telcos were top with 6.27% as per WordStream's recent report released in November 2013. Wordstream suggests that an average of 2% - 5% is considered a good result for competitive industries like tourism.
Next you need to know your 'cost per lead.' Take the average cost per click you are paying for an ad and divide it by your current conversion rate and you will arrive at your cost per lead. If your ad's cost per click is $1.00 and the conversion rate for that ad is 5%, then your cost per lead is $1/.05 which equals $20 per lead.
It is not enough to know that you spent $100 on PPC marketing and it resulted in $180 in bookings. Knowing your cost per lead allows you to know how to allocate your marketing budget best.
A few PPC marketing options
As Google is the number one search engine and they have perfected the PPC model with rebust reporting too, it is an obvious choice for intentional marketing. Do your research for the most appropriate search terms for your business, not the obvious two word terms like Auckland Accommodation but suitable long tail terms like Auckland accommodations for families with small children.
With TripAdvisor recently launching their TripConnect option, they have studied what Google Adwords does and laser focused intent marketing by offering the PPC model on their review site for accommodations.
Facebook offers the PPC model for those that want to play in the intuitive marketing arena where by you focus on the specific types of people you want to suggest your product to (newly engaged Australians living in or near Sydney) using Facebook Ads. With Facebook's recently released ads in the newsfeed, the results for marketing within Facebook has shown dramatic results.
Nanigans released a study in October of 2013 which highlights retailers advertising on Facebook saw a 375% explosion in click-through rates from Q3 2012 to Q3 2013. The study also indicated that newsfeed ads had massive click through rates while the right hand side ads had the better conversation rate. The study only looked at retailers but many are using the results a generalisation across industries.
So in summary, the pay per click space is becoming popular and with good reason, it works. But as with all good things you need to understand what you're wanting to achieve, have a clear budget and learn the metrics that allow you to succeed with a solid ROI. Happy Marketing!