Think Hard About The Next Dollar You Spend On Search – Are You Maximizing Your Marginal ROI?

Think Hard About The Next Dollar You Spend On Search – Are You Maximizing Your Marginal ROI?
SHARE
THIS



The transparency of search as an advertising channel is appealing to marketers as it makes it relatively easy to forecast acquisition outcomes and to measure ROI. And, CFOs love the apparent certainty of it when it comes time to approve budgets.

That’s why search is often the first tool in the kit that digital marketers reach for when they want to fill the funnel, with the majority of spending going to a single, dominant publisher.

However, an analysis of actual paid campaign data by Kenshoo suggests that by thinking smarter, marketers can maximize their returns across publishers by focusing on what is known as marginal ROI.

ROI is calculated simply by dividing total revenue by total spending, whereas marginal  ROI only looks at the impact of an incremental increase in campaign spending on revenue.

For example, if you increase spending on a campaign from $80k to $100k and you generate an extra $30k in spending, then the marginal ROI is $30k/$20k or 1.5.

The chart below provides a simple illustration of the idea.

Some description

(Image source: Kenshoo)

As the report notes, “The marginal ROI is the slope of the curve that you get when you plot predicted revenue against spend, and it depends on where you are on the x-axis.”

As the curve flattens the ROI on every incremental dollar starts to decay. The trick for advertisers then is to work out where on the curve they are.

In a study commissioned by Microsoft, nine Kenshoo paid search programs were analyzed to determine which publisher yielded the best return on the next dollar of investment.

According to the authors of Maximizing Paid Search Potential by Measuring Marginal ROI, in five of the nine campaigns studied it would make more sense for the marketer to invest their next dollar on Bing. Three cases showed that dollar could be better spent elsewhere, and the final case delivered no clear differentiation between publishers.

The report states that, “Given the nature of the paid search market, it should not be altogether surprising that Bing holds a bit of an edge here. For example, marketers frequently put many of their eggs in the basket of a single search engine, where they may face greater competition and price pressure, and subsequently receive a considerable amount of attention and optimization.”

As a result, they say, “the next most immediate opportunity for efficiency might be on another publisher.”

The authors also suggest that spending on a less dominant publisher is more likely to be taking place in the earlier “steeper” part of the ROI curve, and therefore offering a stronger opportunity for marginal ROI.

As spending increases on the publisher the curve flattens and the differentiation and advantage lessens.

According to the study, “The net result is that marketers using Bing Ads as part of their paid search strategy may well be able to benefit from a higher marginal ROI for their next dollar of investment, and should keep this in mind when analyzing and optimizing their campaigns.”

The report offers four key takeaways for marketers;

  •   Forecasting tools can be applied creatively to help understand which paid search publishers have the best upside potential.
  •   By forecasting the Marginal ROI of each publisher individually (rather than overall ROI), marketers can compare the value of incremental spending with those different publishers.
  •   As publishers and channels proliferate, deeper understanding of Marginal ROI and its relationship to program effectiveness will be increasingly important for the agile marketer.
  •   When applied to primary paid search publishers, Kenshoo found greater incremental spending opportunities for Bing in a majority of analyzed cases where search publishers were forecast separately.

“New channels and publishers are emerging regularly, and each of those will present opportunities for marketers to gain additional traction with their customers. Strategic use of portfolio-based forecasting across channels and publishers is a valuable tool in the marketing toolbox that can help make sense of those opportunities and help you make smarter, more data-driven decisions, and put you on the path of being a truly agile marketer,” according to the study.

This article originally appeared at www.which-50.com

Latest News

Businesswoman hand connecting jigsaw puzzle, Business solutions, success and strategy concept
  • Media

CMO Council Partners With Australian Marketing Institute

Australia’s pre-eminent organization for marketing professionals has announced a partnership with the global body, the Chief Marketing Officer (CMO) Council, to offer international research, marketing intelligence and best practice insights to some 60,000 marketing practitioners in the country. The Australian Marketing Institute (AMI), which provides professional accreditation and continuing education, will give its members preferred […]

M&C Saatchi Creates Campaign For Lexus Featuring Music By Beck
  • Campaigns

M&C Saatchi Creates Campaign For Lexus Featuring Music By Beck

M&C Saatchi Melbourne has created a campaign for the launch of the Lexus compact SUV set to the soundtrack of Beck’s “I’m So Free”. The Lexus UX was designed by the manufacturer’s first female designer and is built to anticipate the driver’s every need with the TVC demonstrating its uncanny ability to be one step […]

How To Create Connections To Increase Your Influence
  • Opinion

How To Create Connections To Increase Your Influence

Darren Fleming (pictured below) is a speaker, author and trainer who specialises in helping leaders influence their teams. He is the author of Don’t be a D!ck – creating connections that make influence happen. In this guest post, Fleming offers proven tips on how to improve staff connections and your influence around any office… The secret to […]

Opinion

by B&T Magazine

B&T Magazine
PayPal Unveils “Uncle Awesome” In Witty Christmas Spot Via Buzzman
  • Advertising
  • Campaigns

PayPal Unveils “Uncle Awesome” In Witty Christmas Spot Via Buzzman

A dodgy uncle is the star of PayPal’s new Christmas spot set to air across 15 european countries this festive season. The work of famed Parisian agency Buzzman, the ad plays on the traditional family Christmas and the arrival of an uncle notorious for his over-touching, cheating and over-eating. This time around, thanks to Paypal, Mr […]

Isentia Builds Out Executive Team With Three New Appointments
  • Media

Isentia Builds Out Executive Team With Three New Appointments

Isentia Group Limited has announced three senior appointments to its executive leadership team to accelerate product enhancement, operational efficiencies and support ongoing transformation. Following an extensive search, Paul Russell has been appointed chief technology officer (CTO), Kelly Young chief human resources officer (CHRO) and Peter McClelland chief financial officer (CFO). Ed Harrison, Isentia chief executive officer and managing director, […]

Ovarian Cancer Australia Says ‘It’s Time For Ovary-Action’
  • Campaigns
  • Media

Ovarian Cancer Australia Says ‘It’s Time For Ovary-Action’

Ovarian Cancer Australia has launched its first pieces of work via agency 10 feet tall. ‘It’s time for ovary-action’ is their empowering, new creative platform that aims to rally all Australians to stand up and take action for the cause. The launch includes a quirky content video accompanied by print and radio components that aim […]

Assembly Label Appoints The Wired Agency
  • Media

Assembly Label Appoints The Wired Agency

One of Australia’s leading fashion brands, Assembly Label has officially appointed The Wired Agency as its exclusive digital campaign partner. As a market leader in the ‘simplified essentials’ space; quickly becoming renowned for their minimal approach to design and clothing construction, Assembly Label has recently opened their tenth retail location as well as being well-represented […]