Monday, March 31, 2008

PPC: When Position Matters

In PPC, you are typically looking for the lowest cost of conversion or CPL (cost per lead). Then you apply the sales conversion rate and voila!, you have optimized for cost of acquisition. Position only matter to the extent that you get the appropriate volume.

What if you have a premium product? What if it's an emotional purchase?

Then top position will matter.

We have a client that sells a consumer emergency service. It's an emotional purchase where the buyer can go one of 2 ways: buy right away with a "high quality" service or price compare to get the basic set of functionality.

The focus was on getting the appropriate lead volume at the right cost given the sales close rate. However, given that the price of the product was higher, the sales close rate was low. If the client's ad appeared as position 5 in a list of similar competitors, they would lose out as those purchasers are making decisions based on price.

So we ran an experiment. Take the most relevant keywords, bid high to gain top position and see what happened.

The result: Close rates went up 150%, CPLs went up over 30%, cost of acquisition fell by greater than 50%.

The upshot: Customers perceived high quality by high position. Though the cost of the client solution was 100% higher than the competition, they increased sales to the right target customer.

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