Thinking Beyond the Click
Keyword prices are always a hot issue and it's understandable why this is so. Many paid search campaigns run at razor-thin margins, and if the cost of the keywords driving your business rises by just a few pennies, it can land campaigns in negative ROI-land.
Much is known about the broad price fluctuation patterns that occur seasonally. Obvious example are the keywords "Valentine" and "Carribean Cruise," which peak in the early part of the year. Much less is known about other factors which influence keyword prices such as price pressure caused by the entrance of competitors to the search marketplace or changes to the search engines' algorithms. These increases are harder to predict, quantify, and prepare for.
Keyword prices are important, and you should always make sure that your campaign gets the most out of the keywords you must buy. In practice, this means culling underperforming keywords and expanding those "long tail" words and phrases which are less subject to inflation caused by competitive pressures. With large campaigns involving hundreds to hundreds of thousands of keywords, the process of keyword optimization can become highly labor-intensive, which is why serious search marketers use automated tools such as ROI-based bid optimization software.
The problem, however, is that while intelligent bidding on keywords is an important part of the process of designing profitable search campaigns, it's really just the starting point. To make your campaigns deliver, you've got to "think beyond the click." Because while your bidding software might be giving you great deals on clicks, if these clicks don't convert, your campaign will fail.
There isn't a single "magic bullet" that can ensure that the clicks you buy convert (if there were, everybody's search campaigns would be profitable). There is, however, a philosophy which you can apply which can enhance your conversion ratio. This philosophy is holistic, meaning that it is meant to apply to all phases of your search marketing campaign, from bid to final conversion. It focuses on optimizing efficiencies at every touch point your customer will take from click to sale.
These touch points include all significant non-price variables in the customer conversion chain, including keyword discovery, creative copy, landing pages, offers, and time-based and geographical variables. While it is possible that all of these touch points in your campaign are performing well, it's likely that any or all of them could perform better. How much better they could perform can only be known through testing each one of them against a statistically valid sample of searches. Once you have the data, you can optimize each of them to yield maximal efficiencies.
How much efficiency gain can you expect to yield? Well, every business is different and so is every search marketing campaign, but double-digit gains in conversion rates are not out of the question. These improvements come not from dramatic improvements in a single campaign element, but by summing the efficiency improvements gained at each touch point. So, for example, if a better creative improves your conversion rate by 3 percent, a better landing page by another 3 percent, and a better offer by another 3 percent, you've yielded a 9 percent gain in your conversion ratio. Some marketers will simply pocket such gains, and others will plow back the money into securing better positions on SERPs, which can produce significant advantages in scale, driving further conversions.
Make sure your inhouse team or SEM agency understands that focusing on bid prices is important, but is just a piece of the overall puzzle. Make sure that they have the technology and the analytical ability to optimize all points in the click-to-conversion chain. By optimizing all variables that you control, you'll both give yourself a tremendous advantage against your competitors, and insulate yourself against pricing changes which you don't control, such as those imposed by exogenous events or by changes to the engines' algorithms.