I recently had the pleasure of speaking with Nick Danford, our guest expert at Point It’s upcoming?Thinking With Google: PPC Profitability event on the Google campus. Nick works with Google’s Global Business Organization, where he drives performance-based strategy and crafts AdWords solutions with some of the department’s most strategic, digital agencies. I challenged him to help me understand how paid search can help a marketing department grow into a digital advisor to the larger business, and wanted to share the highlights of our conversation.
Why has PPC profitability become such a hot topic?
The market space is crowded. Everyone is trying to tie investment to results — and not just any results, but the right ones. For most companies that’s about profitability. That’s what the CMOs care about. They are the people who hold the purse strings, who are actually making the decisions, and whose jobs are on the line if business return isn’t meeting expectations. The C-suite is focused on profitability and it seems that even though advertisers have an abundance of data, it can still be challenging to follow that line of thinking for in-house marketers. That’s why it’s so critical to involve your agency in the conversations. Agencies like Point It are armed with a C-Level business point of view that can help you show the impact an individual channel, like paid search, can have on the bottom line.
Focusing on Paid Search profitability
In the past, Google has been focused on metrics other than profitability.?Was there a gap between the agency and the advertiser in how the story was told? Is that why you are focused on helping agencies craft a connection between the in-house marketers and day-to-day contacts and their stakeholders?
Drawing a clear line of value from ad to revenue is hard. I would say that everyone is still struggling to tell that story. Rarely do clients use their in-house or agency experts to the best of their ability. Oftentimes they’re thought of as money spenders and ad managers but not as strategic digital advisors. This puts courageous agencies in a position to challenge this misconception, helping them break out of the “agency-as-lead-machine” mindset, and, as we like to say here at Google, try to solve for the whole problem.
When a strategic marketer starts solving for the whole problem, they start digging deeper, asking more questions. Why are people trying to get leads? They’re trying to get leads because leads bring in revenue. How much does that lead cost? What does it bring in? Then you get into these higher level strategic business metrics like profit, but also average order value, or customer lifetime value, etc. So you’re going behind the platform and interpreting the numbers into something that a business leader is going to care about. That’s not easy.
Deciphering business intelligence from paid search takes solid business acumen, but it also takes some guts. Anyone doing that is going above and beyond what a typical ad manager is hired or expected to do. It means trying to solve for something bigger —and that’s something that not everyone is capable of doing, nor wants to do. Ideally, a company would find a marketer, a team, or an ad manager that’s going to be their guiding light. They shouldn’t just want to hire an agency or an in-house expert, but someone that’s going to help their business grow because they care about their results in the same way that leadership does.
Telling your story to the C-suite takes guts
You mentioned something earlier about it taking guts, and I think that is a really important sentiment. Telling hard truths and making recommendations based on data — not just from a statistics perspective, but from a business insights perspective — you can run into some painful blockers. When you’re doing paid search work, especially from an agency’s perspective, you’re not always connected with marketing leadership. How can an agency like ours help an ad manager, or someone who owns the PPC channel, tell the profitability story to their C-suite?
You’re right, having guts is a critical part of this process. If you’re good at your job — any job, really — you want to make a difference in your customers’ lives. You have to be willing to challenge your client, and that happens from a place born out of trust.
Whether you’re an external resource or an internal one, you have to understand what the person you’re serving needs and help them accomplish their goals. If the company’s goal is rapid growth, and your goal is to rise up in the company, connecting those dots for the the people in an organization and taking that to leadership is key to making even more magic happen for the advertiser.
But, circling back around to guts and bravery, the key is making sure these stories don’t stop at just one level in an organization. Don’t settle. Request leadership’s presence in your quarterly business reviews, and show them how you’re making an impact on their business. Make sure that leadership understands the importance of the paid search channel to their bottom line. Make sure each level of the organization understands the importance of this channel to their goals. Draw the line. It could make people uncomfortable, but it’s also the way you’re going to get recognition for key results. It’s how you’ll be included in the larger marketing strategy — or better yet, company strategy — conversation. Someone who does that well could skyrocket from a marketing manager to a strategic partner to the business.
Getting started with a profitability model
When you think about helping a company create a model that shows profitability through paid search, where do you start?
There are several things that go into it. We’re going to wave the bravery flag again here, because a lot of what you’re working with surrounds attribution strategies. And attribution is a combination of art and science. It’s based on educated assumptions, which are in turn based on existing data, which takes — you guessed it — guts to stand behind. You’ll want to make sure your measurement is as complete and accurate as possible. After that, make sure the conversion window is good, and ask yourself, “Am I capturing everything? Are there lags? Are there delays? Is that accounted for in the data I’m using to build my attribution paths?”
The next thing you’ll want to address is your attribution model. We recommend companies who are still using last-click attribution take a harder look at that. Campaigns that are truly driving value are a) going to provide you with more critical data about your customer and b) not going to offer best practice information with a last-click model. I’d say that attribution is the most crucial part of all of this, because when you have good, detailed attribution, you can accurately see which campaigns are the most profitable.
Next you’ll want to fine-tune your goals. It’s a good idea to set different goals for the different networks or devices you’re targeting — I’ve seen clients whose goals differ based on versions of their site. Their mobile site might have an email capture goal, while their desktop site is aiming to generate leads or reach a purchase goal. Once you ensure your conversions are tightly aligned with the ways you segment your audience, you can start looking more closely at your PPC account. You’ll find that account looks a lot different once you’re armed with cleaner data.
After goals you should look at conversion value. You’ll want to understand profit margin — keeping in mind that profit margin can differentiate between types of products or services, and will vary across campaigns. After you remove advertising cost, you’ll have an estimated profit for that purchase, which will allow you to look at the purchase more holistically. When your attribution is buttoned up, it’s easier to understand how each piece of the “purchase path puzzle” impacts the overall sale. For example, your display campaign might have a higher CPA, but it might also be more profitable because it touches more valuable leads on the way to converting them.
Remember: all leads are not the same. All audiences are not the same. All clicks are not the same. But going through these exercises paints a clearer picture of what’s actually driving value — unlike just looking at return on ad spend or cost for acquisition, which only shows a piece of the picture.
Not to be blunt, but if you’re an individual contributor — or even the leadership that owns the paid search function or channel — how do you convince people that the work you need to do to spearhead profit-driven marketing is worth it?
I get this question a lot. If you put a dollar into a machine and it gives you more than a dollar back, then that’s going to be worth it. Whatever’s driving these profits — as long as you can attribute it to driving the profit — is valuable to the company.
It comes down to looking at paid search as an investment vehicle, rather than as a cost center. If you’re optimizing the metrics that matter to the leadership at your business, then the effort and the resources are worth it. If you reach a point of diminishing returns, you’ll want start optimizing — that’s something you can plan for down the road, when you’re considering long-term strategy.
I’m excited you’ll be speaking at the upcoming Thinking with Google event! What else will you share with our audience?
I’ll be talking about why this effort is worth it. We’ll talk about the benefits, and the basics that advertisers need in order to use their agency in a more strategic capacity, and about putting profitability front and center when working with your digital marketing agency.
Don’t forget to register to dig deeper! Maddie Cary, Point It’s VP of Client Services, is going to join me — and she’s whip smart. It’s going to be a really lively conversation. Plus, we’re providing a free Google Home Mini and a free continental breakfast to each person who joins us. You really can’t lose.
Are your paid search efforts on point? Point It offers a PPC Audit that has helped our clients see increased qualified site traffic and leads, decreased CPL, and more. Learn more about our PPC Audit and what it can do for you.