PM Digital has grown exponentially since it was launched in 2002. In the past year, PM Digital expanded its existing search engine marketing capabilities by providing access to an even deeper pool of talent in the natural search and social media marketing areas. MediaHarbor® continues to evolve and help PM Digital’s clients drive results. Built exclusively by PM Digital, MediaHarbor® simplifies and optimizes search performance on a real-time basis and gives clients an edge by effectively scaling and leveraging their search campaigns.
 
An important industry resource, Internet Retailer’s Top 500 Guide provides profiles on each of the 500 biggest Web merchants in North America based on annual sales on the web, including corporate strategies and merchandising and marketing tactics. This year the ranking also includes sections for social networking and shopping comparison site affiliations, site search features and functions and mobile commerce applications.

Consistent with Google’s 3^rd Quarter Earnings and their outlook for 2010, paid search will receive ample 2010 budget dollars within the retail media mix.  Because of the efficiency and control paid search gives retailers in yielding sales at an acceptable ROI, most marketers will try to shift as many dollars as possible to paid search and away from less efficient sources.  In fact, if asked, most will say they would like paid search to be an even larger part of the mix, if only they could get more scale from the program.

The inability to get more scale out of paid search is sometimes confounding. Within merchandise categories, we frequently see certain retailers owning top spots for a wide swath of keywords which competitors can’t make work.  For example, the scale that Merchandiser B wants so badly is going to Merchandiser A, despite the fact that Merchandiser B is a category leader.  How does this happen?

What may be at play is that Merchandiser A is evaluating paid search using a different set of metrics beyond the typical Ad-Cost-To-Sales Ratio or Return on Ad Spend.  By applying different metrics, Merchandiser A can afford to bid higher for a keyword.

Below is a look at what some of these alternative metrics are and how they can be applied:

• New to file. New customers are always more valuable to a retailer than return buyers.  Keywords that drive sales can be analyzed to identify the new-to-file ratio, and those that yield more new-to-file buyers can be given looser metrics.  (Several existing applications, including PM Digital’s MediaHarbor, can set and manage unique metrics at the keyword level.)  But how deeply merchandisers can compete once armed with less rigid metrics doesn’t stop there.  “New to file” can be defined in many different ways, and there is little consistency among merchants.  For some, a “new buyer” is one who never purchased from the company before.  For others, it’s someone who hasn’t bought in the last 12 months, or 24 months, or 36 months, or who falls beyond the cutoff date in the suppression file used for the catalog merge/purge.  There are still others who consider “New to File” someone who is new to online but had previously purchased offline.  With all these varying definitions of a new buyer, even if a merchant is using looser metrics for keywords identified as having a high new-to-file ratio, it’s not necessarily a level playing field.

• Cart leaders. Some marketers will loosen their target ROI metric for keyword-related products that are most frequently placed first in the cart.  Cart leaders can be easily identified in site analytics reporting.

• Assist keywords. There have been numerous analyses that show how searches and clicks on generic keywords frequently result in conversions on trademark terms further downstream.  Marketers should periodically perform a clickstream analysis to identify what their top assist keywords are and then loosen the metrics for those keywords in paid search.  This is another reason why some advertisers can own top positions for keywords that are inefficient for comparable merchants.

• White mail demand. Most catalogers allocate a portion of paid search revenue back to their catalog source.  The percentage to allocate is typically identified in a matchback analysis.  This practice alone can create huge advantages for a paid search advertiser if they are using a lower percentage than their competitors.  There may be another factor at play here as well.  Some catalogers also allocate a portion of their unsourced direct-load demand to their various marketing sources proportionally based on the percentage each source represents to total sales.  This practice will lift profitability for paid search and should enable an advertiser to compete more intensely.

• Lifetime value. Measuring repeat purchases for each marketing source will determine lifetime value.  A merchant in top position on search for an otherwise unprofitable keyword may have determined that the paid search source yields more repeat buyers than another source.  Most multi-channel marketers understand the importance of lifetime value but surprisingly few have completed the analysis or are acting on their findings with defined business rules.  It is highly probable, though, that top merchants who own key placements on very competitive paid search keywords have done a full lifetime value analysis and are acting on it.

• Branding. Over the past few years, we have seen certain marketers create a core list of keywords important to their brand and bid aggressively on them.  Branding keywords are typically isolated into a separate campaign (so as not to bring down performance for the whole campaign) and have a different, less rigid set of metrics.  Essentially, marketers are willing to lose money on terms that are determined to have significant branding value.  Funding for branding campaigns often falls within an advertising budget as opposed to a marketing budget.

• Coop funding. Although not yet in widespread use, there are paid search campaigns in which the merchant brand will help fund a retailer’s campaign.  In this scenario, the marketing dollars are often split 50/50, enabling much deeper paid search advertising.  Bids are typically cut in half when evaluating performance.

There are many great research tools that provide intelligence on competitive paid search activity but the fact remains that no one can look under the hood at the criteria another marketer is using to evaluate their paid search performance.  For those who wonder how one advertiser can possibly achieve top rankings on otherwise unprofitable keywords, the odds are good that more advanced, strategic metrics are being employed.

Suzy Sandberg is President of PM Digital.