What's a Keyword Worth?

Stuart Larkins is vice president of media at Performics, a Chicago-based online marketing services firm specializing in customer acquisition for multichannel marketers. He talked to Direct about how to measure return on investment with search engine marketing.

DIRECT: How do you recommend marketers measure results in SEM?

LARKINS: By far, the most effective form of measurement for a sales-driven program is keyword ROI, a comparison of the price paid per click vs. results achieved. Usually the goal is sales or some type of other measurable transaction.

DIRECT: Clickthroughs don't cut it anymore, right?

LARKINS: Clickthroughs are just the beginning. Marketers need to know what keywords are converting and how, and what the ROI for the bid price is. Instead of clickthroughs, we have to focus on what each individual keyword delivers. So if a keyword costs you 50 cents a click, and you get 100 clicks, that's going to cost you $50. So if you don't generate enough sales to justify 50 cents a click, it's not a profitable ROI. The continual process in managing ROI with search engine marketing is to pull each keyword down to a profitable level.

DIRECT: Are you looking for a lot of clicks?

LARKINS: Not necessarily. It's a finite science. You could charge 50 cents a click and not get any clicks for 99 clicks, but on the 100th click get someone who buys something that costs $5,000. Then that sale could make that 50 cents a word profitable. If you know you're only going to drive one sale out of a number of people who click on a keyword, that one sale has got to be a big sale and enough to cover your costs for those 100 clicks.

DIRECT: Does a marketer always have to pay top dollar to hold onto the top position in search results?

LARKINS: It's all market driven. So if you pay only 30 cents, you might drop down to the third or fourth position on a search engine and you don't get that many people clicking on your keyword. At that point you have to ask, ‘Is it worth paying 50 cents and have a better ROI?’ You don't want to take a keyword down to a lower price. Once you put a value on a keyword, you want to maximize the value of that keyword. If you lower the price of the keyword, you tend to get fewer people clicking. So the challenge is hitting on that finite solution that maximizes the return on each keyword.

DIRECT: How do marketers test?

LARKINS: One is to set a budget or to set click volume. For example, a company might decide to spend $100 on a keyword to test it and after that, if it doesn't get any sales off the keyword, will drop it. Or the company will measure a defined number of clicks — so that, for example, when they get 250 clicks but there's no sale, then the company drops the keyword.

DIRECT: What's the process of measuring keyword ROI?

LARKINS: The first thing a client should do is build a keyword list. You do that by looking at all the products you sell and derive keywords from that. A computer manufacturer would have, for instance, ‘laptop computer,’ ‘black laptop,’ ‘notebook,’ you name it. Virtually every item in a company's inventory is a potential keyword and every item has 10 keywords around it because of the ways people search — cheap notebook, Toshiba notebook, etc.

DIRECT: How many keywords do marketers start with?

LARKINS: Sometimes it's 5,000 words, but I've seen them go as high as 50,000 keywords.

DIRECT: How do they track?

LARKINS: Client A builds a keyword list and they have 5,000 keywords. Then they make sure they have the appropriate tracking per keyword. Companies like Performics have a software program that auto-generates tracking URLs for each keyword. That means, each time someone clicks, that URL lets the company track that individual keyword. You can go to Overture or Google and set up an account and track just the overall traffic, but you don't know which particular keyword is generating traffic and sales. Once a consumer clicks on that keyword, you track how much they spend on your site and whether they purchased tennis shoes or a pair of socks or whatever the product because knowing the conversion shows you the actual cost per keyword. And the software also tracks whether that individual comes back later and makes a purchase.

DIRECT: What about the text that follows the keyword in each search results listing?

LARKINS: You want to make sure the copy is relevant to that keyword and the category of keywords. It's good to reinforce the search word in the copy. For example, it might say ‘Tennisshoes. com — get every single tennis shoe in the world.’ The copy should also include a call to action.

DIRECT: Does it matter where the person searching for a product enters the marketer's Web site?

LARKINS: Yes, it's better to send them to a landing page where that product is featured. If someone wants to buy a [Microsoft] Xbox, sending them to Circuit City's home page is just going to confuse them. The conversion is higher when someone lands on a page that specifically relates to the search term they used.

DIRECT: What if the search term is broad and general?

LARKINS: If the person searching types in ‘laptop computers,’ the idea is for them to go to the laptop area of the site, where they can see all the laptops and the accessories the marketer has to offer. So you won't ever see an Xbox on a page by itself; you'll see an Xbox with games around it. Amazon.com does this really well — you never look up a book that doesn't have related books around it.

DIRECT: What's next?

LARKINS: Now you're ready to go live. Once it's live, that's when the ongoing process of maximizing your return occurs. You have to be able to continually change your bidding process on the fly on search engines like Overture and Google. Also, you must change your pricing, copy and creative, alter the landing page and test every aspect to keep your ROI.

DIRECT: Do you promote special sales in the keyword descriptive copy?

LARKINS: Yes. As time goes on, you want to insert that in the copy that follows the keywords. Do anything you can to make that copy more compelling and timely. Change keywords as a new product becomes available. And if you're having a huge blowout sale — and you have a lot of products featured on your home page — you do want to send people to your home page in that case.