THRIVEPOINT

The age-old marketing question “How much should I spend on Marketing?” has recently turned into, “How much should I spend on Google?” Over the years, many different methodologies for determining budgets have been promoted, discussed and employed as different businesses try to perfect their marketing. Some of the most popular techniques are to allocate a percent of sales or an overall percent of total budget. Others go with gut instinct or a shoot-the-moon approach to maxing their credit card out. In search marketing, people often promote building a big keyword list, setting it live and ‘optimizing it to results’.

Whatever approach you have heard in the past, its worth considering a completely unique approach to Google budgeting – demand-based budgeting.
Demand-based budgeting is based on the amount of demand for a product or service at any given time. The budget is allocated to placements immediately in response to a customer’s request for information or other question. Google (and other search engines) are the perfect laboratory for this type of budgeting given the nature of keyword searches and the technology used to buy the ads.

Whereas many forms of marketing are based on reaching people of certain demographics or behaviors, search marketing is based on responding to a customers expressed need or want and the the following three steps will help you set the right demand-based budget:

What is your sales goal?
One of the most important steps in setting any marketing budget is to first determine your goals and objectives. How many sales do you want? What is your target margin per sale? How much room does marketing have to contribute to each sale?

The key reason this step is important is to establish goals and governing metrics for your spend. If a DVD player has a 15% profit margin, then it is likely not in your favor to spend more than 15% of the retail price of the DVD player per sale. Many budgeting methodologies build off this same premise but most stop here, but don’t stop here!

With demand-based marketing, you are targeting the market’s pent-up demand. Setting goals is critical to determining if there is enough demand in the market to reach your goal or if the market is too competitive (ie. expensive) to reach your goal. The next two steps help you determine how your goals map to the demand in the market and if market demand is not quite up to what your expectations are, how to determine where latent demand exists.

Understand your target customer’s problems and then choose keywords
Unless you are blessed with a ubiquitous brand like “Coca Cola”, “McDonalds” or “Wal-Mart”, most customers may not have heard of your company, product or service and as a result will probably not express themselves uniformly. To make sure you respond effectively to the universe of pent up demand in the market, target a customer’s problems/questions in their language and present your company’s products and services. Using a DVD player as an example, Customer problems may be…

• Explicitly known, such as “I need a DVD player” or
• Implicitly known such as “I want to watch a movie” or
• Latent and unknown such as “I am bored and do not know what to do”

Not only that, customers have different vocabularies that they use to express this pent up demand. Vocabulary variations have important implications for the demand-based marketer. In the above example, if you are selling DVD players, and focused your marketing only on ‘DVDs’, then you would miss up to 78% of the traffic in the marketplace or up to 132 Million searches per month:

• Do they search for “DVDs”? (37MM queries per month)
• Do they search for “videos”? (68MM)
• Do they search for “movies”? (55MM)
• Do they search for “”films”? (9MM)

Tailoring your overall campaign (and its messaging) to fit the customer need and vocabulary helps you increase your reach and sell to your customers.

To get started, use Google’s keyword tool to build a keyword list. Spend some time working on a number of different variations. Build the list to be targeted specifically to your product and service but expansive enough to include the variations that different customers might use when searching for something they might not know of yet.

Determine how much room you will give the competition to maneuver and then set your budget
The demand-based marketer knows that their targeted keywords reach potential customers that just need to see their offer before they become a paying customer. Much like you would not let your competitors steal your customers right before they walk in your door if you ran a retail store, why let your competitors do the same when customers are searching for products and services that you offer.

Use Google’s traffic estimator tool, to determine the traffic available and cost per click of each targeted. Then rank how valuable the traffic for each keyword is to your business success. Many search marketers do this by running active campaigns to determine how “a keyword performs”. This reactive approach lets you utilize real data to determine how well a keyword performs. An overall best practice, Thrivepoint also recommends proactively identifying high value keywords that are critical to business success.

The exercise is not intended to force you to max out your spending. Instead, it is intended to focus your efforts back on the sales goal. If a keyword is valuable enough to purchase, then ask yourself, why wouldn’t I purchase all traffic available? This part of the exercise helps you understand your real upper limits on the budget and lets you tie the results back to the sales goal. Keep in mind organic search listings will command the majority of clicks and it will be critical to get placement on target keywords there as well.

All budgets usually have upper limits and what ever their cause, cash flow, performance, expense, etc., using these three steps will help any marketer build a more targeted Google budget with direct marketing performance and demand based response at the core of the campaign.

If you would like additional information on this topic or a free consultation on your marketing efforts, please contact a Thrivepoint advisor.

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