A disconnect seems to exist among marketers about the process of measuring ROI as customers move through multiple touchpoints. Most marketers are familiar with the conversion funnel — beginning with creating awareness, then on to consideration and from there to the conversion and the remarketing cycle - but they often struggle to properly attribute the dollars brought in from each step of the process. Because of the challenge, ad dollars may end up being distributed unevenly, with too much money spent on one channel and not enough on others, causing marketers to miss some big returns. When ad dollars are spent more efficiently, ROI increases.

Let me give you an example of what I mean: imagine an electronics company that is launching what’s certain to be the “next big thing.” If the company doesn’t have much brand awareness, they may prep the launch with display advertising, along with offline media such as radio, TV or print.

Once awareness begins to build, the company may begin a search campaign to capitalize on people who are searching by brand name. They might also create a marketing effort around the blogosphere to continue to build awareness of the product. As browsers become ready to buy, a search campaign focusing on the specific item name or model number, along with marketing on the company’s Web site, can help push consumers to make the purchase. After the purchase, the company remarkets to them via email.

In other words, buyers make a purchase after first being made aware, then clicking through to the site from display advertising (and perhaps other online efforts), ending up at the Web site through natural search Keyword A and then finally making the purchase after clicking on paid search Keyword B. If the company does not tie together all elements of the marketing campaign — if, in other words, it gives credit for the sale only to the last touchpoint, or Keyword B — they’re not properly monetizing the earlier campaigns. Display, for example, may be given less money in future budgets, despite the fact that it had a great hand in raising awareness for the product.

Omniture can help keep this from happening via its complete and accurate cross-channel measurement available through a Genesis integration of SiteCatalyst, SearchCenter and other Omniture products with Dart, iBlaster, and other ad servers. With such a cross-channel plug-in, marketers can tell what percentage of the sale should be attributed to the different touchpoints in the conversion funnel, allowing them to make more accurate decisions about their online ad spend and thus improve ROI.

A report just released from Omniture revealed a major challenge search engine marketers are currently facing: it seems most search marketers struggle with getting to the deeper, more insightful data that will have a bigger impact on revenue. They’re making important business decisions based on superficial metrics such as click-through rates and cost-per-click. Those metrics are valid and have an important place in overall marketing analytics, but there are more valuable metrics that marketers are ignoring, at significant cost to their companies.

By looking at cost-of-goods-sold, and getting a true picture of return on investment (as opposed to return on ad spend), SEM marketers can stop leaving money on the table.

Tactic 3: Cost of Goods Sold

Most marketers look at the cost of a search marketing campaign and at revenue returned from the campaign. So when they talk about return on investment (ROI) what they’re really looking at is return on ad spend, rather than the return on total investment. That’s because a true measure of ROI takes into account the margin and profitability of the company’s products.

Say, for example, that a retail site has a big box, $2,000 item that weighs several hundred pounds. Because the cost of getting that to the shop or warehouse, and then shipping it out again (for online orders), is much higher than that of a smaller item, the margins are tighter. Now say that item comes with some accessories. Complementary items may be smaller in value but higher in margin. Selling more of the big-box item may result in more revenue, but at lower margins.

Knowing the margins of the products can help retailers know how much money they can spend on keywords for one item versus another.

This is a simple process with SiteCatalyst, assuming you know the profit margins of each product. (If you don’t know the margin on your product, the information on this tactic can drive a discussion internally.) Once you have feed the data into SiteCatalyst, you can begin optimizing for true ROI rather than just for return on ad spend.

You might discover that you were losing money on certain keywords without knowing it. Or you might discover you can affordably spend more money on certain high-performing keywords. Either way, you’re certain to improve ROI simply by having the right knowledge at hand.

The next step is even more exciting: layering this solution with the online/offline data integration (also layer with Tactic 2 that I wrote about last month) and you’ll get an even truer picture of ROI.

Next time, I’ll discuss how you can improve measurement, and ultimately improve ROI, for cross-channel marketing campaigns.

In the meantime, if you’re interested in learning more about the challenges marketers face in effectively managing search campaigns, see the Omniture Search Engine Marketing Readiness Survey.

This implementation allows users to allocate conversions back to keywords prior to the keywords that led to a conversion. In other words, conversions are allocated back to SearchCenter campaigns using either a First, Last, or Single-Visit allocation method.

For example, imagine a company that sells rugs. When people are thinking of purchasing a rug, they likely begin searching for the word “rug” or “area rug.” Then, as they narrow down their options, they may search for “Persian area rug” or “modern area rug.” The second, more specific keyword is what usually gets credit for the sale in most systems, while the first keyword is all but ignored. An SEM marketer might be inclined to devalue the first keyword, “rug,” because it is expensive - yet it’s creating sales by being the searcher’s first contact with the company.
The CVP custom solution will also allow allocation of conversions across campaigns from multiple visits. Then, a report can be run to show conversions, side-by-side, for both Last and Full-Linear allocation.

That being said, studies we’ve done across our customers show that it takes about 1.2 keywords being clicked on to make a sale. So, while more than one keyword is being clicked, it doesn’t happen very often. In order to make a tactic like this worthwhile, you want to look at two types of keywords: very broad consideration keywords that are high volume and high cost, and brand keywords.

These tactics can be extremely worthwhile in terms of ROI, but they take more consideration than the standard implementation. Bear in mind that they generally require a consulting engagement to get them set up in the most efficient manner.

Next time, I’ll continue to look at integrations of measurement solutions by introducing how to use Vista rules for cost-of-goods-sold analysis and cross-channel marketing effects.

But sometimes, all our excitement must seem like we’re spouting pie-in-the-sky ideas. Because what we’re finding is that people are only scraping the surface of what they can actually do with SearchCenter and their SEM campaigns. They’re sticking with the obvious stuff, like measuring orders that come from keyword campaigns — but they’re missing the deeper level, such as looking at all the steps of the shopping cart conversion process and measuring “microconversions” along the way.

Update: This post is the first in a series about SEM tactics that lead to greater ROI from search campaigns.

• Tactic #1. Online-Offline Revenue

Offline conversion data can be imported into SearchCenter for reporting and optimization purposes. Once the data is imported, your paid search campaigns can be optimized based on offline lead fulfillment.

For example, we have a client whose average order value is over $2,000. With a purchase that big, the client’s customers tend not to like to place their orders online. They prefer to pick up the phone. Omniture can give that client’s customers visit-level reference numbers. Here’s how it works: the person on the phone collects the reference number. Then, using a data sources file, the order can be uploaded into SiteCatalyst, and thus SearchCenter. That enables the company to track when a keyword is clicked on and when a purchase is made, whether the purchase happens online or over the phone.

This is important, because certain keywords might convert better offline, while others have better online conversion rates. If you have a keyword that drives 70% offline conversions — and a higher average order value than most online orders — you’d likely want to spend more on that keyword. But, if you thought the keyword was converting poorly, because you didn’t track offline conversions, you might devalue it and spend less money on it.

The same tactic can work with lead generation. Most search engine marketers measure only to the point of the lead, because confirming leads tends to be a hassle. But it’s easy with Omniture. If you’re using Salesforce.com and also use SiteCatalyst and SearchCenter, for example, Omniture integrates with Salesforce to get confirmed leads, identify the value of the revenue of those leads, load them back into SearchCenter, and attribute them to the keyword/s that led to it.