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Feel free to discuss, I would love to hear other people's opinions on this
Quoted from my blog
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This article is going to tell you how my company dropped their CPC for branded terms by 50%. Who wouldn’t want to do that? Keep reading.
Before I go on any further, let me clarify for anyone who might be slightly confused when I refer to branded terms, I am referring to search terms with some version of a company’s brand name in it. As a little background, I recently came on board at a Fortune 50 retailer to do SEM work for them. They have been having some internal discussion about whether or not they should be advertising on branded terms because upper management thinks it is cannibalizing organic results. Thats another article I will be posting, the findings from our experiment of Organic cannibalization from Paid Search. Anyway, we see a very high CTR, conversion rate, and ROAS (Return on Ad Spend) for our branded terms, but our CPCs were in the high teens and it was costing a lot.
When thinking about the Paid Ad keywords, it can be thought of just like typical supply and demand. The more players bidding on a keyword the higher the CPCs will be. Because of this, branded terms tend to cost less than others. Have you ever thought you might be driving up your own ad cost? That is exactly what we found with my company. Our brand is very large and so is our paid advertising budget. We spend millions a year on paid search. There was a theory that since we were such a large player for purchasing our branded terms that we might be bidding up our own prices, so to speak. A test was done and our max CPC was reduced to what our average CPC cost was. After this was done, we saw a drop of several cents in CPC price. Then, after we lowered it to the average CPC, it was lowered roughly another 20%. All the while, watching to make sure none of our terms went inactive for search, thus indicating we had gone to low. After lowering it the second time, we had successfully cut our CPC by nearly 50% and were seeing single digit CPC.
To pull it all back together in case my train of thought was off, we realized that our brand power was quite large and that we could lower our branded CPC by simply lowering our bids. I thought the findings were pretty darn interesting. Not to mention the lower CPC allowed us to realize a higher ROAS.
Anyone else seen this before? Also as a disclaimer, I am not taking credit for these results, I actually started a few days after the theory was put in to effect. I just thought I would share our findings.
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[edited by: majorbta at 4:04 pm (utc) on July 20, 2007]
When people are searching for your brand, they are almost always going to click on your brand listing, even if some competitor decides to bid agressively and out bid you on your own brand terms.
We've seen little if any difference in sales regardless of whether the brand terms are in the top spot or not and in some cases encourage clients not to bid on brand terms because for the most part it is just throwing money down the toilet. Same thing with putting the homepage in Yahoo! Site Match.
If you have people in the organization who look strictly at financials with no understanding of the dynamics of search, then you often have to spend on the brand terms to make search campaigns look like a good investment but if people can think just a little outside the box and look past the accounting numbers, then they may realize that even though the numbers from paid search look worse w/o advertising on brand terms, the company makes more money overall.
