If you have well organised PPC campaigns, each ad group should contain an ideal set of keywords that focus on a central theme. Thereafter, my own personal choice is to have total control of each keyword with a comprehensive understanding of its ROAS (return on ad spend) and more fundamentally an overview of its ROI. Central to profitability of each keyword is its individual cost per click and minimising those costs, both at campaign and keyword level, is fundamental to an account with healthy growth potential.
Let’s assume you have done everything right. Your ad is in top position with a great CTR, excellent conversion rate, high quality score and above target ROAS. You’ve had weeks, if not months or years of great returns from this little keyword and suddenly overnight a competitor discovers just how profitable this keyword is. Immediately, competition increases for your keyword, your costs start to increase and soon after that campaign which was delivering you excellent profitability levels, is just about breaking even. I’ve seen this happen many times and often when competitors begin to target your brand. When faced with this scenario I employ a technique I called ‘keyword compression’.
Most online advertisers are looking to tick the following boxes for their most lucrative campaigns and keywords:
1. Top of page rate – How often is your ad top of the page?
2. Impression share – Out of the total impressions available, how frequently did your ad appear?
3. Average position – The closer to 1 the higher your ad appeared on average.
3. Impression share Lost (IS Lost) – Out of the total impressions available how many did we miss?
4. Average CPC – How much did each click cost us?
What you will see when competition increases in a certain space, is that costs begin to inflate and consequently ROAS decreases. If you’re keywords lose ROI sufficiently to make them unprofitable, it may be the case that those keyword campaigns may have to be paused or its position sacrificed. This reduces revenue and overall profitability.
This graph shows a one month snapshot of an account that has experienced a rapid increase in costs due to competition. You can also see the dip back down as keyword compression was applied, resulting in the campaign becoming more economical than previously.
The key to using keyword compression is to force the CPC of the keyword down without sacrificing any of the four main metrics above. All too often, I come across PPC accounts where the budget and bids are hugely inflated above what is required to achieve key objectives. This includes a case where bids were over £10 per click, for a keyword that’s costing 4p. It is financial madness and can be avoided with careful analysis and application of compression techniques.
Carefully reducing the max CPC, whilst constantly reviewing the KPIs above and ensuring there is no degradation in the performance should be a technique that delivers exceptional benefits for the business. Applying this process to the point where the keyword remains top of page with no loss of IS, will facilitate you finding the true cost of maintaining top position. It is the case that many of the campaign that previously looked unprofitable are suddenly profitable again.
To demonstrate the sustained profitability of this account here’s a graph for the same date range showing revenue:
The compression technique for this campaign alone saved the client over £350 a day. Applying the same across an entire account and you’ve got a pretty powerful little technique….and a slightly healthier account.