The benefits of a PPC yield management strategy

We’ve all been there – you’re looking to book a hotel in a prime vacation spot and see some great deals. A few days later, you come back, credit card in hand only to find out that the price of the hotel has tripled.

The reason? You’re vacationing at the same time a major music festival is scheduled to be in town and you’re now competing with perhaps hundreds of thousands of others all vying for the same space as you.

That said, this approach doesn’t just apply to the hospitality and travel industries.

In fact, it can be leveraged to maximize yield by almost any search engine marketer and online advertiser, regardless of market size, industry or vertical.

How so?

This complex and evolving pricing strategy around the fundamental laws of supply and demand is aimed at generating the highest possible dollar for the provider in light of time of day, the number of competitive bids, and a myriad of other variables.

And PPC yield management applies to your online advertising strategy in a surprisingly similar way, with the idea that if you hit the sweet spot, you are all but guaranteed to be rewarded with high returns.

PPC Yield Management: The Highest Returns at the Right Time

First, let’s define yield management.

At its core, yield management, also known as revenue management in the travel and hospitality industries, is a pricing strategy that essentially aims to predict and influence consumer buying behavior in an effort to maximize revenue – or yield – from industries that have limited offerings and time-sensitive bookings.

Simply put, yield management means that an organization prices their products, services, advertising inventory or other online offerings in such a way to garner the highest revenue at the best price and exactly the right time.

Perhaps not surprisingly, this strategy is highly utilized by industries that have offerings that can either expire or are in limited supply – such as hotel rooms, airline seats, and conference spaces – which are often subject to strong surges or downturns in demand based on an array of market variables.

You’ve likely seen it in action without even realizing it.

Hotels, for example, employ this online booking practice when there’s a major event – such as a citywide conference, concert, or sporting event that might cause demand for hotel rooms to spike and availability to be scarce.

Similarly, the travel industry is notorious for leveraging this approach for online bookings, which can garner top dollar for vacation destinations during the frequently traveled summer months, but yield far less for those same places in other seasons.

PPC yield management takes that approach a step farther and applies it to the process of online advertising. It’s still making frequent adjustments in the price of a product or service in response to fluctuations in market variables.

However, the concept of PPC yield management is aimed at getting that consumer to the business website in a way that targets the highest number users most likely to make a purchase or conversion in the most efficient way possible – meaning the cheapest cost per click.

Here’s How It Works

The way that ads are ranked on search results are like the function of an auction – every advertiser interested in placing an ad for a given search query makes a bid for that ad to show.

For advertisers, that means there’s an optimization opportunity regarding how much they need to bid for that to occur based on keywords.

During the bidding process, a lot of information is captured about a particular consumer regarding their digital engagement, which includes their device, location, and time of day, among other things.

This kind of information gathering, which is ostensibly non-invasive, can be paid for with keywords in order to place a value on how relevant that user is to a given business.

Because it’s keyword-specific, every keyword is going to have historical performance data combined with bid landscape data from publishers, which when totaled, present a keyword level relationship between the projected click volume at a given bid level.

The benefits to this approach for the advertiser are numerous.

In a PPC program, keyword searches can be treated like a lead – you already know the intention of the user, so advertisers can bid on search query results knowing the user’s intention.

PPC yield management is additionally beneficial because advertisers only get charged or have to pay for that lead when a customer clicks on an ad, indicating additional interest.

Essentially, the strategy contains two tiers of interest in whatever the advertiser is offering them – the search query itself, and then the content of the search ad.

Once a customer clicks on it, they are directly interacting with the business. It’s then up to that business to take the click into next steps and across the finish line.

Controlling the Yield: What’s Behind a PPC Management Platform

For the vast majority of organizations investing in a PPC advertising program, having an automated platform to manage the abundance of bids is a necessity, not a luxury.

A PPC management platform saves countless man-hours and drastically reduces human and operational error, while generating opportunity, spiking ROI, and boosting bottom line profits.

These platforms integrate with customers’ data sources, whatever those may be, to capture the conversion information about their customers that they’re attempting to maximize or optimize.

That data is then paired with data from publishers to generate optimized keyword level bids dynamically and every day for every keyword that customer has.

The three components key to that optimization algorithm include:

• Historical keyword level performance data.
• User data for purposes of bid modifier adjustments.
• Bid landscape data from the publishers.

Depending on the business and performance goals of the customer, these platforms offer a variety of bid solutions, which determine the algorithm that derives an optimal keyword level bid.

Both the keyword level and user demographic information are extremely relevant because they capture the competitive landscape for that keyword. Because these auctions are dynamic and involve multiple layers, what others are bidding should and does influence the success of the bid.

The customer has a set of metrics that define the success of their program, all of which will directly impact their bid strategy and the tactics they leverage to generate clicks and conversions.

A customer utilizes their own unique bidding strategy, utilizing all of the available data and the sophisticated algorithms to achieve bidding performance greater than any manual or less sophisticated approach.

Customers’ bidding goals can vary greatly, ranging from:

• Maximizing revenue given a target budget.
• Maximizing revenue given a target ROI level.
• Maximizing conversions given a target CPA level.

These all depend on their unique needs, business goals, and ROI objectives.

Automating ROI: The Benefits of a PPC Management Tool

For customers, attempting to manage a PPC program without using all of the data at their disposal means that they are not operating a peak performance.

Similarly, attempting to manage a PPC program without an automated tool means that they are limited by the capacity of whatever person or persons are attempting to manage that program.

And for PPC marketers and advertisers, the manual approach can leave a lot to be desired, presenting major gaps in their program that leave them with a slew of missed opportunities and wasted spend.

For example, Business X might have a paid search program, managed by two on-staff team members, and they do their best to make bid and bid adjustments to react to a changing business environment and a changing competitive landscape.

They might even attempt to review their higher volume keywords frequently. However, not surprisingly, they usually don’t have the time or resources to evaluate any of their longer tail keywords or to assess the impact of other bid adjustments.

If they attempt to make around 100 bid adjustments per week and adjust bid adjustments every few months to a program that could have around 50,000 keywords, it’s all but inevitable that they will fall behind on their PPC goals.

Simply put, humans are not as well-equipped as an automated system to recognize patterns, some of which are subtle, some of which take place over larger timeframes, and some of which are made within a program and will contribute to other segments of that program performing differently.

An automated tool, on the other hand, would calculate an optimal bid for all 50,000 keywords every day using new data dynamically and adjusting bid adjustments every day utilizing the same incoming data, regardless of the volume of interaction.

It also wouldn’t view keywords in a vacuum, instead of taking a portfolio bidding approach to optimization, attempting to maximize the marginal utility of each keyword depending on its relationship between bid level and volume.

For advertisers, this can mean generating an increase in performance that provides hefty returns and more than more than outweighs the cost of the platform – with a median performance improvement that could be anywhere between 10 to 30 percent on average.

Summary

While PPC yield management might seem well-aligned with simple economic principles, the ability to optimize your keywords bids to the point where they generate your organization top dollar is a strategy that takes time, effort, and constant refining in order to get right.

It takes wisdom, experience, and even a little bit of luck.

Like a tightrope balancing act, the advertiser will be required to leverage a variety of factors, which include time, date, location and device, to their advantage, in an effort to make the best bids that garner the maximum yield for their budget or bottom line.

Like almost anything else, however, organizations can’t expect to hone and master this skill on their own with a man-powered staff. Without help, it’s likely your PPC management strategy will be nothing more than a glorified guessing game.

For those who are serious about conquering this skill, automating this process and investing in a management tool will be critical to their PPC strategy going forward.

If leveraged correctly, it could fill critical knowledge gaps in your PPC program that historically have resulted in missed opportunity, and instead, accelerate performance, increase ROI and generate additional profits that could leave your team looking like rock stars.

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by Chaitanya Chandrasekar
source: SEJ