Holiday 2015 Paid Search Best Practices: Bid Indexing

Bid indexing will improve paid search performanceNow that it is officially Fall and Holiday is fast approaching, it is time to dot every “I” and cross every “t” to make sure paid search campaigns are in top shape.  A surefire way to improve year-over-year paid search results during the critical six-week period from mid-November through December is to index daily bids based on prior year performance.  There are two reasons why indexing can help.

First is that there is always a crush of new entrants trying to win Holiday impression share on key terms.  Some of these advertisers are dormant much of the year and then launch their campaigns (or significantly ramp them up) during Holiday.  Some run ads all year but expand their product mix during Holiday and, likewise, their keyword portfolio.  Others bid on competitors’ terms only during Holiday.  They make lots of sales quickly and then leave the auction before the trademarks they are poaching on have ever even realized they were there.  (This last group could include brand competitors and affiliates.)  This, combined with the influx of new search advertisers on core keywords, drives up prices in the ad auction.  In order to compete for top positioning, bids most surely will need to be increased.

Second is critically important for advertisers using automated bidding tools including those from third parties, in-house, and/or the search engines.  Most bidding tools adjust cpcs based on a look-back period (usually about 2 weeks).  Based on how a keyword performed in the past, daily bids are set consistent with how high a cpc can afford to be while still achieving p&l goals.  On Cyber Monday you don’t want an automated tool setting bids based on how a keyword did 2 weeks prior – you want it set based on how it performed on last year’s Cyber Monday  –  a once-a-year aberrational event.  Cyber Monday bids need to be highly aggressive in order to assure top positioning.  And since most other key performance metrics also typically go up such as AOV and conversion rate, the p&l will usually remain in line – even at the higher cpcs.  On Cyber Monday, as well as every other key Holiday eCommerce day on the calendar, brands do not want to leave any sales on the table.  Bid indexing is the answer to that.  Likewise, on December 26th, bids should not be automatically set based on a 2-week lookback period because cpcs will be artificially inflated vs. what they will be in reality the day after Christmas.

The method for establishing what the index should be entails identifying when the lift in prior-year’s sales started for Holiday.  This will differ across retail verticals with some (cooking-related, for example) having their Holiday ramp up starting much earlier in November, others having it more closely clustered around Thanksgiving (jewelry and electronics, for example) and others yielding the majority of sales from Black Friday-on.

In terms of which metric to index, revenue per click enables you to back in to what the highest cpc can afford to be while still yielding an acceptable p&l.  That lift in cpc can become the basis for how the index is established.  If may be better to determine the revenue lifts based on direct load sales rather than paid search sales since looking back at a paid search campaign that was not indexed in the prior year may give a false read.  For example, if bids weren’t adjusted properly last year, it’s possible sales were left on the table making this year’s exercise a self-fulfilling prophecy.

Another important element in establishing the index is to recognize and adjust for any aberrational events from last year that are not in place this year such as promotional activity that may have changed or shifted on the calendar.  In this case, override the index with something more aligned with this year’s promotional schedule.  To this point, it would be helpful to keep a log of this year’s activity in order to facilitate accuracy when creating next year’s index.

Bid indexing is a great safeguard for maximizing paid search performance during Holiday.  That said, it is always a best practice to reality check each day’s sales activity making tweaks and adjustments, as needed.

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