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Navigating through the point of diminishing returns

Marketers are famous for piling on to high-performing channels. But when they become saturated and competition increases, a channel’s performance declines and diminishing returns are inevitable

Economics aside, dependency on search engine and social media advertising represents a challenge for chief marketing officers (CMOs). Should they chase the declining performance curve or drive spending to other less-saturated, yet less predictable, channels? Our advice: don’t be the marketing organisation that chases the declining curve.

Lest the decline in post-COVID digital ad spending seems like a reprieve from sky-high cost-per-click (CPC) prices, spending is likely to rebound and with a vengeance. If your returns were struggling before, it means they’ll be flatlining in the near future as dollars, euros and pounds flood back into Facebook, Google and LinkedIn.

“I think we can all agree the COVID-driven decline is likely to be a very temporary one,” says Doug Bell, CMO of the enterprise search and content marketing platform Searchmetrics. “The rebound has a high likelihood; the time to value for digital marketing is rapid compared with other channels, especially traditional advertising.

“This will only increase competition and further accelerate the point of diminishing returns for marketers, especially those in the most intensely competitive segments.”

In straightened budgetary times, organic search and content can deliver more traffic for less

Evidence of the decline began well before the pandemic with CAGRs (compound annual growth rates) for paid search on the retreat, having gone from more than 20 to 7 per cent, a result of steadily increasing CPC costs and weaker conversion rates.

It’s a situation that has been worsened by the introduction of the European Union General Data Protection Regulation directive in 2018, eliminating the very data sources CMOs need to manage through this change.

“I think we took for granted how much information we were collecting about people without really worrying too much about the consequences,” says Lillian Haase, Searchmetrics’ marketing director for Europe, the Middle East and Africa. “Now we’re able to see much less information automatically so the old ways of doing things are no longer working.”

Shaking up the marketing mix

While the outlook might look bleak for digital marketers, especially as budgets and teams get slashed in the wake of COVID-19, Matt Colebourne, chief executive at Searchmetrics, sees the crisis as an opportunity for CMOs.

By seizing the chance to rebalance their digital marketing mix, through including more organic search, marketing leaders can not only weather the immediate storm, but also lay the foundations for long-term success.

“Search engines are seeing significant volume increases, however much of that traffic is not intentioned; it’s not people actually looking to buy, but rather to cyber surf. Much of this increased traffic will convert to sales at a far worse rate, which could see you spending the same amount, but delivering less in sales,” Colebourne explains.

On the other hand, organic search costs are not volume dependent, so increased traffic is an opportunity to build awareness and consideration without it posing a threat to your budget.

“That awareness and consideration will act to increase conversion to sale for later-stage, intentioned traffic,” he says.

Being present in the earlier stages of customers’ purchase journey will also be a distinct advantage for companies that can no longer afford to compete when digital ad spending rebounds.

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Leveraging non-traditional data sources

While data privacy has put many data sources off limits to marketers, Searchmetrics is helping them find new, non-traditional sources to tap into. Keyword data is combined with metrics such as search volume, intent and seasonality to deliver invaluable insights, while data sources like Google trends, hashtag data and Amazon bestsellers can be layered on top.

In addition to optimising your marketing efforts, says Björn Darko, director of the Digital Strategies Group at Searchmetrics, these insights help you to better meet user needs.

“If you assemble this data to fulfil the search intent, this ultimately gives you a nice tool with which you can target your users,” he says.

By understanding if keywords are transaction or information driven, marketers can tailor content and offers to suit. Darko gives an example of the keyword ‘ski helmet’.

“People searching for a ski helmet really want to make a purchase, so they don’t want to read a lot of copy about ski helmets. What they want is a 50 per cent discount on ski helmets or a buy-one-get-one-free offer, and so on,” he says.

“On the other hand, ‘ski mask’ is a rather informational keyword. People are more likely to be looking for specifications, like which one is better at reflecting the sun. To help these users make a better decision you can serve them how-to articles.”

When it pays to use paid

Organic search will deliver you greater returns for a lower cost, but it’s not a silver bullet. It works best in combination with paid ads, with the ideal ratio of paid to organic on a sliding scale depending on your goals. As Bell notes, marketers should “surge with paid, trail with organic search”.

“If I’m trying to grab share, I’m going to be at a 60:40 organic to paid ratio. From there, I’m trying to get back to the health ratio of 80:20 or reach best in class, which is 95:5,” he says.

Darko adds that paying for ads on your poorly ranking transactional keywords, where you can actually acquire traffic is a sensible strategy. As is directing spend towards capturing specific user groups. He says: “Sometimes organic is not really the answer, especially if you think about acquiring new users, like the younger demographic. These users are on other platforms, such as TikTok and Instagram, so it makes sense to advertise there.”

Don’t chase the declining curve

Taking advantage of the retreat from paid is a six-month window at best, so now is the time to look to mid and bottom-of-funnel content. With content development costs declining as rapidly as paid costs, search engine optimisation can deliver as much as ten times return on investment.

Colebourne concludes: “In straightened budgetary times, organic search and content can deliver more traffic for less. A key value proposition for organic is that you can measure the whole journey, from research through to intent to purchase. Getting it right can yield five to ten-fold increases in organic traffic to your site.”

For more information please visit www.searchmetrics.com

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