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In this issue of the Food-by-Mail Industry Update (FBMIU), we summarize key Paid Search response stats and trends that we saw from several specialty-food companies during the holiday 2008 season.
We hope you can use this data to benchmark and improve your own online performance and help position your company, website and online marketing efforts for more success in 2009.
Pay-Per-Click (PPC) Search Engine Marketing
The following are compiled Google results from September 1 through December 31, 2008 from a sampling of several specialty-food companies we work with.
Branded vs. Non-Branded Keywords
When managing PPC campaigns, it’s generally best to break out the branded keywords from the non-branded keywords to get a better picture of the success or failure of a campaign.
Branded keywords are any key phrase containing the company’s trademark name (i.e., 5th Food Group or 5th Food Group Marketing would be our branded keywords). Non-branded keywords are everything else (e.g., Specialty Food Marketing).
Of the food companies we work with, branded keywords accounted for 5% of the amount spent on PPC but accounted for 58% of the PPC sales. We also found a direct correlation between branded keyword activity and direct mailing activities (i.e., catalogs arriving in homes, space advertisements and even email campaigns). In other words, and not surprisingly, more offline marketing activity generated more people searching for and clicking on the company’s name.
Branded vs. Non-Branded Key Word Stats
Click Thru Rate (CTR) calculates the number of times an ad is clicked compared to the number of times an ad is shown on Google’s sponsored listings.
Comparing 2007 to 2008, branded terms had a slightly but statistically insignificant increase in CTR. Non-branded terms had a 9.7% lower CTR in 2008. The total CTR fell 10.3% in 2008.
Average Cost Per Click (CPC) calculates the average one pays for a click. Our goal was to have a competitive position as long as the keyword was converting at an acceptable cost per order.
In all cases, the non-branded keywords were more expensive than the branded keywords. The cost per click was dramatically higher for branded terms in 2008, averaging $.16 vs. $.09 in 2007. Cost per click for non-branded terms was basically flat with 2007 at $.52 each. The overall average cost per click grew 4.4% to $0.46 in 2008.
Conversion Rate calculates the number of orders generated per click. We utilized Google’s conversion tracking software to track the conversions and sales generated by Google.
Comparing 2007 to 2008, conversion rates were down slightly for branded terms and down 15% for non-branded terms. In total, conversion rates were down almost 12% in holiday 2008.
Average Order Value (AOV) calculates the average value of an order. Our goal was to maintain the same AOV for pay per click as the overall website.
AOV was down for both branded and non-branded terms. In total, AOV was down 7.6% in 2008. This is consistent with results we saw with catalog and other offline marketing efforts. The lower AOV shows consumers were spending less per gift sent and were sending fewer gifts. In addition, many companies reduced, suspended or eliminated their corporate gift purchases, which also drove down AOV.
Cost Per Order (CPO) calculates the average amount spent (on key words) to generate an order. In general, our goal is to generate orders at breakeven or better for non-branded terms; therefore, the target CPO was dependent upon the individual client’s profit margin.
The cost per order was dramatically higher for branded and non-branded terms in 2008. Branded terms saw a 71% increase in cost per order and non-branded terms saw a 19% increase. Overall, the CPO was up almost 19% compared to 2007. The increased CPO is largely a function of lower conversion rates and not higher costs per click.
Cost as a % of Sales (COS) calculates the amount spent on the key words as a percentage of sales. Like CPO, our goal was to generate orders at breakeven or better for non-branded terms; the targeted COS was dependent on the individual client’s profit margin. In general, however, we shot for 25% COS on non-branded keywords.
While we were able to hit our overall goal of a 25% cost-to-sales ratio, the costs increased significantly over 2007. COS grew 86% for branded terms and 29% for non-branded terms. In total, COS was up 28%. Like cost per order, the higher COS is primarily due to lower conversion rates, not higher cost per click.
Sales- to-Spend Ratio calculates the ratio of sales dollars to the cost of the key words. It is the invert of the cost as a percentage of sales (COS) stat. Like CPO & COS, our goal was to generate orders at breakeven or better on non-branded terms; the target sales-to-spend ratio was dependent on the individual client’s profit margin. In general, we shot for 4-to-1 ratio on non-branded keywords.
As has been the case since we started tracking the data three years ago, branded PPC is one of the highest returning parts of the specialty food direct marketer’s program. As the table below shows, for every $1 spent, branded PPC returned $114.58 in sales. While this is off 46% from 2007, it’s still wildly profitable.
Non-branded PPC generated $4.49 in sales for every dollar spent, so it was also profitable, even though it fell 22% from 2007 levels. Overall, for every dollar spent on PPC, the program returned $10.25 in sales.
We hope these response statistics will be helpful to you as you begin analyzing results of your own holiday 2008 e-commerce efforts and start planning for the holiday 2009 season.
In the next issue of the Food-by-Mail Industry Update, we will provide several recommended steps you can to take to improve your ratios in each of the key metrics outlined above.
Warmest regards,
Tony Cox
President
The 5th Food Group and Catalog Solutions, LLC
ABOUT 5TH FOOD GROUP & CATALOG SOLUTIONS
5th Food Group helps specialty-food companies grow and make more money by developing, managing and implementing their mail-order
and online marketing programs.
We are the only catalog/Internet marketing firm that works exclusively in the specialty-food industry.
Helping smaller companies and larger companies with small mail-order or Internet divisions is what we do best.
Visit us online at www.5thFoodGroup.com to download a copy of our free booklet, The Seven Habits of Highly Ineffective Catalogers, and for information on our fully guaranteed introductory program called JumpStart.
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5th Food Group