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In this issue of the Food-by-Mail Industry Update (FBMIU), we present selected data from our second annual roll up of paid search stats of specialty food online merchants from the previous 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 2010.
Pay-Per-Click (PPC) Search Engine Marketing
The following are compiled Google results from September 1 through December 31, 2009 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 true reflection 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 clients we work with, branded keywords accounted for 14% of the amount spent on PPC but accounted for 74% of the PPC sales, vs. 5% and 59% in 2008.
As was the case in 2008, there was a direct correlation between branded keyword traffic and direct mailing activities. Clients with multiple mailings throughout the season to their customer list and targeted rental lists had more people searching for and clicking on their branded terms.
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 2009 to 2008, branded terms had a 13.6% decrease and non-branded terms had a 4.9% lower CTR in 2009. The total CTR was up slightly 4.7% in 2009 due to a large increase in branded orders (21.5%).
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 2009, averaging $.21 vs. $.16 in 2008. Cost per click for non-branded terms in 2009 was down almost 10%, averaging $.46 vs. $.50 in 2008.
The overall average cost per click fell 14% to $0.39 in 2009. This is primarily a result of companies reducing paid search spend while focusing on improving ROI and not just driving site traffic regardless of cost.
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 2008 to 2009, conversion rates were down 14.6% for branded terms and down 8.7% for non-branded terms. Yet, in total, conversion rates were up almost 16% in holiday 2009 because there were more branded orders in 2009.
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. However, in total, AOV was up slightly in 2009. Again, this is due to the large increase (21.5%) in branded orders for 2009. The lower AOV shows consumers were spending less per gift sent and were sending fewer gifts.
Cost Per Order (CPO) calculates the average amount spent (on the 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 terms in 2009, but slightly lower for non-branded terms. Branded terms saw a 57% increase in cost per order and non-branded terms saw a 1% decrease. The slight decrease in CPO for non-branded terms brought the total CPO down by 25.6% as compared to 2008. The increased CPO for branded terms is mostly a function of lower conversion rates, but also in part from 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 for branded terms over 2008. COS grew 65.5% for branded terms and 4.3% for non-branded terms. In total, however, COS was down 26.8%. This is due to the decrease in non-branded orders with the higher COS and increase in branded orders with a much lower COS.
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 four 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 $71.87 in sales. While this is off 39.6% from 2008, it’s still wildly profitable.
Non-branded PPC generated $4.11 in sales for every dollar spent, so it was also profitable, even though it fell slightly from 2008 levels. Overall, PPC was more profitable in 2009. For every dollar spent on PPC, the program returned $13.62 in sales.
We hope these response statistics will be helpful to you as you begin analyzing results of your own holiday 2009 e-commerce efforts and start planning for the holiday 2010 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