Unit economics: The foundation of a good SEM campaign
A strong understanding of the economics of any business unit is absolutely critical to any digital marketing campaign managed against non-brand key performance indicators (KPIs) in a search engine marketing (SEM) campaign.
One would think any reasonably large and successful business would have a good handle on their unit economics, and that this knowledge will be shared down the chain of command to the mid and lower levels of the marketing team.
But time and time again, I have found this critical foundation is missing, miscommunicated, insufficient or is so outdated as to make it worse than worthless. “Worthless” in this case means that bad data does no actual harm. “Worse than worthless” means the utilization of the wrong KPI goals resulting in media waste and — more importantly — missed revenue and profit opportunity.
In other words, the company’s health is at actual risk because the marketing team and the business team aren’t on the same page. In some cases, members of the marketing team may be working at cross-purposes, using incompatible KPIs and metrics.
Silos standing in the way of marketing AI?
I had the privilege of attending a lunch recently with members of the Direct Marketing Club of New York, the Interactive Advertising Bureau (IAB), and other marketers, including MediaMath CEO Joe Zawadzki.
Although we attended the lunch to discuss the power of artificial intelligence (AI) and machine learning to solve marketing problems, the consensus was many brands aren’t ready to empower decision-making with AI.
Their organizations were often so siloed that the inertia of departments and organization charts were a big factor slowing down the adoption of AI and machine learning in terms of optimizing marketing spend. A common theme across the table was the winners and disrupters in many industries are the ones without any legacy departmental structure. These included Tesla, the Dollar Shave Club, Casper & Purple, and even Amazon.
How does this all relate to pay-per-click (PPC) search engine marketing campaigns? Well, the influence of legacy structures affects your ability to grow yourself as a marketer and business person and directly influences your ability to communicate — with rational questions — up the chain of command (while following protocol), even if those communications might decrease your own departmental budget.
Rational questions for marketers to ask
Let’s use some common KPIs as examples of how things are often done now in SEM campaigns and how one might apply smarter business unit economics by asking some rational questions in the following scenarios:
PPC account (typically retail) managed by return on advertising spend (ROAS) with last click attribution
Rational questions to ask include:
PPC account managed based on last click attribution around cost per action (CPA) or lead gen
Not all businesses make the sale online, so marketing teams running campaigns used to generate leads and are given a cost-per-lead or CPA target to hit. Rational questions to ask include:
Fixed budget PPC account
Rational questions to ask include:
There’s probably another column that could be written on the nuances of applying unit economics to marketing, but this should give you a solid start toward a good SEM campaign.
Opinions expressed in this article are those of the guest author and not necessarily Search Engine Land. Staff authors are listed here.
About The Author
Kevin Lee is Co-Founder and Executive Chairman ofDidit
a leading digital marketing and technology firm started in 1996. Didit has made 11 acquisitions to transform itself into a one-stop-shop full-service marketing firm from a SEM/SEO boutique. Kevin continues to invent new technology platforms for Didit and for clients. Kevin also co-founded We-Care.com generating over $8 million for nonprofits via cause-marketing. As a true Digital Marketing pioneer, Kevin gives back to the industry via 4 books, speaking engagements, and 780+ published columns. Kevin received his MBA from Yale University and lives in Scarsdale with his wifeDr Allison Kahner
and two kids.
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February 28, 2018 at 11:53AM