Rethink Your Search Marketing Budget for ‘09: 5 Tactics to Defend Requests, Add Flexibility, Boost ROI

Planning a search marketing budget is a challenge. The elastic nature of cost-per-click pricing, plus continual changes in competition levels and the effectiveness of targeted keywords, can overwhelm your best spending expectations.

Data from MarketingSherpa’s most recent Search Marketing Benchmark Guide shows, in fact, that 49% of marketers set their PPC budgets too low and burn through that money too quickly. Many marketers also consider SEO efforts as “free,” causing them to overlook the costs of external consulting or in-house staff time needed to implement tactics.

“It’s hard for executives that have been around for a while, especially marketing executives, to get a handle on how it all works,” says Jennifer Matthews, Senior Director, Marketing, Smartsheet. “That’s where these low budgets come from. Marketers take their best guess and say ‘Let’s try it and go from there.’”

Matthews has managed search budgets at Smartsheet, Concur and Classmates.com. Before that, she experienced budgeting issues from the agency side, working with clients that often didn’t know exactly how much to set aside for their campaigns.

Here is her advice for planning a search marketing budget that can adapt to changes in PPC and SEO strategies and create opportunities for additional testing that’s essential for optimizing search efforts. She suggest five tactics for the budgeting process:

Tactic #1. Set goals based on the quality of the leads or customers generated by search marketing.

You must start with a goal for your search campaigns when establishing a budget. The problem, says Matthews, is that many marketers base their goals on metrics that don’t reflect the true value of the leads or customers generated by search activities.

Too many marketers base their goals on conversions – without tracing those conversions farther down the sales pipeline to learn what they’re really worth to the company.

“A lot of time people get stuck into measuring conversions, but what is the quality of that traffic or those conversions? That’s the biggest hang-up right there.”

- Smartsheet is a subscription-based online project management tool. So, Matthews bases her search budget on the value of the subscribers generated through marketing. She traces visitors who converted from a search ad to a free trial as well as those free trial members who then converted to paying customers.

- Ecommerce marketers have a slightly easier task. They can measure the average percentage of search visitors who buy and calculate the average value of those sales. Using those numbers, they can decide how much traffic they need to generate to reach a sales revenue goal.

- B2B marketers using search for lead generation must trace the value of a lead beyond the conversion point – downloading a white paper or webinar – to a subsequent activity –moving from lead to opportunity to closed sale.

In each case, the key is determining the ultimate value of search visitors to correctly budget for cost-per-acquisition.

Tactic #2. Combine SEO and PPC into one search marketing budget.

Matthews recommends combining SEO and PPC into one search marketing budget. Many organizations, particularly larger companies, operate SEO and PPC separately and, therefore, create distinct SEO and PPC budgets.

“I’ve always looked at SEM as a whole. You may have a paid search team and a natural search team, but they should always work together.”

Operating the two channels under one budget gives you greater flexibility when spending your overall search marketing dollars. For example:

- Certain search terms may become too expensive for you to maintain high advertising placements. You can back off on PPC spending and focus more money and effort on increasing your natural search rankings for those terms.

- You may be nearing the end of a quarter and not making your PPC goals. You can temporarily suspend certain SEO projects and increase your budget in paid search to make up the difference.

“In the end, the SEM budget stays the same, but I can tweak within that.”

- When you find yourself achieving great results with paid search campaigns – thanks to strong keyword selection, landing page optimization and bid management – you may find yourself under budget for paid search.

Rather than throwing more money at those paid search campaigns, Matthews looks for opportunities to boost natural search rankings or even hire more internal or external help for specific SEO projects.

IMPORTANT TIP: Don’t forget to budget for the work that goes into SEO projects. Just because you’re not bidding on keywords does not mean there is no cost associated with those efforts.

Budget items include:
o Cost to create new search-optimized content
o Fees paid to external consulting agencies
o Value of the time spent by in-house IT or marketing personnel on SEO projects.

Tactic #3. Carve out a percentage of your search budget for testing.

Testing is an essential tactic for managing search marketing campaigns. It’s even more important for marketers who face tight limits on their search spending and feel they may have maxed-out their cost on PPC ads.

In that case, they can optimize the campaigns they’re already running by testing new keywords, landing pages or advertising copy.

Matthews recommends setting aside a percentage of your overall search marketing budget for ongoing testing. The exact percentage will depend on your unique needs. Here’s how to calculate it:

- Look back at your previous test results to determine an average success rate.

Start by analyzing test result data for a meaningful period of time – the past year or two. Look for the rate at which those tests demonstrated a meaningful improvement in tactics.

For example, historical analysis may show that you conducted on average five tests per quarter, and two of those five tests generated significant improvements.

- Plan next year’s testing activity on that average success rate.

You can set a goal for the number of tests you need to perform the following year based on that analysis. By examining the potential ROI of those tests, you also can estimate the potential payback from testing activity – but be conservative. “Tests are always going to go differently.”

- Spread testing activity out across the year.

It helps to maintain a consistent, ongoing approach to testing. That way you can adapt to challenges in your current search campaigns or new opportunities as they arise. Plan to conduct a certain number of tests each quarter.

Tactic #4. Analyze past campaign and test results for new activities.

An added benefit of analyzing your past campaigns and test results is the ability to plan new campaign activities for the coming year.

You will know which campaigns are your highest performers and which past tests delivered the best results. So, you can budget for those activities next year.

Tactic #5. Support your budget requests with facts.

You’ve identified your most successful campaign tactics and may need to defend your current budget against potential cuts. You may have even targeted new tactics that will add to your budget. Be prepared to justify your budget requests with data that shows potential results.

- Prepare detailed data on tactics used in every campaign in that summary to answer additional questions from your boss or budget committee.

- Prepare data on the campaigns or tests that *didn’t* perform well so you can answer questions about why certain tactics failed and what you learned from the experience.

“Executives want to see good, hard numbers,” says Matthews. “Show them the facts.”

Useful links related to this article:

Additional MarketingSherpa data and analysis on search budgeting can be found in our recent presentation, “New Research Reveals What’s Working in Search: Teleseminar Transcript, Slides, MP3”:
http://www.marketingsherpa.com/article.php?ident=30855

MarketingSherpa’s 2009 Search Marketing Benchmark Guide Executive Summary:
http://www.marketingsherpa.com/article.php?ident=30701

Smartsheet
http://www.smartsheet.com/