

Users Don't Always Buy What They Seek

We find that, more often than one might think, people initially searching for one manufacturer brand by name end up actually buying a different brand from the advertiser's site. In paid search it's important to measure the value of traffic as precisely as possible. This means not just granular bidding -- to the ad level, when statistically possible -- it means using the best measure of value on a conversion event. In retail, margin data provides the most accurate view of an order's value, but assuming that the margin rates implied by the keyword are the margin rates on the order isn't always a great idea. Not only do people change their mind based on selections, promotions, etc; they also tack on items from other manufacturers, potentially changing the margin %. We did a down-and-dirty analysis of this phenomena for 5 retail clients in different product categories. METHODOLOGY: We grabbed a random sample of twenty orders from each advertiser following a user search that expressed a specific manufacturer brand preference. We looked at all the items on those orders to determine:
  • The Keyword Match %: How often does the order include any items from the manufacturer searched?
  • % of Items on Matched Orders: What fraction of the items on the orders that do match are from the named manufacturer?
  • % of Sales $ Matching: All in, what fraction of the total sales dollars come from the manufacturer brand named in the search phrase?
RESULTS: Pretty clearly, this can be a meaningful effect for a number of advertisers, and it's also clear that the variance from advertiser to advertiser is significant. In some cases, this phenomenon is less a function of add-ons and user's changing their minds than the nature of the category. Someone searching for "Ford engine parts" is very likely to buy a belt, filter or hose made by someone other than Ford. Nevertheless, those who assume average order values or margin percentages based on the keyword may need to validate that assumption. CONCLUSIONS: Whenever possible, the actual margin on the order is the best way to go. We find a back feed of order-level margin is ideal. In addition to getting the margin right at a granular level, it allows for frauds and cancels to be knocked-out and discounts to be incorporated. Obviously, for those who have very consistent margins, return rates, and lifetime values across all categories and manufacturers, this isn't a big deal. But, for most folks, it's well worth looking under the hood.
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