Brand Growth & Customer Loyalty
I have always been told by old-school marketers that PPC is the faucet that can be turned on and off; generate sales in the short term while SEO and social media provide the long term solution. Well, I would argue that PPC also carries many of those same long term benefits. The question then becomes: How can we measure those long-term effects?
First, let’s discuss what the long-term effects of paid digital advertising really are. There are 3 factors that contribute to the long term success of a digital advertising campaign.
Brand growth & The Buying Cycle: Each time a potential customer is exposed to a brand, the likelihood that they will purchase from that brand increases (basic advertising, I know). Don’t forget that the amount of touch points it takes to actually trigger a sale is going to differ by person, by industry, and by product. Understanding the value of a touch point is the first step in understanding the full impact of your PPC campaigns. Specifically with digital advertising, a PPC ad is likely one of many touch points before a purchase is made. If we are only looking at last touch attribution it is likely that the volume of transactions and revenue influenced by your PPC campaign is being severely under reported.
Customer Loyalty (CLV): There is a reason that your cell phone starts to slow down months before your two year contract ends and you have no choice but to purchase a new phone every 2 years. This is called Customer Lifetime Value. Nothing is more valuable than the ability to generate repeat business. When quantifying the return on your PPC campaigns, you also must understand the long-term value of a customer. If we only tie revenue back to one purchase, we will never understand the full ROAS of a campaign.
Word of mouth (referrals): Any business will tell you that by far the most effective marketing is word of mouth. For this reason it is essential that you deliver an amazing experience starting with the search results and ending after the sale. If you deliver a good experience, you will get referrals. The goal here is to get to the point where you can measure the average number of referrals driven by each customer. If you close a sale through PPC and that person tells 5 friends about the product, then really your revenue from that sale might be as much as 5x what you thought.
Mind the Gap with Multi-Touch Attribution
One way to see the long term effects of PPC is to measure the difference in revenue between last click attribution & multi-channel attribution (over a 90 day look back period). The difference between these two values will give you the revenue generated by users who came to the site through a PPC ad at some point in conversion funnel, and then came back and purchased through another traffic source (direct, organic, social, etc.). This data set includes both repeat purchasers and users who needed multiple touch points before making a purchasing decision.
As a test, I ran this analysis for two drastically different companies. Company A is a 2 year old company that is just at the cusp of getting out of startup mode and company B is large brand that has been around for 30+ years. Check out the results:
When running this type of analysis, we find that that there is a significant revenue gap between these two attribution methods. What is most interesting is when this gap grows larger and larger each month a campaign runs. Multi-touch attribution, for any type of online marketing or paid advertising, should be an essential part of any marketer’s tool-set in 2015.
Do you have a different method for calculating PPC’s “Halo Effect?” We’d love to hear from you in the comments below!