With the holiday shopping season fast approaching, it’s important to allocate your resources to the paid search programs that will deliver the most benefit. The key is to identify the categories, sub-categories and specific products that will “pop” this year, and dedicate the majority of your time building out accounts in those areas.
Which Categories and Sub-Categories to Promote
In general, the categories and sub-categories that performed well for you last year will do so again this year. Look at your year-over-year historical data to determine which categories usually peak, and when, and build out your accounts accordingly.
Of course, it takes time to build out accounts, and time is money. It helps to have a metric to prioritize what to build out. At Adlucent, we look at profit per keyword. In some categories, the profit generated per keyword can double or even triple during the holiday season. The impact to your top line can be substantial; even if the marginal profit per keyword increases just 20 cents, in a category with 500,000 keywords, that’s an additional $100,000 in revenue. We usually see much higher changes. Calculating your profit per keyword across categories and sub-categories can help you pinpoint where to allocate your efforts for the highest return.
Which Products to Promote
It’s also important to dig deeper into each sub-category and try to identify the specific products that will be break-out sellers for you—meaning that their conversion rates are higher than similar products within the category. In this case, the specific products that were hot last year will rarely be the hot items this year. However, the same types of products will generally do well.
These break-out products might surprise you. They are not always the obvious products like the Kindle. Instead, they might be something like the FURminator, which was an incredibly hot item for Amazon around 2008.
Note that the definition of a “hot” or “break out” product depends on your business goals. It might be revenue or margin contribution. Or it could be some other business goal entirely. For instance, industry analysts widely believe that Amazon will do extraordinarily well from a gross revenue perspective with their new Kindle Fire this season. But the Kindle Fire is probably a loss leader for Amazon, meaning it has negative margins. Amazon will still aggressively promote it, however, because they understand the lifetime value the Kindle Fire—essentially a consumption device for Amazon’s vast library of digital books, music and videos—will deliver.
Customer interest in products today can provide early indications of which products will convert well during the holiday season. Look at the products customers frequently flag as gifts on your website during the year versus the ones they flag during the holidays. This helps delineate purchases that are not seasonal from those that are. You might even want to offer customers extended returns into January in exchange for some basic survey information about the occasion for the gift (e.g., Christmas vs. a birthday). Also look at what products customers are starting to add to their wish lists or otherwise saving as a purchase reminder—these could also indicate potentially hot products.
Also, make sure you’re promoting products around the right historic average order value (AOV) within categories and sub-categories. For instance, if the electronics category outperformed for you during the previous holiday season but the AOV was $75, your customers were buying lower-end products as gifts, not flat-panel televisions. This would suggest that you focus your efforts on promoting all electronics products in a range of, say, $50-$100.
As a final note, I’d like to emphasize the importance of retail intuition and hand-crafted ad copy. Obviously, no one knows the best keywords for the next hot product yet—because they’re new, there’s no historical data to rely upon. Only retail SEM experts can predict the right keywords and write compelling, relevant ad copy to capitalize on the sales opportunity. We see time and time again that an investment in quality, in the right areas, goes further than any fully automated “spray and pray” approach.
Ultimately, I’m simply advocating you implement some kind of scoring-based evaluation process to help you determine how to allocate your limited time and budget most efficiently. How you implement such a system is up to you, but with the holiday season before us, it’s important to get started today.