In the world of Search Engine Marketing (SEM), where businesses compete to capture demand and drive conversions, high qualitative data is a critical pillar alongside advanced smart bidding strategies. If handled correctly, these two pillars enable marketers to craft targeted, adaptive, and truly results-driven SEM campaigns that will bring the channel's incremental value to new heights.
Profit data vs Revenue data
Data provides the foundation upon which effective strategies are built for SEM campaigns. This is because data collected and sent to the platform informs every decision of a bidding strategy, from keyword selection to budget allocation. Utilizing the best data for your business makes it possible to align marketing efforts closely with your business goals. For instance, leveraging profit data as conversion value allows ecoms to tailor their SEM strategy, ensuring that every marketing dollar not only drives clicks but contributes meaningfully to the bottom line.
To illustrate. Imagine having two products with the same price, and their respective revenue is sent to Google ads for optimization purposes, the algorithm won’t know which product is better than the other. However, underneath the hood the products might have completely different circumstances, one might have 5% margins and the other might have 25%. Optimizing these two on the same COS% or ROAS target will lead to completely different results. One of them would be profitable when the target ROAS is set to 1000% and the other would not.
Target ROAS & Simulators
To take SEM strategies further, we can start enhancing our decision-making with a target simulator, especially when profit bidding is already in place within the platforms. Target simulator is a tool within Google ads that helps advertisers estimate the impact of changing their Target ROAS on key performance metrics like conversions, costs, and conversion value. If the conversion value then is gross profit level 2 (GP2), it enables you to calculate how much GP3 (Gross Profit Level 3) you will end up with after an adjustment.
By utilizing target ROAS simulators, we as marketers can get closer to setting correct targets thus enabling us to get closer to achieving the equilibrium where GP3 is maximized, which is central for sustainable growth.
Without target ROAS simulators, it can be challenging to determine the optimal target, as the perfect target ROAS shifts based on fluctuating factors like competition and the attributes of specific products in the portfolio.
The role of the target simulator can thus be essential in a data-centric SEM approach, allowing us to navigate the ever-changing landscape of online competition and continuous shifts in product performance and market demand. Helping us to find the ideal point of profitability and growth.
Although the target simulator can be used for accounts where profit isn’t gathered, we still face the problems illustrated under “Profit data vs Revenue data”. It can help us achieve optimal revenue with an acceptable COS% or ROAS. However, it won’t assist us in getting closer to the equilibrium of maximized GP3 as displayed in the table below.
Strategy in between these two pillars
The strategic layer sits between the two pillars, data, and smart bidding strategies, marketers can here determine the right profitability goals for each campaign or product cluster. Whether the aim is to drive top-line revenue, maximize growth while controlling losses, or strike a hybrid balance. By segmenting the campaigns and products on these strategic objectives (as displayed in the image below), the data provided, smart bidding and target simulators can guide us to achieve the desired outcome. Adjusting strategies based on business layers and the role each product plays ensures that SEM efforts contribute optimally to the broader business objectives. Using this strategic approach, marketers can align SEM efforts more precisely with profitability targets, resource allocation, and long-term growth objectives.
