Moving beyond the basics

FOUR ADVANCED STRATEGIES FOR GOOGLE SHOPPING

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Adoption rates rise Since Google Product Search transitioned to Google Product Listing Ads, a pay-for-play image-based ad service, we’ve witnessed adoption rates grow as retailers embrace the SURͤWDEOH�DGYHUWLVLQJ�model. In fact, the number of PLAs displayed in November 2013 doubled over 2012 and the number of advertisers grew 55% to 8,700 (Jefferies). Now that the average retailer is spending between 30% and 50% of their search budgets on product listing ads (PLAs), they are looking for ways to optimize the channel to improve performance. PLA management doesn’t mean greater complexity and more effort, with the right data sets and strategies, retailers can consistently deliver superior advertising.

Introducing Google Shopping

Retailers are spending an average of 30%-50% of their search budgets on Google Shopping. We expect this number to trend upwards as more retailers learn how to drive greater performance through the channel.

50% Product Listing Ad Spend

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0DQ\�UHWDLOHUV�HPSOR\�VLPLODU�VWUDWHJLHV�WR�PDQDJH�ERWK�WH[W�DGV�DQG�3/$V��EXW�ͤQG�WKH\�DUH�XQDEOH�WR�achieve similar results. The reason for this is PLAs have a unique set of challenges that are harder to solve than traditional text-based PPC. Some of the key obstacles include:

1. Ensuring the right ad is delivered Traditional text ads match a user’s search query to a keyword that the advertiser creates and controls. With PLAs, queries are matched to products that are deemed relevant by Google based on product LQIRUPDWLRQ�FRQWDLQHG�LQ�WKH�*0&�IHHG��5HWDLOHUV�KDYH�VLJQLͤFDQWO\�OHVV�FRQWURO�RYHU�ZKHQ�DQG�ZK\�WKHLU�DGV�DUH�DSSHDULQJ�IRU�VSHFLͤF�queries. In order for retailers to control their message and deliver the most relevant ad, they must understand consumer intent. The questions now are, how do retailers understand consumer intent and how can they use it to drive better performance?

2. Optimizing the bid process Bid management is a huge task for retailers, especially those who have a large catalog of products. It’s so complex, most retailers set one bid for broad categories of products, or even worse, for all of their products. This is like setting the same bid for all keywords. Other retailers give up entirely and put all the control back in Google’s hands by setting cost per acquisition (CPA) targets. Optimizing PLA performance is an even larger struggle, so where do retailers get started? Common PPC metrics such as average position and impression share are not available for PLAs, so what data should a retailer look at in order to effectively manage and optimize bids?

3. Managing PLAs with limited resourcesPLAs should receive the same amount of time and attention as the rest of your PPC program. They must be created, managed, and optimized due to complexities that stem from product catalog attributes. IT has to be involved in every change, reducing the HIͤFLHQF\�RI�WKH�PDUNHWLQJ�WHDP�DQG�GUDLQLQJ�FULWLFDO�GHYHORSPHQW�UHVRXUFHV��0DQ\�UHWDLOHUV�VWUXJJOH�WR�ͤQG�LQWHUQDO�UHVRXUFHV�WR�manage PLAs, and external agencies and feed management companies are not providing optimal performance. How does a UHWDLOHU�ͤQG�WKH�ULJKW�VHW�RI�3/$�PDQDJHPHQW�VROXWLRQV�VR�WKH\�FDQ�focus on marketing and advertising strategy instead?

Challenges

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Since Q4 2012, Adlucent clients have seen PLA performance outperform text ads, as well as the industry averages. Cost-per-click (CPC) has remained 13% lower than text ads, while click-through-rates (CTR) have been 77% higher, signaling a positive response to the visually appealing ads by consumers. Shoppers are not only clicking ads, but they’re converting too. The conversion rate (CVR) LV�����KLJKHU��OHDGLQJ�WR������PRUH�UHWXUQ�RQ�DG�VSHQG��52$6���7KH�RQO\�VDFULͤFH�ZLOO�EH�DYHUDJH�RUGHU�YDOXH��$29���%HFDXVH�FRQVXPHUV�DUH�ͤQGLQJ�H[DFWO\�ZKDW�WKH\�QHHG��WKH\�DUH�OHVV�OLNHO\�WR�browse resulting in a 14% lower AOV. During the 2013 holidays, Adlucent saw saw PLAs outpace text ads in clicks (3X), ad spend (10X), conversion rate (10X), and revenue (5X), while CPCs increased as competition heightened YoY.

There are various strategies retailers can employ to improve the performance of their PLA programs, but the difference between a modestly performing PLA and an exceptional one hinges on how well the retailer ads align with consumer needs and interests.

PLAs gain momentum

Adlucent Client PLA Performance Over Non-Brand Text Ads

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Relevancy and PLAs Advertising that’s relevant converts. In the case of online advertising, retailers who take a “set it and forget it approach” will see fewer conversions and return on ad spend, and they’ll ultimately fail the consumer. When it comes to product listing ads, retailers must understand the intent behind each search query so that they’re matched to the most relevant product in the feed. This provides the best opportunity to improve impression volume, clicks, conversion, and deliver an overall better shopping experience for the consumer. It comes down to delivering the right product, at the right price, at

the right time, to the right person. We’ll cover strategies to help get you there.

In the past, traditional advertising meant casting the largest net to see how many customers could be pulled in. Commercials have cannibalized television programs, billboards appear at every major intersection, and jingles have taken over radio airwaves. The average consumer is exposed to an estimated 5,000 messages per day, and that number is only growing.

The rise in the quantity of advertising does not translate into more conversions. Targeting continues to be a critical component to an ads success. Text ads allow for advanced segmentation and targeting, and retailers continue to invest in this channel. By delivering an ad that’s matched to a consumer’s query, a retailer is acknowledging consumer intent and increasing their chances for conversion. The same is true for PLAs.

Just because an ad is targeted, doesn’t mean it will deliver the click through and conversion rates you’re looking for. Only ads that are relevant to a consumer will generate superior results.

Ad relevancy

Note, all of the tactics that follow can be pursued with generally available tools, however, the time and effort required without the assistance of a PLA product may be prohibitive. A new generation of technology is available that provides the analytical foundation for real-time insights and automated workflows that can rapidly implement recommendations.

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1. The right product

“weed eater” Let’s take a look at the search query “weed eater.” It’s both a brand and a category of products. A retailer may not be able to understand consumer LQWHQW�XSRQ�ͤUVW�LQVSHFWLRQ��EXW�DIWHU�analyzing other search and sales GDWD��FDQ�GHWHUPLQH�ZKHWKHU�RU�QRW�the leaf blower by Weedeater is the right match for this query. It’s unlikely to be a match because it’s not aligned WR�FRQVXPHU�LQWHQW��DQG�WKHUHIRUH�WKH�ad should be adjusted or negated.

Selecting the right product Retailers should create PLAs for their product catalog and then monitor performance. PLAs are like shopping windows, you want your highest performing products on display. Since Google determines which product—if any—will be matched; special attention must be paid to how you structure your PLA program. A best practice is to use intent information from your paid and organic search programs, site search, and sales information to help organize product feeds into highly performing categories, or segments. From there you can select the top converting products per category to promote.

The gateway adEven when you select the best product to display, it may not be the one that a consumer purchases on your site rather, the product shown in the ad simply serves as a gateway to another product. Adlucent has found that only 56% of PLA orders include the product listed in the original PLA.

:KLOH�DQDO\]LQJ�DG�SHUIRUPDQFH�LQ�$GOXFHQW̵V�3/$�GDVKERDUG��ZH�QRWLFHG�WKDW�WUDIͤF�IRU�D�KLJK�OHYHO�query was being sent to many different products, but only two of those products were top sellers, GULYLQJ�WKH�PRVW�UHYHQXH�IRU�WKH�HQWLUH�VLWH��7KURXJK�QHJDWLRQ��$GOXFHQW�VKLIWHG�WUDIͤF�WR�WKH�WRS�WZR�SURGXFWV�WR�HQVXUH�WKH\�UHFHLYHG�PD[LPXP�H[SRVXUH��7KLV�UHVXOWHG�LQ�D������LQFUHDVH�LQ�UHYHQXH�IRU�WKH�TXHU\�

150% REVENUE INCREASE&DVH�6WXG\��$�0DMRU�2IͤFH�)XUQLWXUH�5HWDLOHU

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“solitaire diamond ring” When a shopper searches for a GLDPRQG�ULQJ��3/$V�DUH�VKRZQ�IRU�rings costing less than $100 to nearly ���������7KHUH�LV�D�VLJQLͤFDQW�JDS�LQ�SULFH�UDQJHV̲VR�ZKR�ZLOO�JHW�WKH�click? Analyze search and sales data to set an average price that most closely aligns with consumer intent.

When inexpensive is cheap The lowest priced product is not always the highest converter. A shopper may question the quality of the product, your brand, and your overall product line. One strategy is to create price buckets based on the average price at which a customer converts. This data should be pulled by category and for further granularity, segmented by new versus existing customer.

Promotions versus pricePromotions are often hidden in PLAs with a mouse-over. Google includes both MSRP and sale price in the GMC feed. Adlucent data has shown that a lower sales price will typically outperform a free VKLSSLQJ�RIIHU�IRU�3/$V��,Q�WKH�FDVH�RI�SDLG�VHDUFK��D�IUHH�VKLSSLQJ�RIIHU�FDQ�SURYLGH�D�VLJQLͤFDQW�ERRVW�to click through rates when placed in ad text. If you’re offering free shipping for products appearing in your PLAs, try a test where you lower the product price by the shipping amount, and saving the offer for your text ads. As results will vary by retailer, make sure you monitor the results and adjust your program accordingly.

2. The right price

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3. At the right time

“apple iphone” When searching for a broad term OLNH�$SSOH�L3KRQH��ZH�VHH�VHYHUDO�generations of the product. It’s LPSRUWDQW�WR�ͤJXUH�RXW�ZKLFK�PRGHO��DQG�SULFH�SRLQW��KDV�WKH�KLJKHVW�FRQYHUVLRQ��,Q�WKLV�H[DPSOH��WKH�WZR�year old model at the highest price point offered by Walmart should be negated.

Ad performance changes over time You may have a hot product now, but it won’t remain that way forever. Why pay to promote it past its time? It’s important to monitor where each of your products are in their lifecycle and determine which ones are the most relevant now.

When you promote an aging productYou may want to run PLAs for an underperforming product or aging model when you’re ready to liquidate inventory. While it’s logical to promote clearance items, your conversion rate may not be as high as you would hope if a consumer is looking for a newer model.

+RZ�WR�IXQQHO�WUDIͤF�WR�WKH�ULJKW�SURGXFW�,Q�RUGHU�WR�IXQQHO�WUDIͤF�WR�WKH�EHVW�WDUJHW��UHWDLOHUV�KDYH�WKUHH�RSWLRQV��DGMXVW�ELGV��QHJDWH�SRRUO\�performing queries, or simply don’t promote certain products at all. We recommend you use all three with an emphasis on negating poor performing queries.

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“soccer cleats” A person searches for the term soccer cleats. Is this person a beginner or SUR�DWKOHWH"�&KDQFHV�DUH��D�WUDLQHG�athlete would know a brand or model of soccer cleat they wanted and therefore wouldn’t use such a generic term. By better understanding ZKR�WKH�VKRSSHU�LV��\RX�FDQ�DOLJQ�D�SURGXFW�ZLWK�WKHLU�LQWHQW��LQFUHDVH�your odds of a conversion.

:KLOH�ZRUNLQJ�ZLWK�RQH�RQOLQH�UHWDLOHU��$GOXFHQW�QRWLFHG�WKDW�WKH�WRS�WH[W�DGV�TXHU\�ZDVQ̵W�JHWWLQJ�D�ORW�RI�WUDIͤF�ZLWK�3/$V��$IWHU�ORRNLQJ�DW�WKH�SURGXFW�IHHG��ZH�QRWLFHG�WKDW�WKH�TXHU\�ZDVQ̵W�SUHVHQW�LQ�WLWOHV�DQG�GHVFULSWLRQV��3URGXFW�WLWOHV�DQG�GHVFULSWLRQ�FKDQJHV�ZHUH�TXLFNO\�XSGDWHG�XVLQJ�$GOXFHQW̵V�3/$�DXWRPDWLRQ�IHDWXUH��UHVXOWLQJ�LQ�D������LQFUHDVH�LQ�LPSUHVVLRQV�DQG�D�����LQ�&75��KLJKOLJKWLQJ�DQ�LQFUHDVH�LQ�ERWK�UHDFK�DQG�DG�UHOHYDQF\�

A 360% INCREASE IN REACH&DVH�6WXG\��$�0DMRU�2IͤFH�)XUQLWXUH�5HWDLOHU

4. To the right personUnderstanding intent by customer target 7KHUH�DUH�D�ORW�RI�WKLQJV�ZH�FDQ�ͤQG�RXW�DERXW�D�VKRSSHU�EDVHG�RQ�WKHLU�TXHU\��,W̵V�LPSRUWDQW�WR�ͤJXUH�out the key differences in your customers that your ads should align to. Information such as level of expertise, price point, and sense of urgency are located within the search term. One useful trick LV�WR�DQDO\]H�JHQHUDO�YHUVXV�VSHFLͤF�TXHULHV��,I�\RX̵UH�DQ�DSSDUHO�UHWDLOHU��WKHUH�ZLOO�OLNHO\�EH�D�ODUJH�difference between a woman searching for a pair of high rise boot cut jeans and one searching for Levi’s skinny jeans. Creating groups aligned to customer intent will provide you with the greatest opportunity for conversion.

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Core Benefits of Google Shopping Campaigns

• Visibility into Product Catalogs: Google Shopping Campaigns now offers retailers the ability to segment products into their own groups directly in AdWords. This gives a view into your product catalogs without having to go to the Google Merchant Center, helping streamline the previously fragmented experience of slicing and dicing a product catalog into targets.

• Visibility Into Product Ad Metrics: Retailers can now see product performance data independent of its product group. Previously they were only able to get performance data at the product target level, and for broader targets, weren’t able to decipher which products within that target were performing well. This provides visibility into performance of the exact product that was displayed in the PLA.

• Visibility into Competitive Metrics: Competitive metrics such as impression share, benchmark CTR, and benchmark CPC are now available through Google Shopping Campaigns, giving retailers the ability to see how they stack up against their competitors.

Tips for a Successful Transition to Google Shopping

• 0DNH�6XUH�WKH�3URGXFW�)HHG�LV�8SGDWHG� Review your product_type, adwords_labels, and adwords_grouping values before migrating your Shopping Campaigns. Remember that adwords_labels and adwords_grouping will no longer be supported, and the new custom_label attribute will be limited WR�ͤYH�FROXPQV�IRU�HDFK�SURGXFW�

• Transition Slowly: Move to Google Shopping Campaigns slowly, making sure the right strategies are being aligned for your product ads program and business goals. Quick moves can have a detrimental effect on impression share, CPCs, CVR, etc.

Transitioning to Google Shopping Campaigns Advertisers will be forced to shift to Google Shopping Campaigns by end of August 2014. This new campaign type for PLAs provides retailers with more ways to manage their product ad programs. Prior to Google’s launch of Google Shopping Campaigns in September 2013, a single ad group was associated with an entire Google Shopping Campaign. After realizing the importance of ad groups, Google has launched ad JURXS�OHYHO�FRQWUROV��LQFOXGLQJ�PRELOH�PRGLͤHUV��QHJDWLYHV��DQG�SURPRWLRQDO�FRS\�WR�EHWWHU�PDQDJH�\RXU�product ads.

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• .HHS�D�&ORVH�(\H�RQ�7UDIͤF� Once you have begun the transition to Google Shopping Campaigns, NHHS�DQ�H\H�RQ�\RXU�WUDIͤF�OHYHOV�̰�QRW�RQO\�IRU�FHUWDLQ�SURGXFW�JURXSV��EXW�IRU�SDUWLFXODU�TXHULHV�DV�well. Make sure your new campaigns are picking up your most successful queries before shutting the old campaigns off. • Begin Transitioning Sooner Rather than Later:�6WDUW�E\�PRYLQJ�\RXU�VPDOOHU�FDPSDLJQV�RYHU�ͤUVW��7KLV�DOORZV�\RX�WR�JHW�D�ͤUP�JUDVS�RQ�KRZ�WKH�QHZ�*RRJOH�6KRSSLQJ�&DPSDLJQV�ZLOO�SHUIRUP�IRU�\RXU�product ads, before transitioning over the rest of your product ads program.

)LQGLQJ�D�%LGGLQJ� Strategy that WorksStarting June 30th, Google will be retiring their max CPA% bidding strategy for PLAs. So what does this mean for your PLA strategy? Let’s take a look.

What is cost per acquisition (CPA)% bidding? A CPA percentage target is calculated by subtracting overall cost from sales. Google uses historical conversion data to predict the likelihood that ads will convert, and then sets CPA% targets at the ad group or campaign level.

7KH�DGYDQWDJH�RI�D�&3$��ELGGLQJ�VWUDWHJ\�LV�D�UHWDLOHU�FDQ�VHW�LW��DQG�IRUJHW�LW��7KH�PDLQ�EHQHͤW�EHLQJ�the time saved in managing campaigns.

The disadvantages of a CPA% bidding strategy are two-fold. First, retailers leave money on the table with broad spend allocation. Second, consistent performance requirements limit your flexibility. CPA% campaigns are slow to react or anticipate sudden changes in performance because Google is only looking backward at a 30-day window. This prevents seasonal or new product campaigns from even using the model.

What is cost per click (CPC) bidding? A CPC bidding strategy allows retailers to decide how much they would be willing to pay for someone to click on a text or product listing ad (PLA), and then Google determines the actual cost that will be paid based on that retailer’s quality score (QS) and ad rank.

7KH�ͤUVW�DGYDQWDJH�RI�D�&3&�ELGGLQJ�VWUDWHJ\�LV�WKH�OHYHO�RI�JUDQXODULW\�WKLV�PRGHO�SURYLGHV��5HWDLOHUV�FDQ�SUHFLVHO\�DOORFDWH�VSHQG�LQ�RUGHU�WR�RSWLPL]H�UHWXUQ��6HFRQG��UHWDLOHUV�FDQ�TXLFNO\�DGMXVW�WUDIͤF�volume to anticipate or react to sudden performance changes.

The one disadvantage for the CPC bidding strategy is that granularity can potentially lead to scalability issues. Retailers can be stuck with a multitude of bids that have to be adjusted regularly so targets can be met.

A Happy Medium: The Portfolio ApproachAt Adlucent, we recommend retailers meet in the middle to maximize conversions and clicks. We take a portfolio approach by optimizing CPC bidding strategies in order to achieve a CPA% goal. 7KLV�SURYLGHV�JUDQXODULW\�DQG�IOH[LELOLW\�ZLWK�D�&3&�PRGHO��ZLWKRXW�VDFULͤFLQJ�UHWXUQ���

CPA Success When we transitioned one Adlucent client from CPA% to a portfolio CPC strategy, clicks increased 55%, revenue increased 71%, CPA dollar amount went down 11%, and the CPA percentage amount decreased 7% year over year.

END CPA

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Before and After Increase in Impressions

CPA Impressions CPC Impressions Total Impressions

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)LQGLQJ�WKH�ULJKW�VROXWLRQ�'XH�WR�UHVRXUFH�FRQWUDLQWV��PDQ\�UHWDLOHUV�ͤQG�WKHPVHOYHV�XQDEOH�WR�GHGLFDWH�WKH�DPRXQW�RI�WLPH�DQG�IT resources needed to properly manage a PLA program. Some elect to outsource this function to their feed management provider. While these solution providers deliver a properly formatted feed, they don’t provide the insights into consumer queries that are necessary to optimize your PLA program. They are also not incentivized to improve performance. Other retailers elect to work with a search agency for PLA management. Unfortunately, many agencies lack the technology that’s necessary to make real-time updates and enhancements to the feed in order to improve ad performance. Agencies also provide a RQH�VL]H�ͤWV�DOO�DOJRULWKP�WKDW̵V�QRW�WDLORUHG�WR�\RXU�XQLTXH�EXVLQHVV�JRDOV��6R�ZKDW̵V�WKH�DOWHUQDWLYH"

Technology is the answerA PLA management technology can take the burden off an in-house team by automating bid optimization and making performance recommendations.

Adlucent is the only PLA solution with bid management and real-time feed optimization built into one tool. At the core of the technology is ad relevancy, which helps predict which product will be relevant to each consumer based on intent data.

Other key capabilities include:

» Diagnose problems and recommends changes based on pre-determined priorities and investment thresholds

» Automated bid management and real-time feed optimization

»��)XQQHO�WUDIͤF�WR�WKH�ULJKW�SURGXFW�EDVHG�RQ�FRQVXPHU�LQWHQW�LQVLJKWV

» Customizable dashboards and reporting capabilities

Managing PLAs with limited resources

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Summary3URGXFW�OLVWLQJ�DG�SURJUDPV�DUH�FRPSOH[�DQG�GLIͤFXOW�WR�PDQDJH��$V�UHWDLOHUV�FRQWLQXH�WR�VHH�VWURQJ�results from PLAs, they will continue to invest more spend, further driving the need for greater performance. The amount of data to be analyzed, the complexity of coordinating strategies across disparate systems, and the number of changes required to provide real-time optimization is beyond the scope of most individuals and teams. With well-integrated technology, powerful analytics, and automated workflows, a high performance PLA program can be effectively managed with minimal effort.

GENERIC PLA SOLUTION ADLUCENT PLA SOLUTION

Text Ad Performance PLA Performance

About AdlucentAdlucent is a retail marketing technology and analytics company focused on delivering relevant search ads that convert. Adlucent uses a unique combination of shopping data, consumer preferences and in-market data to dramatically improve advertising precision. 7KURXJK�WHFKQRORJ\��6DD6�DSSOLFDWLRQV�DQG�VHUYLFHV��$GOXFHQW�GHOLYHUV�HIͤFLHQW�VROXWLRQV�WDLORUHG�WR�retailer need.

Interested in more PLA resources? Visit www.adlucent.com, email us at solutions@adlucent.com or call 800.788.9152

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