Sell Thousands of Products? Have a Search Budget Allocation Strategy?
For eCommerce brands that sell thousands or tens of thousands of products, determining how to allocate an overall paid search budget may not be a straightforward process. Based on the volume of search demand, many brands could spend their entire search marketing budget in just one product category.
When we talk with brands about how to maximize the ROI of their search budgets in an ecosystem of thousands upon thousands of products, we apply a framework with two primary considerations:
1. The strength of their brand across the different product categories that they offer
It’s essential that brands have an accurate self-awareness of their most known and sought-after products. For example, Swatch is undoubtedly most known for their watches, but they also sell sunglasses. If maximizing ROI is the goal, companies are best off investing search advertising dollars towards the categories where their brand is the strongest. If brand building is the goal for a new product category, search advertising is best complemented with other awareness tactics like programmatic or social. Some brands have weak awareness across many of their product categories, while some brands have very strong awareness across the majority of their categories.
2. Company structure and budget flexibility
For companies with many different departments, locations, or brands, we typically find that the budget is either fluid amongst these various stakeholders and groups, or each department has a set budget and goals. This, of course, impacts the budget allocation strategy applied across the entire catalog of products sold.
There are four primary combinations of these considerations:
- Weak Brand, Flexible Budget: For brands with relatively weak strength across many of their categories, but have flexibility in how they allocate their budget, we recommend a category domination strategy. If ROAS, AOV, or Conversion Rate are lower than desired across the board, brands are better off emphasizing and spending against certain categories to improve these metrics. Additionally, when you spread a set budget across too many products and categories without a strong brand, it is much harder to analyze and learn what is and isn’t working within a search program. In this case, we recommend selecting a smaller number of categories to focus on and optimize spend based on performance within those categories. This not only helps build brand awareness within a smaller number of categories, but also concentrates the budget so meaningful learning and optimization can take place.
- Strong Brand, Flexible Budget: On the other hand, if you have a strong brand across most of the categories and products you sell, and don’t have any restrictions or coverage requirements at the category or department level, we recommend testing and learning across a wider catalog of products. Then optimize based on the best product or keyword performance at a granular level. This means some categories may only have a handful of products that meet the target ROAS, while other categories have many investable products. In order to execute this strategy, your account structure must be built with a high degree of granularity so that you can identify individual top performing products and top performing keywords.
- Strong Brand, Non-Flexible Budget: For companies with strong awareness across categories that have department level P&Ls, typically they have assigned fixed budgets and goals for each department. In this scenario, we recommend that within each department, search budget is tested across the full catalog of products while using a granular account structure, as in the previous scenario. Budget should be optimized and shifted to the top performing products based on the campaign goal - whether that is ROAS, customer acquisition, cost per lead, or something else. For some brands, this may mean that the full search budget can be spent on a subset of SKUs and still achieve the overall goal without investing in other keywords or products.
- Weak Brand, Non-Flexible Budget: If you are in charge of performance media at a company with weak brand strength in many categories, and have restrictions in budgets, quite frankly, you aren’t likely set up for success. Without the ability to concentrate your budget into a few places, you will wind up spreading your budget too thinly across all categories, preventing you from collecting meaningful and actionable data.
By now, you are starting to see just how much more complex search marketing is for eCommerce brands that sell a massive volume of different products. In my next post, I will explain more about how brands use reporting and infrastructure to combat some of these challenges. If you’d like to learn more about how Rise can help your paid search program, contact us today.