What is Keyword Tiering and How Can It Increase Paid Search Profit?


Keyword Tiering: Can It Increase Paid Search Profit? - Eric Sachs SEO

Running PPC campaigns that meet your business needs without breaking the bank isn’t exactly an easy thing to do. It’s quite the balancing act for many, including those who consider themselves PPC professionals.

The entire goal is getting more clicks – and hoping those clicks not only translate to site traffic, but to leads that will eventually convert to sales. But when you’re on a budget, and even when you’re not really, you don’t want to pay for the wrong clicks. If you’re paying for a lot of clicks, but aren’t seeing a return on investment, those low quality leads are a waste of money. And even though sometimes the wrong clicks can still make you money, it doesn’t always translate to a profitable sale.

That’s where keyword tiering comes in to save the day.

What Is Keyword Tiering?

This is a method of prioritizing your paid search ad spend based on keywords you know are performing well. Some keywords are a waste of money and you need to stop bidding on them. When you stop bidding on the ones that yield you no profit, you leave more room in your budget for those that do.

It’s not possible to rely solely on branded terms because they are the ones that perform the best. You still need traffic and conversion volume, which translates to sometimes bidding on keywords that aren’t as optimal as you’d like. But the more of those kinds of keywords you have, the less profitable your account becomes.

If you’ve got a decent account manager, they’ll find a balance between the keywords so you’ll get profit and conversion volume at an affordable rate, but since your business needs change for a number of reasons. This means the number of conversions and sales your business can handle may also change.

Think about it. If the majority of your sales team is out on vacation, it doesn’t make sense to spend a bunch of money bringing in high quality leads while no one is around to close the sale.  Yeah, you could reduce your ad spend on all your keywords, but I’m here to tell you that you should just cut spending on the less profitable keywords. Tiering allows you to turn tiers on and off as your business needs change.

Setup Keyword Tiering

Step One: Check Your Tracking

Before you get started, it’s critical to have a quality conversion tracking system in place. If you don’t, your keyword tiering system may not be as effective as you’d like. It’s only as good as the data used to support it.

If you do not have several months worth of quality conversion data available, this must be setup before you can continue with the rest of the process.

It’s incredibly easy to track form completions in AdWords, but if you want to make keyword tiering work for you, it’s necessary to track all the conversion actions that matter to your business. Some examples include:

Less than 30% of AdWords advertisers are using high-quality conversion tracking methods. If you’re one of those accts that doesn’t have adequate tracking, you need to fix that first. If you’re using AdWords to generate leads, you must know which keywords produce sales. If you’re not aware of how profitable your keywords are, you won’t be able to develop effective tiers.

Step Two: Categorize Keywords

When you have one to two sales cycles worth of solid tracking data, it’s time to setup your tiers. Of course the right strategy will vary from one business to the next, and may even change over the course of business operations. In this example, I’m giving you four tiers, and that’s the starting recommend most people recommend. You may find you can get away with less, but you may also find that you need more.

Keyword Tiers

Tier 1: Proven Profitability

These are the best keywords you’ve got. They are the ones that are consistently producing profitable sales, and are generally driving most of your revenue. Unless your sales team is way too busy with the leads you already have, or you’re short staffed while your sales team is away, there’s no reason to ever turn this tier off. If you do, you’re missing out on new profitable business. And there’s no reason for these keywords to miss out on impressions because of your budget issues. Always remove the budget from a lower tier and allocate it here. Paying for impressions should always be on these keywords first.

Tier 2: Producing Sales

Keywords you place in this tier are generally a reliable source of qualified leads and sales, but for whatever reason, they’re not consistently as profitable as you’d like them to be. Your cost per click may be running a little high for these leads, or maybe the customer lifetime value associated with these keywords is low.

A lot of the time, it’s possible to optimize a bit and turn tier two keywords into tier one keyword. When this happens, promote it, but until then, leave it in the second tier.

If you’re looking to increase your lead volume, and you’ve reached the maximum share on the first tier, then you move down to this tier. The account will not be as profitable, but you’ll still get good leads and sales for a reasonable price.

Tier 3: No Sales – Yet

In this tier, place the keywords that are promising, but haven’t translated to sales yet. They may give you leads, but you’re not really able to predict whether or not those leads will convert into revenue.

If your sales team is really hungry and you’ve maximized your impression share on both tiers one and two, it’s time to turn on this tier. The right sales person can usually turn an unproven source of leads into a reliable stream of clients.

Tier 4: Producing Leads

At this tier, you’ve got your keywords that could go either way. They’re bringing you leads, but those leads aren’t the best match for your business. They are the ones who are unresponsive, or worse, trying to sell you something.

But, you stick with them because occasionally you’ll find the golden nugget that makes it worth it. It’s best to leave these keywords off until there’s major complaints about lead volume. Most often, the keywords you place here are expensive busy work for your sales team.

But, if team morale is down, turning on keywords in this tier will at least keep some leads in, which is better than nothing. Once the team gets busy working on tiers one to three again, you can turn the fourth tier off.

Back to Setup

Step 3: Labeling Your Tiers

At this point, you need to sort your keywords tiers within AdWords, so it’s time to label them. If you’ve never used labels in AdWords before, all you have to do is click on the Keywords tab. From there, click Columns, then select the double arrow next to Labels, and click Apply.

Next, check the boxes on all your tier one keywords. Click labels in the drop-down. Create new label, and name it “Tier 1”.

Repeat the steps with keywords in the other tiers you’ve setup for your business.

Step 4: Maximize Profitability

Once your tiers are setup, use them! To make it easier, setup custom filers for each tier. This way you can quickly see the keywords that are in that tier. Click on the Keywords tab, then choose Create filter from the drop down menu. Set the filter to “Labels contains any” and choose the tier you want. Save and apply the filter.

Over the course of the next quarter, you should notice your cost per conversion drop dramatically, as well as the cost per sale.

Smart Keyword Tiers Make the Most of Your Budget

Keyword tiering can help you make the most of your paid search budget, which is especially important if you’re working with a less than ideal amount of money. This strategy will of course take time to implement, but will increase the overall value of your AdWords account.

Do you use keyword tiering? If not, do you plan to now? Tell me what you think in the comments below.

SEO virtuoso, CEO @Sachs Marketing Group. Focused on being of service to business owners - helping to better position them in the eyes of their audiences.

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