How to Decrease CPA with Dynamic Search Remarketing
August 27, 2014
It’s the wild west in the world of internet marketing with cut-throat competition, short consumer attention spans and rising costs. It becomes necessary for an eCommerce or other small businesses to keep its top game to attract new customers, and find ways to reduce costs. Cost per acquisition can be high enough, and only a few customers can be converted to a high lifetime value. It only makes sense to make the best use of tools available to reduce cost per conversion.
There is a wide variety of tools available, and they are fairly powerful and capable of delivering results. You have at your disposal conventional tools, new tools, and if you are creative enough, a combination of the conventional and new to create a far more powerful system. Your objective is not to merely acquire a lead; you want to acquire that lead of costs that are not prohibitive.
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The Conventional: DSA and PLA
Sometimes with 1000s of products, you don’t have the time to build out every single product. Along with the time challenges, many of these keywords won’t have search volume. Your focus needs to be on building campaigns for your top performing products and categories.
– Amanda West-Bookwalter on PPC Hero
Dynamic Search Ads have been an important player in driving ads to eCommerce businesses for a long time. You can target search keywords with DSA, the more precise the better. They also offer an added benefit of allowing you to find new keywords through their search query report. If you have a huge range of products, it may not be possible to setup keywords for each product in your catalog. In such cases, use the DSA to target categories. The targeting may be broad, but it can be extremely cost effective.
Another option here is the PLA (Product List Advertising) that offers a greater visual appeal. For Product Listing Ads (or its upcoming successor Shopping Campaign) on Google Ads, users need to have a Google Merchant Center Account. The PLA works much like the DSA; only the displayed advertisement includes an image of the product, plus other relevant text information, e.g. the price. PLA are more useful when you set the keyword to a category.
Imagine an electronics eCommerce website. For a website that has a large inventory, it may not be possible to add keywords to everything for a niche, say headphones. It would be much easier to target “headphones” as a category. A PLA for the category might even use your advertising feed to get images and information of new products to display in your advertisement automatically.
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RLSA the Powerhouse
RLSA (Remarketing List for Search Ads) is a comparatively new entry on the block, making its official debut on Google about a year ago, though it did spend considerably more time in the beta phase before that. RLSA can include features of both DSA and PLA, but is remarkably different in the way that it approaches the idea.
In standard search campaigns, your bids, ads and keywords are the same for every search and every searcher. But if you knew which searchers represented higher value prospects, you might want to bid higher, show on broader keywords or present different ads to these customers to improve your results.
Remarketing lists for search ads lets you do just that. You can use your existing remarketing lists to more effectively reach past site visitors so you can get more conversions and potentially better ROI.
RLSA is not meant for a wider audience that gets you new acquisitions. It is meant to strengthen existing leads and customers, and remind them of your website. RLSA targets existing customers, or people who have visited your eCommerce website at least once. Targeting those who have already visited your website, or done business with you is significantly easier; at least in theory. People who have visited the website or done business with it before, have already been exposed to the brand and are likely to do business again.
Ads of this type can even draw from the visitor’s behavior and history on your website to show them highly targeted advertisements. Since the set – these advertisements are displayed to – is reduced, you can use wider keywords for targeting.
Continuing on our previous example of an electronics eCommerce website, let us assume a customer visited the website, checked out the hard disk category, and perhaps looked at a couple of disks. RLSA will show this person targeted PLA style advertising that focuses on the hard disks available, and those the person noticed.
Additionally, the search web will go wider, and this customer could see your hard disk advertisement even when searching for something as wide as “storage device.”
In fact, you do not need to work hard to see this work. Simply visit a few shopping websites, and see the advertisements you are served get populated with the products pages you visited on those shopping websites. That makes for an encouraging rate of conversion, and is excellent at increasing the Customer Lifetime Value (CLV).
Additional Read: Remarketing and Retargeting
Hello DSA, Meet RLSA
We have seen that DSA is great at is job, and RLSA gets the job done quite well. Our objective, however, is lowering costs and maximizing CPA and CLV. We could use both DSA and RLSA for excellent results individually, but how about we get the two together and make a campaign that is larger than in sum than both individual parts.
Welcome RDSA (Remarketing for Dynamic Search Ads or Dynamic Search Remarketing), the combination of DSA and RLSA. It should be said that RDSA is not an official offering from Google Ads, but rather a user end intelligent combination for DSA and RLSA.
The greatest benefit of an RDSA is that it works as effectively as DSA, and can have better conversion results than the RLSA. This combination allows for greater customer retention, a lower cost per acquisition, and a higher CLV.
Also Read: How to Create Dynamic Search Ads
Looking at the Best CPA
Effectiveness of any campaign cannot be gauged unless we know the cost per acquisition and the profit the campaign can deliver. This makes it necessary to know how to calculate cost per acquisition. For a very simple calculation, you could just keep a track of the number of acquisitions, and the cost of the campaign. In this case, the cost per acquisition would simply be the cost of the campaign divided by the number of leads.
In order to properly assess what you are going to spend in each lead marketing channel, it is necessary to understand what you are willing to spend to acquire a new customer (cost per acquisition), and ultimately, the lifetime value of the customer.
– Ryan Kelly on PearAnalytics
For example, if you ran a campaign that cost $200, and acquired 40 new customers, the CPA is simply 200/40, which comes out to be $5. For fixed time durations, this formula can be effective.
However, a better outlook requires a more detailed cost per acquisition formula. This one hinges on the CLV, or the customer lifetime value. The CLV is the profit that comes from a returning customer. The greater activity period of the customer, and the greater the number of sales, greater is the CLV. For example, a customer buying ten items every year for five years has a high CLV, whereas a customer buying similar five items for two years provides a lower CLV.
It is generally advisable to keep the CPA at 15% of the CLV. This is not a solid rule, but rather works fairly well as an established practice. Having calculated the net CLV, you can calculate the CPA threshold.
Following this, we use the formula already stated to calculate the CPA campaigns from individual campaigns. If your CPA from a campaign exceeds the CPA threshold from the CLV, it might be time to rethink the campaign.
It is generally noticed that the RDSA has a lower CPA as compared to individual DSA or RLSA campaigns. Hence, the RDSA is gaining favor as a lead marketing technique.
Setting up RDSA
Since Display Search Remarketing is not currently available as an out of the box tool, you have to create a combination of DSA and RLSA for RDSA to work. It basically packs the goodness of both in one sweet package.
As the first step, your website should be setup for RLSA and dynamic remarketing to work. Since this requires script and code additions to your website, it is always advisable to get this step done first.
For the next move, we need to kick off a DSA campaign. Setup a DSA campaign as you would usually do, but this time, hit on the “audience” tab and choose a wider audience. You could even choose to go super wide and select “all visitors.” If you cannot find the audience tab, look under “All Campaigns.” Better, use the Ads Editor for easier access.
The primary purpose of this campaign is to bring visitors to your website. Once you get these visitors, it is easier and beneficial to kick off a RLSA campaign targeting these people.
Generally, a DSA campaign does not allow you to select an audience. Hence, you would need to use the Ads editor to include the audience. As the next step, you set up the ad to work as “Target and Bidding.”
Pulling off these unconventional changes, you have created a DSA campaign with RLSA character. Well, congratulations, your RDSA campaign is now all set to work.
When you do go the extra mile to setup an RDSA campaign, it would be advisable to offer it a bid that puts it higher than your DSA campaign, but slightly lower than the RLSA campaign.
Your RDSA campaign will show up in search results for visitors even without having to bid on the specific keywords. Moreover, since the ads will be displayed to people who have already visited your website, you can bid higher than a regular DSA knowing that the chances of conversion are higher.
An RDSA campaign is intended to keep your CPA as low as possible. A way to accomplish this is by increasing the CLV. A customer can be encouraged to regularly visit your website and do business, increasing the CLV of the customer, and allowing you to lower your CPA. In effect, the cost of generating a new lead is a lot higher than doing business with a returning customer. Making the CLV higher helps keep the cost per lead low. Advertising campaigns like the RDSA can effectively ensure that your business is always in the mind of the target customer, who would then be more likely to return for new business.
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