There's no loyalty from shoppers who buy only from the lowest-price provider. The moment a competitor lowers its price below yours, the customer leaves. There's such cost and effort associated with acquiring customers that in many service industries, customers only become profitable in the relationship's second or third year.
Spending acquisition dollars to attract customers who defect the moment a cheaper option is available is short-term thinking.
In an ongoing paid search advertising campaign, a large insurance company expressed interest in appending some of its keywords and keyword phrases with the words "cheap" and "free," as in "cheap health insurance" and "free insurance quote."
We tested these phrases and noticed some trends. Keywords and keyword phrases with solid conversion rates plummeted when "cheap" or "free" was appended onto them.Specifically, conversions were 25 percent less likely when the word "cheap" was appended to any of the company's search terms.This occurred in the insurance industry. Other verticals may experience different results.
A second phenomenon is the relationship between longer keyword phrases and higher conversion rate. We expect a specific query to convert at a higher rate than a broad keyword would. Not everyone grasps the greater benefit: More specific, longer phrases are often less expensive than broad keywords. Again, the plural of "anecdote" is "data."
The longer the keyword phrase, the higher the conversion rate. But often, longer keyword phrases aren't queried with the same frequency as shorter phrases. The trick is to identify as many of the longer phrases as possible. Google's new AdWords Automater system could be a powerful tool in increasing marketers' ability to identify more long, specific keyword phrases that can be purchased at lower rates to increase volume on these higher-converting, less-expensive keyword phrases.
Back to that earlier point: Though appending "cheap" or "free" to a keyword phrase makes the phrase more specific, consider the long-term benefit of attracting and paying for clicks from bargain-hunting customers.
With only anecdotal evidence and gut instinct on which to base this hypothesis, I'd posit even if customers searching on "cheap"- and "free"-related queries were attracted at a significantly lower CPC and converted profitably on their first site visit, they're more likely to defect when your competitor targets that phrase and offers a lower price.
The answer in SEM, as with all marketing, is test and measure.
posted by Jen @ 5:21 AM
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