PPC Advertising: How Hotels Can Combat Rising CPCs & Increase Revenue

The Problem

If you ask 10 SEM professionals about their greatest concern regarding the long-term viability of PPC advertising, I would guess 9 out of 10 would mention rising CPCs. As Google continues to milk their Paid Search cash cow, doing everything they can to monetize their SERPs pages, many hotel advertisers are left wondering how they can compete with larger brands and OTAs with seemingly unlimited marketing budgets. We at GCommerce have seen this trend firsthand, with CPCs rising by as much as 30-40% YOY in some cases. All else being equal, this leaves hoteliers with 3 main options:

  1. Increase Paid Search budgets each year to keep up with rising CPCs
  2. Keep Paid Search budgets the same, acknowledging that revenue and ROI will most likely fall YOY
  3. Take budget away from Paid Search and put it into a different advertising channel

None of these options are ideal, but as Paid Search is near the bottom of the proverbial purchasing funnel, it’s important to keep your ads in front of your most qualified potential customers. With this in mind, only in rare cases would we recommend shifting budget from Paid Search to a different channel as part of our marketing strategy.

This then begs the question, if you are going to commit to PPC advertising, do you just have to accept the reality of rising costs and decreasing revenues, or is there anything that can be done to try to buck that trend? This is a question we’ve been trying to answer, and it turns out there’s a silver lining to this seemingly dark cloud.

The Experiment

The use of technology in marketing has become ubiquitous as the industry has accepted that computers and algorithms can work much more quickly and efficiently than we can on our own. Bid optimizers such as Google Doubleclick and Adobe Media Optimizer have become staples at most digital marketing agencies because of their extremely powerful ability to learn which users are most likely to convert as well as which max CPC bid will gain the most goal conversions for a given keyword, allowing us as search marketers to spend our clients’ budgets much more efficiently and, most importantly, increase ROI.

Before the experiment, we typically assigned all the keywords in an account to one bid strategy, which lumped in branded keywords with non-branded keywords, and we would set the CPC floors & ceilings fairly wide in order to give the software the freedom to change keyword bids to a higher degree. The more we thought about this, the more we thought there must be a better way to set them up. This led to the decision to test breaking out our bid strategies into branded & non-branded keywords, where the max CPC for branded keywords is kept quite low while remaining fairly high for our non-branded keywords.

Since branded keywords almost always have the lowest CPCs and the highest revenue production, we didn’t want to spend more than necessary on them since they will most likely convert well even if they aren’t in the #1 position on the SERP. However, for those accounts that have non-branded keywords, we wanted to maintain good exposure for those specific keywords, so we were willing to pay more for those terms if it meant getting a higher CTR and more potential conversions.

Results

We compared data from the month before we split up the bid strategies with the month that we broke them out, and the results seem to suggest that this move was the correct one. CPCs decreased by an average of 6.71% while revenues increased by an average of 121.54%.

While this test is certainly not conclusive, it shows the potential for SMBs to compete in the current Paid Search landscape while both increasing revenues and lowering CPCs.

There is not much we as digital marketers can do to stop Google from trying to make money, but we can employ the use of testing, experimentation, and technology as part of our marketing strategies to do everything in our power to maximize ROI for our clients. If you would like more information on how our Paid Search specialists can optimize your hotel’s PPC campaigns and make you more profitable, get in touch with us today!

 

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