This time, instead of looking at the existing portfolios, I looked at the individual keyphrases to see how they performed and if there would be any obvious answers.  Luckily there was!  It turns out that over the last 4 months more than 95% of the 22,000 keyphrases didn’t result in a sale, an assist to a sale or lead.  This made my head spin.  I had always assumed that during the sales cycle people were clicking on the paid ads multiple times.  Therefore, even though we only expected a few hundred sales a month we would need a few thousand active keyphrases to support the multiple clicks of a single user.  This assumption was proven wrong by the numbers.   

After uncovering this flaw in our strategy, we have now restructured the campaigns into only 4 groups:  Performers, Assisters, Lead Generators and Growth Phrases.  The performers can be directly tied to a sale.  The assisters can only be connected to a performer, meaning they were clicked on early in the cycle.  The lead generators only caused leads and the growth phrases are phrases we hope will become part of one of the first 3 groups.  This allows us to put 95% of budget into performers and assisters, 2-3% for lead generators and another 2-3% for growth phrases.   This restructuring allowed us to cut 23% of the budget with room in the budget to experiment on new phrases, even during tough times.  It still isn’t clear how much of a dip in revenue we will see.  My hope is that there will be less than a 10% drop in revenue, because the only group that is truly cut is the the outliers, an unpredictable bunch. 

I think this strategy can work for all companies in times like this.  You may need different labels on your groups and maybe more than 4 groups, but the overall strategy should be the same.  Each group should have its own budget and target ROI associated with it, letting you optimize each one as frequently as possible.  We are planning on regrouping every month based on 4 months worth of data.  These two parameters are probably different for different companies, because it all depends on the sales cycle.  Companies with a longer sales cycle and a higher end product can probably afford restructuring monthly.  Shorter cycles may demand weekly restructuring.

I am really excited about this update and if anyone decides to implement something similar, please let me know how it works for you.  If you already have, let me know if there is something I am missing or if I completely missed the mark, please let me know too.  Feedback is always welcome!

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