Who doesn’t get excited over a good promotion? But for manufacturers, it may not be what you want to lead with in your digital ad copy. Why? We have found that, when running the details of your promotion vs. highlighting your name or brand, customers do not realize it’s your brand directly advertising. They look for an ad with your name when they are searching. Even with a fantastic promotion, digital advertising performance has shown to be lower than just highlighting your brand.
We ran several tests with our manufacturing clients. We found these four results in most instances :
- Clickthrough rate on promo ads dropped over 10%
- Average CPC increased by over 40%
- Conversion rate increases about 10%
- Increase in revenue of under 2%
Revenue does increase, so what’s the problem? The problem is the revenue you’re missing out on because you aren’t driving as much traffic to the site, and the lost profit because of missed revenue and the higher cost of clicks.
Clickthrough Rate Drops
Consider this scenario: A potential customer searches for a brand of “ABC XYZ Widgets” and sees these two ads headlines:
The top ad promoting the brand and custom options receives more clicks with a clickthrough rate of higher than 10% over the promo ad. The customer who is looking for the brand or product knows what they are going to receive when they click on that ad. If they read into the ad description in the second ad, they may have an idea of what they will receive. However, Google indicates that people are most likely to notice your headline text, and recommends not cluttering it with a coupon code – especially one the user will have to magically remember.
Average CPCs Increase Over 40%
Quality score plays a large factor in an increase of cost.
First, ad history builds quality score over time. As ads achieve consistent or increasing clickthrough rates over time and provide good content and a connected landing page experience, their quality score generally remains high. When you switch ads, the system re-evaluates the quality score. Now one of the components – history – is gone, which generally causes a drop in quality score. Any type of quality score decline raises average CPCs.
Second, besides not having history and historical data, these promo ads have over 10% lower clickthrough rates, as already noted. This is going to drop quality score even further.
And lastly, since the ad copy is now so promo heavy, the connection of the ad copy and the landing page experience is somewhat broken, and will also lower the quality score.
“But Revenue is Up!” – Let’s Do the Math
Yes, revenue is generally up 1-2% during promotion time. It usually taps out at just under 2%. We have looked at this week-over-week, month-over-month and year-over-year. While 2% is still an increase, we took it deeper to see what potential was being lost.
An evergreen brand ad on a typical day has 100 clicks at $2 average cost-per-click. It also has a 10% average conversion rate and an average order value of $75. This gives it a total of $750 in revenue on $200 spend. Leaving $550 in profit.
Let’s assume the same impressions, but the clickthrough rate drops 11%, down to 90 clicks. The average cost-per-click increases to $3.50. The conversion rate increases and average order value goes up to $77. The revenue increases to $762, a 2% increase. All on a $315 cost. Leaving $447 in profit.
However, if we run the promotion in a promo extension, along with our evergreen brand ad, and have the higher clickthrough rate and higher conversion rate and average order value, we get the same 100 clicks and 11% conversion rate at the $77 average order value for $847 revenue, all on a $200 cost. Leaving $647 in profit!
Side-by-Side comparison:
| Metric | Evergreen Ad |
Promo Ad |
Evergreen + Promo Extension |
| Clicks | 100 | 90 | 100 |
| Cost Per Click |
$2.00 | $3.50 | $2.00 |
| Cost | $200 | $315 | $200 |
| Conversion Rate |
10% | 11% | 11% |
| Average Order Value |
$75 | $77 | $77 |
| Revenue | $750 | $762 | $847 |
Here’s the catch. Because the details of your promo are smaller in the promo extension, you need to highlight the promotion on your landing page. This way consumers are more likely to see and take advantage of it, which will drive the higher conversion rate and average order value.
If you’d like to learn more about this, or have any other other marketing questions, please leave a comment below or contact us.