The Pitfalls of Data Driven Marketing

An Example In Behavioral Health Marketing

I often hear techie marketers boast about how they are “data driven” so they don’t get caught up in the errors of human judgment – as if it is possible to make complex decisions based solely on what their computer model, formula or data shows them.

Dane Shakespear - Data Driven Marketing

The idea is seductive because with large data sets over a large period of time it is possible to predict patterns, narrow focus and eliminate waste by optimizing marketing efforts and budgets to the predictions of the data model.

But the catch is, it will always take a thinking person to figure out what the data means and how to apply it to real world actions.

Too many “data driven” marketers begin relying so much on what the data says, that they ignore glaringly obvious real world indicators that what the data tells them is incorrect, misinterpreted, or just wrong.

In general consumer markets with huge volumes of searches, transactions, and conversions along with a relatively few possible search phrases or keywords used to find the product – such as in the t-shirt market, it may be possible to see from the data that the majority of sales come from women between 18-35 during the months of March through June, using the keywords “cute tee shirts”, “cute sayings tee shirts”, and “cut t shirts women’s” – then confidently limit spend to women of that age, during those months, and for those keywords to reduce waste and increase ROI.

However, in high cost, low volume markets such as behavioral health services it doesn’t work that way.

This is because the overall volume of searches is low, the cost of clicks is extremely high, and spread over nearly 3,000 keyword variations used to search for a solution for a child’s issues.

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Refining Google AdWords

Test the Forest, then the Trees, then the Branches, then the Leaves..

One of the most important things of any Google AdWords campaign is to continually test and refine.  The best practices for Google AdWords is to continually test and refine keywords, text ads, display ads, placements, ad extensions, target locations, and on and on.

Dane Shakespear Testing Adwords

When testing so many things, it is easy to test things that don’t matter (yet) before testing things that really matter – or will have a big impact more immediately.

Perry Marshall would always tell me that in each of those things you could test is an 80/20 grouping.  There will be a few things that will have a big impact (the 20%), and the rest a minute impact on your results (the 80%.)  BUT, he would also say:

“Before you test the little stuff, test the big stuff and work your way down. Test the Forest, then the Trees, then the Branches, then the Leaves..”

People often get hung up on testing the punctuation of an ad when they haven’t tested multiple variations of drastically different ads first.

The punctuation will have an effect, and has proven to produce big results in many cases, but how much bigger would the results be if you first identified an ad that is %30 more effective than the current ad?

The idea is to make sure you are in the right forest, with the right trees, before you climb the branches and begin polishing the leaves.

Tweaking the leaves of the wrong kind of tree in the wrong forest just uses a lot of time and money for nothing.

The Unlimited Traffic Technique – A Real Life Case Study in Google AdWords

Unlimited traffic?  It sounds like a pipe dream or only a theoretical concept, but in fact it is not only an actual possibility – it will always happen in any online market when someone does a few simple things just a little better than their competition.

google adwords

On the internet, things operate on 90/10 vs. 80/20

When it comes to traffic, 90% of advertisers a fighting over scraps – the traffic left over after the 10% takes their share.  This is why most Google AdWords management companies measure their success by reducing the average cost per click and cost per conversion for their clients month after month.

When you’re on the 90% side of things, you have to worry endlessly about reducing cost per click, cost per conversion, and every way possible to take as much money out of the process as possible.

When you’re on the 10% side of things, your goal is to be able to afford to spend more than your competitors and put as much back into the process as possible.

I know this sounds bass-ackwards, and even blasphemous to a lot of ad management companies – but keep with me, and I’ll explain how it works – and why. (more…)

A Statistical Correlation Does Not Necessarily Mean a Cause-Effect Relationship

One of the greatest aspects of digital marketing in comparison to traditional marketing methods is the amount of reliable data we can collect in a short period of time.

Marketing Statistics

Like no other marketing medium, we can track just about every aspect of every component of the ad and the people who respond to it.

This is great, but if we’re not careful this flood of data can cause us to draw incorrect conclusions to patterns and correlations we find in the data itself.

Here’s an example.

In 1924 a study conducted at Western Electric on employee productivity concluded that employees were more productive when they changed the lighting conditions.  Years later it was realized that the employees were more productive not necessarily because of the new lighting conditions, but because they new they were being observed during the study.

Another example often cited in statistics classes show the trends on a graph of annual murder rates and ice cream sales.  Both have identical seasonal curves on the graph – they correlate, but does this constitute a cause-effect relationship?  Of course not. (more…)

Google AdWords & Pay-Per-Click Marketing

Pay Per Click is probably the most valuable and effective marketing medium in the history of the world.  Yes, it can be extremely costly if you don’t know what you’re doing.

Google Adwords pay-per-click

Google’s Stupidity Tax

Google has what my friend Perry Marshall calls “a stupidity tax” which means that every way that you misunderstand your customer and their intent costs you money – every way in which you misuse Google’s tools, interface or advertising network costs you money.

Google is not out there to save you money, they’re not your friend, instead they’re out there to give the searcher the best, most relevant information possible.  That means that if you don’t understand your customer Adwords will cost you more and more money until you just go away.  Yes, go away.  That’s exactly what Google is trying to do.  Google is designed to weed out the junk.  Period.

Google is Not Your Friend

For years it was near impossible to get on the phone with someone at Google about your Adwords account.  Only a few advertisers had access to a Google rep. I had one early on and quickly discovered that they were quick to dispense bad advice – always relying on the system’s default settings to figure things out for you.  Bad idea.

Letting Google take care of the details for you, is like paying for valet parking when there’s a space for 50 cents across the street.

The way to compete in Adwords is to know how to avoid the pitfalls that others don’t.  If it costs you less to obtain a customer, a sale, or a conversion – and it costs your competitors more, you’ll be able to outlast them – doing more for less, while at the same time it costs them increasingly more.

2year-conv-vs-cost-conv 2

The chart above is an example of a client campaign that had thousands of keywords lumped together in one campaign when I took it over.  After months of sifting, sorting, testing, and optimizing you can see where the cost per conversion drops dramatically while at the same time the conversions jump up at the same rate.

This kind of optimization shift in cost and conversions enabled the client to reach further into the market for the same cost.  The effect on the competitor is the reverse – it costs him more to compete in the same space.

Capture-changes2

This chart (above) shows two things. First, similar to the first chart the costs and conversion rate invert – then after months of consistent performance there is a huge dip, the conversion rate slowly drops, then suddenly at the end the two invert again.  This is an example of the client relying on Google’s suggested settings.  Starting at the dip.

2year-conv-vs-cost-conv

This chart shows another variation of the same client.  The beginning of the chart you see low conversions and low cost per conversion.  Then after campaign optimization you see the numbers again invert, the cost dropping to almost nothing while the conversions consistently rise (costs staying the same.)  Then at the end you see the hard inversion – cost per conversion spike astronomically, while the conversions plummet to almost zero as the client adjusted Adwords settings to Google’s suggested values.

It will be either profitable for you and devastating to your competitor, or vise-versa.

The longer you’re in the middle of it all, the sooner you’ll get kind of a pulse on your competitors.  It’s easy to see whose paying too much because the rank #1 at the first of the month, then disappear until the beginning of the next. The bottom line, if you don’t know what you’re doing, the system is designed to make you learn or go away.

I’ve managed more than $1M per year in pay-per-click advertising over my career.  I’ve seen the Adwords platform start out as simple as a 1970 Chevy truck and grow to the complexity it has now – the complexity of a space shuttle.  It used to be that you could just jump in and “do” adwords.  Not anymore.  Adwords is so complex, entire businesses are built around the mastery of just parts of what it does.

Why not let just anyone optimize your AdWords campaign?

Because 99% of the time they’ve never learned Google AdWords by having to support a profitable business by spending their own money. And if they haven’t done that, they haven’t learned AdWords.

I find it’s almost impossible for a person to become a great marketer learning entirely on someone else’s dime.  Just like it’s almost impossible for a person to become a great salesman working on straight salary with no commission.