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Improved Pay-per-Click Marketing Performance from Time-Tested 80/20 Principle

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As marketers and business owners, we’re always looking for “the next big idea or strategy” to maximize our business performance. Yet, the application of time-tested principles consistently achieve greater results over efforts to create newer ideas and strategies.

For example, Stephen Covey’s New York Times best-selling and world-renowned book, Seven Habits of Highly Effective People is a self-proclaimed synthesis of principles taught by great teachers and philosophers over 150 years ago 1. The world-wide success of this book is evidence to the time-resistant power of principles.

In addition, many hugely successful Internet Marketers generated significant fortunes from applying 50 to 75 year old direct mail principles to the new Internet medium. Marketing strategies used by greats like Claude Hopkins, Robert Collier and John Caples have significant application in today’s digital environment.

Although pay-per-click marketing is a relatively new Internet marketing strategy, its performance relates well to an old principle called ”Pareto’s Law” or better known as “the 80/20 Principle”.

The meaning of the 80/20 Principle is best explained by a recent book, The 80/20 Principle: The Secret to Success by Achieving More with Less”, written by Richard Koch:

“The 80/20 Principle states that there is an inbuilt imbalance between causes and results, inputs and outputs, and effort and reward. 80/20 relationships typically will show that 80% of outputs result from 20% of inputs; that 80% of consequences flow from 20% of causes; or that 80% of results come from 20% of effort.” 2

When applied to pay-per-click marketing, 80% of outputs (or desired visitor actions on your website), result from 20% of the inputs (your keywords.)

Applying the 80/20 Principle to Pay-per-Click Marketing

One of the benefits of running a pay-per-click marketing campaign is the control gained from selecting keywords to bid on. In essence, the keywords you select enable you to target specific types of individuals among varying demographics and at various points within their buying cycle.

But because it is difficult to know specifically which keywords (inputs) will ultimately generate the most actions (outputs) the process of “keyword selection” should be applied liberally. This means that all possible keyword variations and associations should be selected to figuratively “blanket” or span across all potential search queries for your products or services. By relying on your keyword-level tracking system, over time, the resulting website actions will sort the top performing keywords from the poor-performing ones.

Under the 80/20 Principle, if you initially select 1,000 keywords for your pay-per-click marketing campaign, over a month or two depending on visitor volume, your keyword-level tracking system will uncover 20% of keywords that produce 80% of your results. Likewise, the 80/20 Principle will expose roughly 80% of the 1,000 keywords selected that produce minimal to no results.

Aside from seasonality variations and marketplace trends that effect keyword performance, the 80/20 Principle pinpoints a significant operational process that all Internet marketers should implement immediately. By tracking your pay-per-click marketing campaign at the keyword level and identifying the specific keywords that produce maximum results, you can eliminate roughly 80% of your poor-performing keywords. Through this “keyword filtration process” you will re-allocate budget dollars to the top performing keywords and reduce keyword management time spent on poor-performing ones.

Remember These 5 Keys…

1. During your keyword selection process, “blanket” your target market with every relevant keyword variation and association used by your target market to find your products or services. Use Overture or Google Adwords’ editorial review to define the relevancy boundaries (or “the ends of the blanket”) for your target market.

2. Define at least one value-oriented action such as an opt-in, subscription, registration or sale that you seek a visitor to perform on your website. This action (called your “marketing objective”) is the determination point for measuring how your keywords are performing.

3. Implement keyword-level tracking to identify which 20% of your keywords produce 80% of your actions.

4. Pay close attention to seasonality variations and marketplace trends that may cause fluctuations in keyword performance. Instead of eliminating all 80% of your poor performing keywords, identify the most relevant ones to your products and services and the ones with the highest demand volume and work on adjusting their bids, re-writing their titles and descriptions or re-engineering their landing pages to increase their performance.

5. If branding is your primary objective as opposed to “performance” remove your brand-oriented keywords from your 80/20 Principle analysis and associated performance metrics.

Analyze your pay-per-click marketing against the 80/20 Principle to see if an imbalance exists between your inputs (keywords) and outputs (actions). You will discover that a simple revamp of your pay-per-click marketing campaign will significantly increase your visitor-to-action conversion rates, reduce your cost per action and enable a more efficient allocation of your budget across your top performing keywords.

Sources: 1 Stephen Covey, Seven Habits of Highly Effective People (New York, Simon & Schuster Inc., 1989) pg. 18.

2 Richard Koch, The 80/20 Principle: The Secret to Success by Achieving More with Less (New York: DoubleDay, 1998) pg. 4.

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