Academic journal article Journal of Electronic Commerce Research

Bidding on the Buying Funnel for Sponsored Search and Keyword Advertising

Academic journal article Journal of Electronic Commerce Research

Bidding on the Buying Funnel for Sponsored Search and Keyword Advertising

Article excerpt

ABSTRACT

In this research, we evaluate the effectiveness of the buying funnel as a model for understanding consumer interaction with keyword advertising campaigns on web search engines. We analyze data of nearly 7 million records from a 33 month, $56 million (US) search engine marketing campaign of a major US retailer. We classify key phrases used in this campaign into stages of the buying funnel (i.e., Awareness, Research, Decision, and Purchase) and then compare the consumer behaviors associated with each stage of the buying funnel using the critical keyword advertising metrics of impressions, clicks, cost-per-click, sales revenue, orders, and items sold. Findings from our analysis show that the stages from the buying funnel are effective for classifying types of queries, with statistically different consumer behaviors for all attributes among all stages. However, results also indicate that the buying funnel model does not represent the actual process that consumer engage in when contemplating a potential purchase, as the stages do not seem to be associated with expected consumer actions as predicted by the model. Results show that Awareness key phrases cost less and generate more sales revenue than Purchase queries, indicating that these broader phases can be a lucrative advertising segment for sponsored search campaigns. The results reported in this paper are important to researchers interested in understanding online consumers interaction with search engines and beneficial to search engine marketers striving to design successful advertising campaigns. Insights from this research could produce keyword advertising efforts being more effectively targeted to consumers in order to achieve campaign goals.

Keywords: keyword advertising, pay-per-click, PPC, paid search advertising, search engine marketing

1. Introduction

Search engine marketing (a.k.a., keyword advertising, pay-per-click, and search engine advertising) is a form of web advertising that companies use to promote their products and services on search engine results pages (SERPs). Search engine marketing (SEM) is focused on the effective use of search engine advertisements (a.k.a., sponsored results, sponsored links) that appear on the SERP.

This form of online advertising emerged in 1998 [Fain and Pedersen 2006], rapidly has become the central business model of the major search engines [Jansen and Mullen 2008], and is one of the most rapidly growing segments of the online marketing area [SEMPO Research 2009]. Keyword advertising revenue generates billions of dollars for the major search engines [Google 2008]. As such, keyword advertising has helped shaped the nature of the Web today and is, therefore, an area of critical research importance.

Grounded in marketing research, the buying funnel is one well known paradigm used in SEM campaigns for conceptually understanding customer behavior. The buying funnel is a staged process for describing the way consumers make their buying decisions, from becoming aware of the existence of a need all the way to the final purchase of a product or service that addresses this need. Although there are several minor variations depending on the source, the buying funnel model is typically depicted with a four stages, with each stage relates to the cognitive phase that the consumer is what contemplating on whether or not to make a purchase. The first stage is Awareness, when a customer realizes that there is a product that can solve his/her problem or need. After a consumer realizes that a product can address a problem, the customer finds a specific product line and become more knowledgeable about this type of product or service. This stage is called Research. The third stage is Decision, when a consumer is deciding between different brands of a specific product by forming choice set. The final stage of the buying funnel is Purchase. This stage is when a consumer knows what specific product and brand that they intend to purchase, and they are typically doing a price, convenience to order, or similar comparison before executing the purchase. …

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