Driving higher performance from Google AdWords by applying Behavioural Economics

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Published on June 7, 2016

Author: paulsbooth

Source: slideshare.net

1. Driving higher performance from Google AdWords by applying Behavioural Economics Research White Paper from The ATO Co 2016 June 2016

2. Contents 1. The new ad text landscape 2. Testing Behavioural Economics in AdWords 3. The Test 4. Key findings 5. Ads featuring BE copywriting drive a very different performance 6. The highest performance 7. Ads featuring BE copywriting outperformed control ads 8. Cost savings 9. The implications for the current approach to AdWords 10. Conclusion 11. Case study 12. About the authors 13. Appendices 14. Appendix 1. Research methodology and data tables 15. Appendix 2. Research methodology contd 16. Appendix 3. Data tables 17. BE copywriting category outperformance 18. Control ads appeal to the non-engaged I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

3. AdWords growth UK digital ad spend has grown from £825m in 2004 to £8.6bn in 2015¹. In the same period Paid Search (dominated by Google AdWords²) spend grew from £430m to £4.3bn, an increase of some 900%¹. The latest revolution in AdWords is driven by the move of consumers to mobile devices and Google introducing Extended Text Ads (ETAs) Mobile First As the shift from desktop searches to mobile continues, Google will continue to adapt its AdWords platform to take advantage of this opportunity. Google recently reduced the number of AdWords ads from around 12 to just 7 for a desktop search. This is now in line with mobile devices. This places a greater focus on ad text copy. Furthermore, with fewer ads to compete against, a greater emphasis will be placed on ads to compete against themselves in terms of optimization, which will similarly place further emphasis on testing. ETAs – Extended Text Ads In a further development of AdWords, Google also plans to introduce ETAs, which will increase the character count for ads by approximately 50%. This additional word count will create a need for both a more sophisticated approach to AdWords copywriting and testing. The new ad text landscape Surprisingly Behavioural Economics is not widely applied to AdWords, despite the medium being largely concerned with instant decision making. 1. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

4. Behavioural Economics (BE) plays a significant role in human decision making. Heuristics, for example, are the mental shortcuts often used in decision making. Google AdWords is a purely words or language based medium which relies on ad text copywriting. Therefore, in order to test and evaluate to what extent applying Behavioural Economics principles affect performance in Google AdWords, the use of language, or ad text copywriting, is the only means that can be applied. The aim of this research is threefold: 1. To test if BE based ad text copywriting can increase the response levels of Google AdWords ads; 2. To measure the extent of any increase on response levels; 3. To consider the implications of the findings for the current approach to AdWords copywriting. The test is of added importance given the advance of mobile and Google’s greater focus on copy through it’s increased ad text format, both requiring a more sophisticated approach to copywriting. It also rigorously tests the McKinsey assertion regarding Behavioural Economics, that “a more systematic approach can unlock significant value.”³ The influential role of Behavioural Economics has been recognised by the creation of the UK government’s Behavioural Insights Team⁴ to influence the formulation of public policy and design social behaviour change campaigns. In the commercial arena, The IPA’s Behavioural Economics initiative, co-authored by Rory Sutherland and Nick Southgate, examines strategies and insights from the IPA Effectiveness Awards, http://tinyurl.com/IPA-White-Paper. In mobile search specifically the role of Behavioural Economics is considered crucial. Dan Ariely, writing for Google, highlights the need to apply BE principles and consider the importance of branding in the mobile search environment, http://tinyurl.com/Google-Ariely. Testing Behavioural Economics in AdWords 2. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

5. Ten diverse categories were selected representing over 18% of Paid Search expenditure. The categories represented a range of products and services, established and new. The categories were: Computers/internet, Telecomms, Automotive (luxury), Automotive (family), Shopping (Apparel), Lifestyle, Travel (Airlines), Travel (car hire), Travel (hotels), Shopping (supermarkets). One ad (control ad) currently live on Google AdWords and without BE copywriting was selected in each category and tested against a specially written BE copy written ad promoting the same product. In real searches AdWords users are information gathering or at the point-of-purchase. To replicate this category- specific interest, respondents self-identified their engagement in each category through the question “Would you consider yourself to be interested in {category}.” This is the data used in the results. The research was conducted on March 7th 2016: • 1,000 UK responses • Internet search users • Aged 16 – 75 • Quota of n=100 per category The test 3. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

6. C. Ads with BE copywriting increased performance by an average 13% B. Highest outperformance 32% Control ads performed better in 8 out of the 10 categories but with the non-engaged audience. Key findings Applying BE copywriting improved AdWords performance in 60% of categories D. Advertisers in these high-profile categories could benefit from annual cost savings of £90m A. Ads with BE copywriting perform differently r=0.27 4. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

7. Ads featuring BE copywriting perform very differently to control ads. There is a “weak correlation” between responses to ads with BE copywriting and control ads (r=0.27). A. BE copywriting drives a very different performance 66% 58% 57% 54% 52% 52% 48% 38% 32% 30% 34% 42% 43% 46% 48% 48% 53% 62% 68% 70% 0% 10% 20% 30% 40% 50% 60% 70% 80% Engagedaudienceresponses Category BE copy ads Control ads 0 10 20 30 40 50 60 Engagedresponses 5. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

8. 32% 15% 13% 7% 5% 4% 0% 5% 10% 15% 20% 25% 30% 35% Engagedaudienceresponses Category B. The highest outperformance 32% The computer/internet sector saw the greatest increase in responses 6. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

9. 32% 15% 13% 7% 5% 4% 0% 5% 10% 15% 20% 25% 30% 35% Engagedaudienceresponses Category C. Ads featuring BE copywriting outperformed control ads by 13% Average outperformance 13% (typically increases of 1%-2% are seen as a significant improvement in a mature account). 7. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

10. Across the 6 categories where ads featuring BE copywriting outperformed control ads, potential cost savings of £90 million are estimated (based on Google Quality Score rewarding better performing ads with lower costs⁶). D. Cost savings of £90m £21.5m £12.5m £12.1m £6.4m £9.2m £13.2m £0.0 £5.0 £10.0 £15.0 £20.0 £25.0 Computers/ internet Telecomms Automotive (family) Shopping (apparel) Lifestyle Travel (Airlines) Savings(millions) 8. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

11. Testing is the essential component of understanding and increasing AdWords performance⁵. Currently, advertisers and agencies rely on a simplistic system of A/B copy testing. For example, “Buy now” will typically be tested against terms like “Buy today”. In other words A/B copy testing tests random words randomly, with little scientific basis for selection. As a means of helping to understand what motivates users this is extremely limited. The introduction of BE copywriting allows for testing to become considerably more sophisticated and scientific. Firstly, it allows for up to 20 separate BE principles (and thousands of associated words/ phrases/ combinations) to be tested. Secondly, testing the different BE principles against each other could reveal insights that help to understand what motivates a user at a far deeper level. What is unquestionable is that being able to test up to 20 separate BE principle will create significant volumes of new data, which in turn has the potential to create completely new areas of insight and learning, all of which can be processed by Paid Search professionals using the existing Google Analytics platform. The implications for the current approach to Google AdWords 9. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

12. Conclusion The study demonstrates that when AdWords ads written using BE copywriting are compared to current brand ads appearing on the Google AdWords platform, there is a measurable and significant lift in response. The average increase is 13% and can be has high as 32%. UK advertisers invest more than £4.3 bn annually¹ in Paid Search. Such a potential impact on response levels could lead to material cost savings for major brands using the medium. In the 10 categories alone researched the saving amounted to £90m. While focused on 10 major product categories, the research findings are relevant to any brand investing in any product category of paid search advertising. This study has focussed only on the cost benefits of improved performance for Google AdWords advertisers. Obviously, although it lies outside of the scope of this study, the accruing increases in response, conversions and sales that can be expected may be equally significant. BE copywriting also has huge implications for testing, which lies at the heart of the medium. Testing up to 20 separate BE principles can generate vast new untapped volumes of data, analysis and learning. Sources ¹ IAB annual digital revenue review, www.iabuk.net ² Google’s UK market share is 86.65% (Source: Statista http://tinyurl.com/statista-Google) ³ “A Marketers Guide to Behavioural Economics” http://tinyurl.com/McKinsey-BE ⁴ UK Government’s use of BE (Source: The FT http://tinyurl.com/Govt-BE) ⁵ Copy testing is essential to success (Source: Search Engine Watch http://tinyurl.com/SEW-Test) ⁶ Google rewards better ads with lower price (Source: Wordstream http://tinyurl.com/wordstream-QS) 10. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

13. A leading UK brand increased its click count by 34% when BE copywriting best practice was applied (typically increases of 1%-2% are seen as a significant improvement in a mature account). The advertiser was running 89 core ad texts which together with variations amounted to 617 different ad texts. In this controlled test the only element that was changed was how the ad texts were written. Case study +34% Improved results weren’t immediate as Google history initially penalise new ad texts. In this case it took 8 – 10 weeks to reach full potential. Source: The ATO Co/ Google analytics 11. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

14. ATO (Ad Text Optimization) – specialist copywriting training for Google AdWords To date, Paid Search for brands has been built by Paid Search departments in media agencies into a highly successful sector, but without any specialist copywriting support. What's more, increasingly clients see Paid Search as being an important brand messaging medium as well as a transactional one. This places even greater demands on the copywriting capabilities of Paid Search professionals in media agencies. The ATO Co, which specialises in BE copywriting for brands on Google AdWords, has devised a programme of training specifically for media agency Paid Search departments. Led by experienced brand and direct response copywriters, who are also specialists in Google AdWords, ATO training brings together brand communication insights, proven direct response copywriting techniques and Behavioural Economics principles that govern decision making, and packages them specifically for AdWords ad text writing. About the authors For information contact: Paul Booth CEO The ATO Co. Paul@TheATOco.com +44 (0)7715 041 807 12. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

15. Appendices 13. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

16. Research methodology and data table Ten diverse categories were selected representing over 18% of Paid Search expenditure. The categories represented a range of products and services, established and new. 10 high-profile businesses identified as active on Google AdWords UK in February 2016 with ad texts not featuring BE copywriting were selected. The categories were: Computers/internet, Telecomms, Automotive (luxury), Automotive (family), Shopping (Apparel), Lifestyle, Travel (Airlines), Travel (car hire), Travel (hotels), Shopping (supermarkets) One ad currently live on Google AdWords and without BE copywriting was selected in each category (control ad) and tested against specially written ads featuring BE copywriting promoting the same product AdWords searchers are information gathering or at the point-of-purchase. To replicate this category specific interest respondents self-identified their engagement in each category through the question “Would you consider yourself to be interested in {category}.” This is the data used in the results The research was conducted on March 7th 2016: • 1,000 UK responses • Internet search users • Aged 16 – 75 • Quota of n=100 per category 14. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

17. Research methodology (contd.) Writing of ad texts for comparison in research New ad copy generated by copywriters trained in ATO™ Behavioural Economics practices. Ads written to adhere to Google rules and policies Research questions 1. Preferred ads identified: “Imagine you are searching on Google to find out more about {category} and the ads below appear. Please choose your preferred ad.” 2. To replicate the point-of-purchase/research nature of AdWords users respondents self-identified their engagement in each category through the question “Would you consider yourself to be interested in {category}.” This is the data used in the results. • Respondents identified themselves as more engaged in computers/internet, telecoms, shopping (apparel), travel (airlines), travel (hotels) and supermarkets • Respondents identified themselves as less engaged in automotive (family), automotive (luxury), travel (car hire) and lifestyle • Suggests that and respondents self-identification of engaged/non engaged is robust Calculating potential savings Using the ATO Metric system control ads were evaluated to ascertain their likely Google Quality Score and associated media cost premium (source: ClickEquations). These premiums were associated with category spends (source: ADGooroo) to generate a potential saving figure 15. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

18. Engaged response - data table Category Winning ad Total engaged responses BE ad copy responses Control ad responses Difference (no) Difference (%) Computers/ internet BE copy 68 45 23 22 32% Telecomms BE copy 78 45 33 12 15% Automotive (family) BE copy 46 26 20 6 13% Shopping (apparel) BE copy 56 30 26 4 7% Lifestyle BE copy 44 23 21 2 5% Travel (airlines) BE copy 71 37 34 3 4% Travel (car hire) Control 40 19 21 2 5% Travel (hotels) Control 77 29 48 19 25% Shopping (supermarkets) Control 81 26 55 29 36% Automotive (luxury) Control 23 7 16 9 39% 16. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

19. 66% 58% 57% 54% 52% 52% 48% 38% 32% 30% 34% 42% 43% 46% 48% 48% 53% 62% 68% 70% 0% 10% 20% 30% 40% 50% 60% 70% 80% Engagedaudienceresponses Category BE copy ads Control ads Ads featuring BE copywriting outperformed control ads in 6 of 10 categories Categories that performed better with BE copy 17. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

20. 58% 54% 49% 46% 32% 32% 45% 33% 38% 44%42% 46% 51% 54% 68% 68% 55% 67% 62% 56% 0% 10% 20% 30% 40% 50% 60% 70% 80% Engagedaudienceresponses Category BE copy ads Control ads Control ads appealed to the non-engaged audience Appealing to the non-engaged audience reduces the value of ads on the AdWords platform, where active searchers are engaged. 18. I Driving higher performance from Google AdWords by applying Behavioural Economics I White Paper

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