Gone are the days when PPC was new, sexy and could do no wrong – in the wake of a crippling recession that continues to hold us in its grip in 2010, even online marketing programs are under greater scrutiny.

Clients are asking more tricky questions about their paid search programs in order to evaluate their performance. They are tinkering with sales data and trying to make the right attribution calls. The client is becoming more sophisticated and agencies need the intellectual property and arsenal to be able to provide the answer even before the question is posed.

But, are clients asking the right questions and drawing the right conclusions? Or, are they beating to death an excellent marketing medium by over-analysing data incorrectly and making bad business calls as a result, such as dropping PPC spend or pulling out altogether?

There are a number of factors, if not measured / addressed properly, which will significantly skew paid search results. We will explore four of these factors in  this two-part post:

1. Measuring Full Customer Value – When you get a paid search driven purchase, are you fully measuring the value of that purchase or are you selling PPC short? Beyond the immediate short-term benefit of a sale, there are long- term benefits that should not be overlooked:

• Customer Lifetime Value: If you make monthly recurring revenue from a client, this should be factored into the sale and attributed to paid search. Certainly, recurring revenue will be a factor of attrition rate but perhaps estimate your average attrition rate and calculate the real lifetime value of a sale rather than just the initial value of the purchase. This will provide you with a much more accurate picture of sales margin.

Furthermore, depending on the type of business in which you operate, you may accrue the value of repeat purchases. If you run a solid business and happy customers return, the long term value of the paid search driven sale may far exceed the marketing cost to capture that initial sale.

• Customer Referral Value: WOM (word-of-mouth) and direct referrals are incredibly valuable given their credibility. This is ‘free’ marketing that should not be overlooked!

2. Is Sales Tracking Fully Functional? Ironic, that with paid search the costs are completely transparent – we see all the costs incurred, but we don’t always see all the sales generated by PPC. This is for a plethora of reasons, some of which are simpler to solve than others:

Tracking code is incorrectly set up or the javascript is located in the footer so if a content heavy, image laden page takes a long time to load, the searcher may already have jumped to the next page before the tracking parameters have kicked in to record the searcher on that page. Searchers disable cookies making cookie tracking redundant or they use one machine for the initial search, only to make the purchase from another machine, at work, with a completely different IP address and a new cookie to track. Or if the cookie window is not long enough, the searcher comes back, via an organic click so the sale is not correctly attributed to PPC. The reasons are many, they are diverse and sometimes complicated – but it is important to know about them and try to fix them in order to minimise that margin of error.

In the next post we’ll dive a little bit more deeply into understanding cookie windows and multi-channel attribution.