Clients often wonder, sometimes to themselves and sometimes out loud to us, “how the heck do I increase my traffic and conversions from Google Shopping?” It’s a common question, one that we’ve worked on for many years over here at Big Flare.
There are a lot of different optimisations you can perform if your goal is to increase traffic. A lot of these optimisations are commonly known in the PPC space and are often advised across the Adwords blogosphere. However, it’s funny because of all the possible optimisations you could make to get more Shopping traffic, the one big optimisation that makes the biggest impact is also the one that almost no-one else it talking about! I’m even willing to bet that if you’re reading this and running Shopping campaigns yourself, you haven’t even considered this particular type of optimisation. The optimisation I am talking about is PRICE optimisation, e.g. the process of tweaking your prices to maximise your profit from Shopping. Let’s dig into this a bit…
What Google wants
Google’s goal as a publicly-traded company is to maximise its revenue and profit. Yes, we’ve all heard about some of Google sub-goals, such as “do no evil” and to serve users the most relevant search results. But those are just that, sub-goals. The reason it wishes to serve relevant search results is because that’s what keeps users coming back to Google. When users come back to Google and trust Google, Google makes more money off their Search ads, plain and simple.
The same goes for Google’s Shopping Ads algorithm. It works to maximise Google’s revenue and profit, whilst living under the constraints of their various subgoals. In order to maximise Google’s revenue, the Shopping algorithm must show the ads that are most likely to get clicked on. So, which ads are most likely to get clicked on, all other things being equal? Take a look at this and see if you can figure out which is the most likely ad to get clicked on:
What we have here is exactly the same product, listed on five different shops. How would you decide which one to click on and buy? If you are like most other people who browse Shopping results, you probably said, “the cheapest one”.
Google Shopping is, essentially, a price comparison service after all. So it makes sense that people are most likely to click the cheapest product. If all the products listed are exactly the same, you might as well click the product that is at least £5 cheaper than its closest competitors, right?
Because people viewing products on Google Shopping are usually price shopping, and because Google knows this, Google will usually put the products with the lowest prices into the best positions in their Shopping results. There are, of course, a few other factors that go into deciding whether your product shows up, and where it shows up. For example, the amount you bid and the keywords in your feed all have an effect. But, in terms of sheer impressions and traffic volume, the effect of all other factors is small when compared to the effect of product price.
The price/traffic relationship
We’ve observed this relationship in dozens of our clients’ Shopping campaigns: when a product price increases, Google gives it less shopping traffic, and the relationship is very sensitive. Even a small increase in price (vs your competitors) can cause a huge drop in the amount of impressions and traffic that Google gives you. The good news is though that the opposite is also true: dropping your prices just a little bit below those of your competitors can lead to large increases in the amount of traffic you receive.
The price/traffic relationship is something we’ve observed anecdotally and have acted on it ever since, advising clients where necessary when it would be good to lower or increase prices to better optimise Shopping volume and profitability. Unfortunately though we’re usually so busy getting results for our clients that we don’t have time to put together a statistically significant survey to prove the relationship. We just know what works, and we do it, that’s what our clients pay us for! Lucky for you though, dear reader, another company out in the PPC space has had the time to put together the study, and their results seem to validate the observations we’ve been making for years.
Analyzing the data
You can find a presentation of the study, which was done by Crealytics, over on this Youtube page. The presentation is an hour-long PPC geek-fest that we absolutely loved, but we totally understand if you as a busy business owner don’t have the time or patience to sit through it all. That’s why we’re bringing you the most important findings here in this post.
Analysing a dataset of over 3,900 products and more than 5 million ad impressions, they found this:
What you’re seeing there is that the cheapest product was ranked in position 1 in the shopping results 65% of the time! They also made the observations shown in the below graph, which is an effect we’ve observed ourselves many times but never had a pretty graph to show the exact size, till now. What you see here is that just a small increase in price of +5% can cause the traffic on a product to drop dramatically:
What YOU should do with this knowledge
We’ve talked a lot about theory in this article so far. Now let’s put it all together and make this actionable for you. With this knowledge in mind, what can you as a business owner actually do to increase your profit from Google Shopping.
First step: you’ll want to create a list of your top sellers. Usually in Google Shopping we find that the Pareto Principle holds roughly true, and that 80% of sales are had from the top 20% of products. Go find those 20% of product NOW and write them down.
Next: Compare your prices to your competitors in Google Shopping. Search for your keywords and observe the Shopping results.
How are your prices on your top products compared to your competitors? Also, importantly, how are your margins on those products? Ask yourself: if you took a slightly lower margin by decreasing your prices a small amount, could this lead to more profitability if we assume a large increase in Shopping traffic?
Final Steps: If the answer is “yes” or even “maybe” to the above then give it a shot. Try a 5% or a 10% price drop for one month. Set a reminder, come back to the data after one month, reverse the price change if you’ve ended up with less profit but keep it if results improved.
And that’s all there is to it! It’s really just a question of knowing how you stack up against your competitors’ prices and testing out small price decreases here and there to see how this affects your overall profitability. A lot of advertisers are scared to test price decreases because they are wary of their margins. But, remember this: the price test is only temporary and you might get a lot more traffic and sales as a result. What’s better, a 60% profit margin on $200K’s worth of sales, or a 40% profit margin on $1m worth of sales? I think we all know the answer ;-)