The benefits of using a Portfolio approach to SEM

1.
Portfolio v.s. KW Level
Each marketer should have a goal CPA. At a given CPA level, there are multiple outcomes that can achieve your CPA
goals. So how does a marketer choose the right method? Many marketers look at CPA at the KW level. If a KW is not
achieving its CPA goal, the marketer tends to bid down or turn off these KW’s. What is the opportunity cost of managing
CPA at the KW level v.s. the Portfolio level (campaign or account)?
Example: The marketer bids on 2 different KW’s
Goal: Maximize Conversions at or below CPA of $15
KW: Shoes
Position Clicks CPC Cost Conversions CPA
1 200 $1.50 $300.00 20 $15
2 150 $1.00 $150.00 15 $10
KW: Jeans
Position Clicks CPC Cost Conversions CPA
1 300 $1.75 $525.00 30 $17.50
2 200 $1.50 $300.00 20 $15
KW Level Approach
The marketer chooses to bid on KW’s based on their CPA goals, not allowing them to exceed $15. Based on this
approach, they choose:
KW: Shoes
Position Clicks CPC Cost Conversions CPA
1 200 $1.50 $300.00 20 $15
KW: Jeans
Position Clicks CPC Cost Conversions CPA
2 200 $1.50 $300.00 20 $15
CPA $15
Conversions: 40
In this approach, the marketer would be satisfied because they were able to achieve their CPA goal of $15 and
generated 40 conversions. However, this method does not take into account the opportunity costs of other methods.
i.e. portfolio approach.
Dao, A. (2012). Portfolio v.s. KW Level.

2.
Portfolio v.s. KW Level
Portfolio Approach
The marketer chooses to bid on KW’s based on overall portfolio CPA, allowing KW’s to go below or above CPA so long as
the campaign or account achieves its CPA goal.
KW: Shoes
Position Clicks CPC Cost Conversions CPA
2 150 $1.00 $150.00 15 $10
KW: Jeans
Position Clicks CPC Cost Conversions CPA
1 300 $2.00 $525.00 30 $17.50
CPA $15
Conversions: 45
In this example, the marketer not only achieved its CPA goal of $15 but they also generated 45 conversions.
How come the portfolio approach generated more conversions? Below are all 4 possible outcomes the marketer could
have chosen:
KW Shoes KW Jeans Total Total
Position Position Cost Conversions CPA
1 1 $825 50 $17
1 2 $600 40 $15
2 1 $675 45 $15
2 2 $450 35 $13
Based on the outcomes, there are 3 outcomes that achieve the CPA goal of $15 or below. It is apparent that the
highlighted choice maximizes the number of conversions at the given CPA goal.
Conclusion
The portfolio approach allows you to use the efficiencies of high performing KW’s to get more volume from other KW’s
that are above your CPA goal. With this method, you are able to achieve your overall CPA goals and maximize the
number of conversions at the same time.
Dao, A. (2012). Portfolio v.s. KW Level.