The search for ROI: a hot new area for marketers to invest budget dollars is search engine marketing. The problem: how do you know whether you are spending your money wisely?

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Search engine marketing (SEM) is one of the newest and most effective methods of marketing to customers online. In the past, marketers reached prospects mainly through mass media outlets such as newspapers and radio. Today, marketers have to use not only traditional media marketing but also online marketing to reach prospective customers, many of whom--thanks to the popularity of broadband and wireless connections--use the Internet to search for and select their own products.

When consumers today are seeking a new product, they first go to a computer keyboard, type in the name of the product in an Internet search engine like Google or Yahoo! and in seconds they have a list of companies that offer the product. The challenge for marketers is to ensure that the name of their bank is at or near the top of that list.

So, the big question is, how do marketers achieve that? First, they have to develop an SEM strategy, implement it, and then create a system for measuring how well the strategy is working--in other words, calculating the return on investment (ROI).

This article briefly summarizes not only what search engine marketing is but how do it and measure it.

What is search engine marketing?

From a technical standpoint, a search engine is "a searchable index of all available Web pages." However, since there are hundreds of millions of Web pages, no search engine can list them all; therefore, different search engines have different results. Most search engines today are "crawler-based."

In a crawler-based search engine, an automated program called a "crawler" or "spider" goes out into the Web and reads text and data from the pages of a particular website. Then, through a complicated and long mathematical algorithm, chooses the order by which it ranks by keyword each of the site's web-pages. Two of the key ingredients in search engine marketing are "keywords" and "links."

When a word or place is mentioned more than once on a Web page, the crawler can more easily rank the website according to the correct keyword. Many websites also incorporate various links to other websites that relate to the same topic as the keywords used on the site. These links help the crawler to better index and rank the website. For example, if a customer searches for "free checking" on Google, sites that contain the words "free checking" or are about "free checking" will be listed These pages will be ranked based on the crawler's mathematical calculation as to which Web page best incorporates the searched-for keyword.

Honestly, SEM is nothing more than learning how to show the "spider" that your Web page is the best page to describe a particular keyword. The two most common methods of SEM are search engine optimization (SEO) and the easier, more expensive way of "paid inclusions."

Search engine optimization: the basics

SEO can be described relatively simply: You add selected keywords and links to a Web page. Then, once the "crawler" revisits the site, the "crawler" reconsiders the newly added text and links in its calculations, and ranks the Web page accordingly, comparing it to all the other pages the "crawler" has visited. Then, when a consumer searches for the same keyword, it is listed somewhere within the search engine's rankings. This type of listing is known as a "natural" or "organic" listing. Although this sounds simple, learning how to choose keywords and where to place these keywords and links within the site is more difficult, especially as major search engines continually change how they calculate the rankings of their search engine results.

Marketers can also use paid inclusions, also called search engine advertising. This enables the marketer to purchase a specific keyword for a search engine. These are known as "paid" or "sponsored" listings. The cost of this method can be high, especially if many sponsored listings are purchased.

One of the many ways to get started is to use Overture's Keyword Selector http://inventory.overture.com/d/searchinventory/suggestion/. Marketers can look up keywords that consumers currently use in their searching behavior on Yahoo! The tool will pull up the actual number of searches from the previous month for that keyword, allowing marketers to find keywords that are consistent with their businesses. Then, after finding these keywords, optimize the website by implementing those keywords into the site through what is referred to as "content building."

The second step in SEO is making sure that the text and images on the Web page are both relevant to what the consumer is looking for as well as to the message of the website. If a consumer searches for "free business checking" on the Web and finds a financial institution, the search engine result should direct the user to the section on the site directly related to "free business checking," not one of the bank's other product Web pages. Most websites that have been optimized allow various pages to focus on particular keywords that allow the site in its entirety to reach out to more than just prospects looking for a single product or service. Optimized websites allow prospects to find a variety of products and services.

There are four keys to enhancing a website's total content so that it can be found more easily by searchers: creating pages on a site related directly to specific keywords; using generic keywords throughout the site (examples: Florida banks, Texas banking); creating Meta tags (which are simply bits of text in the website's code that allow the Web crawler to better organize and index the website into the search engine); and, building specific product pages on the site dealing with specific keywords (example: small-business loans).

Community financial institutions can also focus on developing localized, generic content throughout the site by using keywords like "North Georgia Bank" or "Cincinnati Bank" so that keywords are targeted to their locations, yet generic enough that prospects would search for these keywords. These are general ideas; using Overture's Keyword Selector can help target keywords that prospects actually use in their searches on Yahoo!

Paid inclusions

As a second option, marketers can use paid inclusions, also known as search engine advertising. This enables the marketer to purchase a specific keyword for a search engine. These are known as "paid" or "sponsored" listings. The cost of this method can be high, especially if many sponsored listings are purchased.

Most search engines charge an initial fee, and then companies are allowed to bid on specific keywords at the typical minimum of 5 or 10 cents per click. Obviously, the keywords will go to the highest bidder. Your account is then charged when a consumer follows through a click from the search engine advertising onto your site via that specific keyword in that search engine. If you choose to include paid listings as part of your search engine marketing strategy, make sure that you:

* Spend the least amount of money to maximize targeted traffic--traffic that is most likely to open an account.

* Set all bids on metrics (if your ROI on a particular word is losing money, drop the word).

* Bid into the top three positions as often as you can to maximize traffic.

Capitalizing on the new traffic

Once you've increased traffic on your website, the big question is: How do you capitalize on the new traffic, turning prospects into customers? First, you have to find out who these new visitors are. Are they current customers? Is this a new market that the financial institution typically doesn't target? Are the prospects visiting because they are moving to the area? You can answer all of these questions through market research. Providing a simple online demographic survey can help you discover who these new visitors are.

Beyond simple demographic surveying, there are also methods of collecting e-mail addresses and other contact information, but only with the prospect's permission. For example, a contact form on the website that asks explicitly for permission to contact them with further marketing materials or an e-mail newsletter form where prospects can sign up can allow you to better track prospects. It is also possible to set up particular pages on a website called "landing pages" whereby marketers can track which search engines are generating traffic on specific keywords and whether the prospect actually completes a call to action. All of these options allow better target marketing via the website.

Calculating ROI

Possibly the most important part of any marketing campaign is measuring your results. Calculating ROI from a website is relatively simple. There are four items that you will need prior to beginning an ROI calculation within a set time period. For this example, we will use a time period of one month. The four items needed are: number of visitors; number of sales on a specific product; cost of search engine marketing; and profit.

The first calculation to be completed is conversion rate. The conversion rate is the percentage of visitors who purchased a product in a specific time period. In this example, 5,000 people have visited the financial institution's website and 50 of those have opened a free checking account, which happens to be one of our keywords that we have used in our SEO and SEM strategy. To calculate conversion rate, take the number of opened accounts or applications for that specific product (50, for example) and divide by the number of visitors, 5,000.

50 / 5,000 = 1 percent conversion rate

After calculating conversion rate, visitors per sale must be determined. This calculation gives the number of visitors required to make one sale. In order to calculate this number, divide one sale by the conversion rate of 1 percent.

1 / 1 percent = 100 visitors per sale

The next calculation is our marketing investment. The marketing staff has been paying 20 cents per click from our paid inclusions as well as a monthly retainer for a third party's search engine optimization tracking of $400. In the case that an institution may choose not to use paid inclusion in its strategy, cost per click can be calculated by using the budgeted marketing expense for Internet marketing divided by the number of months in the year. Then, that number must be divided by the number of visitors the institution receives from search engines, which can be found in most Web analytic software. Assuming that this institution uses paid inclusion, marketing has been tracking 25 keywords, with one of these phrases "free checking." So, per keyword, the institution has been paying $16 per keyword per month ($400/$25). You also know that roughly 100 visitors visited your site by clicking on your paid listing, "state free checking," at a cost per click of $0.20. Since we also had an additional $16 per keyword per month, this cost must be added to the investment.

$0.20 x 100 = $20 + $16 = $36

The last calculation is ROI. After completing profit reconciliation, this financial institution has discovered that the free checking product makes an average profit per account of $35 per year. The institution has opened 50 new free checking accounts via the website over the past month, so we will multiply $35 per year annual profit to the number of accounts opened, 50, to discover how much profit the institution has made opening new free checking accounts from the website, $1,750. In order to calculate ROI for the first year, we must divide the amount of profit made, $1,750, by the marketing investment, $36.

$1,750/$36 = 48.6 percent ROI over the next year

Calculating ROI for the lifetime of these new 50 free checking accounts is just as easy. Lifetime profit, which is stated as profit over the next five years, for this product is $100. In order to calculate this number, we simply divide our lifetime profit for these new 50 accounts, $5,000, by the marketing investment of $36.

$5,000/$36 = 138.9 percent ROI over the lifetime of the product

From both of these ROI calculations, we learn that this institution's site is performing very well. According to Yahoo! Search Marketing, after calculating ROI, any institution can then decide whether its search engine marketing is overperforming or underperforming. If the site is overperforming and the institution is using paid inclusion, Yahoo! suggests that the institution raise its current bidding price in order to get higher position, generating more sales leads to increase revenue. However, if the institution is not using paid inclusion, the institution may choose to expand their site and their choice of keywords in order to expand revenue beyond just this one keyword.

If the site is underperforming, Yahoo! makes four recommendations:

* Rewrite any titles and descriptions used in paid inclusions to be more of an introduction to the actual keyword that the prospect is looking for.

* Review the uniform resource locator (URL) link and make sure that the page related to the link relates directly with the search term. By this, the institution is checking whether it placed the correct keywords on the correct pages.

* Lower the bid amount. This lowers costs, which may be the reason for the underperforming ROI.

* Improve the website's content. All content on the site should inspire the prospect to take action now.

Developing an SEM program is an ongoing process. Products change, the prospects that visit websites change, and the market changes. Five years ago, AOL was king and dial-up connections were in every home. Now, digital subscriber line (DSL) connections and online video are mainstream and people have direct access to more websites and knowledge than ever before. The smarter the consumer gets, the better the marketing staff has to become in order to provide an experience for every prospect and customer online and off-line.

For More Information

Read the Complete Paper

This article was excerpted and adapted from a longer paper entitled, "Search Engine Marketing and Financial Institutions. The Need for Online Marketing Improvement," that was written by Nicholas E. Kastner, CFMP. In 2006, the ABA School of Bank Marketing and Management presented this paper with the James H. Donnelly Jr. Award as the best research paper or marketing plan prepared by a member of the graduating class.

A copy of the paper is available for free to members of the ABA Marketing Network. Go to www.aba.com/MarketinNetwork ford downloading information.

The paper is also available to ABA member banks for $49. Nonmembers can purchase the paper for $79. For order information, go to www.aba.com/MarketingNetwork/ABAMN_SBMpapers.htm.

For information about the ABA School of Bank Marketing and Management at Northwestern University, Evanston, Ill., go to www.aba.com/Events/SBMM.htm.

by Nicholas E. Kastner, CFMP

Nicholas E. Kastner, CFMP, is the bank marketing officer at Gainesville Bank & Trust, Gainesville, Ga. The institution has $550 million in assets. E-mail: [e-mail].