I continue to be fascinated by the Local SEM churn issue (50% to 100% annually), why it exists and whether it will be resolved in some way. The Local SEM or local online ad products being sold are generally speaking the right products for the SMB market — conceptually. Execution has been a problem.
On the publisher/sales channel side there are a bunch of issues going to sustainability and margins but that’s a discussion for another time. The central problem from a advertiser churn standpoint appears to be the apparent disconnect between the promises of sales people incentivized to acquire customers (but not retain them) and the actual experiences of SMB advertisers.
I was sent an email by someone, which tells an interesting story about working with a firm in the Local SEM segment. I won’t identify the source or disclose the verbatim contents of the email. The advertiser was not a typical SMB but a more sophisticated PPC marketer with more budget $10K+ to spend online each month. The person eventually cancelled the Local SEM service in question (I don’t know how long they were with it however).
The firm being criticized managed only a portion of the overall PPC spend. Here is my paraphrase of the main complaints conveyed in the email:
- Service and communication after signing were poor. This person was very frustrated in not being able to communicate with the people managing the campaign directly
- The quality of the creative and keyword selection fell below the level of “best practices”
- Inflated representations were made by salespeople about the specific expertise of the PPC campaign managers, which apparently were unjustified
Overall the salespeople reportedly created heightened expectations that were largely unfulfilled.
This is a snapshot or microcosm of what’s going on across the industry. The way to deal with this is to be more cautious about ROI claims and expectations, as well as considering tying a meaningful portion of sales compensation to customer retention. In addition, more and better communication and customer service appear to be called for.
If you have any different experiences, feedback, ideas or critiques please let me know.
Screenwerk 
March 27, 2009 at 3:23 pm
Hmmm. I was speaking w/someone who has sold various types of technology for decades: His comment (paraphrased): I sell it…I hope it works. Sometimes it works…..sometimes it doesn’t. Same story for several decades.
That is similar with advertising services.
From the buyer side my experience w/ salespeople selling various SEM services….they are way overselling…..and want way too much money for what they can deliver. I’m sure that is true for thousands of smb buyers.
As to maintaining PPC campaigns….hm….at some point it becomes a question of the cost of the service versus doing it inhouse or moving it to a less expensive management team.
March 27, 2009 at 11:16 pm
Similar to what earlpearl is saying many SMB owners are jaded by the experiences of advertising in yellow pages, newspapers, radio and tv. The oversell/overprice/underperform experiences they’ve all had, I hear it from them all the time, makes them weary of all of it.
Online it becomes the same things once you go to the “big agency” level. You’re just another client of many and doing the bare minimum for that clients spend is all they’ll get.
In PPC in particular I’m not a fan of the practice of being paid a percentage of overall ad spend, not till those budgets are really high, and for most SMB’s they are not that high. It puts the ad manager in a position to maximize the clients spend, not maximize the clients profits from the campaign. As long as the client sees a minimally acceptable ROI the “agency” does what it can to ramp up spending and not work towards improving ad quality, keyword selection, and landing pages so as to MINIMIZE ad spend while MAXIMIZING leads or sales.
March 29, 2009 at 12:49 am
Greg,
I think it’s an inherent issue of scale in this medium.
To justify infrastructure and valuation, the larger PPC aggregators and even local listings purveyors have to have a significant sales volume. Account management at that level doesn’t scale.
Nor does the knowledge.
I would argue it’s an issue of inventory and value per lead as well. When one is suffering the thin margins of a PPC only approach it’s not possible to invest appropriately allocate brain power to deliver value.
We’ve got very low churn, but also have fewer sales in a month than one salesperson at the larger firms in a week.
And mangement of clients and their accounts is our largest single expense.
The Yellow Pages scaled by having limited account management due to their short production cycle. Online requires constant attention to deliver the same return on investment.
Will
April 2, 2009 at 2:05 am
Below is an excerpt of a networking newsletter that is distributed in Atlanta. I have removed the name of the company referenced but you may recognize it from the comments:
“Research Note:
“XXXXX” helps small and medium-sized businesses attract local customers via search engine advertising and online yellow-pages marketing.
“XXXXX” has a young, and in some cases green, sales team. While our experience with our sales rep has been very positive, some of our members have received less than stellar service from other sales reps. They have experienced sarcasm from the “XXXXX”sales team regarding their current strategies. This is because the “XXXX” sales culture is based on sales not service. This is very typical of a rapidly growing company trying to go public. High numbers per sales rep is key for an IPO.
“XXXXX: still has not answered the golden question; how does “XXXXX” differentiate itself between two customers that are in direct competition? For example, why should my company use “XXXXX” as a marketer when my direct competition is using “XXXXXX” ? How will I know that my account will get the same level of service and results?
Despite the improvements needed with their sales approach, “XXXXX” is still a good alternative to the Yellow Pages. “XXXXX” search engine advertising is powerful and they are producing results. Ultimately, do not look to “XXXXX” as the silver bullet for your marketing strategy. They should be used as part of a wider marketing campaign.”
April 2, 2009 at 10:12 am
One can infer who it is. Who issues the newsletter?
April 2, 2009 at 4:26 pm
That newsletter brings up a big beef I have with the local SEM industry. One marketing agency servicing two, or more, direct competitors is a real problem, in most cases.
I think there is an inherent conflict of interest there. Data being collected in Analytics, Adwords, etc.. is extremely valuable to the clients business and using that data or even potentially using it, collected from the first client, to assist with developing a similar campaign for a second client competing in the same industry and location just screams big red flags for me.
April 3, 2009 at 2:38 am
It’s a local networking group (I’m not a member, it was forwarded to me). This gentleman had invited a representative of the referenced local search firm to speak at an event to help educate local businesses on the benefits of local search. Apparently, after many business owners complained about the service they received, he felt compelled to address the issue in a subsequent newsletter.
Stever – Imagine if a local tv station only accepted advertising from one car dealer, or manufacturer. Category specific sales forces are prevalent in many business models – from media to software to manufacturing. It is incumbent upon the organization to manage proprietary information with the sensitivity it deserves. It’s unfair to hold search (or any interactive media) to “higher” standard.
April 3, 2009 at 3:02 am
A tv station, radio station, newspaper is a far different beast here. The tv, et.al. are not accumulating traffic data specific to that business, ie. actual keyword usage and ROI on each keyword. No, that is nowhere near the same as saying a tv station reaches x number of viewers. Keywords indicate actual demand and intent. Viewership is just bodies. We’re talking about an agency, like any adverting agency selling ad development and management service, not the media outlets themselves that just sell real estate on their channels.
June 17, 2009 at 1:27 pm
[…] in the wake of the churn that I’ve been writing about and that Borrell documented in the Local SEM segment, it’s also clear that the issue […]