In the dynamic world of digital marketing, staying ahead of the curve is crucial for businesses looking to maximize their return on investment.
In 2023, marketing agencies have witnessed a significant shift in the industry landscape, particularly when it comes to rising marketing costs.
This is likely due to natural changes that exist in ecommerce, changing customer preferences, as well as a recession likely on the horizon.
As paid search advertising becomes increasingly competitive regardless of industry, marketers are grappling with declining conversion rates and mounting costs per lead. Let’s delve into the latest findings from a fantastic report from WordStream and explore the implications for ecommerce businesses as 2023 presses on. Let’s dive in!
Conversion Rates: A Downtrend Across Industries
Across almost all industries, paid search advertising conversion rates have witnessed a decline compared to the previous year. Only two sectors—Beauty & Personal Care and Education & Instruction—managed to maintain their conversion rates.
However, other industries experienced significant decreases, with Arts & Entertainment facing a 36.2% drop year over year and Apparel, Fashion & Jewelry observing a 34.9% decrease.
Industries at the Pinnacle of Conversion Rates
Leading the pack in conversion rates were industry sectors such as Animals & Pets, Physicians & Surgeons, and Automotive Repair, Service & Parts, boasting impressive rates of 13.41%, 13.12%, and 12.61%, respectively.
On the other hand, Apparel, Fashion & Jewelry, Furniture, and Real Estate struggled with the lowest average conversion rates at 1.57%, 2.57%, and 2.88%, respectively.
This side-by-side outlines the shift to necessities from “nice to haves.” As wallets tighten, customers tend to focus on what they need most first and will take longer to consider other purchases that are not of necessity.
Cost Per Lead: The Steady Surge
While the cost per lead (CPL) saw an overall increase, it was not as dramatic as in previous years. However, a staggering 91% of industries experienced a rise in CPL alongside a decrease in conversion rates.
Automotive Sales and Beauty & Personal Care were the only two sectors that bucked this trend, with CPLs decreasing by 8.6% and 3.9%, respectively.
There is likely an increased competition factor here that is flying under the radar.
As more brands have ramped up their ecommerce advertising over the past 18 months to make up for a pandemic-based pullback, cost per lead pricetags are following supply and demand costs associated with paid media placement.
Industries with the Highest CPLs
The sectors commanding the highest CPLs were Career & Employment ($132.95), Attorneys & Legal Services ($111.05), and Furniture ($108.85).
On the other end of the spectrum, Automotive Repair, Services & Parts ($21.12), Animals & Pets ($23.57), and Shopping, Collectibles & Gifts ($31.50) boasted comparatively lower CPLs.
Lead generation in paid media is one of the most challenging areas to tackle—there is really no way around it.
And the high-ticket CPLs outlined above are nothing new—but again, more searching (demand) for these higher priced services (supply) are going to be impacted by increased competition in these areas.
Click-Through Rates: Finding the Right Balance
In terms of click-through rates (CTR), most industries experienced an uptick, with only Business Services and Industrial & Commercial sectors seeing a marginal decrease. Nevertheless, these declines were overshadowed by the significant CTR improvements witnessed across other industry sectors.
CTR is a metric that is great for optimizing campaigns but not a great buying signal.
It is so top-of-funnel (TOF) that you can’t really put a price on it. But what this does tell us is that more people are searching for what they want and are clicking ads to get them from A to Z.
Industries with the Highest CTRs
Industries such as Arts & Entertainment (11.78%), Sports & Recreation (10.53%), and Travel (10.03%) emerged as frontrunners, achieving impressive click-through rates.
Conversely, sectors like Attorneys & Legal Services (4.76%), Home & Home Improvement (4.80%), and Business Services (5.11%) grappled with lower CTRs.
The interesting part of these metrics is that the highest CTR categories are in what we would call non-essentials. Entertainment, sports, and travel seem inverse to where we would expect to see purchasing during a recession.
We are chalking this up to the post-pandemic hangover many have experienced over the past 18 months. That said, we expect these numbers to shift to new categories should a recession officially set in.
Cost Per Click: Balancing the Budget
The cost-per-click (CPC) landscape has seen its fair share of changes in various industries.
Out of the industries analyzed, 14 sectors witnessed an increase in CPC, indicating a rise in the average amount businesses need to pay for each click on their ads. On the flip side, eight industries experienced a decline in CPC, potentially providing some relief to marketers aiming to optimize their ad spend.
One notable finding is that the Apparel, Fashion, & Jewelry industry maintained the same CPC as the previous year.
This indicates that businesses within this sector have been able to maintain stability in their advertising costs, allowing them to allocate their budget more efficiently.
Industries with the Highest CPCs
When it comes to cost per click (CPC), some industries stand out with higher expenses. Attorneys & Legal Services lead the pack with a CPC of $9.21, followed by Dentists & Dental Services at $6.69, and Home & Home Improvement at $6.55. These sectors require a larger investment to secure ad placements and reach their target audiences effectively.
Conversely, certain industries have managed to maintain lower CPCs, allowing for more cost-effective advertising campaigns. Arts & Entertainment, Real Estate, and Travel all share a CPC of $1.55, demonstrating that businesses in these sectors can attract clicks and engagement without incurring exorbitant costs.
Navigating the Changing Marketing Landscape
As businesses strive to make the most of their paid search advertising campaigns in 2023, it is imperative to understand the evolving dynamics of the industry.
With declining conversion rates and rising costs per lead, marketers must adapt their strategies to achieve optimal results while keeping costs in check.
While some industries have managed to buck the trend and maintain or even improve their conversion rates, the majority have experienced a decline. This emphasizes the need for businesses to continuously monitor and optimize their campaigns to stay ahead of the competition.
Furthermore, the cost per lead has seen an overall increase across industries.
As marketers face higher CPLs, it becomes crucial to implement targeted and efficient strategies to ensure a positive return on investment. Businesses should explore avenues for optimizing their lead generation processes, leveraging data-driven insights to maximize their marketing efforts.
Darkest Before the Dawn
On the bright side, click-through rates have generally improved, indicating that businesses are finding ways to attract users’ attention and drive engagement.
By focusing on creating compelling ad content, optimizing ad placements, and refining targeting strategies, companies can increase their chances of capturing user interest and boosting CTRs.
Finally, the cost per click has exhibited a mixed trend, with some industries experiencing rising CPCs while others managed to decrease their costs or maintain stability.
It is vital for businesses to carefully manage their ad budgets, finding a balance between bidding competitively for ad placements and controlling costs to maximize their overall marketing ROI.
Staying the Course
In the ever-evolving world of digital marketing, understanding industry benchmarks and trends is paramount for success.
By leveraging the insights provided here and continuously refining strategies based on data and analysis, businesses can navigate the changing marketing landscape in 2023 with confidence.
Remember that the National Positions team is here to help you drive better results and achieve marketing objectives during the good times and the not-so-good times. You can contact our team of experts today to help navigate what’s coming and get your marketing strategies on point in 2023.