This is the summary of an article by Bernard J. Jansen and Simone Schuster. You can get the pdf of the behavioral targeting article here: Bidding on the Buying Funnel for Sponsored Search and Keyword Advertising.
Search engine marketing comes in various terms, such as search engine advertising, pay-per-click and keyword advertising. It is used by companies for product and service promotion on SERPs, or search engine results pages and its effective use.
Among the major search engines, this is the central business model used. The paradigm used by SEM is primarily called the buying funnel, a staged process that describes how consumers decide how they buy. The first stage is Awareness, the second stage is Research, third stage is Decision, and final stage is Purchase.
The buying funnel is widely accepted, so it is very important to investigate if this is the accurate way of explaining how consumers behave in response to keyword advertising campaigns. Is the buying funnel an advertising paradigm or is it really how consumers behave? Should a SEM campaign target the Purchase stage right away, or should each stage be targeted? These are some of the open questions.
The foundations of the buying funnel comes from information processing theory which is the main theory for all consumer behavior models. It is used to model how consumers can be reached by advertisers, and it is a nice fit to decision making among consumers.
Awareness is a consumer’s conscious need and desire to address that need with a service or product. Research is an information seeking process which includes looking for the right product governed by several factors, including affordability, necessity, etc. Decision is when a consumer comes up with a purchase set or a list of possible products. Purchase is when the consumer has actually made a decision to purchase or not purchase a certain good.
According to this paper, there is a few published empirical research regarding the buying funnel among literature related to SEM. This research has both practical and academic implications and so is a very worthwhile pursuit.
The research question is: For online consumers, do the purchase and search interactions with keyword advertisements follow the buying funnel stages? Specifically, the study aims to determine if it is possible to tell in what stage of the buying funnel an online consumer is based on his or her search query. The following are the hypotheses to the research quesion.
First Hypothesis: There is a significant difference among the queries of each buying funnel stage based on the average number of impressions. Whenever an advertisement appears on a search engine results page after a user submits a search query, that’s called an ad impression.
The second to sixth Hypotheses are all similar to the above hypothesis, where the significant differences on each stage of the buying funnel are based on average number of clicks, average cost per click, average sales revenue per query, average number of orders, and average number of items ordered, respectively.
Methods and Results
Data is obtained from daily keyword advertising information from a nationwide retail chain that has a sales presence in both brick and mortar and online stores, spanning four years amounting to a little less than 7 million records and 40,000 keyword phrases. These key phrases are then classified according to one of the four stages found in the buying funnel.
Based on the occurences of classified queries, 51 percent are found to belong to the Research stage, followed by 28 percent for Awareness, 17 percent for Decision and finally 4 percent for Purchase. One research has previously concluded that most online consumers use search engines to research about products or services.
The hypothesis testing shows that indeed the buying funnel represents the behavior of actual consumers online. All of the hypotheses have significant differences, and so the buying model is really a workable model. On the other hand, the results also show that the buying funnel only works well for the classification of the focus of online ecommerce queries and not a good model to describe the movement of a consumer from one stage to the following stage.