For years, many marketers have spent a lot of time and money trying to find the perfect keywords for their paid search campaigns.

In some cases, marketers are bidding on thousands of keywords. But could it be for naught?

It's a question worth asking in light of a revelation made by Gary Friedman, the CEO of home furnishings retailer Restoration Hardware. 

At the Goldman Sachs 24th Annual Global Retailing Conference held earlier this month in New York City, Friedman told attendees that several years ago, his online marketing team requested a doubling of its budget. Such a significant request was met with some skepticism, but the online marketing team was confident and for a seemingly good reason: their customer acquisition and ad costs were the lowest in the company.

Intrigued, Friedman asked them for the details. "Tell me about the data, show me how," he requested.

Eventually, the conversation turned to the company's AdWords buys and Friedman asked a simple question: "how many [keywords] do you buy?" The answer: 3,200. 

To which Friedman followed up:

I said, well, what are the top words? How are they ranked, the ranking of the words? Oh, we don't have that, right. And I was getting the look at like, oh, Gary is kind of one these old brick-and-mortar guys. He just doesn't get it.

And I said, well, what are the top 10 words? And they didn't have the information. I said, why don't we cancel the meeting and come back next week when you have the data? I'm sure that Google sales representatives who are taking you to the expensive lunches and selling you the 3,200 words have that data. So why don't we get the data and then let's review the data?

When the group reconvened, the online marketing team had the data, and it was quite surprising. 22 keywords were driving 98% of the business. And what were those keywords? "Restoration Hardware" and 21 ways to spell "Restoration Hardware" wrong.

According to Friedman, Restoration Hardware canceled its buys for all keywords, including its name, the next day.

The online marketing team at first objected, pointing out that a competitor like Pottery Barn could "squat" on the company's name, but Friedman, who to this day is dismayed by the number of companies that pay Google millions of dollars a year "for their own name", wasn't having any of it:

I said, "excuse me?" I said, if someone goes to a mall or a shopping center and they're going to Restoration Hardware and there's a Pottery Barn there, they're already squatting, okay? It doesn't mean they're going to go into their store. If somebody wanted to buy a diamond from Tiffany and just because Zale's is sitting on top of them in a shaded box doesn't mean they're going to go to Zale's and buy a diamond.

Friedman's revelation about Restoration Hardware raises a number of subjects that are worthy of examination.

Perhaps the biggest: despite the fact that it is a publicly-traded company that does more than $2bn in revenue per year, Restoration Hardware's online marketing team didn't know which of the more than 3,000 keywords it was buying ads against were driving business.

Let that sink in.

The marketing team knew its customer acquisition cost and its ad cost, and probably could have reported on any number of other fancy metrics, giving it the confidence to ask for a doubling of its budget, but it didn't know that "Restoration Hardware" and common misspellings were responsible for 98% of the revenue its paid search campaigns were delivering.

This is a great reminder to marketers of the importance of seeing the forest from the trees. There are more tools than ever that promise mastery and optimization of every facet of digital marketing, but these can be a double-edged sword. While many of them no doubt deliver benefit, they can also make it easier for marketing teams to get lost in the weeds and overcomplicate their efforts. 

While Restoration Hardware's experience might be slightly more extreme than typical, the experiences of major advertisers like JPMorgan Chase, which drastically slashed the number of sites it advertises on after finding that most of them were useless, and Proctor & Gamble, which cut its digital ad spend by $100m without ill-effect, suggest even the most sophisticated of companies could probably benefit from taking a closer look at their digital ad efforts.

Patricio Robles

Published 20 September, 2017 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (5)

Pete Austin

Pete Austin, CINO at Fresh Relevance

Great article.

Just to clarify an obvious point, but "top keywords", presumably means ranked by ROI, not just by number of clicks. The value of the leads or outcomes compared to the cost of each keyword.

Last time we tested Google adwords, we also didn't see positive ROI for any keywords so, like Restoration Hardware, we gave up on using them. But YMMV.

3 months ago

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George Dawson, Principal at reCommerce Advisors

There is so much missing from their approach I don't even know where to start but the two things that come to mind are:

1. Multitouch attribution models are table stakes these days no?
2. Only 3200 keywords is TERRIBLE keyword generation/coverage given their catalogue when I was at Wayfair we had MILLIONS of non-brand keyword strings. They key is NOT bidding on top of funnel, low converting, "dumb" terms like Stool or Bed but to get much more specific with LOTS of terms like "modern bed for a condo" that will cost less and convert more!

3 months ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

George,

Yes, it would be interesting to ask about the attribution models they were using, but here's the thing: the CEO says his online marketing team couldn't even tell him which keywords were driving sales yet it was asking for a doubling of its budget. That in and of itself is mind-boggling.

Restoration Hardware is a $2bn/year publicly-traded retailer. The fact that this scenario existed at such a company is eye-opening.

While I doubt that every company is like Restoration Hardware, and certainly ecommerce natives like Wayfair are far less likely to be, I also can't imagine that Restoration Hardware is unique.

3 months ago

Pete Austin

Pete Austin, CINO at Fresh Relevance

Restoration Hardware is switching to a membership model, with a yearly membership fee and deep discounts, so arguably its leadgen marketing is only promoting ONE product and long-tail search terms are relatively inappropriate.
https://www.fool.com/investing/2017/04/05/why-restoration-hardware-was-among-last-weeks-bigg.aspx

They can do the actual furniture marketing via email instead, at much lower cost than adwords, once members have signed up.

3 months ago

Alexander Levashov

Alexander Levashov, Director at Magenable

I've seen this story many times.

Google and media agencies can show nice average numbers when mix branded keyword and others and hence 'prove' reasonable ROI.
But when you get rid of branded terms, you see that you are wasting time and money too often: https://magenable.com.au/marketing/can-save-thousands-dollars-paid-search-advertising/

Several years ago eBay conducted massive experiment on the subject that showed that bidding on branded keyword was a waste of money

3 months ago

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