PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
E-merchants should demand results from sites where they advertise.
Marketing online has come a long way in a short time. Investors have galvanized Internet companies to evolve their marketing strategies from a mass market to a targeted approach, finding efficient and verifiable marketing strategies to convert online browsers into buyers. Sock puppets and Super Bowl ads be damned-smart e-retailers are now taking their cue from direct marketers.
Marketing to targeted audiences coupled with a reasonable return on investment is critical for advertisers. Paying huge slotting fees to receive eyeballs-but not buyers-is unwarranted. Smart marketers are demanding pay-for-performance metrics.
History provides us with a good analogy of another market, similar to last year’s buying frenzy on the web. In the 1980s, television exploded. In short order, my TV expanded from 13 channels to 40-thanks to cable. This gave me a plethora of programming choices. And it gave advertisers a vast new world of advertising venues.
800 call = click
We saw the birth of ginsu knives and two-minute direct response commercials. We saw the mainstreaming of QVC and the Home Shopping Network. We saw-I was there strategizing and implementing-Sports Illustrated giving away football phones and Michael Jordan videos. What do these all have in common? The ad time was all bought on a pay-for-performance basis. With so many channels, all new, no network could prove its audience size apart from that audience’s proclivity to buy.
Sports Illustrated negotiated performance deals based on the volume of 800 number calls. This same measurement has manifested itself today on a cost-per-click formula.
At BizRate.com, we buy online media ads only on a cost-per-click or pay-for-performance basis. It must get us traffic that we can convert and monetize. We also sell space on our site on the same basis. We are comfortable sharing the upside in pay-for-performance with our over 1,500 merchants. In fact, we’ve built an auction engine so our partners can decide how much they are willing to pay to get a highly qualified lead. Merchants like the ability to set their own rates and we give greater prominence to those who bid higher.
Merchants have many choices as to how they can derive success in this evolving pay-for-performance era. At BizRate.com, we offer five options: pay us a cost-per-click fee (usually 50 cents to $1.50); tell us your customer acquisition cost and we’ll back into that metric for you; give us a monthly budget and we’ll optimize your bidding in the auction; tell us how many redirects you want to your site; or share revenue with us.
So beware of CPM-only sites that say this is their only model. If you look only at sites that offer the full menu of pay-for-performance metrics, you’ll save loads of marketing expenditures, get maximum sales, and help drive the industry to where it will end up anyway.
My evidence for this contention comes from our own experience at BizRate. Shop.org and Boston Consulting Group reveal that the average merchant has a 1.8% browse-to-buy rate. BizRate.com provides industry leading conversion rates of 5% to 8%.
There are other tools that online marketers can lift from direct marketers’ toolkits. They include:
Co-op e-mails: Targeted e-mails can generate personal interaction by notifying consumers of deals on products most important to them. BizRate.com e-mails produce up to 20% response rates because we provide merchant deals in the context of relevancy and quality. We charge here on a CPC basis.
Sponsorships: Teaming with other merchants to provide a package of services and products is cost-effective. For example, imagine co-op marketing between a toy manufacturer and an e-retailer in children’s clothing. It’s a natural relationship in a parent’s mind-so why not in yours as a marketer?
As the second most visited retail site according to Jupiter/Media Metrix, BizRate.com’s marketplace balances seller and buyer demands. Consumers come to us for relevant information; merchants come to us for tools to deliver that information in a targeted manner to 8 million shoppers each month-with real, quantifiable results.
Chuck Davis is the President and CEO of BizRate.com based in Los Angeles, CA. He can be reached at email@example.com.