January 31, 2008, 12:00 AM

SPONSORED SUPPLEMENT: How to find the payoff in search marketing

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When best practices are applied in an auction, retailers are more apt to approach bidding in a rational manner, weighing the uptick in business to be generated by the keyword against its cost. It is a more effective approach than bidding on a keyword until the cost exceeds the keyword’s daily budget. “Retailers need to apply the same rigors to paid search as they do direct mail,” says Lee. “But most retailers lack the technology to do it, which results in two kinds of retailers at the top of the paid search results; brilliant marketers and ignorant idiots.”

Still, some competitors will bid so irrationally on keywords that it makes no sense for a retailer to exceed the normal bid price. In these instances, retailers that have tested the value of keywords in their dictionary can turn their attention to alternative keywords, dayparts, and geographic clusters that in combination can generate desired sales without blowing a huge hole in their budget. “This type of segmentation keeps retailer’s paid search strategies competitive without necessarily tipping their hand to the competition as to what they are up to,” Lee says.

One exception to paying top dollar for the top ranked keywords is for seasonal items with a small sales window, such as roses for Valentine’s Day or flowers for Mother’s Day. In these instances, competition among retailers is so fierce in the category and the selling season so short that there is a strong business case for paying the extra money to secure the top-ranked keyword.

“If retailers can afford to buy the keywords that get them a number one ranking and having that ranking will enable them to clearly outdistance competitors in lower spots when it comes to sales, then it is not a loss for them to do it,” says Stuart Larkins, vice president of search marketing for Chicago-based search marketing firm DoubleClick Performics.

Finding the alternative product

Retailers who sell on price and can’t afford to overpay for a seasonal keyword can still fight back. Offering an identical item at a lower price is certain to catch the shopper’s attention if the search result does not rank first. The key is to be sure the search result ranks in the top three, as shoppers are less inclined to scroll further down, especially if price is a dominant feature of the ad copy.

“If the retailer is selling the exact same product as competitors at a lower price, then it is all right to go with a lower ranking because it is going to pull in a lot of shoppers,” Larkins says. “Retailers that know how their sales strategy compares to their competitors’ tend to be more nimble in these situations, allowing them to get the most value out of their keyword purchases.”

Buying the price of an item as a keyword is an effective way to obtain a high search ranking in a competitive category without breaking the bank. IProspect’s Murray cites the example of a collectibles retailer that has successfully used the keyword “$14.99” to drive sales. “We conducted some data mining and found this was a term frequently entered in shopper search strings for the types of collectibles the client sold in this price range,” recalls Murray. “Since it was not a search term actively sought by competitors, it was available for a good price and yielded a high return.”

Determining the true value

Determining the true value of a keyword and subsequently how much to bid for it requires an understanding of the role the keyword plays in the path the shopper took to the sale, especially if the keyword is generic. Generic keywords or phrases, such as “wool sweater” play an indirect role in the sale, but are often necessary to capturing a sale as it may be the first keyword search entered by the shopper.

“Shoppers don’t always convert through their first keyword search, but those words do assist in making the sale,” says Jeanine Belsky, vice president of retail for 360i, a New York-based digital marketing firm. “Retailers don’t always see the revenue connected to initial generic keywords entered at the start of the shopping trip, because the link to the sale is not direct.”

In some cases, a generic keyword may be the first step in driving traffic to the store, where the shopper makes a purchase.

All too often, retailers do not give credit to a keyword click that assisted in the sale. Typically, the only click measured has been the last click before consumers complete a transaction. Any other clicks on a marketer’s search results that led up to that conversion receive no credit for accomplishing the goal.

For example, a non-branded keyword such as “DVD player” gets little credit for assisting in a sale, even though the term may have been the starting point for the purchase. What ends up getting credit is the search string specific to the model purchased, such as “Sony DVD player E-Series,” according to Belsky.

“Taking a look at the entire clickstream helps retailers to understand the value of each keyword that played a role in the conversion and ensure that all of these keywords get proper credit,” Belsky says. “Considering how all keywords assist in a sale can significantly improve campaign performance.”

With the availability of algorithms that can closely measure the ROI on paid search terms retailers can reduce their risk of exceeding ROI targets for keywords by tracking the entire clickstream taken to a purchase. “The key is not to get caught up in a bidding frenzy for keywords and paying beyond what will generate an acceptable ROI for that keyword,” adds David Szetela, CEO of Clix Marketing, a Louisville, Ky.-based paid advertising firm.

Branded words’ longer horizon

One point retailers need to remember about branding campaigns is that they do not always generate an immediate sale online, but may create in-store sales, which makes it tougher to gauge the sales lift generated, adds 360i’s Belsky.

Just as retailers must broaden their understanding of the role of each search word in the sales process, they must also seek new ways to use search words to generate sales.

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