PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
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If a search marketing firm makes strategic, tactical or channel-specific recommendations without first gaining an understanding of the retailer’s business objectives and internal capabilities and limitations, those recommendations would be uninformed and indicative of the way the vendor does business, suggests Murray.
“Think of it this way,” he says. “If someone tried to sell you the latest, sexiest little sports car without first learning that you are on a limited budget, that you don’t know how to drive a standard transmission and that you want a car that can pull a huge trailer behind it, what type of partner do you think they’d make?”
In evaluating search marketing proposals on behalf of consulting clients, Thurow looks for the red flag of the black box, emphasizing that no search marketing company has inside knowledge of any search engine’s ranking algorithm. “If any search marketing firm tells a retailer that they know the secret of the black box because they have PhD engineers on their staff, then promptly show them the door,” she says.
“A lack of flexibility, lack of experience, and lack of references” from a prospective search marketing partner are other signs that a retailer should keep looking, suggests Jeffrey Pruitt, president of the Search Engine Marketing Professional Organization and executive vice president of corporate partnerships at search marketing firm iCrossing Inc.
Prepare for the end
Another danger signal is what a search engine marketing prospect tells the retailer about how it would handle the end of the relationship. Retailers should establish upfront in any contract that they retain ownership of search engine marketing and product feed accounts with Google, Yahoo and other platforms on which they list products.
“Some unreputable firms tell you that if you leave, they simply shut off your accounts and cannot transfer them-totally not true,” says Jeanne Hopkins, chief marketing officer of MECLABS Group, the parent firm of marketing research company MarketingSherpa. “If they do this, you lose all your setup, your current optimized structure and your quality score in Google.”
Stuart Larkins, senior vice president of search optimization at DoubleClick Performics, the performance marketing division of DoubleClick Inc., says a search marketing company that plans to devote only one individual to the actual daily management of the retailer’s program is one more thing that can spell trouble. “You might want to look elsewhere if only one person is working on your program, from bid management to copy/keyword creation to technical support,” he says. “One person in the trenches day-to-day won’t be thinking strategically about your business.”
That doesn’t mean a retailer should turn up its nose at an agency team that’s few in number. The Talbots Inc., with online sales of $231 million in 2007, has substantially grown its paid search campaigns with the help of a relatively small team from Impaqt, according to Kate Goodman, Talbots director of e-commerce.
“We were looking for a team that took a collaborative approach to business and made us feel like we were working as one unit,” Goodman says. She also wanted a company that demonstrated an understanding of both paid search and natural search and one that greatly improved on the level of service it had received from its previous vendor. Impaqt’s team and client services director delivered, she says.
“It’s a small team in comparison to other organizations we looked at,” she adds. “That was initially a consideration, but we felt that the team was tenured and devoted to this space and although small, they were solid and had strong growth potential.”
Finding the detour
While tips abound on how to detour trouble spots in selecting a search marketing vendor, it’s harder to pin down precisely what will be the proof of a successful engagement. That becomes an issue when a retailer is setting up a contract with a search marketing company and attempting to forecast costs.
Larkins says retailers should shy away from a search marketing firm that offers specific guarantees of performance. “Data accuracy should be guaranteed and a clear schedule for forecasts and deliverables should be established. But beware of firms that guarantee a certain level of performance, particularly with natural search,” he says.
But while reputable firms say no to performance guarantees, they say yes to metrics that track progress, such as traffic, conversion, and click-through rates, iCrossing’s Pruitt says. Many believe the best way to track program performance is return on ad spend-dollars earned per dollars spent-which can also be used to establish incentive-based goals, different from performance guarantees, he says.
Gbur offers one example of how Impaqt has worked with retailers to set metrics on pay-per-click programs. “With many, we’ve established performance-based pricing in which we’re evaluated based on hitting an advertising spend to sales ratio,” typically one dollar spent for every four dollar earned, he says.
So how much, in dollars, can a retailer typically expect to pay for a pay-per-click search marketing program? Vendors shy away from this question, saying that given differences among clients, business models and program, no search engagement is typical, but Marketing Sherpa’s Hopkins offers that on the paid search side, “15% is fair for the first $100,000. From that level, the fees can scale down.”
The pricing on search engine optimization services is a different story. With many factors they don’t control, such as ever-changing search engine algorithms, firms don’t often use incentive based pricing for search engine optimization services. Impaqt’s usual approach with search engine optimization engagements, for example, is a flat fee for consulting.
Murray adds that optimization services may be priced as a monthly retainer; sometimes the retainer is front loaded so that during the initial period when the search vendor is doing the heaviest lifting, the monthly payment is higher than it is later in the campaign. For any search marketing engagement, retailers can expect to sign a contract for a set duration, which either the retailer or the search marking company can cancel on an established number of days’ notice, he says.
Defending its approach