May 29, 2009, 12:00 AM

Search Within

Before assessing search vendors’ offers, e-retailers should first know what they need.

Finding a good search engine marketing vendor is a bit like finding a compatible mate-to be successful, e-retailers first need to know what they want and second need to make sure their choice can provide it.

Outdoor equipment and apparel e-retailer Cabela’s Inc. had a specific search engine marketing goal during the 2008 holiday season: drive in-store sales. And so it turned to vendor Performics Inc., which offers a search marketing service called Local designed to boost bricks-and-mortar sales.

Working with Performics, Cabela’s displayed a series of ads promoting coupons redeemable at specific Cabela’s stores. It used geo-targeting to serve the ads to online consumers located within 200 miles of the Cabela’s store featured in the coupon. The paid ads focused on keywords for the Cabela’s brand, the holiday event and a combination of both, such as “Cabela’s Holiday Event.”

The results were better than expected.

About 10% of consumers who saw the ads clicked through to nab the coupons-much higher than the 3% forecasted. And 40% of those who fetched the coupons redeemed them in stores, better than the projected 15%.

“They helped drive our offline business and push traffic to our retail stores,” says Derek Fortna, Internet marketing manager at Cabela’s. “They’ve taken their online experience and proven they can drive our offline business as well.”

As Cabela’s found, search engine marketing can do more than just drive clicks to a web site. It can also increase brand awareness, boost cross-channel sales and target highly profitable, repeat customers. And so, when choosing a search marketing vendor, e-retailers should first establish their objectives and then find a firm that’s helped others reach similar goals. Once a merchant finds a handful of vendors that fit the bill, the real vetting processing can begin.

Know the territory

One reason Cabela’s got it right is because it didn’t fall into the trap of merely choosing a vendor with many retailer clients, says Shar VanBoskirk, vice president and principal analyst at Forrester Research Inc.

“Most marketers in any industry look for a vendor with industry experience,” VanBoskirk says. “But it’s better to work with a vendor partner who has experience solving business problems akin to yours-regardless of the industry.”

In fact, VanBoskirk says, the leading marketing firm in a particular vertical may not be the best choice for an online merchant. “Sometimes a vendor which dominates in a certain industry will end up doing the same best practices for everyone, meaning you and your competitors will all have the same search strategy,” she says.

On the other hand, Maris Daugherty, senior consultant at J.C. Williams Group Ltd., says merchants, especially those selling in specific niches, should make sure a vendor is familiar with the retailer’s industry and jargon.

“If you’re a specialty retailer or are really strong in certain categories, make sure the vendor is strong in those as well,” she says. “It will assist you in capturing the cultural references and category lingo into your keywords and phrases, thus potentially providing a better-performing long tail,” she says.

For example, she says a clothing retailer will want a firm that knows all the terms used for pants, such as jeans, trousers, capris and clam diggers. That’s even more important for a retailer selling highly technical products, such as magnetic dry pumps. A vendor should know that the lab technicians who purchase such pumps call them mag-pumps.

Delegation distress

Given the importance of search marketing, outsourcing it can be frightening, especially since e-retailers often feel they know better than anyone their potential customers, business model and brand.

“We have considered using SEM’s, but we have not signed on with any,” says Jody Murdough, co-owner of toy e-retailer BigToyExpress.com. “We have been reluctant to delegate such an important responsibility to any outside group that does not possess the full knowledge of our business and who are out of sync with our strategy.”

For example, Murdough has spoken with vendors that recommend he bid on the keyword “toys.” While this may rack up impressions and clicks, Murdough says the conversion rate would be weak and, consequently, cost-per-conversion high.

“It is much too broad a search keyword for a niche toy store like ours and would not be a wise investment,” Murdough says. “The bottom line is that we have not felt comfortable enough with the quality of what we have seen out there yet to invest in SEM.”

But some experts say Murdough may simply be looking in the wrong places. Quality vendors can not only help retailers calculate an acceptable average cost per order, they can help make sure customer acquisition costs remain at or below that level.

SEM companies also can help retailers determine what they should be paying per order by category, Daugherty says. For example, categories with slim margins will have a different target cost per customer than private-label products with a high margin, she says.

VanBoskirk says many e-retailers choose a search firm that is focused on sales volume, not profit. That, she says, is a big mistake.

“Retailers in particular often spend way more than they need to for certain customers,” she says. “Spending $100 for a $30 customer is much less profitable than spending $200 for a $500 customer.” Retailers should look for a search firm focused on delivering profitable sales, not just volume, VanBoskirk says.

One way to do this is to establish a contract up front with a vendor that clearly spells out short- and long-term goals, expectations and success metrics. For example, a retailer might say it only wants to spend a certain percentage of its search marketing dollars on customer acquisition.

Contract talk

The way firms and e-retailers measure success is especially important to handle up front, says Mara Devitt, partner at retail consultancy McMillanDoolittle LLP. For example, a vendor may think its job is to merely drive traffic, while a retailer defines the goal as driving traffic that converts. Retailers should make clear their expectations and put them in writing before signing on the bottom line, experts say.

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