June 29, 2010, 1:43 PM

Paid search marketing remains king

Retailers are spending nearly 40% of their marketing budgets on paid search.

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Although retailers are constantly on the lookout for the next magic bullet to lure new customers and grow online sales, traditional online marketing tactics, such as paid search, e-mail and affiliate marketing, command the lion’s share of retailers’ marketing budgets, according to Forrester Research Inc.’s “The State of Retailing Online 2010: Marketing” report commissioned by the National Retail Federation’s Shop.org division.

Paid search makes up the biggest portion of marketing budgets across all types of retailers. For instance, apparel, accessories and footwear retailers allocate 42% of their total marketing budgets to paid search; beauty and personal care retailers allocate 43%; general merchandise retailers, 39%; home retailers, 34%; and sporting goods and accessories retailers, 44%.

That paid search spending stands in stark contrast to social media marketing, which despite considerable hype, makes up a small percentage of retailers’ overall marketing budgets. For instance, apparel, accessories and footwear retailers allocate 2% of their total marketing budgets to social media, which includes social networks and blogs; beauty and personal care retailers 3%; general merchandise retailers 2%; home retailers 3%; and sporting goods and accessories retailers 2%.

The low costs associated with social media marketing may be one reason retailers say they are finding value in the channel, even though the ROI for driving online sales remains murky, according to the report. In fact, only 31% of respondents using social media marketing said that they had a specific set of metrics that they used to gauge their success in the space and 28% said that social marketing has helped their business grow.

Other motivations for using social media that were cited by retailers include:

  • To experiment and learn what they can do with the channel, 80%.
  • To listen to and better understand their customers, 50%.
  • To avoid being perceived as late movers, 47%
  • Senior management pressure, 20%

Among those measuring their actions in the space, there’s little consensus as to what to measure. Among the metrics retailers use to measure the success of social media marketing, 80% are measuring the growth rate of their followers; 59% are measuring sales attributable to links on social networks; 49% click-throughs to the retail site; 38% requested action taken; 26% percent of products with more than one review; 26% improved search engine optimization; 22% media attention or buzz. 

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