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.

Some firms, including search marketing firm iProspect, will negotiate performance-based contracts. Such contracts vary from client to client, but in general pay vendors based on whether or not they meet pre-determined objectives. However, Paul Wilson, chief revenue officer at iProspect, says his firm requires historical sales and analytics data before it considers such agreements. And, he says, that’s something small e-retailers or merchants new to e-commerce oftentimes do not have.

Other search firms offer a sales-based fee model, meaning they only charge for sales, not clicks. Search marketing vendor Adlucent LLC operates on this basis with lingerie e-retailer Andra Group Inc. and the system has worked out well, says Tomima Edmark, CEO of Andra Group. “They’ve increased my return on ad spend by at least 100%,” says Edmark. “They have been able to find key phrases that turned my campaign profitable.”

Adlucent has helped Andra locate and bid on longer, more specific search terms indicative of an online consumer who is ready to buy. For example, the term “bra” generates a lot of traffic but relatively few sales. Instead, the retailer may bid on the more specific term “size 36C red bra.” Consumers typing a search phrase like that are more likely to be ready to purchase, making that term more valuable than a more general one, Adlucent says.

Adlucent also has found high conversion rates on products that have been positively reviewed on an e-retailer’s web site. Therefore, spending money on keywords for highly rated products makes good business sense. For one Adlucent retailer, products that have at least a three-star average review convert at twice the rate of other products, says Michael Griffin, co-founder and chief technology officer of Adlucent.

It can make sense for a retailer to pay an outside firm if it has expertise in search marketing beyond that of its internal staff. But some retailers have found they can make do with their own staffers, and save money.

That’s what Tom Cox, CEO of e-retailer Golfballs.com, is doing this year. “We utilized outside services for two to three years and were happy with the relationship. It wasn’t until the steep downturn in the economy that we discontinued working with them at the end of 2008,” Cox says. “We were entering a very slow period of the year for our business and felt it was better to basically retask a current employee than continue to pay fees to outsource.”

It was a rough transition at first, Cox says. But with the free help of campaign management tools from Google, Golfballs’ return on investment eventually went up 25%, as it generates about the same revenue with less ad spend.

Vetting a vendor

But retailers that have decided they need help from a search expert likely will find themselves meeting a series of vendors who all can make a compelling case for their strategy and experience. Retailers have to be prepared with specific questions that can narrow the field.

For instance, VanBoskirk of Forrester says merchants should ask the firm to address a scenario, such as, “What will you do to solve my current problem of paying too much for low-spending customers?” “It’s much better than asking the vendor to talk about their capabilities or past experiences,” VanBoskirk says. “Asking the vendor to talk about how they would handle a hypothetical situation is very indicative of what it will be like to do business with them.”

E-retailers also should try to get a sense of how much attention they will receive. Does the firm have a long list of larger clients that will inevitably come first? How many staff members will work on the account? Will the retailer have direct access to these individuals? These are all questions to ask, experts say.

In order to find the best vendor fit, it’s smart for e-retailers to think about all aspects of their businesses. For instance, online merchants that sell internationally should seek a firm with experience in the countries in which they do business.

There are also philosophical differences among search experts that an e-retailer should be aware of, Daugherty says. Some favor letting a retailer’s affiliates bid on keywords including the retailer’s brand name, figuring that will lead to sales; others say doing that will just drive up the price of important terms. “You want to make sure,” she says, “you align with an SEM team that agrees with your perspective.”

katie@verticalwebmedia.com

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