International sales increased an even faster 30%. The company also reported a record profit of $857 million during the second quarter and accelerated expansions ...
To find out how effective its web ads were, TechnoScout halted all online advertising from mid April to mid July. The results: they work but could be more effective.
The great thing about online advertising is that marketers can see how many times consumers click on ads and how much time they spend viewing them. But if an online campaign coincides with large campaigns in other media, including print and radio, a marketer can have a tough time separating online advertising’s effect on sales from offline’s.
Joel Skretvedt, director of Internet marketing and operations for Techno Brands Inc.’s TechnoScout.com, was determined to find out just what his online campaigns were producing. And he reasoned there was only one way to do that. So from mid April to mid July, he halted all online advertising, including banners as well as campaigns to boost Internet search results. “We knew we were getting a portion of sales from offline advertising, but we weren’t sure if spending for online media was also producing sales,” Skretvedt says.
He quickly learned the answer: Online ads are crucial to sales, but they could be doing a better job.
The test involved pulling all ad placements from Yahoo.com and other major sites and halting all search-based marketing. The result: Online sales fell 45%, Skretvedt reports. The decline was more than the privately held TechnoScout had anticipated, since it continued its extensive print and radio campaigns, including 250 million monthly ads in dozens of major publications including Time, People and The New York Times. Those ads proved insufficient without help from online ads. “Offline ads didn’t carry the load as much as we had expected,” Skretvedt says.
The test revealed that online ads account for 45-50% of online sales, catalogs for 25%, offline advertising for 8% and word of mouth for the rest. Since online ads went back up in late July, online sales are moving back up to their prior levels. By early August, they accounted for about 19% of company sales, compared to about 26% before the halt of online advertising, Skretvedt says. He expects online sales to recover to pre-test numbers as online advertising resumes in full.
While TechnoScout has a new appreciation for the work that online advertising does in driving sales, Skretvedt still plans to make online ads more productive. While the test-halt resulted in a drop in sales, it had less impact on profits, indicating that TechnoScout needs to improve the ability of online ads to produce better results per dollar spent, Skretvedt says. He says he must not only make ads more creative and effective with special offers, but also negotiate better contract terms. “Now we’re spending $1 in online advertising to get $2 in sales, but I’d like to be spending $1 to get $3,” he says. By comparison, he says, Techno Brands strives to keep offline advertising within 38% of sales.