Madison Reed has raised $32.1 million since launching 15 months ago.
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Comparison shopping engine operators say the engines also help marketers attack the problem of customer acquisition from more than one angle. Search marketing is a volume play that produces good conversions because of the declaration of intent. Comparison shopping leverages the notion of shopper intent further. As a consequence, it drives less volume because it pulls in only focused shoppers already well down the path to purchase but, theoretically, those shoppers produce better conversion rates.
How much better? Brian Smith, a comparison shopping engine industry consultant and blogger who also manages online marketing for a b2c site that sells home security equipment, says he has seen ROI for the store, PersonalProtectionStore.com, go two to five times higher on the advertising it does on comparison sites than on straight pay-per-click advertising it does on general search engines Yahoo and Google. Smith also notes that those results aren`t consistent across all seven comparison sites on which the store advertises, and that he watches results very carefully, cutting back on bids and pulling out of engines when results aren`t justifying what he`s spending.
Fanlo says that across a variety of marketers using Shopping.com, he has seen conversion rates 50% to 200% higher than on general sponsored search. But Fanlo grants that not all marketers that use comparison shopping engines will see that kind of spread. "The softer the product category, the closer the ROI will be between the two," he says. "If you are selling something that is very brand-focused, keyword engines might do just as well. If you are selling something that is very specification-focused, like a digital camera, the ROI is going to be better on a comparison engine."
Better ROI is tied to the fact that the format of a comparison shopping engine puts more of the information needed to make a complex purchase--product specs, brand, price, shipping details, and product and merchant reviews--in front of the shopper before the shopper ever chooses which retailer`s offer to click on in the results. By contrast, shoppers who click on a keyword listing in sponsored search results don`t get most of that information in the search listing and arrive at the site less qualified and less ready to buy--but the ad sponsor must still pay for that click.
Shopping in softer product categories isn`t as driven by the comparison of multiple attributes on comparison engines because such products are attached to less structured data; that is, categories of data such as product specs that are standard across all products in the category. Cameras, for instance, are associated with a lot of structured data in comparison engines; something like a down comforter, less so.
But even where a product has fewer attributes that can be compared against the competition`s in a grid, comparison shopping engines still bring something to the table that general search doesn`t: customer reviews of merchants and products, a point underscored by Mohit of Shopzilla, which launched initially as the business ratings service, BizRate. "If e-commerce is going to thrive on the Internet, you need an intermediary of trust," he says. "Just having a series of links may be a good way to arrange information, but it`s not going to be good enough to help people make a decision on where to buy."
Reviews can affect click through dramatically, says Stephen Imbler, CFO of comparison shopping engine NexTag. In buying a camera for his own use on NexTag recently, Imbler first sorted for the model he wanted by price, eliminated the three top-listed (lowest-priced) vendors because they weren`t highly rated or didn`t have enough reviews yet, and zeroed in on the first in his sort that displayed a four-star rating. He then checked how that vendor had been rated within the past 90 days and then the past 30 days, and finally read some of the customer reviews to see what customers did or didn`t like about the merchant he was considering before making a decision.
Weighing the pros and cons
"Can you deal with the things people don`t like?" he says. "Maybe the review says the vendor ships slowly. If you don`t need it next week, and you`d like to save a couple of hundred dollars, maybe that`s okay. Maybe the review says the vendor will try to upsell you when you order. If you`re up for that, that`s fine. If not, you pick another vendor that doesn`t upsell." The point for retailers is that success on comparison shopping engines is about more than lowest price, he says. "The reviews are very important," he says. "Just having the lowest price doesn`t mean the retailer is going to have the best-performing offer."
While some merchants attain increased conversions and higher ROI on the traffic delivered by comparison shopping engines, and industry leaders like eBay and media conglomerate Scripps have bet on the future of comparison shopping with big-money acquisitions, some marketers in the trenches are grappling with issues that could hinder that growth unless addressed, and they go beyond the rising cost of clicks that affects many CPC programs.
Hawkins observes one limiting glitch in the system: the absence in some cases of a universal identifier on products that ensures that the products the engines pull from an index for comparison from different merchants are, in fact, the same product, and that shoppers are seeing a true apples-to-apples view. Products in some categories have an associated UPC or model number; books might also have ISBNs. "Go over to sheets, pillows, shirts or pants or a number of other product categories and there are no associated model numbers or UPCs or ISBNs. So when you search for a down comforter, all you see are different pictures of down comforters, with different prices listed for different merchants. You just have to look at the product and pick one that looks good," he says.