Groupon says its focus is on the bottom line, rather than top-line growth.
Online video offers new ways to present product information— but it’s not as easy as YouTube makes it look.
If a picture is worth a thousand words, then a video must be worth 100,000 words. At least that’s the view of some online retailers who have started using video to promote their goods and who appear convinced video will become increasingly valuable.
They hope to take advantage of increasing consumer familiarity with online video as a result of free video web sites like YouTube. The e-retailers deploying video say it helps bring products to life for consumers, but that the technology challenges remain formidable.
What online video does best is support sales by informing customers and keeping them on an e-commerce site longer than they might have stayed in the past, says Thom Disch, president, CEO and owner of Handiramp.com, a b2c and b2b company that sells ramps for homes, businesses and vehicles. “Video gives action and voice. It’s a wonderful way to reach out and tell the customer, ‘This is the right product,’” says Disch, who also is founder and CEO of Internet-Engine.net, an Internet marketing company.
New marketing opportunities
Video can demonstrate how a product works and offer instruction on how to use and care for the product in ways that static images cannot. Video also provides new marketing opportunities: E-retailers can post TV commercials as well as clips on special offers, and videos can be embedded in marketing e-mails.
However, the technology is new and not yet easy to implement. Producing a video requires a significant investment of time and money. And even if their suppliers provide product-demonstration videos, web merchants still have to integrate the videos into their web site platforms.
Videos from multiple vendors mean multiple formats that have to be made compatible with e-commerce platform software, drawing information technology resources away from other projects, e-retailers warn. While some retailers might conclude online video is a luxury rather than a necessity today, others are already in the game and hoping to benefit from the broad trends making online video more commonplace.
The technology behind online video has improved significantly as the use of high-speed broadband has expanded to two-thirds of all Internet-connected U.S. households. Those faster connections have more consumers looking to the Internet as a source for movies and TV shows, such as through Apple Inc.’s iTunes and RealNetworks Inc.’s Real.com.
E-retailers are noticing. In the State of Retailing Online 2007 survey by Shop.org and Forrester Research, streaming video clips and podcasts ranked second among the technologies web merchants planned to invest in to help consumers better research products, cited by 51% of the 150 respondents. Product zoom was first at 58%.
Video’s basic selling point is that it shows a product in action. A video demonstration of a power drill, for instance, can help sell the product, and help the shopper find the right drill, Disch says. “If you can show in a video how easy a product is to use you can confirm it’s what the customer wants-or that it’s not what they are looking for,” he says.
Handiramp.com started using video in 2005 to describe its equipment and show how one product differs from another, Disch says. It began by creating videos in-house with a simple digital camera that had a video feature. The result was brief clips showing simple set-up for ramps used on commercial and private vehicles. For its pet-oriented product, the company turned to a professional videographer to develop a 4-minute video showing how to use pet ramps.
Many of Handiramp’s product demos use Flash technology from Adobe Systems Inc. to manipulate still images shot with a digital camera, many of which can shoot a few seconds or a few minutes of video. The company is updating its web site and plans to add more 1-minute product demonstration videos to increase the time shoppers spend on the site.
Disch is convinced that consumers who spend more time on his site will be more likely to buy, although he admits he has not measured the relationship. “I know that sales are up, but I cannot tell you just how much might be due to the video,” he says. “I am a big believer in A/B testing, but in this case I just knew that the video content was better than the content that was replaced.”
2nd Wind Exercise Equipment is another retailer using video and thinks it’s paying off, but does not yet have the tools to measure its impact on sales. The company, which sold mostly used exercise equipment when it launched in 1992 but now sells primarily new equipment, knows that consumers are viewing 6,000 to 8,000 videos a month on its site, 2ndwindexercise.com, says Adam Lindquist, director of business development. And, he notes, “a person who looks at it stays onsite six times longer.”
But does that lead to more sales? “We believe there is a correlation but we have no statistical data to back it up,” he says. He adds that the marketing firm that helped him develop the online video, Juice Media Worldwide LLC, is developing a tool to help 2nd Wind track the relationship between video views and sales.
Getting started with video wasn’t easy, Lindquist says. “A lot of it was seat-of-the-pants and the first couple of videos were kind of bad.”
Since the start-up phase, the videos have improved and the retailer has come up with more ways to use video. “We use it to post our TV commercials, to show sales specials, and on the service side as an instructional aid for customers,” Lindquist says. The company also uses video to communicate with its 110 physical stores in the upper Midwest, for instance giving them access to new videos provided by manufacturers.
2nd Wind also includes videos of beginner exercises in e-mails to customers as a sales follow-up, he adds. 2nd Wind now has its own studio to create product demo videos, Lindquist says. The studio cost about $15,000 to set up, a price Lindquist says is at the low end of such investments. “You could easily spend $50,000 to $100,000,” he adds.