May 29, 2009, 12:00 AM

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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, 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.”

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