Amazon is growing on-demand services after reporting a 20% sales increase in 2015.
Social media commands the buzz, but established tools pay the rent.
The gamble signals the ongoing shift: 72% of retailers plan to spend more on marketing via social networks this year than in 2010, according to survey data from Forrester Research Inc. and Shop.org. In terms of expected increases in marketing spend, only search marketing beat out social media, with 75% of retailers planning to devote more dollars this year to that channel, according to the March survey of 68 e-retailers, including web-only retailers, multichannel retailers and manufacturers who sell online to consumers.
But despite those hopeful bets on social marketing, the channel represents only 2% of the $5.5 million average marketing budget among the retailers responding to the survey. And less than a third of survey respondents—29%—could say that social marketing has boosted business, with 18% saying that a social network presence was among the top sources for customer acquisition. Compare that with search marketing, which 90% of respondents consider a top customer acquisition source, or affiliate marketing, 49%, or organic search traffic, 44%.
Still, retailers and marketers can't ignore consumers' moves to social media and their apparent willingness to research products, consider retailers' promotions and even buy through Facebook and Twitter. A separate report released in May by Shop.org, the "2011 Social Commerce Study," found that 77% of online adults in the United States use social networks and 54% of those consumers have followed a retailer on Facebook, Twitter or a retailer's blog. Additionally, 35% of shoppers say they would be likely to make a purchase directly from Facebook and 32% say they would do the same via Twitter. And with more consumers carrying smartphones and using them to shop in between checking their Facebook and Twitter accounts, the power of social marketing promises to become even more important.
"Instead of waiting to get back on their desktop computer to watch videos or interact online, Americans are easily accessing social networks when they have even a few moments of down time, whether they're scanning Facebook news feeds while picking up their kids from school or tweeting about their shopping experience while browsing the mall," says Fiona Swerdlow, head of research at Shop.org. "The popularity of mobile devices will only boost the power of social commerce, which presents an incredible opportunity for retailers."
But retailers certainly should not count out older forms of online marketing, even if so much seems to be about Facebook and Twitter these days.
Web-only footwear retailer Birkenstock Central this year launched a new e-mail marketing program along with its migration to a new e-commerce platform. The retailer has improved the power of its marketing e-mails through such tactics as improving deliverability rates and instituting automated e-mail offers that, for instance, notify customers when out-of-stock items are back on virtual shelves. Those automated back-in-stock e-mails have produced an average clickthrough rate of 20.73% and a sales conversion rate of 22.73%, says Jim Moore, president of The PSNE Group, the retailer's parent company.
Automation also can help retailers get more punch from their paid search marketing efforts. Online pet supplies retailer Drs. Foster & Smith automates much of the process by which it crafts and bids on keyword phrases that the retailer uses to advertise its products on search engine results pages. The automation technology enables the retailer to set rules for how much the paid search system should bid on those keywords, and also tells the system the desired margins for campaigns.
"You hand over the keys and tell the system what you hope to achieve," says Matt Stelter, the retailer's assistant manager of Internet marketing. The technology also enables him to more efficiently transfer a marketing campaign from one search engine to another—say, from Google to Bing—without manually tweaking coding in spreadsheets. The result is higher conversion rates from paid search and a lower cost per conversion.
Of course, there is nothing stopping retailers from combining various online marketing channels, as IDWholesaler.com, which sells ID cards, printers, badges and related gear, found when it wanted to increase customer engagement and also boost its profile on search engines. The web merchant launched a contest that had artists submitting designs for custom ID lanyards; the contest encouraged entrants to link back to IDWholesale through Facebook, Twitter and blogs, increasing the company's profile both among search engines—Google and Bing generally look favorably on such inbound links, unless a retailer is found to have paid for them—and consumers. "This contest opened us up to a new target audience that is more engaged in social media," says marketing manager Jennifer Clancy.
No matter which paths retailers choose, the power of online marketing is certain to increase, at least going by findings of a June study from market research firm eMarketer. U.S. spending on online advertising—this includes such formats as online video ads, search, display and banner advertising—will reach $31.3 billion in 2011, up 20.4% from $26.0 billion in 2010. All that spending means that Internet advertising will represent almost 20% of all major media ad spending in the United States in 2011. Last year, web advertising accounted for 17% of all spending; by 2015, web spending will account for 28%, eMarketer says.