The big picture

New tools help retailers analyze which of their online marketing investments help drive sales.

Thad Rueter

Determining whether and how a retailer's paid search, display ads, e-mails and other web marketing investments lead to sales can feel like trying to nail down the source of a winter illness. Was it the coughing bus passenger, germs from the dirty sink in the break room, or the warm-cold-warm temperature patterns?

It's that circling chase that recently led Cat5 Commerce, an 8-year-old e-retailer that operates 10 sites including HikingBoots.com and TacticalGear.com, to recently begin using Google Inc.'s Multi-Channel Funnels tool to better understand how its customers shop. The tool, launched less than two years ago, is a feature within Google Analytics that enables users to attribute how different marketing forms contribute to a sale. That lets a retailer form a more precise view of which paid search and display ads, posts on social networks, e-mails and affiliate marketing links helped produce a conversion, and that information can help steer the retailer's future direct marketing investments.

"Effective attribution modeling is a challenge, but it's essential as customer touch points grow and our marketing efforts cross channels," says Andrew Hoefener, Cat5 Commerce's co-founder and chief operating officer. "Without an effective model, you run the risk of calling something a failure that is actually contributing key conversion assists. I wish I could tell you that we have this nailed, but it's something we're grappling with."

His concern is well-founded, as online shoppers are exposed to many kinds of ads and marketing e-mails across multiple devices—PCs, smartphones, tablets, mobile phones within stores— as they search for the best bargains and products. Last year, a survey of 16,000 online shoppers around the world by business consultancy Capgemini found that 60% of respondents expected that by 2014, the "convergence of retail channels will be the norm." In fact, 43% of U.S. adults have already participated in showrooming—when a shopper goes to a store to test out merchandise and then searches the web, often from a mobile device, for a better deal or to research products—according to a November survey of 2,249 consumers conducted by Harris Interactive Inc.

Such behavior can make tracking the influences that lead to a sale ever more challenging. And each new ad outlet further complicates measurements. "It feels like we take two steps forward, and then two steps back," says Scot Wingo, CEO of Channel-Advisor Corp., a company that helps retailers sell online at marketplaces such as eBay Inc. and Amazon.com Inc. "Right when you think you have it figured out, consumers start to use more devices."

In response to these changes, retailers are gathering performance data from multiple sources and making investment decisions based on what they can see, and vendors are stepping up with measurement tools intended to help. Research and measurement service providers are offering tools that aim to provide a more complete view of marketing investments and how one investment influences the others. Meanwhile ad venues like Facebook Inc., eager to show their worth as lucrative destinations for retailers' marketing dollars, are introducing their own tools to measure the value of their ads.

Among the most popular marketing- measurement tools is Google Analytics, a free service used by 163 of the retailers in the Internet Retailer Top 500 Guide and 300 in the Second 500 Guide, to gauge such e-commerce essentials such as where site traffic originates, conversions and the general effectiveness of online marketing efforts. Multi-Channel Funnels is an add-on to Google Analytics that compares how such channels as paid search, e-mail marketing, natural search and display ads—and the keywords, referral sources and other nails and screws of online marketing efforts—contribute to sales.

Using Multi-Channel Funnels has helped Cat5 Commerce realize savings that could add up over the course of a year. "One thing we've learned using Multi-Channel Funnels is that we have been overvaluing paid search for some of the largest keywords we bid on," Hoefener says. "The data indicates those keywords have been playing [less of a role] than we originally believed, and we are now experimenting with dialing back certain bids and measuring the subsequent impact."

He says that the e-commerce company, which operates TacticalGear.com, recently learned a lesson about the term "tactical gear," which helps bring traffic to the site. "We now believe we were overvaluing those clicks by 35% to 40%," he says. "The potential savings from that single insight could be worth tens of thousands of dollars."

Google last year also launched Mobile App Analytics to Google Analytics users, enabling retailers to determine how shoppers interact with their mobile apps. Among the metrics retailers can measure is what consumers do with a specific mobile app, such as the number of purchases and revenue generated from the app.

And about a year ago, Google started giving Google Analytics users a deeper view of how social marketing efforts pay off. E-retailers that have e-commerce tracking enabled on the free version of Google Analytics can generate a "social value" report to see how social media contributes to conversions on their e-retail sites. Google says the feature provides marketers with return-on-investment metrics that matter most to executives—conversions and bottom-line revenue—rather than data points whose impact aren't so clear, such as the number of Likes retailers have on Facebook.

The social report offers a metric called "last interaction social conversion," which accounts for sales conversions that occur as a result of a consumer clicking through from a social network to an e-retail site and completing a purchase in the same session. Retailers also see "assisted social conversions." These are sales that have come about during a designated time period—say 30 to 60 days—during which an online consumer has interacted with the e-retailer via social media and later made a purchase.

Facebook generated $1.329 billion in advertising revenue in the fourth quarter of 2012, a nearly 41% jump from the same period in 2011, but despite that growth, many marketers remain skeptical about the value of ads on the social network—only 29% of advertisers say social media advertising is effective and produces a measurable return on investment, according to a January report from The Nielsen Co. and its subsidiary Vizu. Facebook is trying to ease that uncertainty, in part by its announcement late last year that it would offer measurement tools meant to show marketers that their ad dollars are well spent on the social network.

The new tools enable marketers using Facebook's self-service ad creation service to create code that measures conversions that occur outside of Facebook that have been influenced by an ad seen or clicked on the social network. Retailers add the code to web site pages associated with their marketing goal, such as registration or checkout. That code alerts Facebook when a consumer loads the page in question at some point after viewing or clicking on the ad in the social network.

Facebook combines that action with the mountain of data it has about its users so marketers can better target consumers likely to respond to their advertisement. Flash-sale e-retailer Fab.com says using the tool helped it decrease its new customer acquisition cost by 39%. Facebook defines a conversion as a consumer completing the ad's desired action, such as signing up for a Fab.com account.

Measuring the power of the social marketing dollar promises to become more important to retailers this year. The Nielsen/Vizu report, based on a survey of more than 500 U.S. digital marketing and media professionals, found that 64% of respondents plan to increase their spending on social marketing this year—but that many marketers have yet to find effective ways to measure how social marketing sparks sales and lifts brands.

Beyond social media, some retailers are figuring out how to gain longer views of their customers—and constantly testing what might work. Build.com Inc., for instance, uses Adobe System Inc.'s SiteCatalyst tool—part of the Adobe Marketing Cloud platform—to collect and analyze data that divide shoppers into high- and low-value segments, among other groups, for ad targeting.

That enables the web-only home improvement retailer, for instance, to figure out how site visitors behave and purchase over two- to four-month periods. That information can then show the retailer that some expensive ad campaigns targeted at frequent customers might generate a loss in the short term but significant lifetime sales, says Brandon Proctor, the retailer's vice president of marketing.

Digital marketing firm Kenshoo Ltd. similarly aims to give retailers a wider view of their online marketing efforts with SmartPath, a tool it launched in mid-February. Via web cookies and mathematical models, the tool gives e-retailers a view of how a consumer comes to make an online purchase instead of, say, giving full credit to the last online action—or click—made by the consumer before buying.

Take the word "aquarium"—seemingly a natural term for a pet supplies e-retailer, but one also used by consumers when searching online for attractions, such as the Shedd Aquarium in Chicago, making its use potentially less attractive for retailers and marketers. "On the other hand, you may discover that the word 'aquarium' started people on the path to buy one," says Gordon Magee, Internet marketing and media manager for pet supplies e-retailer Drs. Foster & Smith, which was one of the retailers that tested SmartPath. That's where a tool such as SmartPath may help, as it can identify the multiple clicks that lead to a sale, and help the retailer assign a percentage value to each (out of 100%, which would represent the sale), he says. While similar tools from other vendors also provide data about a consumer's path to purchase, they tend to focus more on the first and last clicks, not on the clicks that can come in between, he says.

That means the retailer can, for example, spot a keyword that might not perform well in a paid search campaign, but yet helps set a consumer upon a path that might result in a purchase via an e-mail marketing message. With other tools, that e-mail message might get all or most of the credit for the purchase, Magee says. "Successfully optimizing for a consumer's true path to conversion is one of the holy grails sought after in online marketing," Magee says.

That's what all online marketers crave. And these new tools are helping them get a fuller view of the impact of marketing investments, even as online marketing options proliferate.




Adobe, Andrew Hoefener, Build.com, Cat5 Commerce, ChannelAdvisor, Drs. Foster & Smith, e-commerce technology, e-mail marketing, Facebook, Google Analytics, Gordon Magee, Kenshoo, marketing technology, mobile app analytics, Mobile marketing, Multi-Channel Funnels, paid search, Scot Wingo, social marketing