New Holiday Norms Motivate Merchants to Shift Strategies

Dec 14, 2012 12:20 AM  By

Encouraged by a healthy spike in online sales from PPC ads on Thanksgiving Day and Cyber Monday, retailers are realigning their search advertising strategies, aiming to capitalize on the big days that remain and close out the 2012 holiday shopping season on a high note.

The numbers are enticing and offer merchants some intriguing benchmarks against which they should compare their own performance. As detailed in the Kenshoo 2012 U.S. Online Retail Holiday Shopping Report: Early Edition, online search and shopping behavior has changed remarkably since the 2011 holiday season as consumers’ hunger for – and comfort with – e-commerce and digital advertising continue to soar. In fact, the Kenshoo report found that:

· Holiday season revenue driven by search advertising recorded a year-over-year (YoY) increase of 25-percent
· Average order value (AOV) went up five percent YoY
· YoY Return on Ad Spend (ROAS) from paid search increased eight percent
· Conversion rates rose by 10 percent YoY
· Cyber Monday drove the heaviest search traffic of the holiday period, with a 66 percent YoY increase in search ad impressions and 57 percent lift in clicks
· Thanksgiving Day delivered the largest AOV of any day during the period, topping $150, with revenues from search advertising for the day increasing more than 60 percent

These compelling performance metrics come at a time when competition and budgets are both on the rise in the digital advertising space. For example, the Kenshoo report found that average paid search cost-per-click (CPC) rates rose eight percent YoY, while retailers have increased their holiday search advertising budgets by an average of 31 percent.

Taking note of all these numbers, retailers may need to fine-tune – or in some cases, entirely rethink – their search advertising strategies to realize optimum returns in the closing days of the holiday shopping season. Important considerations include:

Taking advantage of Google Shopping’s Product Listing Ads (PLAs)
In shifting to a paid model for PLAs, Google Shopping is delivering outstanding performance to early adopters who embrace the new format. According to the Kenshoo report, Google PLAs outperformed product-related keyword searches, providing 36 percent higher ROAS and 28 percent lower CPC rates, while more than doubling their CTRs.

Investing wisely for the extended sales season
The earlier than usual arrival of Thanksgiving and Cyber Monday added an extra weekend to the 2012 holiday shopping season. As a result, many retailers are adjusting their holiday search advertising budgets.

Reconsidering bid strategies of the past
The YoY increases in both AOV and ROAS justify higher spending and CPC tolerance. To leverage these investments, retailers should increase their focus on impressions to maximize targeted exposures and capitalize on improving click through rates (CTRs).

Increasing customer engagement through social media
By targeting their key demographics, retailers can make their fans strong brand ambassadors.

Covering all the digital channels, especially at the point-of-sale
Smartphone and tablet search has grown to represent more than one out of four (27 percent) of all clicks. Though computer search clicks remain robust, retailers should make sure to have all channels covered, especially at the points where sales are created.

Improving data quality by testing and adjusting attribution models
Having easy and instant access to data provides retailers with the insights they need to make quick, but ultimately critical, decisions in the hectic holiday season.

Though the clock is ticking on holiday shopping this year, retailers still have time to make the season brighter and improve the playbook for 2013. As demonstrated by the sales successes of Thanksgiving Day and Cyber Monday, the savviest retailers will be those that leverage advanced tools for managing paid search, mobile and PLA campaigns. Happy Holidays!

Ari Rosenstein is Marketing Research Director at Kenshoo.