Case Study: Redcats USA
By Ann Meyer
New York-based Redcats USA, whose home goods and apparel catalogs include BrylaneHome, La Redoute, and Jessica London, is in its second phase of a major online prospecting program. It began by pursuing affiliate marketing programs four years ago, and in 2003 it began prospecting through the use of paid keywords on search engines, says director of online marketing Peter Dammann. Last fall it added a natural search optimization program. Redcats saw sales attributed to search climb 34% in the paid keyword program’s second year, with one site, men’s apparel merchant KingSize Direct, experiencing a doubling in sales from search. That title has a heavy proportion of male shoppers, who tend to shop around less, Dammann says.
As far as Dammann is concerned, affiliate marketing is the most cost-effective online prospecting method because it’s a pay-for-performance model, where merchants pay a commission to the affiliate only when a prospect converts to a sale. Affiliate marketing generates more revenue for Redcats than search, he says.
Redcats provides 20 sizes of creative for use on affiliate sites. It works with several dozen affiliates, though the top 10 account for the bulk of the sales. Redcats’ affiliates tend to be online shopping malls, loyalty programs such as Ebates, charitable or savings programs such as Upromise, and coupon-related sites such as CouponMountain.
But Dammann has found that analyzing keyword performance can boost your return on investment in search marketing. “At one point, we had 10,000 keywords across our brands,” Dammann says, though now Redcats is being more selective in the words it bids on.
Redcats has determined every keyword has a “sweet spot” that provides the best return on investment. It requires trial and error to find that spot. “When we add a word, we will start very conservatively with a low cost per click. Then as we see a word pay out, we’ll raise it incrementally until we find that sweet spot,” Dammann explains. For example, Redcats might find the term “plus-size dress” worth $1 per click because the conversion rate is high, while the more generic “women’s dress” doesn’t perform as well.
Finding that sweet spot doesn’t happen overnight. “It takes months and maybe a year to determine what’s the best mix of placement, price, and copy for a word,” Dammann says.
Effectively managing a keyword program also requires knowing when to yank a keyword buy because it’s not performing well enough. Generally, 10% of keywords drive 90% of sales, Dammann says. Typical conversion rates range from 1% to 16% for a highly specific item.
And being the top listing on a search engine doesn’t guarantee the best results. “Being first is almost too easy,” Dammann says. “The more qualified shopper, or the more diligent shopper, is going to go down on the listings and not click on the first rank.”