infoUSA special report : the web as a prospecting tool

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.”

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infoUSA special report : the web as a prospecting tool

Searching for Customers Searching for You
By Ann Meyer

Stuart Larkins, vice president of partner services for Chicago-based marketing services provider Performics, sums up the benefits of search engine marketing this way: “Search is the only marketing arm where customers are raising their hands and saying, `I want information on this product,’”

A February study by Performics and information provider ComScore indicated that roughly half of all online purchasers used search to make a purchase, with some of the searches going back as far as 12 weeks prior to the sale. What’s more, brand names of online retailers were in the minority for the searches made during consumers’ shopping research periods, with most brand-name search occurring only immediately before the purchase. Prior to that, however, shoppers were more likely to search using a generic term such as “running shoes.”

As further evidence that search marketing is quite capable of pulling in customers who haven’t previously seen your print catalog, consider the success of pure-play Web merchants.

Luminous Chao, which operates gardening supplies and furniture Websites felcostore.com, ironfurniturestore.com, and orchardsedge.com, considered launching a print catalog to prospect but nixed the idea because of the cost. Ditto for space advertising, publicity, and just about every other approach.

What’s proven most cost-effective is buying keywords online. “All our money is spent on Google and Yahoo!’s Overture venues, and a few other more targeted opportunities, such as garden-related directories,” says Marcia DiVerde, founder of the Elk Grove Village, IL-based online-only merchant.

Besides pay-per-click keyword buys, many marketers have gained new customers and new business via natural search, also known as search optimization. Catalogers need to make sure their Website is search-engine-friendly, so that the engines’ “spiders” can crawl through the site easily and understand what it’s about, says Jody Hartwig, chief executive of Netconcepts, a Madison, WI-based Internet consulting and development firm. Beyond that, she says, “if you provide content that includes the keywords you want to target and you do it in a structured way, you’re going to do better overall.”

While marketers might see paid keyword advertising as a straighter path to getting visibility on the search engines than optimization, you should consider using both techniques, experts say, especially as the cost of getting your paid keyword positioned in a top ranking continues to escalate. If the cost of buying an important keyword exceeds your budget, focus your efforts on natural search for those keywords and spend your dollars to buy more-specific terms, which generally cost less “It’s definitely advantageous to be in top 10 naturally, because you’re not paying for that over and over again,” Hartwig says.

But optimization is an ongoing job. “It’s something you have to tweak and stay on top of over time. If you don’t, you’re likely to see a decline in your rankings,” Hartwig notes. “Search engines change their algorithms, and other competitors are optimizing at the same time.”

Optimization also requires an understanding of how the search engines determine the rankings, says Heather Lloyd-Martin, director of search strategies at Morrisville, NC-based WebSourced. For instance, you can pay Yahoo! on a cost-per-click basis to guarantee an important page is included in the index, she explains, but you can’t influence what rank the listing will be given. Google’s natural listings, on the other hand, can’t be purchased. “There aren’t ways to guarantee it’s in Google, but there are certain things you can do with your architecture to make it easier for Google” to spot your Web pages and include them, Lloyd-Martin says. “The words on the page are tremendously important for search engine spiders. They are using that data as part of their positioning determinations.”

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infoUSA special report : the web as a prospecting tool

Right Place, Right Time, Right Keyword
By Ann Meyer

The Internet is not only a new channel for marketing to and servicing old customers, it’s also a new channel for gaining new customers, thanks largely to search engine and affiliate marketing.

Case in point: Personal care and cosmetics merchant Garden Botanika. At the beginning of 2004, the Redmond, WA-based company implemented a strategy to acquire customers using natural search and paid keyword advertising, says Web marketing manager Ellena Stiff. It later added banner ads, portal sites, and affiliate marketing to its online acquisition efforts.

A year later, nearly nine out of 10 of the company’s online customers were new to file, Stiff says, blowing away the theory that most online buyers are catalog customers who prefer online ordering to picking up the phone. “I’m sure there’s some overlap,” Stiff says. “But with 88% who are new to file, we feel that’s proof we’re reaching a new segment that we would not have otherwise.”

Garden Botanika’s experience is in line with overall industry numbers, experts say. New-to-file customer acquisition through search engines ranges from 30% to 90%, says Stuart Larkins, vice president of partner services for Chicago-based Performics, the performance-based marketing division of online marketing services provider DoubleClick.

What’s more, online acquisition programs can cost you less than offline prospecting methods. Larkins estimates that the average cost of acquiring a customer through traditional catalog prospecting is $30-$40, compared with $10 via an affiliate program and $20 through search marketing. Ironically, however, many multichannel merchants continue to hold online prospecting to a higher standard than offline prospecting, he adds. “A lot of catalogers think their catalogs are driving online sales. Our argument is that it works the other way as well,” Larkins says. One reason could be that customers acquired online sometimes have a lower lifetime value than those acquired via print prospecting. Norm Thompson Outfitters’ Internet acquisition files continue to grow at a healthy clip, thanks to paid and natural search efforts as well as affiliate marketing. But while the Internet is expanding the Portland, OR-based apparel, décor, and gifts merchant’s reach, “we are seeing that Web prospects do not have as high of a lifetime value as [those acquired via] traditional prospecting,” says director of acquisition Patty Davis. Still, Davis says, the Web marketing is boosting the company’s brand awareness. And as the company continues to market to those customers, their lifetime value might improve.

The fact is, the Internet is changing the way Americans regard shopping, says Peter Dammann, director of online marketing for multititle mailer Redcats USA, and any cataloger that ignores the opportunity to find new customers online is handing its competitors quite an advantage. “Not participating in any particular area of the Web’s marketing mix—whether paid search or natural search or affiliate marketing–is a missed opportunity,” he says. “There’s a certain segment that prefers those methods.”

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