Balancing Priorities for E-commerce Growth

One of the most effective tactics for customer acquisition and retention is search engine marketing. With marketing budgets tightening, savvy merchants need to focus on SEM to attract new customers and entice existing once to purchase again.

Search engines are by far the largest driver of traffic to e-commerce Websites, generating 40% of visits and 32% of online purchases according to Forrester Research. Even so, there is room for improvement.

MarketLive research of more than 100 online merchants shows a wide gap between top and bottom search performers with top companies converting customers at a rate more than 1,500% higher than bottom performers.

Google remains the dominant search engine in terms of traffic. According to Nielsen/Netratings Google captured 64% of all searches in March 2009. Based on this data, merchants might be tempted to focus solely on Google for search optimization and paid advertising.

But a deeper analysis of search usage paints a different picture. Forrester found that 53% of online consumers use multiple search engines to address their needs while only 20% use Google exclusively.

To maximize investments in search marketing, you must understand the demographics of your customers. Once you have this information, you then select the best search engine for your needs.

According to Forrester, MSN and AOL attract older, more affluent users; women predominately use and ISP-provided search engines; more affluent shoppers use Google; and shoppers who consult advertisements are more likely to use and Yahoo.

Balancing paid and natural search
In addition to apportioning resources across search engines, merchants should balance their investments between dollars for paid-search ads and resources for optimizing the site to rank well in natural or organic results. Both types of search results attract e-commerce traffic and sales.

While natural search drives more visits, paid search is more effective at creating visits that result in orders. Conversion rate from paid search more than 26% higher than the conversion rate for natural search.

Paid search wins the conversion contest because of the degree of control it offers merchants. With paid search, merchants can specify which link to use for each keyword term and carefully craft page content to match keywords, helping ensure they present relevant products and offers to searchers.

But overreliance on controlled paid-search placement isn’t necessarily the most efficient way to drive sales. Merchants who use paid search strategically typically drive better conversion rates from less traffic; they’re also likely to spend less on paid search.

A further argument for fine tuning the balance of paid and natural search comes from industry data that shows merchants are investing more heavily in paid search—which means competition for popular keywords will continue to drive prices higher.

According to the Search Engine Marketing Professionals’ Organization (SEMPO), spending on paid search initiatives increased by 47% in the past two years. And 46% of merchants project increased spending by 10% to 60% next year—diverting funds from print media and direct mail to do so.

To take advantage of the potential effectiveness of paid search ads without breaking the bank, try balancing the following tactics:

  • Move beyond branded search terms: Recent data from Forrester shows that branded or trademarked terms remain the leading paid search revenue drivers despite merchants’ attempts to branch out beyond them. While investment in branded terms represents only 27% of merchants’ paid search spending, it still generates more than 50% of paid search revenue.

    To attract new customers not yet familiar with the brand, merchants must do a better job of identifying paid search terms that are relevant to shoppers and lead to products that match the promise of ad text.

  • Focus SEO efforts on long-term goals: Use paid search for “quick hits.” With natural search optimization efforts taking 30 to 45 days to kick in, paid search can be a more powerful tool for short-term promotions.
  • Consider targeting: Limiting paid search ads to geographically-relevant destinations ensures that shoppers in Hawaii won’t see your ads for winter coats, while zeroing in on the demographic segment most likely to purchase your goods will help to boost relevance for your target market.
  • Use behavioral search tools: Google has recently joined AOL and Yahoo in offering targeted search ads based on searchers’ prior behavior. Google’s interest-based advertising serves ads based on browsing behavior. Yahoo’s search retargeting program uses searchers’ prior search terms to target display ads for search. And AOL offers behavioral search targeting based on browser behavior.

    Search marketers report they are willing to bid more for clicks targeted to those users whose browsing habits and recent searches align with their paid-search offers, according to SEMPO. Fully three-quarters of search marketers say they would pay more for behavioral targeting—more than for either demographic or daypart targeting.

By focusing your efforts and limited resources on search engine marketing and taking a balanced approach to the tactics described here, you will be able to attract more customers and get existing shoppers to buy more. This will help you weather the current economic storm and position your company for better times ahead.

Ken Burke is founder/chairman of MarketLive, an e-commerce software and service provider for midsized retailers.