Searching for a Return from New Customers

Posted on | August 1, 2006  
Writen by | Ian Griffith

Story by Ian Griffith on 8/1/2006
Many retailer websites do quite well by listing their inventory online and sending out regular email campaigns to their existing customer base. The challenge, however, is attracting new customers to your website. Two of the primary methods of advertising online are “Search Engine Marketing” SEM and Shopping Comparison sites.

A study by iProspect found that 62% of Internet users during the 2005 holiday season researched products using search engines. While search engines provide both natural and paid search results, it is becoming increasing important for merchants to be found for both kinds of searches. Natural searches can be unpredictable as search engines constant tweak their algorithms. High ranking for popular keywords can disappear without explanation at a critical time, leaving paid search ads as the only guarantee of a position on the first search page.

The same study found that 26% of Internet users researched products using Shopping Specific Search Engines such as Froogle, Yahoo! Shopping, Shopzilla and PriceGrabber. These pay-per-click shopping comparison sites show products listed by merchants and compare them based on price. They also encourage consumers to rate merchants suggesting which stores are more reliable.

Creating ads for SEM and Shopping Comparison sites are different kinds of tasks. SEM requires creating text ads for display near natural keyword search results. Crafting ads, experimenting with keywords and tracking your bids is the ongoing work of managing campaigns on Google's Adwords and Yahoo's Search Marketing.

Once an ad has successfully generated traffic, your website needs to be ready to convert this traffic into business. While Google gives higher ranking to an ad that is better targeted to the keyword than a less specific ad with a higher bid, the top wine keywords often command bids over 50 cents. The cost of attracting new customers can quickly ad up if your ability to convert a sale is less than 5% of this traffic.

In contrast, Shopping Comparison sites require a regular feed of your inventory. Unfortunately each site has different formatting requirements and there are tricks to ensuring your products show for all the relevant searches. Again constant tweaking to improve conversion rates is the key to recovering a healthy return on this stream of traffic. The cost per click on comparison sites is generally closer to 30 cents making this traffic more affordable.

However, research this year by McKinsey & Company warns that advertising inventory is becoming scarce and that projected budgets for 2007 will overwhelm the limited space for ads. Bottlenecks in the supply of advertising space create higher prices which are especially obvious in the bidding competition for popular keywords on Google. While Google has done a great job of making online advertising accessible to the lay user, ads on the Google search network now come at a premium because of their popularity.

While the American Advertising Federation identifies “paid search” in general as offering the highest return on investment for online advertising platforms, the better returns increasingly come from testing results on smaller search engines and shopping comparison sites. Ultimately the best return comes from converting on-time customers into lifelong shoppers, so this initial investment can be spread over many transactions.

To learn more about how the Beverage Media can help you Sell Wine Online with a website for your store, contact Ian Griffith at 212 571-3232 x318….

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