17 December 2011
Paid search has become the cornerstone of online marketing campaigns for retailers. It’s the media channel that has driven the entire momentum of Internet retail and become the most relied on form of advertising for many businesses. It has the ability to be highly targeted and incredibly flexible and it delivers some of the best ROI figures when compared to other online marketing activity.
But here’s the rub: are retailers getting the most value from search? It’s easy to become complacent when all you have experienced is strong sales growth and half-decent ROI – but what does ‘good’ look like and what does search really have to offer retailers in the future?
To answer these questions, we have to look at the landscape for search. In many respects, paid search embodies the ‘Perfect Marketplace’ – it certainly meets most of the assumptions:
- a large number of buyers and sellers
- the units of goods sold by different sellers are the same
- there’s perfect freedom of entry to, and exit from, the market
- individual transactions leave the market unaffected
However, there’s one assumption that paid search cannot match – that buyers and sellers have complete information on the prices being asked and offered in the markets. Let’s come back to this point shortly.
Potentially, the paid search landscape is the ‘Perfect Market’ where supply should meet demand. It’s a self-regulated landscape (except for editorial rules), driven by the economic justification that a retailer can place upon bidding for an advertising space (the supply) that taps into an uninhibited ‘database of intentions’ (the demand), where consumers express what they want in the next five minutes or next five years.
In simple terms, the search market’s ability to match supply with demand presents a considerable opportunity – one that, in my view, remains untapped by retailers or agencies working on their behalf. In the previous definition of the ‘Perfect Marketplace’, one of the criteria was perfect information. You don’t have to perform many searches on Google to find that most paid search adverts generalise and offer little or inaccurate information – particularly when it comes to product related terms. I believe the search market has become complacent, settling for ‘second best’ search campaigns. We can find established brand names making do with insipid and/or inaccurate ad copy that lands potential customers on irrelevant pages with a lack of visibility on key search terms. There’s certainly an expectation from retailers that an increase in sales volumes from search is the responsibility of the engines. However, I’d argue that much of the change has to come from the fundamental way that retail search campaigns are structured, managed and optimised. The transformation begins from the very basis of how you approach search and what you expect from it.
To transform your search opportunity and campaign, you need to adopt two strategies:
- A product segmentation strategy
- Technology that uses an accurate product feed to manage your search campaign to the ‘economics of the moment’
In simple terms, a product segmentation strategy breaks down your campaign into tight, relevant groups that allow you to be highly focused and specific to individual parts of the search market (e.g. top sellers, end of line, high margin, category leader). There are three parts to this strategy:
- Segmentation – use search terms to narrow or broaden your audience
- Targeting – use bid price and ad copy to target specific users
- Position – use ad copy and landing page to position your offer
You apply this approach across your entire product portfolio and define a set of rules that allow your segments (all of part of your campaign) to achieve the best possible ROI within the changing dynamics of the market at that specific moment. Using this approach, you can now define a much more meaningful set of commercial criteria by which to manage product segments of the campaign (e.g. stock position, margin, current price, competitor price, reviews).
Essentially, the ‘economics of the moment’ drive each product segment of your campaign; your position in search is managed by the commercial dynamics of the business at that moment. For example, on Monday you might want to sacrifice margin to drive down a stock position and then return to a margin-based strategy by Thursday. The point is, you have full commercial control of your campaign.
That’s great in theory, but how do you publish your ‘warehouse to the web’ in real-time when you’re managing portfolios containing 1000s of products and ever-changing stock, price and margin? It’s certainly not possible to do it manually and that’s where the second strategy of transformation becomes so important.
The second strategy transformation assumes that paid search is now a ‘technology sport’. To optimise and maximise sales volume and ROI, it’s highly advantageous for retailers to link their warehouse to Google using an accurate product feed and the Google API. This allows you to optimise (or remove) any product segment of the search campaign against stock position, price, reviews, performance and margin. As every retailer knows, price and stock position are the most important drivers of conversion – so it’s vital to be able to automatically use these to optimise your campaign in real-time, as the ‘economics of the moment’ change.
To date, the ability to automatically link warehouse inventory directly to a search campaign hasn’t existed. However, at Summit Media we backed our belief that technology could help us do this. After two years in development, our search application can take product feeds and transform them into segmented search campaigns based on predefined business rules. Retailers such as Argos are now reaping the rewards.
This innovation enabled us to generate keyword sets from the feed and to create multiple Ad Group creatives. Also, other commercial information contained in the feed – such as stock position and margin – can be processed through a ‘black-box’ of business rules used to optimise the campaign and set the segmentation strategy. For example, if the competitor price is X, then show the price in the creative. The new campaign can then be automatically uploaded via the Google API as frequently as required, responding to changes in the business or search landscape.
Summit Media has found this new approach of managing campaigns using product feeds to be highly effective – albeit impossible unless you have the right technology to automate the process. It’s beyond spread sheets and late nights. It’s also why multichannel retailers like Argos and pure-plays like Amazon, Play.com and eBay lead the search market. So challenge your existing provider to develop the same service or be prepared for competitors to have a significant advantage.
To put this into perspective, let’s take one day during peak in December across the product feeds we managed for search campaigns:
- 800,000 warehouse products reviewed
- 270,000 keywords added
- 89,900 Adword creatives revised with new prices
- 521 new Ad groups created
- 2,746 existing Ad groups changed
This level of automatic campaign update delivered an average uplift in CTR of between 15 – 30% and conversion improvement was significant.
The first steps towards this two-pronged approach that will transform your paid search campaigns involve getting an accurate product feed and a clear understanding of how to segment your product portfolio. The right technology will make this automated approach to managing paid search far more simple and efficient than the manual approach that many retailers use now. It will also allow for the placement of complementary messages into different marketing channels (e.g. lead with price in shopping comparison, and reviews in paid search).
However, the quality of product feeds amongst most retailers is still poor – which is a surprise given the importance of the data to the online marketer in today’s feed-driven world. By investing a little time into improving its feeds, a large retailer could probably make back the annual salary of its IT director within a week. So, if you’re in charge, it’s worthwhile making this a priority.
It’s time for retailers to synchronise their businesses with search.