February 2007 - The Balancing Act

Are you driving your store traffic in the most efficient way? Perhaps you’re not carefully evaluating your online and offline needs to strike the right marketing balance.

By John McAteer

Allow me to gaze into my crystal ball and see if I can’t describe your organization from afar. I see a company with a dedicated web team whose job is to drive online sales in the most efficient way possible. They are tasked with and rewarded on how efficiently they can buy traffic and convert it to sales. I see them doing this with affiliate marketing and search, followed by online ad networks.

Another group is coming into focus. Your offline team is tasked with driving traditional brick-and-mortar store sales. I see them using circulars and ROP newspaper ads and, in some cases, magazine advertising as their marketing vehicle of choice.

Some of you also have a “branding team” or an internal “creative team” that works with your various departments and outside agencies to drive increased awareness.

In short, your organization is set up along functional lines. Resources are dedicated to specific marketing vehicles. This traditional alignment of assets against narrowly defined media is supposed to result in easier coordination among departments, external agencies and other vendors. But this type of traditional, linear organization is often poorly suited for today’s complex and dynamic marketplace.

Most of the companies, in theory at least, have a multichannel marketing strategy. But most are very poorly implemented. Multichannel marketing typically translates to multi-department silos. Like a set battle in which opposing forces line up against each other in an open field, each team is tasked with its channel-specific goals and is rarely given credit for any cross-channel sales or success that may occur as a result of its efforts. Online gets little or no credit for the customers its search campaign drives into brick-and-mortar stores. Similarly, offline’s dazzling four-color circular tucked into Sunday newspapers may flood their servers with shoppers, but it gets no credit for the success.

This siloed approach often causes inefficiencies in your organization’s search-marketing strategy, as well. Held to tight direct-return-on-ad-spend metrics, your online team is likely to avoid advertising on generic terms such as sofa, blouse, power tools, shoes, etc. But these generic search terms typically represent the beginning stages of a buying cycle and can be substantial traffic generators to your website. Such generic terms may appear to be low direct sales drivers, but this is merely a function of the poor cross channel tracking mechanisms we have at our disposal.

The irony of all this, however, is that the consumers and their messy (i.e., human) shopping habits are being left out of the equation. They are still shopping for these products, but they are using search terms that you have determined to be unprofitable by your single channel ROI equation. As a parallel to the tree falling in the woods, if a consumer purchases a high-end cordless drill on the web, but your online team doesn’t capture it because the term power tools is not included in its search buy, does the sale actually occur?

In other cases, your online team may avoid promoting big-ticket items because they know that such promotions do not convert directly to online sales. The majority of shoppers today still purchase offline, especially big-ticket items. But before they plunk down the plastic on that big-screen plasma TV, they spend hours shopping online. They do their homework, researching the various makes, models, features, benefits and prices, before walking into a brick-and-mortar store.

According to JupiterResearch’s “Entertainment and Media Consumer Survey,” a full 39 percent of consumers’ time is now spent online, and this time shift is coming at the expense of other media types, with newspapers and magazines taking the brunt of this shift. As a result of this change in media consumption, one has to ask: Do your current media expenditures still make sense?

If you are like most retailers, a significant portion of your marketing budget is probably spent on newspapers and/or pre-print (circular) advertising to drive in-store sales. If you ask most retailers if this traditional method is the most efficient way to drive store traffic, their answer is likely to be a resounding yes. But a closer look at the numbers calls into question the real effectiveness of this approach.

For starters, manufacturers often fund circular advertising through co-op or market development fund (MDF) programs. Thus, because it costs the retailer very little, measuring, its true effectiveness is not always the highest priority. Stated another way, if a retailer does not have to pay for the circular, the ROI may not always be as important as the exposure it generates.

The prime justification for spending on newspaper or circular advertising is the belief that offline advertising drives awareness and in-store sales. Our physical stores benefit from our offline marketing, but so too do our online stores. Advertising done via newspapers, billboards, radio, TV, circular and direct mail positively impacts both our brick-and-mortar stores and our websites.

However, if we believe offline marketing helps all channels, including online, why is it so difficult to believe that online marketing has a reciprocal benefit to offline sales?

One likely answer is that we have not yet developed a “token” or other direct tie mechanism that links online marketing to offline sales. Coupons are one traditional measurement device that when married with an online campaign, can effectively drive customers into retail stores, but they are still not completely reliable or secure. And their redemption comes at a cost.

There are studies that show the effect online marketing has on offline sales, most recently ComScore’s “The Role of Search in Consumer Buying” report. And major retailers have published reports on this topic. Best Buy and Sears, as two examples, report that between 40 and 50 percent of online sales are picked up at a brick-and-mortar store. Furthermore, we know that once consumers are in a store, they are likely to spend more on additional items. Even with this, the retail industry does not give proper credit to online marketing.

Until such proof mechanisms are developed, you may need to go with your gut instinct on this marketing measurement. Ask yourself this: Have you ever shopped online and later purchased offline? Most likely you will answer yes. Odds are your customers, at least the ones with high-speed Internet connections, would give the same answer. But going on faith alone can be disastrous.

While you can’t expect competing media-newspapers, circulars, radio or TV-to come to you with proof of this online-to-offline impact, you can conduct experiments on your own to measure the effectiveness of online marketing to in-store sales.

Most retailers can measure store lift as a result of circular or ROP newspaper advertising. This is done by running a circular in a specific local market or DMA and simply measuring the subsequent store lift as a result of that effort. Why not repeat the experiment online and measure those results? Most ad networks have the capability to target DMAs and if you can get a cheap enough CPM, and a large enough reach, you should be able to promote your local store and measure the resulting lift. For the sake of accuracy in comparison, your online and offline promotional messages should be consistent.

For retailers, the justification for circular marketing may still remain strong (depending on whom you ask) but as newspaper circulation continues to decline, and media prices and printing costs continue to rise, the circular value proposition may begin to fall into question.

The media landscape is changing radically and rapidly. As a marketer, you are tasked with figuring out these changes and coming up with optimal marketing and media plans that best convey your company’s value proposition with the budget resources allotted. Complicating the task further, your customers’ wants and needs are also a moving target. So what is the optimal marketing mix? No one can know for certain.

However, if the basic goal of marketing is to be in front of customers, your message needs to be visible on the media they consume the most. And your customers are increasingly online. According to Universal McCann’s “Advertising Expenditures Report,” consumers are now spending 39 percent of their time online, but Google estimates the average retailer spends less than 5 percent of its annual marketing budget against online. This mismatch most likely tells us that the typical marketing mix is probably out of whack. Perhaps it’s time to re-evaluate your current marketing strategy and try to strike the right balance.

John McAteer is director of retail at Google. We would appreciate your feedback. To submit comments, please e-mail the magazine at
[email protected].


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