A Show-Stopping Performance

In times when change comes quickly, many things can keep online marketing managers up at night. The question is: What should keep them up?

Some grapple with balancing their own search marketing efforts against affiliates’ or understanding which marketing strategy delivers a better yield in terms of marketing cost as percentage of sales (CAPS). Others struggle with an increasing need to spend on customers more than once, through multiple advertising venues, in order to earn the final purchase.

Looking forward, e-commerce executives must plan to actively deal with two critical issues: embracing integrated performance marketing and adjusting their goals, success metrics and tactics. While this sounds simple enough, the risks behind making the wrong choices continue to rise.

Performance marketing surrounds us and has converted Web marketing from a grand experiment into a must-have for direct, retail and brand-focused marketers. Given this hyper-focus on performance, savvy marketers and the agencies they employ are playing in multiple facets of online marketing ranging from traffic-focused cost-per-click, to awareness focused barter arrangements, to cost-per-sale/action campaigns.

Other interesting trends include the emergence of geographically targeted and “day part” search buys wherein pre-set business rules help to automate decision making behind campaigns. Contextual marketing technologies like the UK’s Vibrant Media or Quigo also offer potential leveraging strategies that employ text-based ads and use content relevancy to place them.

If they could, marketers would choose a single, reliable, integrated technology or agency partner that offers vital insights, reduces friction and streamlines media buying. Centralization of campaign data across multiple advertising strategies offers the potential of an information-rich environment to make short- and long-term decisions. It also opens the door for rule-driven automation that enhances the productivity of already constrained human resources. This is integrated performance marketing, or IPM.

Moving forward on such an approach requires an appreciation for complex legislative, technical and operational issues that shape today’s performance-focused strategies. Many marketers have surface-level perspectives on how, as an example, affiliates actually generate legitimate (or illegitimate) sales or return on advertising spending on key search terms. Making the leap to IPM will provide marketers with insights needed to streamline decision making.

Until then, reality demands marketers must plan, execute and optimize their campaigns with fragmented tools. Marketing managers responsible for numerous performance initiatives will continue to be at the mercy of disparate technology solutions. Tracking campaign performance within individual spheres – email, affiliate programs, CPC media buys, etc., – is simple. But centralizing data is difficult, making it harder to work smarter or faster. Search marketing company iProspect created iSEBA to address these needs.

Concurrently, in an environment filled with change, executives are forced to come to grips with mergers and acquisitions among vendors. (See story, page 60). Industry consolidation inside the affiliate, search management, ad-serving and comparison shopping spaces serve as examples. As companies like ValueClick, DoubleClick and aQuantive continue to cobble together performance-focused technology and service providers, the market is forced to ask itself, “Why?” and “What’s in it for me?” Time will tell, but IPM looms on the horizon.

Not So Simple

There is agreement in that performance strategies are not as simple as they look. Marketers are suffering through the intertwining of performance strategies such as affiliate and search marketing. A more sophisticated approach to measuring and benchmarking the effectiveness of individual strategies is needed.

As an example, although affiliate marketing is perceived as purely performance based, experience dictates otherwise. Specifically, what appears on the surface to be affiliate-generated sales oftentimes result from multiple customer behaviors, unscrupulous tactics or other marketing campaigns. Efficacy of each is clouded.

By assuming an integrated perspective and focusing on how customers end up arriving on their Web site, savvy marketers are discovering that customers are being driven to purchase based on multiple online and offline ad/marketing spends. As an example, individual orders generated by customers may involve multiple media interactions such as radio advertising, a shopping comparison portal and, finally, a cash-back affiliate site. Today without the proper tools, it’s difficult to see such trends. With an IPM approach, it is possible both to spot them and to adjust media spending accordingly so as to significantly lower marketing CAPS.

Seeing Through New Glasses

Brand awareness and direct response advertising can coexist and must plug into corporate goals shared across the e-commerce team. IPM can help. Inside these different marketing realms, campaign-level spending and objectives are measured in different terms yet both intersect with overarching business objectives such as CAPS and lifetime value (LTV) of customer. These measures drive strategic decision making (i.e., media budget allocation) offline and online; they must be understood clearly.

By aggregating data cross-strategy, decision makers can hold various types of media spends up against each other using a common, business rule-driven yardstick specific to their goal. The marketer may be interested in hitting a predetermined marketing CAPS and/or LTV number. In either case, centralizing results data yields new perspectives on cost efficiencies of each particular strategy. While a handful of marketers are able to engage in such an approach and reap the benefits, costs may very well outweigh the benefits.

Embrace And Adjust

More and more, we see the need for technology solutions to facilitate streamlined IPM. In order for marketers to develop smarter media spending plans, a cross-strategy viewpoint aimed at good, better and best strategies is needed. Yet many struggle by integrating existing and homegrown solutions.

Search management and performance-marketing agencies like Advertising.com, AvenueA and iProspect are beginning to roll out solutions in which business rules drive media buying decisions under a single strategy. In order to make the best media spending decisions, it is paramount to measure effectiveness across multiple types of performance campaigns in real time. This requires a tactics-level understanding of the details of each strategy, such as how affiliates generate sales numbers. Equally important, marketers are being forced to identify quickly which marketing vehicle delivers results better than others and why.

JEFF G. MOLANDER is CEO of Molander & Associates Inc., a Chicago-based publishing and consulting firm that helps multi-channel retailers, catalogers and service companies to manage their affiliate programs.