Comparison Shopping Engine Strategies

CSE Marketing in a Tough Economic Climate

In case you haven't heard, the economy is having a bad hair day. Because of declining consumer spending, all marketing initiatives are being evaluated at many retailers. It's a sad fact, but marketing on comparison shopping engines can be labor intensive and depending on several factors, expensive. There seems to be a trend of online retailers reacting to these conditions by slashing budgets and in some cases, pulling feeds down completely. While decreasing budgets may be necessary, for most retailers, eliminating the program completely is not the best way forward.

Below are thoughts on what retailers should keep in mind when considering the future of their CSE campaigns. Though there may be other issues facing retailers right now, such as challenges surrounding credit, product sourcing, etc., these comments are intended to be independent of such complexities.

• Give credit where credit is due: I sometimes hear merchants say "my CSE program isn't working," when the reality is usually "only part of my CSE program is working." Most retailers currently operating on CSEs have some subset of products that are selling consistently. Our experience is that the many products that repeatedly sell on CSEs are very efficient and usually profitable. Even if the total campaign is not achieving your goal, some products probably are. If a Google AdWords program was operating below goal, I doubt many merchants would completely shut it off. They would lower bids and probably remove certain campaigns, adgroups or keywords that are not performing. CSE is no different in this sense. Recognize successes within the campaign and keep them going. It's an extreme step, but if your business is in crisis mode, removing all products except for this subset of consistent sellers can result in much lower costs while retaining some profitable revenue.
• Rebuild slowly: If you do take this sort of action, you will probably find that the products that are working are a small piece of your overall product set, which makes it likely that the cost incurred by those items is also a very small part of the total cost of the campaign. Recall from past discussions about the long tail of CSE feeds that in most cases, the majority of cost comes from activity on items that drive no revenue. This means your newly slimmed down CSE campaign may be over-efficient. This is what we often see when we take this approach of cutting out the long tail completely because the majority of the risk and uncertainty is removed. If this is the case, it may be best for your business to take that extra efficiency to help offset some other channel, but many retailers will be able to reinvest in CSE. Do this by re-introducing products/categories into your feeds to try to get the maximum revenue while still operating within the construct of their financial model. The best way to do this is to start slowly and watch to see how the reintroduced products/categories perform.
• Focus on your strengths: Regardless of economic conditions, most consumers will continue to shop based on value. Price sensitivity will certainly increase, but issues of quality and trust never completely vanish. Therefore, when choosing products/categories for reintroduction into your feeds, it is best to be realistic about your value proposition and how you measure up to your competition. You wouldn't be in business if you didn't do something right, so focus on including only products or categories where your value is strong.
• Maximize CSE feature use: Having a strong value proposition is key, but it is not beneficial unless it is clearly communicated. Many CSE marketers overlook the basics, such as completing the CSE merchant account interfaces with accurate payment types and customer service info. These elements can impact your rank and conversion rate. In addition, user reviews become even more important as consumers are less convenience-oriented and more value-oriented, so be sure to participate in these programs whenever possible. Display of shipping costs, tax info, promotional messages and coupon details should be maximized as well. Your goal should be to convey your value to the consumer as clearly as possible before any clicks are made. Providing as much information as you can will help protect, if not increase, your conversion rates and ensure your competition isn't winning for the wrong reasons.
• Understand the long term impact of your actions: I can't emphasize this one enough. What you do today on CSEs has a direct impact on your future ability to drive CSE revenue. Many CSEs have some sort of popularity function that is based on historical activity. This means that if you take your products down for a few weeks or months, getting back to where you were is very difficult, as if you were starting over from scratch. In addition, most CSE review programs require recent feedback in order to display those rating on their site. If you already have a positive merchant rating, keeping your campaign live is the only way to protect it. The bottom line is that if you pull your best products down today, you are seriously risking that revenue stream not just for the time those products are down, but for much longer.

If anyone has specific challenges, please share them and I will do my best to help.

Managing the long tail

My team and I deal with inventory sets in the hundreds of thousands.  Such large product catalogs cause logistical pains, but in many cases, the larger issue is getting to profitability when the aggregate cost of that "long tail" of low click, non-revene generating products outweighs the revenue generated by the head of the distribution. Sometimes, this is the case whith feeds that are smaller in size.

Below is an example that shows the order distribution by sku of one of our merchants over a 30 day period. This data is for a single CSE, but the total distribution looks very similar.  The x axis is the number of products in the feed, and the y axis is the number of orders each of those products generated. The most important thing to note here is that though the x axis ends at 4000, the total number of offers is actually around 20,000, which means the long tail goes well off your monitor.

Take a close look at the percentages in each of those areas (click to enlarge).  Over half the cost lives in that long tail of products, the majority of which have incurred just a few clicks.  This means the individual product cost is almost invisible, but in aggregate, this poses a serious threat to profitability.  The gut reaction for many is pretty simple. Chop off the long tail and leave in the feed only the products that have generated revenuve (ROAS will double!).  This is where that middle yellow range comes in to the conversation.  That range represents products that generated exactly one order over this time frame.  If no action is taken, the next 30 day distribution will likely look similar to this, but the products that appear in that middle area will not be the same products next time around. So if you blindly chop off the entire long tail, you're likely cutting off a big portion of your future revenue. You then wind up with a similar distribution that does have a shorter tail, but also a much smaller head.

The ideal solution is to remove only the correct products from that tail.  The question is how do you define correct?

There is no way to get it right every time. As soon as you remove a product, you risk losing revenue that could have come on the next click. But most retailers will find there are products that just aren't worth including. Here are a few ideas on how to identify those. Please note that all of these can be loosened or tightened based on your business's tolerance for risk.

• Reverse-engineer your target conversion rate: Look back at the equation in my last post. Drop in the product cost, the CPC you are paying and your target ROAS, then solve for conversion rate. Divide 1 by the result and you have your click bogey. If the product gets that many clicks and no sales, it is officially in a hole. Unfortunately, the above distribution is the result AFTER applying this rule regularly. It also is only addressing the head of the cost tail, not the really long part of the tail. This approach can help cut an unusually large portion of your cost that comes from a relatively small number of products. You could also occasionally widen the time frame on the data set used in this analysis to catch the second tier of products that are not meeting that target conversion rate, but taking longer to reach the click tolerance level.
• Reverse-engineer a price filter:  Try the same exercise as above but solve for AOV. Use your current conversion rate on the CSE in question. The result is the theoretical inflection point of product level profitability.  Products under that price are less likely to work in the long, assuming they convert at or below the standard rate used in the equation.  If you have a lot of products at a low price point, you may wind up with a much smaller feed, but hopefully a higher ROAS.
• Use data from outside your CSE campaign:  If you have 100,000 products, odds are some subset of those products (possibly larger than you'd care to admit) have never sold on your website.  Well, if that long sought after first sale does come some day, it is as likely to come via a CSE as it is to come from any other marketing initiative.  But if you are fighting this problem, it may not make sense to include that initial marketing cost here. Since CSE CPCs are pretty much flat, advertising these self ascribed long tail products is a risk. These products are probably either incredibly niche, or there is a problem with the offer itself (probably the price).  If they do generate traffic, it will probably only be a few clicks, but that is exactly what we're targeting here.

written by Mark Vandegrift -- markv at channeladvisor

The Importance of Conversion Rate

"How can I improve the return I get from Comparison Shopping Engines?"

This is by far the question I hear most from merchants using CSEs. The answer is pretty simple: Improve your conversion rate. Making that happen, however, isn't quite as easy.

First, let's look at why conversion rate is so critical.

Unless you can drastically increase your average order value or miraculously pay less than the minimum CPC, increasing conversion rate is the only way to impact performance since it is the only remaining piece of the equation. The main reason for this is that CSEs basically charge you the same price for every click. Whether that user searched on your brand or your exact product title, or if that user stumbled across your product through a browse mechanism, the cost to you is the same. Qualified traffic and non-qualified traffic look identical from the merchant's perspective.

So now on to the hard part...how do you increase it? While there is no silver bullet, there are some best practices you can follow to maximize this metric.

• Categorize products appropriately
• Ensure titles and descriptions are accurate
• Populate as many feed fields as possible
• Submit clear and accurate images
• Ensure your action URLs work, take the user to a page where the product in question can be easily located and that the price matches the price on the CSE
• Complete the Merchant Information section in the account login area of all CSEs
• Actively remove products that do not convert
• Unless you have already done so, analyze and improve the landing pages on your site

Reviews/ratings on CSEs can impact conversion as well, but only if those reviews are positive, so be sure to provide great service to keep those ratings high.

Ideally, comparison shopping engines will one day expose some level of information as to how a user found the product listing, suggesting some indication of how likely that user is to purchase after clicking, and charge the merchant appropriately. In the mean time, doing everything possible to maximize your conversion rate without the benefit of that insight is your best bet.

"What if my conversion rate is nowhere close to my goal?"

If you use the equation above and enter in your actual average CPC and order value, plus your ROAS goal, you can solve for your target conversion rate. If your current conversion rate from your CSE initiative is significantly different, you may need to adjust your ROAS goal. You can also work to increase your average order value by removing low priced products from your feed or via promotions such as $10 off orders of $100 or more. However, if your target conversion rate is 2% and you are sitting at 0.5% (difference of 4X), it's unlikely that attempts to quadruple average order value will be successful.

written by Mark Vandegrift -- markv at channeladvisor

Meet the Engines

It's just a day of great news!

I wanted to let you all know about "Meet the Engines," a new webinar series for merchants who want to increase their products' visibility on CSEs and search engines. 

So who's coming?  In each webinar, you'll hear:

• Reps from CSEs and search engines on how to be more successful at getting qualified leads and conversions
• CSE and search engine experts at ChannelAdvisor

Interested? Click here to register for all seven at once.

Here's a general idea of what you get:

• An overview of each engine
• Each engine's selling benefits
• The best ways to get visibility
• Tips and best practices for success
• and the secret sauce...tips and exclusive info from ChannelAdvisor experts

The series covers MSN Search, Google Product Search, TheFind.com, Google Search, Shopping.com, Yahoo! Search and Pricegrabber.com.  It happens once a month, so be sure to mark these dates on your calendar:

• MSN Search – Wednesday, May 30, 2 p.m.       
• Google Product Search – Wednesday, June  27, 2 p.m.       
• TheFind.com – Wednesday, July 11, 2 p.m.       
• Google Search – Wednesday, July 25, 2 p.m.       
• Shopping.com – Tuesday, July 31, 2 p.m.       
• Yahoo! Search – Wednesday, August 15,  2 p.m.
• UPDATED: Jellyfish – Wednesday, August 29,  2 p.m.   
• Pricegrabber.com – Wednesday,  September 5, 2 p.m.

Interested? Don't forget to register.

CSE Strategies at shop.org FirstLook

Wed-Fri I'll be down at shop.org's FirstLook conference with a crew of folks from ChannelAdvisor. 

Thursday at 11:30, I'm hosting a "Ask the Expert" roundtable on "Advanced CSE Strategies".  Here's the blurb:

Forrester reports that Comparison Shopping Engines influence 60% of purchases. Over 35% of the online audience in Q4 of 2006 visited a CSE. This class starts with the basics (top engines, datafeeds, CPC, bidding), and then reveals several advanced strategies that have significantly improved the ROI of CSEs for the web's largest retailers. Think what they can do for you!

I hope you are able to make it and if you're at shop.org stop by our booth (#319) and say hello!