Over Half Of Online Retailers Decreasing Search Spend

Retention Rather Than Expansion The Focus

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The weak economy is driving online retailers to shift their marketing budgets and cut back on search marketing, according to a study by Forrester Research on behalf of Shop.org.

The study surveyed 117 online retailers in the throes of a relatively abysmal first quarter about how they planned to allocate their online marketing budget. While a third will be spending less over all, over half of them (56%) said they would be scaling back search marketing specifically, indicating a plan to reallocate funds toward other venues like email and social media.

Email seems an especially popular option, with 88 percent listing email as a high priority, the majority of them focusing on segmented emails to customers based on stated preferences or purchase data. Others will be highlighting new products and featuring online promotions via email.

That indicates customer retention as the primary goal and not so much gaining new customers.  "Online retailers are trying to weather this economic storm by doing more with less, making smart spending decisions, and leveraging effective, affordable tactics like email to grow their businesses." said Scott Silverman, executive director of Shop.org.

However, the idea that recession is the best time increase the marketing budget isn’t a foreign one—when there’s less money to go around, it makes sense to be more aggressive, not less. The other (slightly less than) half of that group have no plans to cut back original budgets and will be forging ahead as planned.

A quarter of them will take advantage of others’ decreased search spending by increasing their own budget for search and across the board. Of that minority, 80 percent will increase search, 65 percent will increase email, and 60 percent will increase social marketing.

The increase in social media spending is interesting. For many this arena will be a testing ground, and for others it will be a strategy in lieu of the rising cost of search marketing. However, the numbers to support such a drastic switch aren’t quite there yet, according to Hitwise. Search still drives over 30 percent of traffic to retail sites; shopping and classifieds drives 25 percent; and email drives over 10 percent.

Hitwise US: Retail 500 Websites

But social networks still account for less than five percent of traffic and are negative in terms of year-over-year percentage change in upstream visits to Hitwise’s Retail 500 Index.

Social media certainly has been under the spotlight of public attention lately with sudden mainstreaming making social media a very attractive target. But social media’s day may not have fully come yet.


Over Half Of Online Retailers Decreasing Search Spend
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  • http://www.hydranetwork.com Sue

    At Hydra we have not seen an decrease in online ad spending by retailers. In fact, just the opposite. That being said, the increase is in the utilization of CPA or Cost Per Action. These marketers know that with CPA they are getting their dollars worth. They only pay for a lead, form filled out, or even a sale. marketers can allocate risk-free dollars towards generating quantifiable numbers of customers and revenue dollars. Affilate networks such as Hydra, create brand-building campaigns using email, display, search, video and social media. These campaigns run over a network of affilates and generate costs only when deals close.

  • http://www.bellajewelz.com Bella

    I gave up Google Adwords and redirected that budget to pay per click banner ads and the like. I get a much higher response and I found I am spending less than before.

  • http://www.lymediseaseindogs.net/ lyme in dogs

    Economic crisis is considered as a major reason why its very hard for either an individual and a company to make a decision. Both recurring customers and prospective customers are advantages that businessmen and companies must always take into consideration.

  • http://www.adnetworkreviewer.com/ Ad Network Reviewer

    I would expect that there would be an increase in CPM advertising strictly for branding purposes. Naturally, search advertising is geared toward selling products and when no one is buying anything, you simply want people to know you’re still around and you have what people want when they begin spending again.
    It would be interesting to see how CPM advertising is faring in this economy.

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