Online Customer Acquisition: Moving Closer to Smarter Spending

Editor’s Note: This week’s tip is courtesy of Jeff Molander, President of Molander & Associates.As a consultant, I’m often asked, “With so many choices, what gives me the most bang for my buck?” There is no simple answer, but leveraging new, post-shakeout industry trends is a forward thinking solution.

Today, direct marketers and multi-channel retailers find themselves struggling to understand both how and what to spend precious customer acquisition and retention dollars on. With industry analysts and media spinning stories of layoffs and decreased advertising spending, it’s easy to become woeful or confused. Ad spending is tightening; however, taking note of key trends in online spending and trends among online publishers, portals and shopping properties can help. These shifts can simplify deciding how and where to spend for maximum impact.

Very recently two powerful statistics were released. AffTrack announced that advertising revenues from new hybrid models (such as performance marketing) increased 79% across 20% of the Media Metrix top 50 properties in fourth quarter 2001. This marks the first time a substantial metric has been identified to assess the acceptance and success of emerging advertising models involving direct response oriented revenue-sharing. Marketers are spending significantly more on this type of advertising and publishers and innovative shopping properties are reaping the rewards. Shop.org released survey results pointing at a 30% decrease in third quarter 2001 customer acquisition cost among 63 major retailers. This translates to an average spend of $12 versus $20 in 2000.

These metrics are important as they point to what is working - where marketers are most willing to invest. Why don’t we hear more about the success of emerging, hybrid or performance ad models that work so well? Simply stated, because it’s every marketer’s best-kept secret. Of course, affiliate programs, if run correctly, can boost revenue; however, marketers don’t talk publicly about what really works - the portal deals that they executed with performance guarantees.

“Because accountability and ROI are paramount, we are moving beyond simple affiliate programs - toward more sophisticated, in-depth relationships with major portals, shopping properties and other marketers, not to mention performance-based e-mail opportunities” explains Jeffrey Parnell, VP General Manager of E-Commerce at Blair Corporation. “So far, the results have been encouraging.”

Today, marketers must move quickly to work with online publishers and shopping properties in new ways - executing hybrid, short-term deals that share performance risk and, yes, benefits of potential upside. How? Here are some tips when working with publishers/properties:

• Do your homework: is this a logical place to spend and what kind of deals can you already see?
• Be realistic - rarely ask for pure performance arrangements
• Resist doing “affiliate” deals or tarnishing your approach by using this word
• When needed, ask to work with business development representatives
• Don’t forget to leverage e-mail as a delivery vehicle

As AffTrack President, Scott McNulty states, “Those who do not adapt to the new dynamics of online media strategies are sure to suffer and, perhaps, perish.”Indeed, innovative publishers and Web properties have moved quickly to embrace both pure performance and hybrid models.

Direct marketers are now positioned to move forward on developing mutually profitable relationships that tie results to spending.

Related Links:

Afftrack

Blair Corporation

Shop.org

Jeff Molander is President of Molander & Associates Inc., an outsourced provider of multi-channel customer acquisition strategy and business development services for retailers, marketers and catalogers. The company is focused on building performance-based and collaborative commerce strategies. He can be reached at jgm@molanderassoc.com.

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