$3.00 for One Click?

Back in my days in Ecommerce at Eddie Bauer and RedEnvelope, success was so easy!! Clicks for major keywords cost, at most, $0.75; all of our reporting was purely cookie-based, without any understanding of how many of our web buyers were influenced by offline marketing. Our ad cost was 15% (or so we thought). It was fun- we were all rock stars.

Online marketers are just now feeling the pinch that direct mail marketers have been feeling for the last few years. As catalogers have battled rising costs across the board, online retailers are now faced with incredibly high costs, driven up by competition:

Cost per click for the keyword “gift baskets” - $3.00 (on a good day)
Cost per click for the keyword “food gifts” - $1.80
Affiliate revenue share for the shoe category- 25%
Cost to send an 80-page catalog- $0.65

We also know that, depending on the retailer, 30% to 60% of the buyers from paid search and affiliates were first mailed a catalog.

Two scenarios:

$100,000 Spent on Non-Branded Paid Search
$2 Cost per Click
50,000 Clicks
3% Conversion Rate
$100 AOV
$150,000 in Sales
67% Ad Cost, not including the cost of any catalogs mailed to these buyers

$100,000 Spent on Catalogs to Targeted Lapsed Customers (Reactivation)
$0.65 Cost per catalog
154K in Circulation
2% Response Rate
$100 AOV
$308,000 in Sales
32% Ad Cost

Acquisition, in all forms (paid search, affiliates, catalog prospecting), is more expensive than ever in this economy. Two recommendations for your 09 planning:
1) Housefile Reactivation, via email and direct mail
2) Website initiatives to improve conversion rates- these efforts will improve the ROI of all marketing programs