Online Marketing Help: Dollars

August 3, 2015, 4:31 PM

By Tracy Maple Managing Editor, Digital Content

The State of Retailing Online 2015 report finds search and email leading the pack with e-retailers.

Search and email marketing continue to dominate marketing budgets for online retailers, making up almost half of the spending, the latest State of Retailing Online report finds. Why? Because they’re effective and cost-efficient.

Search engine marketing accounts for 33% of digital marketing budgets among retailers surveyed for the report, released in July. Search engine optimization receives 16% of the average and email gets 14% of the marketing dollars, the report finds. Merchants report the average cost per order is $6 and $15 for email and search, respectively. Surveyed retailers, on average, dedicate approximately 6% of their online revenue to web marking, with the median marketing spend at $950,000, the report states.

For the State of Retailing Online 2015 report, Forrester Research used data from the State of Retailing Online survey, conducted in May and June, in conjunction with Shop.org and Bizrate Insights, a division of Connexity. It was authored by Forrester analyst Sucharita Mulpuru with Carrie Johnson, Laura Naparstek and Laura Glazer. Respondents numbered 224, with 61% having $25 million or less in online sales per year, 20% more than $100 million in annual online revenue and 19% with $25 million-$100 million in online sales.

In addition to paid search ads, SEO and email, online retailers find ongoing success with affiliate marketing, according to the report. Affiliate networks sometimes are viewed as the Rodney Dangerfield of online marketing, seeming to get no respect. But they are doing yeoman’s work and “continue to remain strong in the web marketing arsenal,” according to the report. Affiliates are website operators that publish links to advertisers’ e-commerce sites and earn a commission on any sales generated from the traffic they send.

Among other findings:

Retailers were asked to rank their most effective customer acquisition methods, and this is how the channels fared:

58%, search engine marketing (mobile and desktop).

55%, SEO and natural search optimization.

52%, email to a house list.

38%, affiliate marketing.

31%, online marketplaces, such as Amazon, eBay or Rakuten.

27%, remarketing and retargeting through online ads.

25%, Facebook.

Online retailers continue to be challenged by how to measure consumers who switch devices during the shopping journey. Only 22% of those surveyed say they have resolved device attribution in marketing efforts, according to the report.

When deciding where to give credit for an online sale, 38% of retailers of 203 retailers attribute it to the “last touch” marketing channel, so if a shopper clicks through an email and completes a transaction, that marketing channel receives credit for the sale. Only 3% of retailers give credit evenly across all touches and 19% of retailers say they don’t know how sales are attributed, the report finds.

Site merchandising, which involves efforts to improve product presentation on an e-commerce page, is gaining more attention. 63% of retailer surveyed said they are increasing online merchandising budgets this year, and 49% are adding staff dedicated to web merchandising. The most common improvements mentioned are site redesigns and improved product detail pages, where consumers spend the bulk of their time on merchants’ site, the report states.

While it’s important to keep an eye toward the future, the report urges online retailers to disregard distractions and buzz, such as that surrounding Buy buttons that “promise to finally unleash the commerce of social networks and mobile wallets, which purport to snap the anemic conversion rates of mobile devices.”

A retailer’s website should be a priority because it drives organic traffic and organic traffic builds a web business, the report advises. Experimentation and new technology can be good, but not at the expense of the basics: “Search and email are still the lion’s share of online marketing. Merchants should ensure that those programs are as strong as they can be,” the authors write.

Retailers stick with standard methods when spending online marketing dollars

Signs point to marketers opening up their wallets for emerging digital technologies, placing bets on measurable channels such as email, search and social media, shifting resources toward consumer-facing technology, and spending wads of cash on content creation and aggregation.

But success is far from certain.

There’s no question marketing budgets are on the rise. More than half of business-to-business marketers expect their budgets to increase this year, compared to 31 percent of respondents who expected budgets to increase last year, according to a Forrester survey.

What’s Driving the Budget Increase?

What’s behind the increase in spending? Nine out of 10 marketers say digital marketing technologies, which make up a chunk of business technology (BT), are critical to success.

“The CIO of one of the largest banks told me, ‘I have unlimited budget for the BT agenda,” Forrester CEO George Colony told attendees at Dreamforce last year.

Of course, the spike in marketing tech spending has attracted tech giants such as Oracle, which has been on a $3 billion marketing-tech acquisition spree, as well as a plethora of startups. Venture capitalists, too, are rushing to this feeding frenzy.

“In most companies, a CMO can write a million-dollar [operating expense] commitment in a heartbeat,” Ashu Garg, general partner at Foundation Capital, a Silicon Valley venture capital firm boasting big wins with marketing tech investments, told CIO.com last fall.

Follow the Money (or Try to)

Exactly where marketers are putting their dollars, though, isn’t clear.

For instance, a survey from Autopilot found that website, search engine optimization, branding and social media technologies are priority areas, not so much marketing automation. In contrast, a Forrester survey found that marketers’ top focus in terms of their budget is email marketing, followed by search marketing and display advertising.

The Forrester survey shows marketers directing their budgets on “measurable efficiency channels.” However, a survey commissioned by Leapfrog Marketing Institute found that marketers plan to shift their budgets from channel and product-focused initiatives to consumer-focused ones, such as customer acquisition, retention, loyalty and CRM.

Another murky area is a marketer’s return on investment.

Many loaded guns are leveled at a marketer’s chances of success, according to Forrester. As with any emerging technology, the right skills are hard to find. Only 43 percent of marketers say they are able to find and hire people with the digital marketing skills they need.

The Realities of Digital Disruption

Marketers have also waded into unfamiliar technical waters. In other words, marketing technology and data analysis have upended their profession. Most marketers are still trying to wrap their heads around the complexities of technology and trying to separate hype from reality. Hence, there’s a real fear of failure.

Perhaps most frightening of all, the majority of marketers don’t really have a plan. They’re making reactive marketing tech decisions rather than strategic ones. In fact, Forrester says only 44 percent have a clearly defined and deployed digital strategy.

The bottom line: Lots of scatter-shot marketing dollars hang in the balance, while returns may prove to be elusive.

Where Are the Marketing Dollars Going?