March 12, 2007

Paid Search: New Or Existing Customers?

Catalogers enjoyed a blissful business model. They targeted the customer they wanted to acquire, or they sent catalogs to best customers, in an effort to increase customer loyalty.

Online marketing ends that wonderful fairy tale. Take paid search. You pay for a keyword. Customers click on your link, and hopefully purchase merchandise.

Who clicked on that link? Existing, loyal customers? Inactive customers? First time purchasers?

Multichannel retailers with good customer databases know the percentage of paid search respondents who are existing customers. The greater the percentage, the less effective paid search might be over time, as you simply pay Google to steer your existing customers back to you.

More important, however, is the loss of control over the growth of your online channel. With catalogs, you set aside a portion of your circulation for prospecting purposes. You strategically determine the long-term growth rate of your business. With search (especially with natural search), you don't control the long-term growth rate of your business. Google determines the long-term growth rate of your business.


Multichannel CEOs and CMOs: Your task for Tuesday morning is to sit down with your analytical folks, and learn if Google drives existing customers to your site, or new customers to your site. If Google is used by your existing customer base, you have the potential for long-term growth problems, as you may not have a healthy source of new customers to prospect to. If this is the case, today is a good time to start considering how you will find new customers.