September 02, 2009

OMS: PPC And Retail

You've probably been paying attention to the stuff that George Michie has been writing about on the Rimm-Kaufman blog.

Pay attention to his work, folks. It's always fun when the results don't match up with conventional thinking, that's the only way we learn!

The fun part about his research is that it helps you optimize and improve your business. This is great stuff for the online marketer and web analytics expert.

Over here in Online Marketing Simulation (OMS) land, we like web analytics and we like online marketing. But we don't compete with web analytics and online marketing, do we? No, we complement web analytics and online marketing by helping CEOs answer one important question ... "what happens next?"

In other words, you are a retailer, and you just acquired a customer via search. Will this customer shop in your store in the future?

Let's go to the OMS to find out.

A typical outcome looks like this, for a segment of newly acquired search customers:

  • Year 1 Search = $70,000. Year 1 Retail = $130,000.
  • Year 2 Search = $60,000. Year 2 Retail = $170,000.
  • Year 5 Search = $40,000. Year 5 Retail = $140,000.

Notice that most of the future value happens in a retail store.

Your mileage will vary. At Nordstrom, we used Multichannel Forensics, the precursor to the OMS, to learn several years ago that every dollar we saw in search today was paired with another future dollar in retail stores.

This meant that we could dramatically increase the search budget. If you're an online marketer, you like it when your budget is increased because somebody proved that you are adding value not captured in your web analytics software package.

Use online marketing and web analytics to understand what is happening today.

Use the OMS, the Online Marketing Simulation (my version, or the one you create), to understand what is going to happen tomorrow. Once you know what is going to happen tomorrow, you can significantly change your budget levels today!