Posted by Sejal Sura, Senior Manager (Planning & Analytics)
Nowadays, customers are influenced by both online and offline advertising. However, the Web—and especially search—is the most influential channel driving their purchase decisions. For instance, 80% of the population uses search to gather information before purchasing online, and 76% uses search to gather information before purchasing offline. (Performics & ROI Research, 2010 SERP Insights Study). In fact, 74% of people use search to find where they can purchase a product offline. (Performics & ROI Research, 2010 SERP Insights Study).
Therefore, companies must quantify the value of search across all channels (i.e. reseller sites, offline) by deriving paid search online/offline multipliers. More specifically, advertisers need to quantify the value of paid search by product category and customer segment to (1) better allocate marketing budgets across product categories, (2) receive co-opt dollars from channel partners and (3) integrate search strategy with traditional marketing plans. To derive online/offline multipliers, advertisers must calculate the following metrics:
It’s important to derive these values based on product category and customer segment (i.e. small and medium business buyers or consumer buyers), as products and segments may differ in terms of return on ad spend or online vs. offline purchase ratio. A company’s online marketing team can then use these findings to define optimal spend levels across product category and customer segment, as well as partner with the appropriate internal teams (i.e. in-store merchandising, offline marketing) to obtain additional funding for paid search.
Calculating the Online/Offline Multipliers
To derive online/offline multipliers, Performics’ Planning and Analytics Team partners with a research vendor which tracks paid search behavior. We also leverage our clients’ paid search data. Panelists’ search behavior is tracked based on a data dictionary of terms consisting of brand, competitor brand and generic search terms by product category and customer segment. A survey is designed to assess search and purchase behavior and to address qualitative questions. Panelists then complete the survey, indicating what product they purchased, what brand it was and where it was purchased. This is one method we use to quantify the impact of paid search across channels for different product categories and customer segments. Here’s an illustration for one customer segment: non-business buyers of certain product:
Thus, for every 2 units of the product purchased directly from the client’s site, 8 were purchased from a resellers’ site and 7 were purchased offline. This means that for every 1 unit purchased from the client’s site, 4 were purchased from a resellers’ site and 3.5 were purchased offline. These findings are then used to calculate the online/offline multipliers:
The multipliers will differ across subcategory, product line and customer segment. For example, let’s take a look at the same product from the same client, but the product is for small or medium business (SMB) buyers, thus the average order value is generally higher because SMBs buy in bulk or purchase higher-end products:
As illustrated, $1 spent on paid search can go a long way, especially if the advertiser does due diligence in attributing offline and reseller sales to its paid search program. Once an advertiser understands how paid search influences sales across channels for each product line and segment, the advertiser can maximize paid search performance. This includes modifying copy to promote certain products, co-bundling opportunities in certain channels and optimizing landing pages. It also provides an opportunity to refine/create co-op programs with channel partners to obtain co-funding and to increase overall product sales. It can also encourage internal team integration—if in-store sales can be attributed to paid search, the offline merchandising team and the search team have reason to work together to run integrated campaigns. This is especially important as search on smartphones increases. According to Google, search on Android devices surged 300% in the first half of 2010. Additionally, 1 in 3 smartphone users include location in their search queries; paid search can help get these customers through your door.
All advertisers should consider quantifying the impact of paid search across online and offline channels—by using methods like those illustrated above—to secure more search budget and integrate search strategy with traditional marketing plans.