If you do marketing for an eCommerce store, it’s likely that you’re experiencing multi-channel ad cannibalization. This means that, by the time a customer makes a purchase, you unnecessarily pay for them to visit your site two or more times when you didn’t need to pay for all of those extra clicks.
Let’s consider an example.
Suppose a young professional in his early 30’s is looking to buy a new watch. He recently received a promotion and wants to celebrate by upgrading his timepiece. While flipping through Inc. magazine, he sees an article recommendation for a Hamilton Jazzmaster that catches his eye and decides to do a quick search on Google to learn more.
The first thing he sees are Google product listing ads (PLAs) that look like organic search results but are really paid ads with a picture of the product, the name, the price, and the website being advertised. Seeing the watch he’s looking for, he clicks the PLA, causing the website to pay it’s first advertising fee for this particular sale. Then, after browsing the site a bit, he looks at a clock on the wall and notices it’s time to leave for the Red Sox first home game of the season. The browser closes; session over.
A few days later, while scrolling through his Facebook newsfeed, he sees a retargeting ad for same watch he’d been looking for that was paid for by the site he previously visited. Excited to be reminded about the watch, he clicks on the ad to check it out again (once again charging the eCommerce store for another click). He zooms in on the picture to get a more detailed view and admires the classic styling and simple elegance. It’s definitely the watch he wants to buy, but he’s not quite ready yet. He needs to see if there’s a coupon available online, so he opens a new tab for Google and types: “Hamilton Jazzmaster coupon.”
As he scrolls through, he finds a coupon on Retail Me Not for the very site he’s been looking at. Sweet! Time to get out the wallet and make that celebratory purchase! Woohoo!
Our early-30’s young professional is happy with his purchase, but what about the watch website? Are they happy with how everything went down, or did they pay more than necessary for this particular sale?
In a sense, yes, they should be happy. Their marketing worked and led to a purchase. The cash register went “cha-ching” and a sale was made.
But as the marketing director pores later over the numbers, he’s unclear what led to the sale. The customer clicked on a Google product listing ad, clicked on a retargeting ad, and used a coupon. Which marketing channel was the most effective at making the sale, and which one was unnecessary? Are there any that can be cut out without lowering sales? Are any of the options cannibalizing the others and diluting the efficacy of the advertising budget? Is there a way to do more with less?
These are all of the questions that a Marketing Director is left to answer. And for many online stores, digital ads end up being oversaturated. Stores feel like they have to do everything, including Google AdWords, retargeting, social media PPC ads, and coupons, but they don’t know what actually works and what leads to the most sales. Each channel gets a kickback, but which ones are necessary and which can be removed?
Digital marketing agencies are another problem that can come up. They recommend coupons knowing they’ll be attributed to a high number of completed orders, but they aren’t as concerned whether or not it’s necessary to pay that third or fourth final kickback for a coupon. It may not be necessary to complete the sale, but it makes the digital agency look good, so they want you to use them.
So eCommerce stores end up paying for all of these channels. The consumer touches three different types of ads (or more), and you as a retailer are left paying three different ad channels for one sale.
Taking this one step further, every single one of these channels has their own dashboard that shows stats for each campaign. They’ll show you how their ad led to a sale on their dashboard, but unless you’re savvy at looking at first click versus last click in Google Analytics, you’re going to be really impressed with Retail Me Not AND Google Shopping ads AND AdRoll. What do you know, every single channel is performing well!
The problem is that, yes, you do add some new customers with each channel, but your spend goes up three times and your sales may only go up 15%. That’s a big problem and is something you want to avoid.
It’s also a huge problem for younger retailers just getting into the mix. They don’t know what to look for with ad spending. Everyone tells them their channel is successful so they employ them all without any understanding of ad cannibalization. So what are you supposed to do?
Here are three simple solutions you can consider.
Solution #1: Measure last click versus first click
The first solution is to look at last click versus first click. The first click shows how much brand new business you’re getting from the channel, and the last click shows you how much dilution there is. This bit of information unlocks a lot and is the first thing retailers need to keep track of because it shows where your ad spend is getting cannibalized.
Let’s look at an example.
Suppose you look at a standard ad dashboard, say a coupon affiliate, and at the end of the month you earn $100,000 worth of sales with a $4000 spend on coupons. That seems great, but did you really get these sales from the coupon site? Probably not.
When you use the last click versus first click model, you find out how many orders start with coupons and end with them. This gives you a better idea about how much of the sales can be attributed to the coupon site without considering other factors that also contributed to the sale.
If you don’t measure your ads this way, you’ll end up tipping everyone when you could have picked up your own bag. There’s no way to tell with 100% certainty whether or not each additional ad was necessary, but last click versus first click will give you a better idea of which ads bring the most new customers to your storefront.
Solution #2: Think outside the box
The next thing you need to do is to think outside the box. Is there a way you can get the same result without spending as much on each channel?
For example, do you really need to pay for coupons on Retail Me Not when you can offer coupons on your own site? Yes, some people are going to search Google for coupons, so why not offer them on your own website so you don’t have to pay each time someone redeems one?
This is exactly what THMotorsports does. THMotorsports puts the coupons on its website so visitors find them there. If you Google “THMotorsports coupons” the company’s coupon page shows up as the second result which means people still get the coupons they’re looking for, but THMotorsports doesn’t pay an extra buck every time one gets redeemed. This tactic isn’t used that often, and it’s an outside-the-box solution that will save you some money while getting the same results as using a site like Retail Me Not.
Solution #3: Stop a campaign and measure the results
The third and final solution you can consider is stopping a campaign to see how it affects your sales. Stop using retargeting for a month, for example, and see how much your sales go down or if they’re affected at all. Maybe your ad spend goes down 30% and your sales go down only 5%. After you run the numbers, you realize that retargeting ads aren’t getting the return you originally thought they were so you scratch them from your advertising list.
The point here is to experiment with your ad budget for a period of time to see if stopping one type of ad or another significantly affects sales. If it doesn’t, then you know you can live without it, and you now have more money to invest in campaigns that are really driving sales. This ends up being a win-win for your store.
So the next time you’re looking at a new advertising channel, consider whether or not it will generate enough sales to be worthwhile or whether or not it will dilute your marketing budget by cannibalizing sales from your other ads.
If you’re unsure, go ahead and run an experiment to see how much it improves sales, but remember to measure to make sure the spend is worthwhile. If not, don’t be afraid to say goodbye to marketing channels that aren’t performing, even if they come highly recommended from so-called “marketing gurus.” What really matters is what works, and the only way you’ll know for sure is by testing different campaigns and measuring the results.
Here are some key takeaways to remember when running your tests:
- If you advertise on too many channels, you can end up unnecessarily paying multiple times for the same customer to visit your site when one or two different channels would have been sufficient.
- Some channels are more effective than others. Just because online gurus or digital agencies recommend one type of advertising as being the best, that doesn’t mean it actually will be the best for your business. You need to test for yourself to make sure you’re getting the best return on the money you spend on advertising.
- You also need to keep in mind that all of the advertising channels will make it look like they’re solution is generating business for your store which is why you need to measure first click versus last click to see which channel is generating the initial exposure for your store.
What’s your take on this subject? Do you have any experience with cannibalizing your eCommerce marketing spend, or do you have a question about how this works? Leave a comment or ask a question to join the conversation and to share your expertise!