The Economics of Online Marketing

Channel Spillover

Just as many retailers deflate Web demand sales by a percentage to account for frauds and cancels, many then inflate the result to account for spillover into their call centers and retail stores.

While a few firms (e.g., Ingenio, Jambo, VoiceStar, eStara) and search engines offer technology to track online clicks at the ad level into the call center via distinct toll-free numbers, these solutions still are new and costly and have yet to gain significant traction. But they will. Web-to-phone tracking and pay-per-call advertising will become essential for all online direct marketers during the next few years.

In the meantime, many online marketers use monthly call center surveys to estimate call center spillover (“May I ask how you heard about us today, sir?”). A handful of sites display different toll-free numbers to track clicks into the contact center at the gross engine level (i.e., visitors to the site from Google see one toll-free number, while those from Yahoo! see another).

Even fewer online direct marketers track store spillover. There are two reasons for this. First, many online direct marketers have no (or quite small) retail store networks — think Amazon, Overstock and most catalogers. Second, many large, national store retailers with strong online direct divisions still suffer from internal political struggles regarding channel importance and sales allocation.

This will change. In 2006, expect to see more national retailers providing Web visitors with offers and discounts via PDF barcoded coupons redeemable at retail checkouts. During the next few years, if you have stores, expect to be tracking the impact of specific Web promotions on your retail store sales.

Maximum CPC

Suppose you’ve determined an appropriate A/S efficiency target for your business, either overall or by product category. And suppose you understand how to adjust reported Web demand sales to mirror actual booked revenue — some downward tweaks to account for frauds and cancels, some upward tweaks to account for contact center spillover. Given accurate click counts, you can divide adjusted sales by clicks to compute average sales per click.