From DM News' Special Report on E-Commerce Platforms and Software: Prepare for Convergence of Online Advertising, E-Comm
An online shopper just purchased a new DVD player from your product listing on Shop.com, and the purchase appeared alongside your own e-commerce orders in your warehouse management system.
Another shopper just bought new golf clubs from your product listing on Amazon.com, completing the order using the retailer's shopping cart and payment processing services. You paid no product listing or cost-per-click advertising fees to capture either customer.
Another buyer just purchased a gift basket from your own online store using a single sign-in payment service from Google, and you received a discount on your payment processing fees because the buyer was referred through your Google AdWords campaign.
The lines between online advertising and online commerce are blurring, and the convergence has implications for your online retail marketing strategy.
Transactional Online Marketing
Capturing your share of the online retail market means adopting and supporting a broader set of platforms and standards that blend aspects of both online advertising and transactional e-commerce. These range from third-party shopping carts and payment platforms to emerging data feed specifications and disparate advertising pricing models. Shop.com and Amazon operate differently than traditional referral-based data feed marketing channels.
Rather than directing traffic to your own e-commerce site, these marketing partners facilitate a consumer purchase through a unified shopping cart and deliver bona-fide orders directly to your order management system. Instead of paying cost-per-click, you pay a commission on the revenues generated by these orders. In Amazon's case, payment processing services are included, while Shop.com forwards encrypted credit card data so you can authorize and capture payment directly from the consumer.
The major advantages of these transactional channels over their referral-based counterparts are added trust and convenience for the consumer and reduced transaction and customer acquisition costs for you, the merchant.
While cost-per-acquisition or commission-based pricing is an inherent benefit of transactional marketplaces like Amazon and Shop.com, the prevailing model for online advertising has been cost-per-click or cost-per-thousand pricing.
Though CPC-based advertising has been labeled "performance based" in the past, true commission-based pricing models have been limited to marketplaces and affiliate marketing programs.
Now Google is experimenting with "cost-per-action" pricing for ads placed on Google AdSense. Advertisers pay only when a Web user buys a product, qualifies as a sales lead or signs onto a mailing list.
The benefits are material: Cost-per-action pricing builds merchant confidence, addresses click-fraud issues within content networks and motivates the platform provider (in this case, Google) to promote the highest-performing ads and advertisers through the highest-performing content providers.
The more you capitalize on true pay-for-performance marketing services, the more manageable and predictable your return on advertising spend becomes. In the worst-case scenario, your brand and products are exposed to millions of consumers at an advertising cost that cannot exceed commissions on legitimate orders.
The recent introduction of Google Checkout further illustrates the trend toward convergence of CPC advertising and transactional online retail marketing. Google Checkout is an online checkout system that lets consumers make purchases from participating merchants using a single sign-in payment account. Merchants who adopt both Google AdWords and Google Checkout can apply their AdWords spend to their Checkout processing fees.
If Google Checkout is successful, one should expect to see PayPal or another payment option offered for Yahoo Search Marketing, the promotion of Microsoft Passport for Microsoft adCenter users and the rollout of Amazon Payments with A9.
Be prepared to accept multiple payment methods from the likes of PayPal, Google Checkout and Bill Me Later to capture 100 percent of your online market and to maximize the available pricing incentives from marketing platform providers.
Despite added complexity, there are benefits to adopting the platforms outlined here. Online retailers who find efficient ways to adopt and leverage these technologies will benefit from lower customer acquisition costs, lower transaction costs and greater product and brand exposure per advertising dollar.