Study: Online Retail Shifts Away From Price-Based Promotions

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Internet and multichannel retailers are shifting away from price-based promotions as a key strategy for the upcoming holiday season towards e-mail marketing and search engine marketing, according to a new WebTrends report.

The 2006 Online Retail Holiday Readiness Report surveyed 300 Internet and multichannel retailers about key trends and the online strategies they are focusing on for the upcoming holiday season.

This year, twice as many respondents -- 23 percent -- said that they will not be using price-based promotions to generate online revenue from loyal customers during the holidays compared to 11 percent last year. Even the most popular holiday marketing promotion -- free shipping -- has dropped in popularity, from 62 percent of retailers using it in 2005 to only 45 percent in 2006, according to WebTrends,, Portland, OR.

While suggested items, gift idea centers and featured sales item pages remain the most popular site features to generate revenue from loyal customers, the percentage of businesses using these has fallen from last year.

The only features that received a boost year-over-year were personalized promotions and live chat. In fact, 18 percent of retailers are opting to use no site features this year, compared to 6 percent last year.

Overall, retailers ranked e-mail marketing as the most important demand-generation activity for holiday success, with search engine marketing and search engine optimization ranking second and third, respectively.

Reflecting this importance, the biggest increases in marketing spending for the holidays will be in e-mail marketing (52 percent), SEM (46 percent) and SEO (38 percent). The biggest decreases in spending will be in online banner ads (17 percent), print advertising (16 percent) and broadcast advertising (14 percent).

Eighty percent of retailers use regular customer e-mails to build customer relationships, and the activity that the highest percentage of retailers plan to do in the future is to develop a database of clickstream-based information for campaigns targeted to customers' interests.

The survey findings show more retailers need to understand their underlying measurement methodology and ensure it can accurately track unique visitors over time. There were small gains compared to last year in the percent of retailers adopting best practices, including a 1 percent increase in retailers using "true first-party cookies" (25 percent) and a 1 percent decrease in the number using "vendor's first-party cookies" (9 percent) and "third-party cookies" (12 percent). This year, a greater percent of retailers don't know what they are currently using to identify unique visitors -- 44 percent, compared to 32 percent last year.

Furthermore, 27 percent of respondents don't consistently measure demand generation activities, and 63 percent still evaluate campaigns using response metrics (clickthroughs) and activity-based metrics (page views, visits), which lack the visitor-centric insight necessary to target customers with highly relevant messages.


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