As we near the beginning of Q4, retailers are gearing up for what they hope will be a big holiday season. For many in SEM, this means preparing to ramp up spend, running creative testing in advance, and trying to get a handle on what products you’ll be marketing.
The window of opportunity is relatively short – about a month and a half between the beginning of November and Free Shipping Day. So failing to account for price fluctuations and potentially rapid changes in inventory can mean wasting spend or – gasp! – leaving money on the table (and products on the shelves).
You can overcome this – and even use it to your competitive advantage – if you’re armed with the right information. All it takes is a simple product feed and a keen sense of how different keywords drive sales to different products.
Products, Keywords, Creative & Bidding Strategies
Most retailers have some form of product feed they use either to inform internal marketing efforts or to feed to affiliates to help them sell your products. Assuming this is updated frequently, you can use this to inform everything from keywords to creative to bidding strategies.
As new products arrive on the shelves, new keywords and creative need to be built out and tested to help sell them. As items disappear, keywords may need to be paused and/or bids reduced.
For some keywords and products, there’s a simple one-to-one correlation. “Acme Red Santa Playing Golf Sweater XL” probably ties to a single product. If you run out of those sweaters (and why wouldn’t you?), you can simply pause that keyword.
Understanding the Many-to-Many Mapping
It gets tricky here. Each keyword can drive sales for multiple SKUs, and, conversely, each SKU can have purchases influenced by more than one keyword. So in the example above, if you run out of those Santa Playing Golf sweaters, what do you do with “Red Sweaters?” Pause that keyword, and you just may miss out on sales of your Red Reindeer Playing Poker V-neck.
It’s important to understand how the availability of a single product can impact performance of keywords that drive sales to many different products.
Optimizing to Revenue Per Click (RPC)
With RPC optimization, you automatically take into consideration all of the key factors – conversion rate, average order value and the weighting of purchases across SKUs. It also helps you adjust for substitutionary or complementary effects of other items relative to out-of-stock ones.
Someone searching for a specific item may wind up buying a similar or related item from you if what they first wanted is unavailable. The conversion rate will undoubtedly drop and the price could be higher or lower, but by optimizing to RPC, you can account for all of this.
Use Changes in Inventory to Anticipate Changes in Conversion Rate
As you run low on specific items, you know your conversion rate will drop for its relevant keywords, so it may be time to start reducing bids. Why not pay a lower CPC to sell those last four sweaters if you’re going to run out of them anyway?
Leverage Dwindling Quantities or Price Reductions in Your Creative
For many products, “Only 4 Remain” can be an effective influence on shoppers, especially for in-demand products. Similarly, “Back in Stock” can also entice shoppers who have a hard time finding what they’re looking for.
Retailers will always rely on the tried and true techniques (e.g., free shipping, easy returns). But those don’t take into account what you actually can sell today. By using your ever-changing product inventory, you can turn a challenge into a means for generating greater efficiency.
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