May 2010 – Online Insights: Customer Centricity

Personalization and Segmentation: Keys to Customer-Centric Retail

According to eMarketer’s Jeffrey Grau, author of the report Multichannel Retailing: A Competitive Differentiator, “Demanding consumers expect retailers to provide more convenience, flexibility and personalization by leveraging the synergies that come from multiple sales channels.”

It’s a common challenge for retailers. Thousands–potentially even millions–of customers visit a retailer’s store, call its call center or click its website…and all of them are treated identically. They’re presented the same promotions, shown the same products and receive little to no personalized information. Within this homogenized marketing environment, it’s little wonder so many retailers struggle to build a loyal customer base.

It hasn’t always been this way. The roots of retail are in the old corner drug and hardware stores, where individual proprietors focused on building one-on-one relationships with their most frequent and valuable customers. But with the rise of big-box retailing, the quality of customer relationships began to take a back seat to the quantity of store square footage and the number of SKUs inventoried. The new slogan, “We have every product you could possibly want” replaced the older, now seemingly antiquated, “We’re happy to help you find the product best suited to your needs.” At the same time, increasing labor needs and margin pressures encouraged retailers to hire associates with less experience and expertise.

Interestingly, the rise of e-commerce during the past 15 years has both contributed to the impersonal feel of the modern retail experience, while simultaneously offering hope that technology can be leveraged to bring a sense of personalization back to retail. On one hand, pure-play “dot-coms” and “clicks and mortar” websites remove the customer from the physical store environment, limiting opportunities for true face-to-face interactions with store personnel and like-minded customers. But on the other hand, advanced segmentation engines and community features offer the potential for digitally enabled retailers to create a seamlessly personalized experience across all their sales channels.

Zooming in to the Individual
Two decades of rapidly advancing technology has led to major shifts in customer expectations. Amazon was an early pioneer in capturing web-based customer information and using that data to feed a powerful product recommendation engine based on an individual customer’s shopping habits. Because nearly every interaction with the Amazon brand occurs on its website, the company can capture a near-perfect record of everything its customers have searched for, looked at, or purchased over the lifetime of their relationship. Personalization capabilities are then combined with Amazon’s constantly evolving community features, including ratings and reviews, lists and tags, to give each customer both the comfort that they’re never shopping alone, and the security that rich data–personalized to the products they’re interested in–is always available.

Many e-commerce-focused solution companies have developed similar capabilities to offer to other online retailers. These include analytics companies such as Omniture and Coremetrics–which leverage their behavioral tracking engines to provide personalized product recommendations–as well as dedicated personalization vendors such as Kefta, MyBuys and Certona. Other vendors–such as Bazaarvoice, PowerReviews and Pluck–offer community-oriented tools like ratings and reviews, moderated discussions and shared customer lists.

Each of these service providers can provide case studies evidencing the financial value of creating a rich, personalized online experience, through some combination of higher conversion rates, average order values, increased customer satisfaction and higher lifetime value.

A Moving Target
Although competition has spurred technological advances in online personalization and community tools, many of the service providers in this area are focused exclusively on the online channel (usually via a combination of web and e-mail). While a growing number of customers leverage the web to research their major purchases, the vast majority of retail purchases still occur in stores. Most customers calling into the call center have also researched products through the website, and many of those may be browsing the website while speaking with a call center associate. For this reason, customers are something of a moving target, shifting between online and offline channels–and few of the available tools empower retailers to track and respond to their customers’ cross-channel behaviors. For example, a recent article written by Forrester Research notes that “only 29 percent of retail executives surveyed believe their company presents a consistent customer experience across channels.”

In a truly optimized cross-channel environment, there are several steps to a customer-centric approach to retail:

• Customer data is captured in real-time across all potential touch-points–in stores, online, over the phone and through mobile devices and kiosks;
• Customers receive personalized content and alerts via e-mail, SMS and targeted web, call center and point-of-sale promotions based on their unique shopping behaviors;
• Product and cross-merchandising recommendations are consistently personalized across channels, leveraging data generated by other customers with similar tastes, preferences and experiences; and
• Beyond the initial transaction, customers are encouraged to share the brand experience through a combination of personalized loyalty programs, engaging community features, in-store and virtual product demonstrations and recommendations for product use and accessorization.

Cross Over to a True Cross-Channel Retail Experience
As consumers adopt more complex cross-channel shopping behaviors, retailers must evolve their tactics for tracking and leveraging those behaviors. Today, many retailers’ organization structures and technological platforms remain siloed. This limits opportunities for a holistic, collaborative approach to customer marketing. However, new technologies are available now that can bridge the existing gaps and help retailers build a more loyal customer base through cross-channel personalization.

Kevin Moffitt is vice president of strategy and customer experience at CrossView, a retail consulting and technology company and IBM Premier Business Partner. He brings over 12 years of Internet business and creative experience to help CrossView’s clients build and optimize their cross-channel businesses. He can be reached at Kevin at kmoffitt@crossview.com.

May 2010 – Feature: Don’t Hang Up on the Phone!

Re-Engage on the Telephone With Call Tracking

By Bradley E. Reynolds

Is your fully automated, completely optimized website leaving money on the table? If you rely solely on web contact forms, electronic shopping carts and frequently asked questions pages to service customers, the answer is almost certainly “yes.”

Of course, it’s true that the success and measurability of contact forms and electronic shopping carts along with online check-out processes are industry standards for online profitability. But the fact remains that customers still desire human contact.

If you don’t have a way for web visitors to contact you via the phone, research suggests you may be losing the opportunity to do business with a surprisingly large number of people who still like to buy things the old-fashioned way: over the telephone.

According to an August 2009 survey conducted by Harris Interactive for human-assisted shopping site IMshopping, 77 percent of U.S. Internet users who made an online purchase in the past six months would be interested in help from a real person before buying things on the web.

The survey went on further to note that though a majority of online shoppers reported a desire for help at least some of the time, 82 percent of respondents said they had not been able to get that assistance in the past. And more than half of that group said this had affected their purchase decisions negatively–at least some of the time. Additionally, a 2009 survey by TMP Directional Marketing and comScore found that 46 percent of local online searchers contacted a business by telephone after web research.

All of this research demonstrates the dilemma online marketers face: How can you most effectively optimize your website to service the needs of every potential customer, including those who want to do business over the phone? And furthermore: How can you measure the impact of those phone calls?

Until now, measuring the impact of phone calls has been inconsistent at best. Perhaps that’s the reason many online marketers have neglected to engage and promote phone calls as a legitimate and powerful way to complement and improve online sales. Fortunately, with the advent of today’s comprehensive call-tracking solutions, marketers now can quantify the offline impact of their online presence at a granular level.

Background: The Road to Automated E-commerce
Part of the rationale for the move to online-only communication has been the growing desire for traceability and measurement. Companies want to know which marketing effort brought visitors to their site and subsequently, they want to tie that marketing effort back to a specific action such as filling out a web form or placing an order.

The prevailing opinion among online marketers has been that if a website visitor picks up the telephone, the connectivity back to the original referring source is lost–along with the ability to measure the overall success of the marketing campaign. This myth is debunked with the powerful tools today’s call-tracking solutions provide.

Another factor which influences the migration away from telephone calls is perceived cost savings. It is much simpler and more cost-effective to create and publish a series of frequently asked questions on a website and encourage visitors to use this information. Only if visitors can’t find answers to their questions are they offered a web form submission.

While publishing FAQs is a good thing and may be effective in resolving many minor customer issues, the solution clearly won’t resolve all questions. And when offered only a web form for contact–with an unknown response time–customers often become frustrated and dissatisfied. Dissatisfied customers are more likely to look elsewhere the next time they are in need of a specific product or service. Often, by the time your company’s customer service representative responds to the web form, the customer has found a competitor who provided immediate service over the phone.

There is a Solution
By publishing a prominent, easy-to-find local or toll-free telephone number on your website, visitors can simply call for information to help complete the sale. Imagine the unfortunate alternative: Customers surf their way through your online check-out process only to become confused in the middle of filling out their information. Do they abandon the transaction? Do they browse through confusing FAQ pages only to return a short time later to discover their check-out process has expired? Or do they just go to your competitor to make their purchase.

When you make a telephone number available, that same customer can easily pick up the phone, connect with your knowledgeable representatives and get the answers they need from a friendly person who is there to help them. They may even choose to complete the transaction over the phone.

By clearly publishing contact phone numbers on your websites, you provide a proven form of communication to both current and potential customers. Sales wisdom reveals it’s far easier to address a concern over the phone than via the inherently delayed nature of web forms and e-mail responses. Although some customers may prefer to complete online forms, research shows the majority want to use the telephone to make purchases. How much business are you leaving on the table by not providing the most preferred communication option–the telephone?

Measuring the Results
As noted above, savvy online marketers often have been skeptical about using telephone numbers for website advertising campaigns. It’s understandable. Until recently, call tracking was limited to revealing how many callers came through on a particular phone number. Measurement just wasn’t possible.

However, today’s comprehensive call-tracking solutions can provide a treasure trove of data which paints a complete picture of how online marketing (pay-per-click, SEO, e-mail, banner ads, affiliates) drives phone calls. In simpler terms, marketers now can quantify the offline impact of their online presence at a granular level by identifying which keywords are driving phone calls.

Even if five to 10 percent of your conversions happen over the phone, call tracking is imperative for maximizing return on investment. Call-tracking data provides users with intelligence about which campaigns, keywords and marketing tactics are driving calls and, more importantly, whether those calls are generating revenue.

The Specifics: How Call Tracking Works
It is much more than simply recording the number of calls received. Call-tracking software is part of a sophisticated marketing methodology that ties results directly to costs and gives clients accurate, real-time campaign effectiveness figures.

Call tracking allocates a discrete phone number–local or toll-free–for each unique source you want to track. These sources can be keywords, affiliate IDs, search engines or any other identifier. When a visitor arrives at your site, the software conducts a dynamic look-up to determine which phone number is associated with the visitor’s origin page. That phone number is allocated and then cookied within the visitor’s browser.

As a result, call tracking gives clients actionable data which allows them to optimize PPC campaigns, SEO and other offline marketing efforts. Instead of associating a phone number with a particular campaign, ad group or keyword, call tracking assigns a tracking number to each unique visitor session. By tracking each unique visitor, clients are able to see granular data associated with the call.

Call data is then logged into a central database system which can also export the collected data directly into many popular web analytics programs. Additionally, reports can be exported into a spreadsheet or XML feed. Clients looking for even more granular data can integrate call tracking directly into their CRM database using the API feature. Some popular analytics packages which complement call tracking include Google Analytics, Webtrends, Omniture and Coremetrics.

Bradley E. Reynolds is founder and CEO of Mongoose Metrics, an enterprise-level call-tracking solutions provider. He can be reached at mktg@mongoosemetrics.com or at 877-784-0496.

May 2010 – Cover Story: Fighting the Good Fight

Merchants’ Battle Against Friendly Fraud Will Be A Protracted One–Across Two Fronts

By Bob Botelle

The 2009 LexisNexis True Cost of Fraud study contains a wealth of merchant-reported experience in the war against fraud in commerce. A common cause for concern among those experiences? Friendly fraud accounts for more than one-third of the total fraud for online-accepting merchants–or, according to the study, .4 percent of total annual revenue. More than one in five merchants are experiencing increases in friendly fraud. It’s the greatest source of fraud for online-only merchants, representing over one-third of their total fraud losses–and about 24 percent of total fraud losses for the largest e-commerce merchants.

Of all threats to merchants, friendly fraud is perhaps the most insidious. It’s not a function of global competition, margin pressure, customer satisfaction or criminal activity. It’s an ongoing source of fraud loss for merchants in card-not-present/customer-not-present industries, particularly those in e-commerce and direct response. Unlike other forms of fraud, friendly fraud is very difficult to detect at the front-end of a transaction and–as a result–hard to stop before it happens.

Increasingly, many merchants and providers alike view tacit acceptance of friendly fraud as tantamount to decriminalizing theft. There is even growing clamor to create global databases of bad customers.

While there is certainly room for improvement in the prevention and recovery processes that support merchants–particularly within the systems designed to resolve transactional conflict (e.g., the charge-back process)–the potential brand-damaging implications of returning friendly fraud’s volley with a “friendly fire” approach is questionable. More about that shortly.

Getting Around Friendly Fraud
While the term “friendly fraud” means different things to different merchants, its broadest, and perhaps best, definition is this: any transaction, contested by a customer, where the merchant suspects that the customer or a personal associate (child, spouse) legitimately authorized the transaction in question.

Stepping back even further, many merchants will tell you that there’s little distinction between friendly fraud defined as a cardholder who knows they’re responsible for a purchase while refusing to pay for it, and other forms of fraud, particularly return fraud. Ultimately, the merchant faces not only the lost revenue, but also the costs associated with recovery.

Despite the value of many fraud-prevention and screening tools available across the payments industry, there is no magic bullet for tackling friendly fraud. Certainly, the basic, ubiquitous and proprietary solutions for matching card and cardholder, verifying address, etc., still apply. The biggest decision for most merchants is choosing the “front” on which they will battle friendly fraud and the amount and type of investment they will devote to the fight.

War on Friendly Fraud: Two Fronts
The two clear fronts on which friendly fraud can be fought are prevention and recovery. On the prevention battle line–and despite the plethora of fraud-detection and screening tools available today–the reality is that friendly fraud remains largely a challenge of managing the problem versus eliminating it. Prevention methods–such as advanced order scoring and manual order review, as well as high-hold handling–are still a function of the type and ticket value of the good or service that a merchant sells. After all, advanced scoring can kill good orders, and high-hold handling can get quite expensive. Recovery, driven in part through the established charge-back/re-presentment process, is also a balancing act of investment versus return.

Mitigating friendly fraud on either front becomes a function of the people, processes and tools in which merchants invest.

On the prevention front, the people element is comprised of your call center and customer-service staff. Process here is predicated upon the merchant’s risk model, driven by, among other things, choices in customer service training and improvements, velocity-checking management and high-ticket/high-touch policies and procedures. Tools on the prevention front include IP geo-location, device fingerprinting and negative customer lists.

On the recovery front, people investments include those made in legal teams, collection agencies, delivery providers and attorneys general. Process is largely driven by policy or the dollar value of the goods and services sold. Tools include regulations and reporting (the collection of data/proof points used in the chargeback and/or legal process).

Remedies for Success–Education and Persistence
One of the best defenses that any merchant, retailer or service provider can leverage to combat friendly fraud is systemic supplier education. It sounds simple, maybe even trite to some, but think about it in the context of these next questions: Have you ever ordered something from a catalog or a website? Was there ever a time when a call center representative “forgot” to ask you for a card identification number? Was there ever a time when your web purchase did not include a specific box at checkout to include that same card identification number? If you’re a frequent customer-not-present consumer in the card-not-present world, chances are you answered “yes” to one or both of those questions.

This is a first-gate failure of one of the simplest fixes–identify and screen data that indicates a card is in the hands of its rightful owner. Identify and screen matches for address. Collect all that is yours to collect to give you the comfort that the somebody buying is the somebody who’ll be getting.

Pushing education through an entire retail provider chain is critical. What’s more, it’s one of those not-so-conventional areas in which the suppliers themselves can take arms on the merchant’s behalf. Payments partners in their role as the ultimate transaction processor can play a major role in working with a merchant’s chain-of-order management, fulfillment, web sales and marketing and call center providers.

Truly, this remedy supports the prevention side of the battle best, but indoctrinated best-practice behavior comes with the side benefit of extraordinary documentation that can be used, when the time is right, on the recovery front.

Survey most merchants and they’ll tell you that this approach is still not allowing them to prevail in the fight. Yet calls for more controversial approaches are not only likely to be ineffective–they’re likely to be downright damaging to your bottom line.

Negative Lists and the Bad Customer
For years, merchants have used their own, so-called “negative customer” lists to screen orders from customers whose negative order, refund and/or chargeback histories raise flags. This is a sensible and worthy mechanism allowing a brand to weigh its experience with an individual consumer against that same consumer’s lifetime value to the brand. For most merchants, this approach to both customer relationship and brand management has been an asset and not a liability.

Increasingly, however, merchants’ frustration and the lack of a true industry agenda against friendly fraud has helped promulgate a new form of the negative list: the global bad customer list or database.

However, a global database as a new truth-seeking shield shared broadly across, between and among merchants, stands to do more damage to brands and their relationships with consumers than it thwarts friendly fraud.

In fact, these global lists could potentially create a friendly firestorm on the field of commerce. Potential ramifications include consumer alienation, customer loss and–ultimately–damaged reputation. Merchants and consumers routinely have justifiable disputes; most resolve themselves adequately, and the consumers certainly don’t want to be labeled as “bad” because of a negative experience with one transaction or one merchant. Consumers appearing on such lists may have had only one dispute with one merchant. Yet the potential exists for such lists to brand those consumers as bad across a global band of merchants. This ultimately is in no one’s interest–particularly not the merchants’. The rapid evolution of Internet-driven, word-of-mouth consumerism can create brand damage in a fraction of the time required just a few years ago.

Driving a Friendly Fraud Agenda for Merchants
Let it be said in the event that it is not obvious: there is no commerce without merchants with goods and services to sell. And there is no commerce without all of us as consumers to buy these goods and services. But, unfortunately, friendly fraud liability drops squarely in the laps of merchants.

Solutions are not likely to be found in promoting antagonism in commerce: seller battling buyer. This is the principal reason that bad-customer approaches will ultimately be ineffective.

The solution is much more likely to be found in a systemic education process benefiting all fronts on which merchants fight friendly fraud. Solutions should also be found in a stakeholder-inclusive, industry-wide agenda. It will take payment processor, order and fulfillment management systems, call center voices, acquirers, issuers and merchants to promote the educational and programmatic agenda that will help stem–and hopefully reverse–the significant operating costs and revenue losses associated with the enemy known as friendly fraud. It is likely to include the efforts of these same parties to improve systemic dispute resolution processes in cases of suspected friendly fraud.

Bob Botelle brings more than 20 years of direct marketing, customer service and operations experience to Litle & Co. As executive vice president, merchant services, Botelle leads the front-line organization responsible for delivering Litle’s pledge of best-in-class customer service to card-not-present merchants. Botelle can be reached at bbotelle@litle.com.

April 2010 – Column: Editor’s Perspective

Now That’s Multichannel!

For years now, we’ve heard of the importance of channel integration for multichannel retailers. Yet surprisingly, in practice, channel integration often begins and ends with allowing customers to order online and pick up at the store.

I suppose it’s a logical place to start. Customers want this service. A recent report from Sterling Commerce, with research conducted by Opinion Research Corporation, found that 67 percent of consumers consider it important to them. And we know that allowing in-store pick-up of online orders leads to additional in-store sales. In fact, according to a recent eMarketer report, Staples and Ace Hardware both noted that more than one-third of customers who pick up online orders in the store purchase additional items while they’re there.

Despite customer preferences and clear benefits to the retailer, relatively few (34 percent according the eMarketer report) multichannel retailers offer some kind of in-store pick-up for online orders. And reports of other innovative channel integration efforts are few and far between (although I was quite impressed with the Barnes and Noble initiative that garnered more than one million downloads of its mobile application by offering a free cup of coffee to anyone that downloaded the app in-store).

There is a clear leader on the channel integration front, though, and its identity might surprise you. It’s none other than the venerable department store chain Sears, which traces its roots to the 19th century.

Its “Shop Your Way” program is a shining example of channel integration innovation. Here are just a few elements of the program:

With Sears‘ mobile application, customers can order items via their mobile devices and pick them up at the store. Or, if you prefer, they can choose to have the items hand-delivered to their car! Same-day pick-up is offered for many online orders and third-party pick-up is permitted, as well. In-store online kiosks allow customers to order out-of-stock items for delivery. In addition, customers don’t need to comparison-shop while in the store–Sears offers real-time price checks for you and will match competitors’ prices.

And that’s not all. Sears offers a cool application that allows for group gifting. Up until now, group giving was usually accomplished by one poor soul who was forced to choose the gift, purchase it on his or her credit card, collect cash from the rest of the group, pick up the gift, wrap it and deliver it. With the Sears app, it’s all organized and done online for you. Another app allows customers to enter all their appliance model names into one file. Sears will then organize and store all the manuals (no more overstuffed junk drawer) and even facilitate the order and delivery of replacement parts.

Perhaps the most interesting aspect of the program is the new Sears Marketplace. It’s an online virtual megastore where customers can buy nearly anything–millions of new products are offered. It even features the products of third-party merchants who have partnered with Sears. (Sears charges a monthly fee to these merchants and takes a commission on each sale of an item sold on the Sears Marketplace site.)

“In the future world, a great retailer should be able to sell you anything–and customers should be able to shop in any way they choose, seamlessly moving from channel to channel,” says Sears‘ senior vice president of marketing, Richard Gerstein.

Multichannel, indeed.

March 2010 – Online Insights: Strategy

What Does Cross-Channel Really Mean for Retailers?

According to a paper from Harvard Business School titled “Crafting Integrated Multichannel Retailing Strategies,” more than 80 percent of retailers are now selling across multiple channels, including physical stores, websites and call centers. However, according to Forrester Research, less than a third of retail executives say their companies can provide a consistent customer experience across those channels.

While some retailers have implemented specific cross-channel initiatives such as the ability to purchase online and pick up the order in-store, very few are able to go beyond these basic transactional capabilities. As retailers develop their cross-channel strategies, it’s important they understand the three core principles of a true cross-channel experience.

A Single View of the Customer
In a recent CrossView study, we evaluated 26 leading multichannel retailers and assessed their cross-channel capabilities. We researched products, completed orders and tracked customer information across the online, call center and in-store channels. Of the 26 retailers we examined, only one–cross-channel trailblazer Best Buy–could access a customer’s online profile in-store. For the vast majority of retailers, this relatively straightforward–and potentially valuable–request proves to be a challenge.

Access to cross-channel information isn’t just an in-store problem. We found that in 62 percent of call center interactions, the customer service representative couldn’t access online customer profiles, either.

It’s fair to say, then, that although modern retail systems do a good job of capturing a tremendous amount of customer data, very few retailers can leverage that information to provide a single view of the customer across their sales channels. Having equal and consistent access to customer information–including customer preferences, order history and recent behaviors–is the key to creating a focus on the customer, no matter where they are.

An Endless Aisle of Inventory
Every day, countless orders are lost because products aren’t available when and where they’re demanded. Consider the simple example of a customer asking for a shirt in a specific style and size that isn’t on the rack. The product they’re looking for could be available in another store just a few miles away, or at a centralized distribution center waiting to be shipped to the customer’s home. Having visibility into available inventory regardless of location, coupled with the ability to then fulfill to any location, allows a retailer to save the sale and increase customer satisfaction.

Although this concept of the “endless aisle” has received a growing amount of industry attention, many retailers are challenged to make it a reality within their organizations. For example, according to Janet Sherlock at AMR Research, just over half of retailers are able to fulfill orders in one channel with inventory from another. We consider this capability critical for any retailer looking to derive maximum business value from their cross-channel platform.

A Consistent Customer Experience
Inconsistencies are a flashpoint for customer defection and lost sales, so retailers know that their brand experience should be consistent across channels. The same look and feel, the same tone, the same level of service–whether in a catalog, online or in-store–are all critical to maintaining a consistent experience with the brand.

Equally important is the need to maintain consistent pricing and promotions. In the CrossView cross-channel study, 58 percent of retailers offered different promotions across channels. When a customer is presented with an inconsistent experience, it can breed several levels of discontent. First of all, there is the immediate frustration that they aren’t getting the best deal. Second, and perhaps more important, the customer may feel they are being treated unfairly, creating feelings of mistrust and damaging brand loyalty.

In a true cross-channel environment, promotions and pricing are addressed once by the merchant and then leveraged across all channels. The retailer has the ability to initiate a promotion across the board, so the shopper who browses the catalog at home finds the same deals when they log in online or stroll through the store.

The Implications of Wider Cross-Channel Adoption
In spite of the clearly identified customer value of a cross-channel experience, the reality is that many retailers are bumping into the same barriers again and again. Just as we’ve defined some of the most important cross-channel principles above, it’s also critical that we address in clear terms what implementing a cross-channel solution will mean for retailers going forward.

A brief look at the evolution of online retailing provides a better understanding of the current divide in the retail business environment. The web started as a small offshoot of traditional retailing. When it entered a period of unprecedented growth, it became apparent that the web presented a formidable revenue opportunity and significant brand experience. Suddenly, the online channel had a seat at the table, so to speak. Unfortunately, that growth as an almost separate entity created side effects that are now obstacles to multichannel adoption.

The ramifications are clear. Different channel leaders are competing with one another–rather than working in tandem–for both customers and sales. For example, if the manager of a retailer’s physical store is incentivized based on in-store sales only, it’s understandable that he or she would be focused on converting and selling to the customers they have within their four walls. But this leads to lost sales and a bad customer experience.

The time has come for retailers to reinvent themselves and reconsider the traditional way of thinking. Consumers are becoming savvier by the minute. Those out shopping today already expect retailers to have these core cross-channel values in place. They become frustrated when they can’t move seamlessly between the web, the store and the call center. They become especially frustrated when they uncover inconsistencies in the overall experience, feeling that retailers are imposing their internal challenges on them, making it the customer’s problem.

A retailer risks higher customer defection and a loss of brand loyalty, which all translates into a loss of revenue. This is exacerbated by the rise of social media, which allows word of one bad experience to spread like a virus, impacting a retailer’s bottom line in near real-time.

What does this mean? The technology exists today to support full cross-channel adoption. The most significant obstacles remaining are the internal silos and the lack of alignment within the merchant organization. As a result, retail managers must lead from the top down to break apart existing barriers and advocate for improved processes for a new business environment. A retailer will need to examine all aspects of their operations–from bonus structures to organizational structures–to determine how each piece fits into a more integrated approach. Most important, retailers must establish clear cross-channel goals and metrics, and commit to ongoing testing and measuring against those goals to achieve maximum ROI.

Mark Fodor is CEO of CrossView, providers of multichannel commerce solutions for both B2B and B2C organizations. He can be reached at mfodor@crossview.com.

March 2010 – Cover Story: The Offline/Online Disconnect

Harmonizing Your Online Brand With In-Store Customer Expectations

By Geoff Galat

If you conduct an online search query for “offline/online disconnect,” you’re likely to see an amalgam of results with no clear definition as to what this term really implies. Yet despite a lack of definition–or arguably, even general awareness–the offline/online disconnect is very much a reality–and an inevitable challenge for any company that operates in the online channel.

The Offline/Online Disconnect, Defined
So what is the offline/online disconnect, exactly? Distilled to its essence, the offline/online disconnect refers to disparities in customer service and experience across the various sales channels, primarily in-store and online. While improving customer service in the online channel presents companies with a cosmic opportunity to boost revenue and overall brand image, many companies simply aren’t up to par when it comes to their customers’ expectations and online experiences. And the proof is in the data.

In a recent survey conducted by Harris Interactive and commissioned by Tealeaf, we found that the percentage of consumers experiencing online transaction problems remains remarkably high at 80 percent. And the potential online shopping dollars impacted by transaction problems rings up at an eye-popping $47.6 billion! Further affirmation comes from recent Forrester Research data, which demonstrates that the majority of companies are still in the nascent stages of customer experience management, with far too many customers abandoning virtual shopping carts because of experiencing glitches and other usability issues online.

With customers across the online spectrum encountering barriers at the virtual checkout, it’s safe to say that brands with an e-commerce channel have a huge challenge ahead of them as they begin to match their online customer experience with in-store shopping. Compounding the offline/online disconnect is the fact that many successful companies may not even know that their online brand is being tarnished when customers’ experiences are derailed, one after the other, by an online glitch or website transaction problem.

Let’s use the example of Quicken Loans, the nation’s largest web retail mortgage lender and fifth largest retail lender. They were unaware of a major glitch in their site: a barrier was blocking one of Quicken Loans’ predominant online revenue generators being used by customers. Despite call center complaints and customer abandonment and frustration, the company simply did not have the visibility it needed to visualize and identify–and subsequently resolve–the online issue.

Quicken Loans leveraged customer experience management software to evaluate its online channel, and soon the company was able to make the small changes in the text on the online mortgage calculation tool necessary for fixing the online glitch. With online visibility finally realized, Quicken Loans increased the pull-through of the mortgage applications by nearly eight percent, which translated into more than half a million dollars in lost revenue recovered. By embracing a higher level of online visibility and tackling the issues at hand, Quicken Loans improved customer satisfaction, via the online channel, exponentially.

From airlines to Fortune 500s and every retailer in between, the proverbial virtual shopping cart needs a major makeover–and soon. With the amount of tools and services available to help companies optimize their online channel and resulting customer experience, every company under the sun is capable of closing the costly gap between their offline level of customer service and their online customer experience.

The Call Center Catalyst and Social Echo Chamber
Further exacerbating the offline/ online disconnect is the call center, as it can often function as a catalyst for online customer disapproval, as well as negative customer sentiment and experiences. Simply put, much of this “disconnect” lies in the fact that call center agents are simply uninformed about the website and so are not armed with the information they need to assist the customer.

This can be solved in part by properly training and educating employees about the website, how it works and the potential problems customers might have. Having this knowledge of the online channel is vital, but it still leaves call center agents blind to the actual experience a customer has had.

An even better solution is to provide agents with complete, real-time visibility into what a customer actually saw and did on the site–giving them the ability to replay a customer’s session while they are speaking to them on the phone or before replying by e-mail.

Today’s challenging economy has also impacted how consumers think about goods and services–every dollar counts. That, coupled with the exhaustive amount of data available on the social web, has prompted consumers to share their experiences on Twitter, Facebook and other social channels, often about sub-par online shopping incidents. The number of adults who share their experiences regarding plane-ticket bookings and other online purchases gone awry via blogs or social networks has more than doubled over the past year. These shared experiences, from a bad call center experience with an agent to a website transaction issue, can be highly influential. Online glitches can have profound effects on the “word-of-mouth” created via technology and new media.

Fostering Your Offline and Online Brand– Smarter and in Tandem
Despite the challenges ahead for online brands when it comes to customer experience and satisfaction, all hope is not lost, and there is a silver lining to the offline/online disconnect. Our survey found that online customer experience reached an inflection point in 2009. The percentage of consumers who have experienced problems when conducting transactions online showed its first substantial decrease in five years–from approximately 87 percent in all previous Tealeaf surveys to 80 percent in 2009. This improvement points to a growing business focus on delivering better customer experiences as we make our way through 2010.

Analysts and researchers alike are in agreement that more business is being conducted via the online channel than ever before. Companies embracing this new level of visibility are able to radically improve customer experience, brand affinity and agent productivity. It is also a great way to ensure that website errors or issues are rectified as quickly as possible, and customer sessions can be quickly packaged up so that underlying website issues can be corrected. With these changes on the horizon, the online customer experience, as a whole, certainly has a bright future “in store.”

Geoff Galat is vice president, worldwide marketing at Tealeaf, a provider of customer experience solutions, helping companies achieve visibility, insight and answers online. He can be reached at geoff_galat@tealeaf.com.

February 2010 – Online Insights: Viewpoint

Marketing a Small Business Today

Here’s how I created my first small business: Two years out of law school I was fired by the boss from hell. (Her reason? I didn’t “write well enough.” Unbeknownst to her, I was about to have my first book published, and if you think I wasn’t petty enough to autograph a copy and send it to her, you’d be wrong.)

Anyway, I made a profit the first month and never looked back. My business grew because I marketed the heck out of it using all tools available to me at the time: newspaper classified ads, networking at chamber events, seminars, cable TV ads, newspaper display ads and direct mail.

Modern Marketing For a Modern World
But here’s the deal: Today there are far more effective–and economical–ways to get the same, or better, results. While my strategy would be the same (advertise and market a lot, and then do it some more), I’d replace my “archaic” tools with these:

Craigslist instead of classified ads: The growth of Craigslist is evidence of how powerful a classified ad can be, and most Craigslist ads are free. That’s hard to beat.

Twitter, LinkedIn and Facebook instead of the chamber mixer: Networking the old-fashioned way was a bit of a drag–making small talk with people who may or may not be interested in what you do or sell. Yawn.

Social networking is a revolutionary improvement because, while you are still networking, it is faster, broader, more direct, and you can meet and influence a far greater number of people. Rubber chicken lunches be gone!

Podcasts instead of radio ads: I still love radio advertising in the right circumstance, but being able to create and broadcast your own original content is a great advantage.

YouTube videos and webinars instead of seminars: The value of being in front of the public is that you get to be known as the expert–the one pontificating, entertaining and informing others. With online video and webinars, you can craft that image easier, cheaper and more professionally. That you don’t have to rent a conference room at the Holiday Inn is a nice bonus.

Pay per click and pay per impression instead of cable TV and newspaper ads: If immediate sales are your goal, then a Google pay-per-click campaign can make more sense than a TV campaign. You only pay for qualified leads–people who like your ad enough to click on it–and as such you will spend far less because you won’t be paying to reach thousands of eyeballs who will never be buying from you. If branding is your goal, than a pay-per-impression campaign can yield fantastic results for much less money than TV, too.

E-mail instead of direct mail: Traditionally, direct mail has been considered successful if it creates around a four-percent response rate. But you have to buy lists, pay for postage and packaging, etc. E-mail marketing, on the other hand, costs almost nothing and usually yields better results.

As they say, everything old is new again…fortunately for us.

Steve Strauss is American Express OPEN Forum small business expert and author of the best-selling Small Business Bible. He can be reached at sstrauss@mrallbiz.com.

January 2010 – Online Insights: Viewpoint

Use Display Ads To Get More Out of Search

If you’re advertising online, you’re probably paying for search clicks that don’t convert and display ads that don’t drive sales. To solve both of these problems, find a way to make your search and display ads work better together.

I’m speaking specifically of search retargeting. Here’s how it works: after users search for a term that’s relevant to your business, they arrive at your site. But many searchers leave before ever converting. Historically, these visitors would have represented wasted clicks–end of story. But with retargeting, advertisers can drop a tracking cookie on the visitor’s computer and use this cookie to follow that visitor across the Internet. Consequently, advertisers can re-ignite the conversation with these former visitors, drawing them back to the advertiser’s site to finally drive a conversion.

This process increases the possibility that a conversion from a previously lost or abandoned click will occur. It also means driving display ad spend toward users who–through their search activity–have declared themselves as being interested in the kinds of things your company sells.

In addition to the ad agencies that offer retargeting services of various kinds, a number of ad networks offer systems with similar functionality. For example, Yahoo’s Smart Ads system dynamically targets ad offers to Yahoo users based on the activities they’ve performed across the entire Yahoo network.

So, for instance, a user who lives in Los Angeles, plays poker in Yahoo games, reads about poker in Yahoo sports and searches for flights to Las Vegas, is quite likely to be more than a casual Las Vegas searcher–he or she is probably a very serious candidate for receiving ads for flights to Sin City.

Yahoo might serve this user ads with special offers on Los Angeles to Las Vegas flights and these ads might appear anywhere on the Yahoo network.

While different vendors offer different flavors of search retargeting, the common thread is clear: web users spend their lives across the entire Internet. To target them best and to make sure advertisers stay engaged with them, advertisers need to maintain conversations with them across as much of the web as possible–through display, search and the many consumer touchpoints that lie in between.

Mark Simon is vice president, industry relations at Didit, a digital ad firm specializing in search marketing and targeted display ads. He can be reached at mark.simon@didit.com.

January 2010 – Feature: Bullish on Pre-Roll

Reports of the Video Advertising Format’s Demise are Greatly Exaggerated

By Caleb Hill

With the turn of the new year and interactive agency planning teams allocating their budgets for 2010, no doubt there will be a familiar debate between video and non-video planners: to invest or not to invest in pre-roll advertising. On one side will stand those who think pre-roll is a dying ad format for monetizing video content. (After all, as many industry experts have noted, haven’t we been waiting years for its breakthrough moment since the great video player wars earlier this decade?) The other side will defend pre-roll’s viability with as much conviction as Ad Mob will defend their valuation by Google. (After all, isn’t the very fact that pre-roll still dominates the conversation at many industry events testament enough that it’s worthy of a bigger line item in the planning budget?)

The fact is, both sides have a lot of convincing arguments for their cases. Pre-roll’s detractors point out that the format annoys users, it isn’t scalable, it doesn’t exploit the promise of interactive and that new trends merit more funding (like last year’s “next big thing”–widgets). The format’s evangelists point to data showing that pre-roll improves purchase intent and brand recall, that it can have interactive companion banners (that can even expand) and that it’s better to invest in proven, if vexing, video ad solutions than, say, widgets.

Those of us on the product development side of the coin look to where the money goes. And at last count, it seems the pre-roll bulls are prevailing over the bears in most of the planning arguments: the spend on pre-roll video advertising for 2009 looks like it will come in at roughly $500MM. The outlook for 2010–depending on which analyst you follow–shows incremental growth. Not a sea change of growth, but hardly a death knell for this ad format.

The eternal pre-roll optimist, I firmly believe the format is a lock for long-term ascendency as the ad format for the web. Given several important 2009 industry initiatives, I also see a lot of reason to be bullish about pre-roll’s near-term prospects–even beyond industry expectations.

I must now pose–and answer–the operative question: What happened in 2009 to suggest such optimism for pre-roll on the heels of a down economy?

Pre-Roll’s Growth in 2009
In 2009, ad agencies, web publishers, regulatory bodies and technology vendors made several notable advancements to the pre-roll format that should be recognized as further proof that the rumors of pre-roll’s eminent demise are greatly exaggerated. And while these innovators in our space stepped up and delivered more engaging user experiences and better mechanisms to facilitate scale, other contributing factors to a successful year for pre-roll included both an increase in broadband penetration and an improved technology platform for video delivery. Both factors dramatically improve the end-user experience for consuming video online, and have led to wholesale increases in the amount of long-form video now available. Long-form video is a special key to my outlook on pre-roll’s success, as it allows publishers to build a TV advertising model around their content that, if done correctly, can leverage the interactive qualities of the web (e.g., Flash) and monetize nearly as well as television, too.

For example, let’s take a closer look at premium content publishers like ABC and NBC. Their “branded canvas” and “ad pod” pre-roll products have been a revelation for marketers, a huge financial success for the publishers, and consumers seem to accept them as well. These products enable the networks’ premium full-episode player environments with custom, immersive advertising experiences that follow the same generally accepted rules of television advertising (e.g., ratios of ad content to network content displayed largely consistent with the consumer’s television experience).

But true to the interactive medium–and a quantum leap over companion banners–the new full-episode ad formats integrate the re-purposed television ad within a much more effective interface for user engagement. In some cases, users can even re-play the ad content–another leap beyond traditional “run-and-done” pre-roll advertising (and a reason the term “pre-roll” has increasingly become anachronistic, usurped by the more flexible term “in-stream”).

The Rise of Standards
As publishers revamp their sites around the long-form video content enabled by technology companies like Adobe and Bright Cove, for 2010 I predict big demand for a large-scale roll-out of pre-roll advertising products inspired by the big networks and video ad serving innovators, like Panache and my own company, Unicast. And that brings me to regulatory bodies and the monumental success the IAB has had (and will continue to have) rolling out its new VAST and VPAID standards for video player environments. These provide a framework to ensure interoperability between video platforms and ad servers so that advertisers don’t get bogged down in the technical details of each site’s particular video environment. With a robust adoption program in full voice–including major publishers committing to compliance this year–a problematic landscape characterized by fragmented and inefficient workflow, lack of standard publisher specs and ad hoc and inconsistent reporting, is yielding to a new liquid video environment where buyers can begin to leverage the economies of scale required for video advertising to make faster and more substantive inroads into television budgets.

Buyers Help Build Pre-Roll
Buyers have done their part, too, investing enough in pre-roll to help facilitate adoption of the IAB standards as well as to drive new format development. The best example of agency activism promoting pre-roll in 2009 is POOL, an initiative for finding the new workhorse formats for pre-roll. POOL truly exemplifies the power of collaboration across the ecosystem to further online advertising objectives. Headed by Starcom (partnering with Vivaki, also under the Publicis umbrella) and large video-content publishers and distributors like AOL and MSN, the initiative leverages new interactive pre-roll formats to ascertain how video advertising can scale across multiple platforms while providing users more control and more engaging interactive ad experiences.

The investment promise of the POOL initiative extends well beyond 2010, which further informs my optimism for pre-roll. Starcom surely will look to scale its pre-roll media spend beyond the scope of the first round of investment, or the “swim lane” as they call it, to include new web publishers, especially those with premium content inventory. Furthermore, Starcom already has committed to opening new swim lanes, which most likely will include mobile video, interactive television and social media. And the consumer research collected through the duration of the program surely will feed into strengthening IAB standards and their adoption. More heartening is the fact that other large agencies will feel pressure to match the efforts of Publicis, just as more web publishers will look to compete with the first adopters by supporting the new formats. The additive effect should bode well for the pre-roll bulls.

Commendations for Creative
Those responsible for utilizing the richness of the new pre-roll ad formats, the creative agencies, also must be commended, not only for effectively exploiting the creative potential of the new pre-roll formats, but also for contributing to their overall design and, in some cases, deployment. Take a look at the quality of creative content around Lost episodes within ABC’s full-episode player, for example. Here you’ll see excellent rich design, innovation (a lot of AS3 executions) and consumer engagement, particularly with games and other interactive features. Plus, in 2009 more and more video ad content was specifically produced for the web medium. This effort–though still finding its profitability legs–challenges the conventional wisdom that the most bang for the buck simply requires 15- and 30-second TV spots to be re-purposed for the web. While original content produced solely for the web might not rise from a niche pursuit, the scalable middle ground is probably a combination of re-purposed video within an interactive framework akin to full-episode products.

Together, these achievements in pre-roll advertising represent a compelling synergy of highly coordinated innovation, investment and industry standards that have begun to overcome the legendary bugbear of video advertising–lack of scale–and put to rest the criticism that pre-roll is dull, passive and annoying to users.

Challenges Remain
That’s not to say 2009 removed all hurdles to online video advertising. Remaining challenges include a recognized lack of premium video inventory, a static if not falling interest in advertising against short-form video, advertorial pre-roll of the same duration or even longer than short-form video (a common consumer frustration), a flawed and inefficient selling model that depresses prices for content as it syndicates across competing sites and the vexing question of how to monetize popular but seemingly unsellable user-generated-content video, just to name a few.

But thanks to a very successful 2009, we will be sure to see new technologies, research and investment set the stage for continued progress toward the type of monetization (and increased TV budgets) that only improved scale and user experience can bring.

Predictions for 2010
Look for formats that enable consumers to select the advertorial content they wish to see instead of being fed the same 30-second spot again and again. Expect to see dynamically enhanced video formats that improve relevance as well as formats using engaging 3D navigational elements and effects. In terms of pricing, I expect to see evolving models around consumer engagement, view durations and even conversions. Also look for new research and standards. But most notably, I predict a far better monetization of premium content throughout its distribution channels via better-structured syndication deals.

When we launched our first pre-roll product in 2003 at Unicast, we had confidence–as did everyone else contributing to the video market at that time–that we would see a critical mass of publishers and advertisers propel pre-roll and video advertising into the top echelon of online advertising formats. While that has not yet happened fully, 2009 ensured that pre-roll advertising is well on its way to taking its promised place in online media spends. In 2010, it’s going to continue to grow.

Caleb Hill is SVP of product at Unicast, a leading rich media and video ad server and service provider. He can be reached at chill@unicast.com.

January 2010 – Feature: An Eye Toward Performance

Pay-Per-Performance Models Represent the Next Wave in Online Advertising

By David Szetela

The online advertising industry is undergoing the same kind of evolution and maturation one sees in every new industry. But change is happening at Internet-speed, and those companies who don’t understand and can’t adapt to these changes risk being marginalized.

Companies of all sizes have rushed to the online advertising space, spurred on by the measurably superior ROI of paid search advertising. The recession has only hastened the flow of ad dollars away from difficult-to-measure, low-ROI media like TV, radio and print. While advertiser understanding of online advertising best practices and techniques has grown proportionately, the relative complexity of conducting, measuring and optimizing online ad campaigns is a murky black box for many. This is especially true for advertisers and agencies who have become accustomed (some might say mollified) by the relative simplicity of “placing ad media” and paying (or collecting) based on a percentage of ad spend and cost per thousand ad impressions.

The leading seller and beneficiary of PPC advertising is the sudden behemoth Google, whose self-service advertising platform brought the ability to target and reach customers to nearly anyone who can operate a personal computer. But Google has raced ahead–and stayed ahead–of its nearest competitors Yahoo and Microsoft by maintaining a dizzying schedule of new advertising features, reporting capabilities and tools for testing and optimizing ad campaigns. In one week last November, Google rolled out no fewer than three new search ad formats that provide advertisers with greater opportunities to reach customers with graphic-rich images and messages.

Some technically savvy advertisers and agencies quickly learn how to exploit new features to reach more customers more profitably. But many advertisers are finding it increasingly difficult to assimilate each new change, falling behind in the “feature wars” at the same time that competition is driving up advertising costs. This is driving changes in advertiser and agency behavior, especially related to the online media mix and agency compensation models.

Let’s look in closer detail at some of the changes that have occurred in PPC advertising over the past few years, and how this has shaped the advertising landscape.

Increased Competition Means Increasing Click Costs
During the first few years in which PPC advertising gained in popularity, advertisers could expect to pay pennies for clicks on ads that were displayed based on even the most popular search terms. Companies in competitive industries like personal finance, travel and legal services could pay as little as $.15 to $.50 for clicks on ads triggered by search terms like “mortgage refinance,” “Hawaii vacation” and “injury lawsuit.” Resultant traffic to sites was cheap and plentiful, and profits were sky-high.

Those boom days ended around 2005, when advertisers and affiliates starting stampeding to Google with their ad dollars. In recent years, click prices have risen to dizzying levels. It’s common for advertisers in competitive spaces to be paying $5 to $10 per click to ensure their ads appear in prominent positions on search results pages. The most expensive clicks, paid by advertisers of high-priced legal services like medical malpractice, can cost close to $100.

Whether the top bidders in the search click auctions are actually seeing a reasonable return on their advertising investments is anyone’s guess. But there’s no doubt that the average cost per click has risen steadily over the past few years, and already some advertisers are finding themselves priced completely out of the game.

Increasing Complexity
As mentioned, the search engines (led by Google) have, over time, provided advertisers and agencies with a bigger and bigger set of technical tools for creating, managing, testing and optimizing online ad campaigns. This is really good news for those with a solid understanding of the fundamentals of direct-response advertising and with a sophisticated capability to quickly learn how to master new software and reports.

But the number of experts who can push and pull the increasing number of technical levers has not kept pace with the rate of innovation. Ad agencies and in-house marketing departments didn’t anticipate the need for workers with technical proficiency and analytical capabilities. Just 10 years ago, a typical agency employee spent his or her day calling media properties and haggling over the prices of “ad space.” Today’s advertising expert requires the skillset of an amalgamation of David Ogilvy and Albert Einstein.

Changes
Faced with increasing competition and complexity, PPC advertisers and agencies are facing hard choices. Some advertisers are pulling back from PPC advertising and funneling dollars to other online marketing channels like e-mail and affiliate programs.

Other advertisers are moving to the PPC content networks, directing their ads to appear on sites whose visitors comprise their target markets. As described in my book Customers Now, these networks are available to all advertisers currently using Google, Yahoo and Microsoft PPC platforms. The available number of impressions and clicks is growing faster on the engines’ content networks than on their search networks.

Traditionally, advertisers have shied away from content network advertising since response rates and ROI were proportionately much lower than the results obtainable through the search networks. As described in Customers Now, obtaining acceptable ROI is simply a matter of employing best practices in site targeting and ad copywriting and design. In fact, many advertisers are getting better ROI from content networks since competition has not yet driven up click bids and prices.

Pay-Per-Performance
Ad agencies are finding it even more difficult to contend with the changes in the PPC landscape. Clients are demanding closer attention to the fact that sales volumes and margins are dropping. Agencies are increasingly under the gun to work harder and longer to learn and to exploit new PPC features and functionality.

However, their traditional compensation models may be working in the opposite direction. Most online and offline ad agencies are compensated as a percentage of advertising spend. This is an anachronism based on the fact that for many years, advertising effectiveness could only be measured in the number of eyeballs reached–hence CPM charges from the media to the agencies. Spending more money meant that more people were being reached via ad dollars, so it made sense to reward this way.

While that model made sense in a world where measuring return on advertising spend was difficult to impossible, it may not work as well for online advertising, where ROI of every action can be tracked to the penny. Advertisers and clients are becoming reluctant to turn ad budgets over to agencies whose main motivation is to maintain or grow the size of that budget. Often, this is in direct opposition to the objectives of the advertiser, who wants to minimize ad spend to improve ROI.

For these reasons, agencies including my own have pioneered a new compensation method often called “Pay-per-Performance,” usually abbreviated “PPP.” Under PPP models, agencies charge clients based on the performance of the PPC campaigns under agency management. Typically, this means the agency is paid a percentage of the profit generated by the campaigns, or in the case of campaigns where submitted forms or leads are the success metric, a value per conversion.

The PPP model keeps client and agency aligned and working together toward common goals–usually an increase in sales volume while keeping costs under control. For this reason, there has been an increase in support by leading-edge U.S. advertising agencies–such as Clix Marketing, Location3 Media and Semvironment–to promote a PPP campaign partnership. These agencies are now motivated to take the time to learn and employ new search engine features and functionality for the purposes of continually optimizing PPC ad campaigns–using new targeting techniques to reach more and more potential customers, while using reporting and bid-management techniques to minimize advertising expenses.

Every month, more customers and advertising agencies are exploring the PPP model to forge partnerships that are mutually equitable and allow both parties to achieve their goals. These agencies recognize that the biggest benefit of practicing PPP is shifting the focus from ad spend to the outcome of the ad spend within the contract itself. It is a relationship centered at the core on the organization’s profitability.

The agency-client relationship is quite different under the PPP model. There is much closer and frequent interaction during the planning and execution of well-managed PPC campaigns, e.g., in the designing process and the testing of PPC landing pages. Both parties need to feel assured that site analytics are accurately reporting visitor and sales data.

The extra work is certainly worthwhile for the agency and the advertiser/client. In our experience, clients have enjoyed regular double-digit sales growth while keeping costs tightly under rein. The upside potential for agencies is higher than under percentage-of-spend models. Clients are very happy to spend more on advertising when profitable sales are growing proportionately–and that’s good news for everybody.

David Szetela is the CEO and founder of Clix Marketing, an online marketing firm specializing in paid search. He can be reached at david@clixmarketing.com.