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Going organic in online advertising

Fashion retailer cuts millions in advertising costs with customer and search-term analysis


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Abstract

After years of investing heavily in paid online advertising, a fashion retailer’s detailed analysis of search terms, online purchases and customer demographics revealed the opportunity to save millions in advertising costs without hurting top-line sales.

The Challenge

Selling through catalogs, approximately 300 retail and outlet stores and online, this fashion retailer spent a sizable portion of its annual advertising budget on paid search engine advertising. That is, the company bid for the option to display its ads next to the results for particular search terms. However, the company didn’t know how much return on investment (ROI), if any, this practice yielded.

To measure, and improve, ROI, the company set out to analyze key aspects of online search practices and its customer base. Its goals were to determine the incremental ROI on search advertising and identify those search terms that maximize ROI, identify associations between the search terms and the items purchased, differentiate patterns in unpaid and paid search orders and analyze the demographics of customers buying through different online channels.

How We Helped

Deloitte practitioners helped the company analyze 3 million orders from 1.5 million customers to determine the frequency of search keywords that ultimately drove sales. The most profitable orders were found by analyzing the gross revenue per order by item classification, search engine, type of search and new or existing customer status. To gain a clearer picture of online purchasers, internal customer data was merged with data from external sources containing demographic, socioeconomic and lifestyle information. Based on customer and order data, Deloitte helped the company develop.

Solution

The analysis revealed that “organic” or natural (unpaid) search terms yielded ROI equal to or stronger than paid search terms. This knowledge allowed the company to implement a multimillion-dollar reduction in online paid search advertising costs without negatively impacting top-line sales. Interestingly, the analysis also revealed that while paid search stimulates a relatively small amount of incremental online sales, it does help lift in-store spending.

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