Retail marketing technology provider Mercent is launching a set of analytics tools to help online retailers tie ad spend on search and other online marketing channels to retail-specific business results at the SKU level.
Mercent Retail Analytics combines online marketing and search data with sales and inventory data to more clearly report results of spending in shopping portals, transactional marketplaces, and search marketing for subscribers to the Mercent Retail platform.
The service reports on retail business metrics like revenue, profitability, inventory velocity, and return on inventory investment generated by every product on every online marketing channel, according to Eric Best, Mercent’s CEO. With the SEM analytics tools, those results can be tied to specific keywords or groups of keywords through integration with Google, Yahoo and Microsoft via their APIs (application programming interfaces).
“This really changes the game in terms of how online merchants manage online advertising spend,” Best told ClickZ. “They can now, with confidence, know that an additional incremental dollar of ad spend applied to a given keyword or shopping portal will result in a profitable transaction.”
Like many companies, Mercent Retail allows merchants to track traffic, conversions, and orders across SEM platforms. What’s different about the platform is its ability to characterize return on investment for every keyword in terms of business metrics that are more specific to a retailer’s success, such as contribution margin, inventory turns, and return on inventory investment, Best said.
Mercent Retail Analytics ties into Mercent Retail, a hosted platform that sits between a retailer’s line of business infrastructure and online advertising channels. Mercent Retail integrates the retailer’s e-commerce platform, product catalog, warehouse management system, and financial software with a range of channels that include shopping portals, transactional marketplaces like Amazon and Shop.com, affiliate networks, and now search engine marketing. It’s this integration that differentiates Mercent’s offering from a typical SEM or online ad agency, Best said.
“What sets us apart is our ability to track online advertising performance from an analytics perspective, then enable the optimization of product advertising campaigns down to the SKU level, and manage and measure them in terms of retail profitability and inventory velocity (how quickly things are turning over in the warehouse) as a measure of the effectiveness of ad spend online,” he said.
One retail-specific metric that is common offline, but which is not generally trackable online, is Gross Margin Return on Inventory Investment (GMROII, pronounced “Jim-Roy”), Best said. GMROII articulates how much profit is generated for a certain cost of inventory held in the warehouse over time.
“If you’re selling very little product, and have very little profit, but you have thousands of units taking up space in your warehouse, that’s a bad thing,” Best said. “When you’re selling high-volume, high-profit products, and you’re able to keep very low inventory on hand, that’s the retailer’s Holy Grail.”
Using Mercent’s Retail Analytics tools, a retailer can now see how a particular keyword converts back to a particular set of products, and correlate the GMROII scores of those products against the ad spend.
“It allows them to tailor their keyword bidding strategies with better results than if you were managing to revenue alone, and certainly better than if you were managing it to traditional metrics of search engine marketing like page rank, click-through rate and conversion rate,” Best said.
Merchants are required to go through an up-front integration process that last an average of 30 days, and could cost as little as $500 if the retailer has standard, existing systems that can be easily integrated, to more than $20,000 in cases where the infrastructure is non-standard and difficult to work with. After that, merchants pay a 1- to 4-percent share of revenue delivered by the platform.
To make sense for a retailer, they should have a “certain level of sophistication,” Best said. Typically, retailers with an average revenue over $2 million a year online would see the most benefits from the platform, he said.
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