The Danger of Online Direct Response Channels in B2C E-Commerce

As a marketer who cut his teeth at the start of the digital era at the turn of the century, but who studied “old school” marketing before entering the professional world, I always saw clear similarities with e-commerce and “regular” bricks and mortar commerce.

In some ways, I didn’t get what the fuss was about. From a marketing standpoint, it all remained the same to me. Yes, fulfilment and distribution had changed but the fundamentals of marketing had not.

In fact, I believed that brand building would become even more important in the new online era. And do you know what? I think I was right.

Branding in a Digital Age – The Era of Disintermediation

As a digital marketer, my holy grail is direct traffic coming straight to a website (or app) and buying. No cost per click, no cost per view, essentially no incremental costs at all.

This is how you truly grow a business online. When the majority of your sales come directly you can pat yourself on the back for building yourself a brand.

No middle man means more profits. It means a better business model and reduced risk.

However, many businesses focus solely on direct response channels. This is good until competitors start muscling in.

At that point, it becomes an auction. Essentially the price you pay is not controlled by you. It is controlled by your competitors.

 

Generic Keywords and Direct Response is Swimming with Sharks

You can’t build a long term business model and marketing strategy solely on generic Google and Amazon ads. If it works, someone else will copy you. Then someone will copy them. You get the picture.

You will be sucked into a dogfight to the bottom. Your business will end up making a loss on every customer you acquire. That’s not sustainable, is it?

To avoid the marketer’s nightmare of competing on price, you must drive revenue outside of direct response channels.

Offline Retail Model

So the offline retail model is all about branding. Basically, shops and supermarkets stocked shelves with products. Shelf space was valuable and limited. Therefore, in order to optimise revenue per square inch of shelf space, products needed to have a high margin and a high (to put it in the terms of today’s marketers) conversion rate.

The larger the retailer the more deals skewed in their favour. Goods on consignment, delayed payment, returns policy and price all were at the mercy of powerful retailers. They had the real estate and shelf space that you needed.

You were at their mercy. You had to play ball or walk off the field.

E-commerce Model

Take the retail model and instead of shelf space, you have ad inventory and ad positions on search engines.

Nothing has really changed. You must deliver the best revenue per one thousand views of a search results page or you will be moved down the pecking order.

So either bid more or improve your Click Through Rate (CTR) with an aggressive offer. It becomes clear, without a brand you are in trouble. As a result, building one should be front and centre in your strategy.

Let’s face it if you don’t have a brand you are at the mercy of Google and Amazon. Well actually, you are not. Much worse, you are at the mercy of your competitors.

The Two Levels of Retail Branding

In the old school self space dominated world Above The Line (ATL) advertising was a necessity. To put it in terms that your ops and finance teams would understand. Investing in ATL advertising paid off in higher prices/margins, more sales and more prominent shelf space.

There were two levels to this

Level 1: I am in a supermarket and buy a brand because I recognise it on a shelf.

Level 2: I go to the supermarket because it stocks a brand I want.

If you can achieve “Level 2” online you are laughing. Now the key is disintermediating other channels and retailers.

If you have to rely on online retailers to sell your product then your brand is not strong enough. Take a step back to level 1.

What has Changed?

Firstly the limits on shelf space were removed by the internet. In their place came real estate on search engines. Ad depth (number of participants in the auction) determined the price you pay for a click. The more companies fighting for clicks the higher the cost per click.

Later other direct response platforms like Amazon ads came into being. However, the only real difference is that instead of negotiating a deal to get your products on shelves you are now bidding on ad inventory.

 

Voice Search – Who Said Brands Would Die?

Ok, as voice search and specifically non-screen accompanied voice search continues to grow, brands will become more important than ever.

Why?

Well, ad real estate will be more scarce than ever before. You can’t “speak” two products or more at the same time.

The way around this is being the only one. Being the brand.

By owning your brand term you will own the football field.

What would you prefer as a CMO?

“tablet” or “iPad”

“guitar” or “Fender Strat”

In some cases, brand searches are much greater than generic searches. Therefore, in today’s connected world you have no excuses.

Here are two examples:

Bet365 v Betting Sites

bet365 google trends versus betting sites

 

Tesla Versus Electric Car

tesla google trends

Conclusion

We have reached peak generic in e-commerce. Amazon and Google will continue to syphon more and more of your margins. Well, it won’t be them it will be your competition bidding up prices. Its a testament to the advertising products on both platforms that more and more businesses are leveraging them.

However, low barriers to entry equate to more competition.

Avoid the Trap – Build a Brand Aswell

By all means, use direct response channels but don’t forget ATL campaigns. Even better try and build something unique. Most importantly build a relationship with your customers. They are the best brand builders of them all.

As a result, look at what worked before the Internet. You may find the path to growing your brand.