REES46

Online Product Promotion for Brand Manufacturers White paper

Online Product Promotion for Brand Manufacturers

Introduction Nowadays, 66% of all online products are sold through small and medium-sized online stores (collectively called the “Long Tail” in marketing terms). Manufacturers currently do not have enough resources to incentivize sales growth in the Long Tail or collect relevant actionable sales analytics data. This document explores the subject of eCommerce marketing techniques and automation tools that allow marketing department to effectively promote products in the Long Tail and collect precise and detailed actionable analytics data on sales profitability and marketing campaign results from tens of thousands of online stores.

Online Product Promotion for Brand Manufacturers

Marketing problem There are 12 000 000 to 24 000 000 online stores selling products around the world today. Only 1% of them are a part of large businesses with 1 000 and more of daily orders. The rest form the Long Tail that consists of small and mid-sized online stores. Key detail in this situation is that the market share of these 99% makes up 66% of total eCommerce market turnover, while this market is growing faster every year. eCommerce market leaders

Long Tail Diagram 1

652,8B Big players

1,209T Mid-sized

5,76B Small

Annual eCommerce turnover chart

Source: blog.lemonstand.com/just-how-big-is-the-ecommerce-market-youll-never-guess

Online store size

Number

Average annual turnover (USD)

Big players

180 000 (1%)

$652,8B (34%)

Mid-sized businesses

9,180M (51%)

$1,209T (63%)

Small businesses

8,46M (48%)

$5,76B (3%)

Table 1 Business-size-toannual-turnover ratio

Online Product Promotion for Brand Manufacturers

Manufacturers do not have enough resources to use all the necessary marketing tools in the Long Tail (promo blocks, page branding, push notifications and product recommendations) due to the range of problems: Number of online stores in the Long Tail is too large, therefore contract negotiation would require more resources than manufacturers currently have at their disposal and also unlikely to be worthwhile. Average online store lifespan is 0,5 - 3 years, while successful contract negotiation may take up to a year. Online stores do not have the technical ability to correctly estimate efficiency level of manufacturer’s marketing investments.

Picture 1 Promo block and product recommendations (with inserted selected products) on store main web page.

Problem of manufacturers gaining access to the untapped marketing resources is of technical origin and has a clear and simple solution.

Online Product Promotion for Brand Manufacturers

Online store as a digital marketing channel Marketing scheme Use of external recommendation systems is a regular practice for stores from the Long Tail. A single recommendation system can manage thousands of online stores. Effective product promotion is one of the main functions of a recommendation system. Recommendation system is hereafter referred to as “online merchandising platform”. Before displaying current store page, online store requests relevant product recommendations from the online merchandising platform, transferring it the key data: current product ID, current category ID, current page URL. In its answer the platform returns a range of recommended goods from the store catalog that are most relevant to the particular customer.

Main online product marketing principle is that the product currently promoted in the store is added to the recommendation list and displayed at the most viewed part of the page (“best shelves”). Only products that are currently in stock are included in product recommendation list — that highly increases the chance of client turning into an active buyer. Therefore there is a direct correlation between ads display and purchasing process, that provides new possibilities for collecting important marketing analytics data. A critical point is that not every recommendation system provides adequate and effective marketing tools functioning within these algorithms.

Online Product Promotion for Brand Manufacturers

Advertising is best managed using the most efficient methods of product recommendation delivery: Blocks of product recommendations; Promo and trigger email digests to loyal customers; Mobile application store.

Picture 2 Insertion of currently promoted products into blocks of displayed recommendations, gaining them most favorable position in the block, or even excluding competitors from the block.

Product recommendation blocks Displaying recommendation blocks on the web pages is a common practice of any successful online store. A typical set of blocks includes: Popular products.

Recommended for you based on.

Popular products in this category.

You also might like these.

Similar products.

Recently viewed.

Frequently bought with .

Trending products.

Accessories.

etc.

Online Product Promotion for Brand Manufacturers

Trigger emails Trigger emails ensure return of up to 30% of occasional visitors, who typed in their email while browsing the store. These emails are also used for reminding regular customers of volume products they might be running out of after a certain amount of time, as well as accessories for other purchased products. Including currently promoted products into such emails tangibly increases sales efficiency and also puts these products prior to the competitors in the email, excluding them from recommendations.

Picture 3 Displays exclusion of competitors’ products from recommendation in the trigger-based emails by giving display priority to currently promoted

Online Product Promotion for Brand Manufacturers

Mobile application store More than 20% of all online purchases are made via mobile application stores. These applications that are essentially store catalogs in mobile form are useful tools for product offer aggregation. And mobile push notifications make advertising even more personalized. All order forms, completed through mobile app stores, are then sent to the actual vendor.

Picture 4 Mobile app stores also give an option to use online merchandising platform for product promotion and recommendation. A new marketing opportunity, more personalized and with faster response.

Online Product Promotion for Brand Manufacturers

Marketing campaign settings Manufacturers are able to set detailed options for future marketing campaigns, for instance: Target future partners (online stores) based on geolocation and the segment; Choose categories and types of products for promotion; Set maximum price per click; Choose marketing campaign mode: Expansion vs Efficiency

Marketing campaign mode settings Efficiency mode This mode includes following marketing algorithms: 1 to 2 products selected for promotion are positioned at the top of current category; Minimum one promoted product is displayed in the “Similar products” recommendation block at any competitor’s product pages; All competitors can be excluded from the recommendation block on any promoted product pages, ensuring only products of the manufacturer are displayed in the recommendations. This option is available in either mode. This mode increases CTR by 10% and BTR by 0,2% and has the best ROS-(Return On Sales)-to-campaign-expenses ratio.

Online Product Promotion for Brand Manufacturers

Efficiency mode is typically utilized for low-cost and special-purposes products (e.g. car video recorders or camera lens kits) and best used in online catalogs with multiple categories.

Picture 5 Mixed recommendation block with a car video recorder, a toolset and a trimmer added to the list.

Online Product Promotion for Brand Manufacturers

Expansion mode This mode offers an addon to Efficiency mode including following new algorithms in the list: “Popular products” block for store main web page; “You also might like these” block; “Trending products” block; Effective insertion of recommendation lists in every search result page. Expansion mode is typically utilized for popular product categories, such as household appliances, consumer electronics, baby and children products. This mode is not recommended for promotion of low-cost and special-purposes products, such as car video recorders, security systems and computer hardware in online catalogs with multiple categories. Promotion of such products in Expansion mode is practical for specialized online stores with limited amount of categories in their catalogs - 1 to 10 categories (e.g. display of a new model of car video recorder in recommendations in the shop specializing in this field).

Online Product Promotion for Brand Manufacturers

Financial matters Recommended marketing model is CPC (cost per click), since CPC is a very wellbalanced model when it comes to online store and manufacturer’s expectations. CPM (Cost Per Mille) model does not fit manufacturer’s marketing requirements due to higher risks in case product recommendation blocks are positioned at the bottom of the web page, decreasing their usability. It results in lower number of hits as customers are less likely to navigate to the very bottom to see the recommendations. CPA/CPO (Cost Per Acquisition/Cost Per Order) do not fit online store marketing requirements due to higher risks in case a manufacturer of low-competitive products takes best positions in recommendation blocks, decreasing store profit, while the products capable of generating much better profit become excluded from recommendations.

Online Product Promotion for Brand Manufacturers

Quality assessment Despite its versatility, CPC mode bears certain risks, specifically, risks of poor marketing campaign budget management: Ads in non-operational online stores; Cheat clicks possibility in online stores with low ratings. To solve this range of problems, following control methods are applied: Automated marketing campaign quality assessment, including monitoring click-to-order-completion ratio. Incurred expenses are reimbursed in case of discovered fraudulent activities (such as cheat clicks, for instance). Manual monitoring of ongoing marketing campaign from the advertiser’s side, with the live option of filtering out ineffective partners from the campaign.

Online Product Promotion for Brand Manufacturers

Competition for advertising space Several manufacturers may compete for the same advertising slot. Solution in this situation is provided by the online merchandising platform. Choice criteria in this case are: Maximum cost-per-click rate of the product; Maximum online store margin for the product - upon equal click cost for all the competitors, preference is given to the product with higher margin; Product marketability factor — both preceding parameter being equal, preference is given to the product purchased more frequently.

Case studies To assess marketing campaign efficiency criteria, REES46 conducted experimental marketing campaigns for the following manufacturing companies: Neoline (in product category “Radar detector”) DataKam (in product category “Car Video Recorders”) Nikon (in product category “Cameras”) Samsung (in product categories “Mobile” and “TV & Sound”)

CAC indicator (Customer Acquisition Cost) in these cases stands for the expenses of customer acquisition compared (in %) to the store sales revenue for this brand. CAC calculation is made based on ARPU (Average Revenue Per User) in particular product category, clock cost for this category, and CTB factor (Click To Buy, standing for percentage of clicks turned into purchases).

Online Product Promotion for Brand Manufacturers

Neoline Product category

radar detector

Number of online stores

1

Customer flow

32 000 per month

Competitors in the store

32, incl. AVC, BlackVue, KapKam, TrendVision

Campaign duration

32 days

Average product cost

US $64

Before

During the campaign

Product views number

93

194

Recommendations click count

14

67

Sales number

0

7

Incl. sales via recommendations

0

5

CAC

2,3%

Table 2 Сomparative rate analysis for Neoline

Online Product Promotion for Brand Manufacturers

DataKam Product category

Car Video Recorders

Number of online stores

3

Customer flow

150 000 per month

Competitors in the store

32, incl. AVC, BlackVue, KapKam, TrendVision, Neoline, Prestigio

Campaign duration

90 days

Average product cost

US $222

Before

During the campaign

Product views number

6094

7615

Recommendations click count

1377

2146

Sales number

26

41

Incl. sales via recommendations

2

10

CAC

8,9%

Table 3 Сomparative rate analysis for Datakam

Online Product Promotion for Brand Manufacturers

Samsung in “Mobile” product category Product category

mobile

Number of online stores

1

Customer flow

150 000 per month

Competitors in the store

29, incl. Asus, HTC, LG, Keneksi, Nokia, Sony, Xiaomi

Campaign duration

32 days

Average product cost

US $301

Before

During the campaign

Product views number

21 882

26 640

Recommendations click count

3052

4935

Sales number

374

469

Incl. sales via recommendations

34

117

CAC

1,4%

Table 4 Сomparative rate analysis for Samsung in category “Mobile”.

Online Product Promotion for Brand Manufacturers

Samsung in “TV & Sound” product Product category

TV & Sound

Number of online stores

1

Customer flow

150 000 per month

Competitors in the store

12, incl. Philips, LG, Mystery

Campaign duration

32 days

Average product cost

US $380

Before

During the campaign

Product views number

1054

1784

Recommendations click count

56

Sales number

18

45

Incl. sales via recommendations

0

6

CAC

161

1,11%

Table 5 Сomparative rate analysis for Samsung in category “TV & Sound”

Online Product Promotion for Brand Manufacturers

Nikon Product category

Cameras

Number of online stores

1

Customer flow

150 000 per month

Competitors in the store

4, incl. Canon, Sony, Pentax

Campaign duration

32 days

Average product cost

US $348

Before

During the campaign

Product views number

13 523

16 304

Recommendations click count

618

1862

Total sales number

219

256

Sales number

52%

59%

Incl. sales via recommendations

5

16

CAC

5,04%

Table 6 Сomparative rate analysis for Nikon

Online Product Promotion for Brand Manufacturers

Summary and Conclusion Marketing via online merchandising platforms is a new and promising method of product promotion and revenue growth. Platform’s working process is fully automated. Manufacturers can advertise their products in thousands of online stores simultaneously, with no headache — permitting this platform to secure marketing contracts with each store. With the use of this marketing tool, advertisers gain complete metrics of their marketing campaign, and are able to monitor its efficiency in real time — because of deep integration of the online store CRM with the platform.Manufacturers gain full access to the sales, unlocking the opportunity for the store managers to make the right decision. Finally, platform’s core is made of accurate personalization, based on excessive amounts of data (the Big Data). CAC indicator for this tool is anywhere from 1% and beyond, depending on competitive properties of each online product. Using this platform of online merchandising, advertisers will be able to track the ad campaign results in each given store, filter out poorly performing ad campaigns and also examine competitor’s market. Online merchandising platform works in both directions: recommending the product based on client’s particular preferences, as well as attracting new customers to the store using its own methods of personalized advertising. Therefore, marketing your product via such a platform not only serves as the guarantee of proper ad placement but also leads to higher conversion.

Online Product Promotion for Brand Manufacturers

Online merchandising is a functional instrument for building manageable marketing campaigns for SMB sector in eCommerce — sector that is responsible for 66% of all online sales. Until now, manufacturers simply had no resources for effective marketing in this business segment. More and more business professionals find it easy to use this tool, therefore, if your business plans on performing successful marketing campaigns without too much stress attracting a new customer — it is the right time to start.

About REES46 REES46 is an online merchandising platform that manages product placement throughout more than a thousand online stores. REES46 delivers 50 million of product recommendations with 10% CTR monthly. Range of products in integrated stores includes: customer electronics, household appliances, auto products, furniture, baby and children products, clothes and cosmetics. CTR (Click-Through Rate) of marketing campaigns for online stores calculates to 10%. BTR (Buy-Through Rate or Views Into Purchases) in average calculates to 0,2%. All case studies, shown in this document, have been conducted by REES46. For collaboration or other inquiries contact: Dmitry Zubenko: [email protected] Michael Kechinov: [email protected] For manufacturers