While eCommerce currently accounts for less than 1% of South Africa’s total retail revenue, a recent survey by PWC suggests that the online retail sector has a 15,9% CAGR (compound annual growth rate) and will be worth R9,5-billion by 2018.
This is promising – despite the prevailing challenges facing new entrants – and likely the impetus behind many new online ventures. But hope isn’t a strategy and, to stay in business for the long-term, etailers need to change how they drive and convert traffic. So says Daniel Gross, CEO of AdMarula, a specialist performance marketing network.
“Poor conversion is among the leading reasons why online businesses fail,” says Gross. “This could be due to myriad reasons: its user experience is poor, the brand doesn’t have a strong enough offline presence, its online marketing lacks commitment or its founders believe that now they’ve built it, customers will come.”
While they all play a role in an etailer’s performance, Gross believes the source from which the traffic is generated is critical, yet often misunderstood. “Traditional marketing channels that increase eyeballs are the mainstay among online advertisers and media buyers.
So while brands are exposed to hundreds and thousands of consumers every day – where the average click-through rate is around 0.15% – this does not a booming business make,” Gross explains.
Instead, he suggests that rather than fishing in the biggest pool, etailers fish in a smaller one that has a better quality catch.
“While media and their advertisers are becoming increasingly comfortable with online channels – as evidenced by PWC’s entertainment and media outlook study which suggests that online is the fastest-growing advertising segment and is enjoying double-digit growth thanks to an increase in internet usage – they’re largely using a buying model that was developed for traditional media,” says Gross.
Known as CPM – or cost per 1,000 impressions – it gives advertisers access to a massive audience base via online banners or interactive buttons – yet under-delivers on call-to-action. “It’s a great way to build a brand, but not to make a sale.”
What’s the alternative? “Performance-based models like CPL (cost per lead) and CPA (cost per acquisition) are increasingly attractive as they deliver tangible business results.
The problem is they are not that well known,” explains Gross.
For instance, AdMarula’s clients – either direct or via an agency – advertise their brand via a network of pre-approved publishers including bloggers or online influencers and only pay when the campaign performs. “This eliminates their risk, but conversely increases ours,” explains Gross. “Our campaigns have to work. If they don’t, we don’t make money.”
As such, its approach is strategic and must align to business objectives – aka sales forecasts. Publishers also need to deliver against strict criteria and rules of engagement. “We screen everyone before they sign-up and – using a transparent online dashboard – give clients access to who the publishers are, and how their campaigns are performing,” explains Gross.
This visibility is likely what’s attracted big brands like Spree.co.za to AdMarula’s network. Since coming on board, Spree has seen an average increase in month-on-month sales generated via the AdMarula channel of 148%, with 125% growth in new customers from AdMarula’s marketing efforts. As a lead generation channel, it has also shown to be 59% more cost effective than other generation tactics.
So what’s the catch? “The status quo,” says Gross. “Advertisers and media buyers are used to and comfortable with CPM and CPC. To change that isn’t quick or easy, even when the commercial advantages are clear. But, as they say, when eating an elephant take one bite at a time. The same applies to performance marketing; as more and more brands try and enjoy its financial returns, it will in time make a mainstream impact.”
Watch this space: www.admarula.com.
AdMarula is a specialist performance marketing network.
Founded in 2011, it was among the first of its kind in South Africa. Since inception it has successfully helped consumer brands including Mr Price, Spree and Travelstart engage and convert customers online.
Experts at PPC, lead generation and revenue share campaigns, AdMarula’s efforts deliver high-quality, measurable results which increases its clients’ revenue and market share. Located in Cape Town, South Africa, its specialised team is led by CEO and founder Daniel Gross. Visit www.admarula.com for more information.
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