Using Site Search to Improve Merchandising and Increase Conversion Rates
by Dr. Ralph F. Wilson, Editor
Web Marketing Today Premium, October 31, 2006
Have you ever wondered why large online retailers get substantially higher conversion rates than small merchants? I think the answer is three-fold:
Better merchandising techniques (which I'll discuss in this article),
Rigorous testing to find what works best, and
A large enough staff to keep up with the changes needed to be perceived as cutting edge.
A few weeks ago I attended a vendor seminar in San Francisco to learn what large online merchants such as Macys.com do to help them sell better. The seminar was co-sponsored by Mercado (www.mercado.com), a vendor of e-retail merchandising software, and Coremetrics (www.coremetrics.com), a high-end Web analytics company that has partnered with Mercado.
I was particularly interested in Mercado's merchandising techniques. Merchandising, by the way, is a general word that means "sales promotion." However, in a retail setting, it is particularly used in terms of pricing and displaying merchandise in a way that encourages its sale. Mercado began in 1997 as the first e-commerce search vendor, that is, a company that helps improve the on-site search function in online stores. While I'm not trying to push Mercado, their functionality described below will give you a good idea of the features available from a market leader. Other market leaders include: ATG Search, Endeca, FAST Impulse, and WebSideStory
Note: Site search, that is, the search system for a particular website or online store, is sometimes confused with search marketing, that is, natural or paid search using Google, Yahoo, or MSN search engines. They must be distinguished to understand the vital importance of effective site search to online merchants.
The Importance of Site Search
Studies have shown that with e-commerce retail sites:
Over one-third of all buying sessions involve on-site search.
Search users convert substantially better than non-search users, probably because they know what they're looking for better than a shopper who uses a store-browsing approach to find a product.
Search users have a significantly higher order value than non-search users.
That's big. If you can improve search results, you can impact profits.
But many out-of-the box search systems frustrate shoppers, since they don't handle misspellings and alternate words for the same kind of product. Nor do they help the customer narrow a search to find exactly what she was searching for. In the last few years, many larger e-tailers have contracted with site search firms to improve their search capabilities, and often report very substantial increases in conversion rates as a result.
Using Site Search Results for Merchandising
You want to show search users what they're looking for. But if you're a store like Macys.com with tens of thousands of products, what do you show on the results page in the first row or two of product thumbnail photos? It depends on your current purposes, which may vary by the time in the product and seasonal sales cycles:
Purpose
Weight to the top
High revenue
Best-selling products
High revenue
Highest margin products
High revenue
Highest conversion rates
Get rid of excess inventory
Overstocked items, season end items
Push new items
Newest fashions
As you might imagine, the time spent making these decisions would be prohibitive with most shopping cart systems. One of the advantages to Mercado's system is the speed with which e-commerce merchandisers can manage their products.
Once a merchandising manager sets the priorities for search results, the results are automatically and dynamically adjusted. For example, when the best-selling items change, the search results change too (if they have been instructed to feature best sellers). Since products are placed on top based on a formula, they doesn't have to be hand-coded one by one. As new products are added, ranking takes place according to the formula.
Even with the best system, there will be some failed searches. What kinds of products can you offer on the failed search result that can culminate in a reclaimed sale?
FootSmart.com, for example, analyzed search relevancy in terms of search frequency, conversion rate, sales, etc. They identified top items sold for each term and adjusted relevance rankings. The result was an 82% increase in the on-site search conversion rate to a current 47.6%.
Cross-Selling
Cross-selling is another area where profits can be increased. First, you need to analyze your sales to see what products people are purchasing together -- or come back to buy later. Then link these products on both search results pages and product pages.
Dynamically-Created Landing Pages
Another use of site search is with dynamically-created landing pages. When a person who searches on a particular term clicks on a Google natural or paid search result, for example, the search terms are passed into the merchant's site search system. Mercado site search then can produce a landing page dynamically created from a template for the particular product or products that best match that search term, prioritized by the business rules that the merchandiser has set to achieve current sales goals.
The better the data to do this kind of analysis, the more effectively you can spot trends and optimize search results. Mercado keeps some sales statistics as part of its own stand-alone application, but coupled with data from web analytics partners, the amount and quality of usable data increases along with the bottom-line result.
Offer Testing
Another feature of Mercado software is the ability to test offers. For example, for a search on "Mother's Day," which offer is best? Jewelry, perfume, or gifts and gift cards? Each offer is shown on a ratio, say, of one-third, one-third, one-third. Once enough information has been accumulated, you can select the best strategy. Or you might see which offer is most compelling -- free shipping, $10 off, or something else.
The ability to do quick split-testing can substantially cut the time and effort needed to optimize what offer you display -- a considerable benefit considering the money that can be lost if you pursue a promotion based on a hunch rather than on testing results. (While Mercado calls this feature "multivariate testing," it is really split-testing, not Taguchi Method testing as the word multivariate usually implies.)
Macys.com
The seminar included some words from Liz Weisend, Director of Merchandising for Macys.com, whose department is a 12-person, cross-functional team that combines merchandising and web analytics.
Macys.com found that 33% of its visitors use onsite search; those that do experience an 86% better conversion rate than those who don't. When Macys.com implemented Mercado's site search in 2004, conversion rates almost doubled. As failed searches declined, losses from the site declined also. "No results" pages were also used productively to display appropriate products.
Because Macys.com carries thousands of products, they needed a merchandising system that allowed them to automate the site search process, since manually trying to manage the top 100 search terms would take an inordinate amount of time. They were able to take data from Coremetrics analytics to find out which products to link for cross-selling.
For example, they had 500 watches or 140 handbags on the site. Mercado enabled them to take the data about their products which was contained in their database -- including brand, color, department, vendor name, price, warrantee length, and other features -- and use it to help customers narrow their search for products.
With over 100,000 SKUs, Macys.com also uses Mercado's software to manage more than 50,000 actual product pages It also manages landing pages for incoming customers for Google AdWords, using the keyword information to show the appropriate product landing page.
Small Business Solutions
Mercado can work within an ordering system, but doesn't provide that functionality itself. While Mercado developed its core features with enterprise type businesses using its CSN Platform (Commerce Search and Navigation), in January 2005 it began to offer its software as an ASP hosted solution, bFIRST, which they refer to as SaaS (Software as a Service). This is particularly appealing to small business, since it allows them to get up and running quickly without strong IT support and is relatively affordable. The cost is in the range of about $3,000 per month. That's a lot of money for very small businesses, but within the range of many successful small business e-retailers.
Mercado cites as a small business example DelightfulDeliveries.com, a gourmet food basket company with four people in the organization. DelightfulDeliveries saw conversion rates rise 65%, revenue per visit rise 21%, and units per visit rise 50% using Mercado's bFIRST application.
Mercado may have been the first site search vendor, but they now have many competitors. The following list was primarily based on Internet Retailer's 2005 Guide to E-Retailing Resources. Several companies have since been acquired:
If you have only a few dozen products, little traffic, and a dismal bottom line, site search merchandising won't really help you. But if you're already successful online, site search merchandising could take you to the next level.
Small business shopping carts and catalog-building systems are typically designed for template-driven product pages and a straight search capability driven by SKUs in the product database. While some carts offer manual linkages for cross-sell products, they just don't have the capability to do effective, sales-inducing site search.
Site search solutions replace the search and perhaps the product page management within your online store. I've seen many reports (albeit based on press releases from vendors) of conversion increases in online stores that implement site search. My encouragement to you is that, if you fit the criteria of being an already successful e-tailer with many products, once you get past the current holiday season, look very seriously at investing in a capable site search solution that fits your situation. Your profits next season could show a big improvement as a result.
A related study:
"Study shows how leading site search tools perform,"Internet Retailer, April 6, 2006. Cites study by Patricia Seybold Group on five leading site search tools -- ATG Search, Endeca, FAST Impulse, Mercado, and WebSideStory. (www.internetretailer.com/dailyNews.asp?id=18180)
