St. Louis Post-Dispatch David Nicklaus column
Apr 03, 2012 (St. Louis Post-Dispatch - McClatchy-Tribune Information Services via COMTEX) --
Google gives businesses plenty of information with which to measure the effectiveness of their search advertising. Click-through rates, search-term popularity rankings and other data hold out the promise that advertisers should know exactly how much money they make from each ad.
To Tat Chan, an assistant professor of marketing at Washington University's Olin School of Business, a key piece of information still seemed to be missing. Businesses know that some customers use the Internet to do research but make their purchases through other channels, such as over the phone or through a salesperson. If much of that is happening, he figured, then conventional measures understate the value of Internet search advertising.
Working with Gold Biotechnology, a small company in Olivette, Chan and two Washington U. colleagues found enough data to put a value on those hard-to-measure folks who research online but buy offline. The resulting study won an Olin Award -- the university's way of recognizing research that has real-world business applications -- last week for Chan, Chunhua Wu and Ying Xie.
The trio found that customers acquired through Google did enough repeat business with Gold to make the search ads surprisingly profitable. The firm would have calculated a loss of $48 per online customer if it considered just the sales that came directly from an ad, but that turned into a profit as high as $950 once the researchers identified all the offline transactions and calculated those customers' lifetime value.
The researchers, whose study was published in Marketing Science, say their work
provides a practical framework for firms to evaluate the long-term profit impact of their search advertising investment in a multichannel setting.
Sounds like it could also make an effective sales piece for Google.
Read more from David Nicklaus, who is the business columnist for the Post-Dispatch. On Twitter, follow him @dnickbiz and the Business section @postdispatchbiz.
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