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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | NOVEMBER 12, 2002 SMART ANSWERS By Karen E. Klein Running Hot -- and Cold -- on the Web Search-engine fees and declining online sales have an entrepreneur wondering if e-tailing's vaunted future is behind it
A: You need to sit down and crunch some numbers before making any decisions, since you are contemplating making major changes to your business model and will need solid stats on sales trends before considering that step. What percentage of sales come from online customers, vs. your wholesale clients? What does each approach cost, and how much do expenses eat into your profit margin? Internet sales may cost more in marketing and search-engine listings than they did two years ago, but since you're selling retail without the overhead of a physical storefront, does the profit justify the increasing expense of online retail? Consumer spending in the third quarter of 2002 has been so slow, so it's not surprising to hear that you've seen sales drop off. The real test will come during the holidays: If you make an attempt to bump up traffic to your site and still see declines through the end of the year, you may conclude that the investment in digital marketing, especially search engines, does not justify the few sales that come your way. EFFICIENT ALTERNATIVE. "Now that most major retailers have been turned on to the search engines and are willing to bid up the amount they pay for keywords on sites like Google and Overture, it is incredibly difficult for the little guy to be heard or found online," says Carrie A. Johnson, a senior analyst at Forrester Research. "My advice is to keep your site up but to stop investment in online marketing, shift that money to efforts for your wholesale business, and think about using eBay as a platform for online sales." Johnson recommends eBay because it is cheap, you can sell excess or returned inventory there -- and still reach millions of consumers without fighting huge retailers for ad space (in most categories). If you decide that you do want to continue pursuing Internet sales through your Web site, search engines are definitely an important part of your marketing effort. Weigh the time and expense involved in paying for search-engine listings, vs. doing an e-mail campaign, hiring a publicity firm or trying to get publicity yourself, and running ads in national publications. According to Jupiter Research, 78% of Internet usage consists of people researching products and services, so search engines are an obvious way to reach potential customers who don't know your company name or Internet address (URL). Before you pay for listings, however, make sure that you have taken all the key steps to make sure that your site is registered properly. "It's not a hard thing for businesses to do themselves, and there's no need to pay fees, though that can help," says Danny Sullivan, editor of SearchEngineWatch.com. His Web site includes a free, step-by-step guide to search engine optimization. Says Sullivan: "Instead of optimizing your pages, you may have just submitted them to the search engines. That's like sending a bad press release to a newspaper." TESTING TIMES. If you want to test how search-engine listings impact your sales, Sullivan suggests you run paid listings with outfits like Overture.com and Google.com. That way, you'll be guaranteed to come up on searches for the keywords of your choosing. Pay for the listings for a short time and monitor the traffic you get as a result. "If it does well, then it makes sense to consider spending more on paid listings and maybe also doing more work to try and get 'free' natural listings, as well," he says. According to Holly Makris, product manager for AltaVista Express Inclusion, you can list just your home page and pay only one annual fee of $39. "In addition, URLs are guaranteed to be included in the index and added to AltaVista search results within two business days. The URLs are updated every weekday, so, as your business grows and your products change, you can update your site and see the changes in the AltaVista search results the next day," she says.  Have a question about running your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 46th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally. Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | NOVEMBER |
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