Price-comparison ads help businesses lure consumers away from the sites of their rivals.
Have you ever dreamed of marching into a competitor's business, sidling up to a customer, and whispering in her ear that she could get a better price at your place? Stop dreaming. For marketers on the Web, that fantasy tactic is now within reach.
There's a new breed of comparison-shopping software that lets businesses target potential customers when they're browsing for products on the sites of competitors, giving marketers a chance to lure buyers away with better deals. Say a shopper is browsing at an online store. When she clicks on a specific product, the software generates an ad featuring links to vendors offering the same item for lower prices. It's similar to a bargain-hunting site, such as Shopping.com--except that it offers competitive prices wherever consumers shop.
Price-comparison advertising represents a new wrinkle in online marketing. Rather than placing banner ads on sites with related content or bidding for keywords on Google, the ads target consumers based on what they're shopping for at any given time. For merchants who can compete on price but not ad dollars, the ads can be an efficient way to drive traffic and sales to online stores. "It's a step toward getting their names in consumers' minds," says Harry Wang, a research analyst at Parks Associates in Dallas. Most of the services are less than a year old. But businesses are starting to jump aboard.
Steve Hafner, founder of the travel website Kayak.com, uses the technology to compete with giants like Expedia and Travelocity. He had been deploying the usual Web marketing tactics, such as buying keywords on Google and running banner ads on travel websites. But while Kayak.com was attracting more than three million visitors a month, few of them were actually using the site to book travel. In January, Hafner learned about a comparison-shopping advertising service that was recently launched by WhenU, an ad software firm based in New York City. He decided to give it a try.
Here's how it works: WhenU has enticed millions of consumers to download its price-comparison software by offering screen savers and other freebies. Now each time those consumers shop on the Web, the software goes along with them. When they visit a travel site and search for a specific flight, the software grabs the information and generates a pop-up box that invites shoppers to "Save More" by clicking a button that links to Kayak.com. Kayak pays a fee each time a shopper clicks on the box. Because clients set a budget that caps the frequency of the ads, WhenU is able to juggle several competitors at once.
Within a month, thousands of shoppers a week were seeing Kayak's comparison-shopping ads. And those ads were generating a click-through rate of 8 percent to 10 percent, compared with a 1 percent rate for Kayak's search engine ads, Hafner says. Even better, those shoppers who clicked on the ads were 50 percent more likely than those arriving via banners or search engines to book trips on Kayak.com. Compared with the company's other marketing tactics, the comparison-shopping ads "are at the top," Hafner says. "They deliver very targeted traffic."
Hafner declined to say how much he's paying, but Bill Day, WhenU's CEO, says cost-per-click rates range from 20 cents to several dollars, depending on the product and ad frequency. WhenU clients, he says, experience a click-through rate of between 3 percent and 20 percent, compared with an average of 3 percent for all online ads. Of shoppers who arrive via WhenU, between 1 percent and 7 percent make a purchase, Day says.
Several other companies have released similar tools. Vendio Services, an e-commerce software maker in San Mateo, California, offers a free downloadable toolbar, called Dealio. The application travels with shoppers as they search for products in dozens of major online stores, providing them with links to cheaper offerings. Unlike WhenU, Vendio doesn't charge merchants. Businesses simply register on Dealio's website to have product feeds added to the catalog. The lowest prices get top billing.
Of course, the success of price-comparison ads rests mostly with shoppers, who must download software to access the deals. Day claims that 10 million to 15 million shoppers see WhenU's ads each month. Still, it's too soon to tell whether the tools will really catch on. "Consumers are just getting used to comparison-shopping sites," says Patti Freeman Evans, an analyst at JupiterResearch in New York City. "Pop-ups might be the next stage, but I'm not sure if they're ready yet."
For one thing, pop-ups are often associated with spyware, which has a reputation for sneaking onto computers and wreaking havoc with Web browsers. Day maintains that WhenU's software doesn't record Web movements or generate irrelevant pop-ups. Consumers must check a consent box before downloading the software, and the ads feature WhenU's logo. The up-front approach is a key selling point for Hafner. "We wouldn't use a product that wasn't transparent to consumers," he says. "Our philosophy is that we don't like spam, so let's not spam other people."
To learn more about comparison-shopping advertising and other behavior-based marketing techniques, visit the online trade magazine iMedia Connection, which features news stories, tips, and free e-mail newsletters.