Why Your Merchandising Team’s Effort is Lost on Your SEM Team, Part 1: Leveraging Your Product Catalog

Retail search marketers have for years longed to capitalize on "long-tail keywords." Unlike "head terms" that are short and have high query volume (e.g., "basketball shoes"), long-tail terms are highly specific and have much lower query volume (e.g., "black Nike Air Jordans"). Not only are long-tail keywords cheaper than their shorter, more competitive head term counterparts, they're more qualified and therefore lead to significantly higher conversion rates. In theory, lower costs and higher conversions should lead to higher return on investment for retailers. Unfortunately, capitalizing on long-tail keywords has proven to be much easier said than done.

For a retailer managing a search marketing campaign around large retail product catalogs with thousands of SKUs, mining the long tail using keywords simply doesn't scale. As a result, search engine marketers (SEMs) largely disregard their product catalogs when generating keywords for paid search campaigns and overly rely on top-selling SKUs, head keywords or broad match.

While such strategies seem practical, they can fundamentally undermine the performance of your campaign because of four primary reasons:

1. Cost: Head keywords are, by nature, readily apparent to all of your online competitors. This leads to head-term bidding wars which drive up cost per clicks.
2. Conversions: Long-tail keywords are naturally more qualified than head keywords. Consider "Kate Spade" (a head keyword) vs. "Kate Spade red heels size 7" (a long-tail keyword). The long-tail keyword probably represents a consumer who is further down the purchase funnel and more likely to convert into a buyer.
3. Marketing: Long-tail keywords give you the opportunity for more targeted marketing. Continuing with the Kate Spade example, you can write a more targeted ad that shows a more targeted landing page for the long-tail keyword "Kate Spade red heels size 7" than you can for "Kate Spade." More targeted marketing leads to more clicks and better ROI.
4. Bidding: Depending on broad match and head keywords will put you at a competitive disadvantage when bidding on high-conversion terms. If your competitors are mining the long tail, they'll be able to optimize budgets by strategically increasing bids on higher converting keywords and decreasing bids on lower ones. Your competitors will not only have more targeted advertising (as described above), but also more targeted bids. The quality of your traffic suffers as a direct result.

To avoid the pitfalls of over-relying on top-selling SKUs, head keywords and broad match, SEMs must use the most important internal asset available to them, the one created by their very own merchandising team: the product catalog.

The merchandising team's product catalog is critical because it specifies the marketer's intent — i.e., what the marketer has to sell. If SEMs regularly market products that the merchandising team doesn't have, it will ultimately lead to lower return on ad spend and frustrated consumers.

For example, let's say I sell "Nike shoes." When entering "Nike shoes" into free online keyword discovery tools (e.g., Google's AdWords Keyword Tool) to help expand existing keyword sets, they might recommend "Nike vintage shoes" because "Nike vintage shoes" is materially similar to "Nike shoes." However, if I only sell new Nike shoes then this suggested keyword is of little to no value to me.

For retailers with high product turnover and frequently changing products, this creates a big relevance and optimization problem. In a recent industry roundtable, Adchemy reported that it found that over half of all retailers present didn't use their product catalogs to generate keywords. Chances are well more than half of all retailers don't actively maintain a link between keywords in their SEM campaigns with products they are selling. This creates a big problem when the products they sell go out of stock. Furthermore, retailers that use their product catalog for keyword generation overly rely on brand names and model numbers. As a result, they undermine the value of the catalog by ignoring keyword product features that are frequently searched for by consumers — e.g., color, size, capacity, occasion, etc.

Taking full advantage of a product catalog isn't just an issue of SEMs working harder. Online retailers might have thousands of SKUs and potentially millions of keywords; fully leveraging the data contained within a product catalog is fundamentally not a human scale problem.

A new tool is needed to optimize the relationship between the product catalog and keywords. The tool needs to do the following:

• mine the product catalog and generate keywords that are relevant to current stock;
• map hundreds or thousands of keywords to a single product;
• map multiple products to a single keyword (e.g., "blue jeans");
• automatically deactivate — or give marketers the option to deactivate or submit lower bids — keywords that map solely to products that have been discontinued or are now out of stock; and
• recommend new keywords based on new products that are added to the product catalog.

Fortunately for SEMs, new technology is emerging that can help them fully leverage their product catalogs in their paid search efforts.

In part two of this series, I'll discuss how closer collaboration between merchandising and digital advertising teams can significantly improve paid search campaigns.

Thi Thumasathit is the vice president of new business at Adchemy, a provider of advertising technology for large brands and retailers.