Loyalty trends and best practices

Google Shopping Rollout Another Example of Increasing Acquisition Costs

by Matt Ellinwood
September 18, 2012

An excellent post earlier this month on Internet Retailer captured the magnitude of the changes occurring as Google transitions from the method for listing products that's been in place since about 2002 to their new product, called Google Shopping.

eCommerce Sales Funnel
As the article details, retailers have already seen significant declines in the number of free clicks that Google's product search is sending them. For growing retailers with limited budgets, this is an especially painful hit to growth, as it translates directly to an increase in the cost of customer acquisition, regardless of whether they choose to invest in paid product listings or not. Google's action is part of a larger Google product trend. For the past several years, Google has methodically looked for revenue opportunities and has changed its core search technology to create more opportunities to monetize. I saw this personally a few years ago with changes to local listings--my product performance suffered and Google gained based on changes it made to the search algorithm and the display of results and listings.

This is simply part of the larger trend in eCommerce that is now years old--increasing competition means high costs of acquisition. In fact, this is the trend that led 500friends' CEO Justin Yoshimura to found the company. He struggled with high acquisition costs and noticed that what defined successful retailers was to either have very high customer lifetime value or to have uniquely low acquisition costs. It's never been more important for retailers to invest in attracting and retaining their best customers to drive higher lifetime values.


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