If you’re in home improvement, you’ve no doubt noticed that Sears is everywhere online. And they’re especially strong in some key categories: replacement windows, siding and cabinet refacing. You’ll see their ads in the paid search listings, some organic listings, e-mails and a host of other online advertising channels.
The folks at Sears are undoubtedly smart, so you can assume that if they’re advertising, they must be doing so because it’s profitable for them. Here’s the question you should be asking yourself: “Why them and not me?” Said another way, how can Sears find it cost-effective to advertise across so many channels, while local home improvement companies seem to have so few profitable online advertising options?
The answer is simple: Sears has national coverage and a national network of locations. That means they can buy a much wider variety of online media. In short, they have scale…and they use it.
To understand how this works, consider broadcast advertising. If you serve the Cincinnati DMA, you might buy spots on a local station during drive times. Those times are naturally expensive. But there are leads there, and though they may be expensive, you’ll get your share.
Home Depot and Lowes, on the other hand, have national coverage. They can buy broadcast spots anywhere, anytime, and strike deals for national spots at significantly discounted rates. In turn, their cost per response is a fraction of what a local company will experience.
Let’s now extend that concept to the online world. A local home improvement company might like to generate leads by advertising in an outbound e-mail campaign. But that company will run into various obstacles:
- Very few e-mail providers can target via zip code or demographic area;
- The costs for those providers to send those e-mails on a geo-targeted basis is extremely high;
- Setting up a local campaign is generally much more time-consuming than setting up a national campaign.
- Many e-mail providers don’t want to work with smaller, local campaigns—their fixed costs are just too high to make it worth it; and
Yikes! Not very promising for the local home improvement company trying to generate a few more leads.
Now let’s again consider Sears. E-mail companies actually seek them out, because of the opportunity to run large, national lead gen campaigns. Owners of e-mail lists can rent Sears their entire list of names. And to do so they’ll do the same amount of work to send to 800,000 names as they would to send to 15,000 names.
Advantage, Sears.
This same scenario plays out in other online media channels. Buying banner ads on a popular home improvement Web site is easy for Sears. It’s still almost impossible for local home improvement companies to buy that same media, because most commercial Web sites can’t geo-target their advertising. And, they don’t want the hassle of dealing with so many small accounts.
So Sears uses its scale to buy as much online media as it can – nationally. E-mail, affiliate marketing, search listings, third party leads—they are everywhere. They’re making hay online, to the detriment of local companies. So, can local companies grab their fair share of leads?
That talks to an important opportunity (er, responsibility?) of the manufacturers of the products the local companies sell. And that will be the topic of my next post.
