You might not think of a beef retailer as a hotbed of advanced technological thought. But Nebraska-based Omaha Steaks can lay claim to being at the forefront of a number of trends in both marketing and technology. As the Table Supply Meat Company, they began shipping their corn-fed beef to the nation’s restaurants by train in 1917. When freezer technology reached the required level of development following World War Two, the company—now Omaha Steaks International—switched from the rails to the mails and started marketing its products directly to home consumers.
The founding Simon family was also quick to see the potential in this Internet gizmo that began to coalesce in the late ‘80s and early ‘90s. They placed their first Internet ad on the old CompuServ network in 1991—so long ago that the ad was entirely text-based. “In those days, you had to wait two hours for a picture to download,” says Jim Paschal, Omaha Steaks’ director of online marketing. “The younger members of the Simon family”—including company president Bruce Simon, senior vice president Todd Simon and other family members on the executive team of the privately held company—“really caught on early that the Internet was going to grow and online shopping would become the wave of the future. So they felt investing the time and effort to give it a shot would pay great dividends.”
Great indeed, especially recently. Sales at OmahaSteaks.com grew to $85 million in 2004, a 23% increase over the previous year. And both Paschal and online marketing manager Mike Robinson give much of the credit for that bump to the company’s early embrace of yet another emerging technology: search engine marketing.
The company’s early search efforts two years ago were fairly haphazard. “We were just throwing keywords out there without really measuring or understanding them,” says Richardson, a 15-year veteran with Omaha Steaks who holds the primary responsibility for in-house management of the company’s SEM program. But those efforts have grown a lot more focused over the last six months to a year. “We began to take an aggressive approach to SEM, doing some testing of creative and offers, performing targeting a bit better, and then integrating search engine marketing with a lot of the e-mail campaigning we do to our customers,” he says.
One key element was testing the offers that ran in the paid-search ads to determine which produced better click-throughs and conversions. This meant doing A/B testing on price offers versus “12 burgers free” add-on deals. Robinson says the company was looking at click-throughs from these ads, but more basically at sales conversions. “When you’re bidding on terms like ‘beef’ that are going to cost you $2 to $3 a bid, you want to see those conversions to keep your ROI intact.” Sales conversions at OmahaSteaks.com now run about 2.75%, on an average of 850,000 monthly visits.
The company has also increased the number of search engines on which its ads are placed, from 30 or 40 pay-per-click engines a few years ago to 164 this year. That alone will help contribute to an expected 50% increase in its SEM budget this year. Omaha Steaks will also bring in search optimizer iCrossing to make sure their Web pages get crawled in the most effective way.
The company has also gotten good results from extensive partnerships with online marketers such as MSN Shopping, Yahoo Shopping, Amazon and AOL. In fact, they were the seventh merchant to sign a shopping deal with America Online back in 1995. “Back in those days, we actually sold more through AOL than we did through our own Web site,” says Paschal. Omaha also has relationships with comparison shopping engines Shopping.com, PriceGrabber and Froogle, to which they feed product information directly.
Paschal, formerly marketing director for Omaha Steaks’ mail-order business, says the company’s direct marketing roots have given them an edge in developing the online marketing channel. “When we evolved into online sales, we took the fundamentals that we had learned in the mail-order business and transferred them to the Internet,” he says. “I think all direct marketers who were used to analyzing, testing and tracking offers long before the Internet have had a much easier time and a much smaller learning curve in getting onto the Web than folks who were coming from retail or other categories.”
At the moment, online is still a secondary channel through which the company sells its 300 to 350 products ranging from beef and seafood to sauces, cookbooks and pet treats. Direct mail still produces most of the revenue; Omaha Steaks also has 69 retail stores in 15 states, and is looking to increase that number.
Like many online sellers, Omaha Steaks separated its Internet marketing group from the marketing team serving the rest of the company. But it was a brief split, and the online and offline marketing efforts have been run out of a unified department for the last two and a half years. The company’s best customers typically order from more than one channel, says Paschal, and so it’s important that marketers integrate all the company’s channels smoothly. “We found that the sum is greater than the individual parts,” he says. “Online marketing and SEM can have important synergies with our catalog and retail campaigns.”
Affiliate marketing is another way Omaha Steaks has chosen to leverage its Web presence, and this too has an impact on search—mostly in terms of policing their efforts. “We have a handful of affiliates who are very effective at search engine marketing,” Robinson says. “But we limit the keywords they bid on and work with them to make sure that their offers complement rather than conflict with the ones from Omaha Steaks.” Affiliates are also not permitted to bid on the company’s trademark terms.
Robinson also says that the company’s affiliate marketing campaigns should not be too badly hit by recent policy changes in how Google’s AdWords program treats affiliates’ ads. Those changes, announced in January, are intended to ensure that users don’t see a column of duplicate ads from affiliates all pointing toward a merchant’s primary Web site. Some affiliates have objected because sending click-throughs to the merchant site is the surest way to win conversions. The change has made the affiliate marketing environment a bit more complex. Paschal and Robinson say the company is now meeting with its affiliates to discuss strategies but doesn’t expect any long-term impact on online marketing.
“It will be a bump in the road,” Paschal says. “But not a roadblock.”
