Search engine marketing and business performance

CRM as a marketing attitude

Thanks to information technology and network development, e-business has become a new economic mode and has evolved to play an important role in people’s daily lives. This is especially evident with the rise of online shopping – more and more consumers are searching for information and ordering goods online. The internet has become an important carrier of information.

Research shows that more than 80 per cent of internet users use a search engine to hunt for information. However, in the face of massive amounts of information, users are often interested only in the top list of search results.

For businesses wanting to capture this audience, it is vital that their webpages can be ranked and therefore seen first. Businesses do this with optimisation techniques, such as search engine optimisation (SEO) and pay per click (PPC).

SEO is based on end-user behaviour, while PPC depends on the time a user spends on a website, and end-user page hits. Both can improve website performance and online marketing effects. Research, an online media concentrating on China’s e-business research, reports that 42 per cent of internet users hit a business’s advertising by search engine, and 37 per cent of purchase decisions are supported by search engines. As a result, search engine marketing (SEM) is becoming increasingly popular.

What is search engine marketing?

SEM is used to promote sales by increasing the specific keyword exposure. A search engine is a kind of software that collects data or information about websites. The collected data enables a web page to appear in top result lists of search engines by using some necessary optimisation rules, such as increasing some certain keywords exposure or website design.

E-commerce businesses in China

Businesses involved in e-commerce invest in scale expansion and technology innovation, requiring massive capital and labour inputs. Most e-commerce start-up firms try to gain a monopoly advantage by seeking venture capital or investment through initial public offerings. Financing ability describes a business’s ability to attract capital, and this is critical for e-commerce development. In general, financing comes from two sources: external and internal.

In China, businesses wanting to innovate are often constrained by the availability of internal financing. Businesses that have greater access to external private equity financing usually have a greater start-up size. A start-up’s performance is affected by venture capital financing and strategic alliances. A start-up that gains cash and complementary resources will go to IPO more quickly than others. As a result, financing ability plays a key role in gaining critical or rare resources. Due to the nature of this emerging industry, it is important for e-commerce businesses to get adequate capital from venture investment or a bank.

There has been much research exploring the importance of SEM in gaining website traffic and the effect of internal and external financing on firm performance. But there has been little done on the relationship of SEM, financing ability and firm performance. Researchers from Beijing’s University of Chinese Academy Sciences wanted to rectify this. They wanted to find out more about this relationship by studying online retail companies. At the same time, they also wanted to provide some references and guidance for e-business enterprises strategy and operations management.

Search engine marketing research

The researchers focussed on China’s B2C online retailers. The products sold by these retailers included mobile phones and digital products, household appliances, clothes and shoes, cosmetics, luxury goods, food and beverages. B2C websites were chosen as the research sample because China’s B2C market has boomed in recent years. Data shows that in 2012 the Chinese B2C market was 470 billion yuan, a 95.8 per cent increase on the previous year. In the study, performance was measured using operating revenue. Financing ability was measured using capital from venture capital, IPO and others.

How do we evaluate search engine marketing?

Generally speaking, the indicators of SEM evaluation include page rank, page view, the load time and back link. But what do these terms mean?

· Page rank is an important Google measurement of website importance. The value of page rank is given in a range from one to 10. The website importance increases as the value rises.
· Page view reflects how many users access and view the webpage, so it’s an important measurement of website traffic. In practice, page views contribute to an increase in sales.
· The load time is the time that a webpage is loaded, which presents the website quality.
· Back links refer to the number of links received by a web node. The more bank links it has, the more important the website is.

In the Chinese study, the researchers used operating revenue as the measure of firm performance. Financing ability is the capacity a business has to raise money for operations, marketing and management.

E-commerce operates either as platform model or as self-operation model. Advertising, marketing and franchise fees benefit the platform model, while sales revenue benefits the self-operation model. E-commerce business model application can innovate new products and promote the competitive advantage. According to an Research report, the platform model accounts for 60 per cent of the market share in China’s B2C e-commerce.

Research results

In their exploration of the relationship of SEM, financing ability and business performance among China’s B2C e-commerce businesses, the researchers noted these results:

· Business performance has a strong positive relationship with page views.
· There is also a relationship between financing ability and back links, though this connection is not as obvious.
· Financing ability is strongly connected with firm performance and back links.
· Back links have a strong relationship with page views and page rank.
· In practice, the increase of back links and page rank will lead to an increase in page views.
· The researchers also found more users means more revenue.
· The number of page views is strongly linked with e-commerce business performance. This result shows that users are the core resource in e-commerce and so e-commerce businesses must use SEM to attract users. This also highlights the importance of strengthening consumer relationship management.
· Financing ability increases when e-commerce firm revenue decreases. This is because massive capital inputs are used as extended reproduction. The result highlights the paradox of massive inputs and low returns to inputs in e-commerce. The returns of inputs cannot be present immediately because it has a long lag time.
· A business model and SEM have a strong positive relationship with e-commerce business performance. In order to gain long-term competitive advantages, it is necessary for managers to focus on business model innovation and SEM.
· The shorter the load time, the better e-commerce business performance is. So, one of the aims of SEM is to shorten the load time and improve website quality.

Effective CRM systems: A marketing attitude
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