E-mail marketing and search engine marketing will be the focus of many Internet and multichannel retailers’ marketing campaigns as they approach the holiday season, according to a new study released by WebTrends.

Forty one percent of the 300 retailers surveyed in the 2006 Online Retail Holiday Readiness Report, said that the holiday season accounts for over 20 percent of their annual revenue. According to Forrester Research, the industry has already experienced an incredible 33 percent compound annual growth rate, and by their predictions is expected to increase by yet another 20 percent, totaling over $200 billion by the end of 2006.

WebTrends report that this year, twice as many retailers (23 percent compared to 11 percent in 2005) will be abandoning price-based promotions to generate online revenue. Free shipping which was clearly the preferred promotional tactic in 2005, has also dropped in popularity with only 45 percent of retailers intending on using it as part of their promotions compared to 62 percent in 2005.

On-site promotions such as suggested items, gift idea centers and featured sales item pages are still considered the most popular this year, despite a percentage drop (compared to 2005) in retailers choosing not to use these features on their sites. The only features to receive a year-over-year boost were personalized promotions and live chat.

Retailers ranked email marketing as the most important demand generation activity for this holiday season, followed by search engine marketing and search engine optimization. Overall, the biggest increases in spending according to the report will be in email marketing (52 percent), search engine marketing (46 percent) and search engine optimization (38 percent). The biggest decreases in activity spending however will be in online banner ads (17 percent), print advertising (16 percent) and broadcast advertising (14 percent).

Eighty percent of retailers said that sending regular emails to customers was their main strategy in building customer relationships. To further create and enhance customer relationships in the future, the activity ranked the highest (31 percent) amongst retailers was to develop a database of clickstream-based information for campaigns targeted to customer interests.

While according to this report retailers are looking to utilize email marketing and search engine marketing to build and nurture their customer relationships, 27 percent of those surveyed are not measuring their activities at all. Over 63 percent of retailers still measure their campaigns on response and activity-based metrics such as clickthroughs and page views, with only 10 percent currently using visitor-centric metrics such as unique visitors and deferred conversions.