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Multichannel Customer Behavior
By Jim Sterne
You're capturing recency, frequency and monetary data about your customers. You're recording customer service contacts. You're doing your best to capture point-of-sale information and correlate it with direct mail and telemarketing touch-point data. You're trying to integrate your sales force automation systems to keep everybody up to speed on customer contacts and customer desires.
Then along comes the World Wide Web and brings with it something called web analytics. Web analytics is the art and science of tracking what individuals actually do on your website and how they respond to different stimuli (advertising, marketing and customer service). Web analytics allows us to get more granular in our knowledge of each customer. We are moving from the age of demographics, through the age of segmentation, and into the age of behavioral analysis. The effect on the bottom line and on customer satisfaction is significant.
At the start, web analytics consisted of log file analysis: sifting through log files that web servers created as a matter of course. They were never meant to be a business tool, just a transactional record of every file sent out to web surfers in case of catastrophic failure. Unfortunately, log files have turned out to be the 21st Century version of reading tea leaves. "Gee Fred, we got almost twice as many clickthroughs this month as last, but only half as many pageviews. What can it mean?"
The more adventurous took a step past clickthroughs and pageviews to revenues. "Gee Fred, we got almost twice as many clickthroughs this month as last, but only half as many orders with only one third the conversion rate. What can it mean?"
With time came progress. Marketing departments around the world have grown in intelligence in the past couple of years. They've started using web analytics to measure advertising and marketing, rather than just sales results. The persuasion process was instrumented and diagnosed. Small changes were made to see how they impacted prospects' ability to get from awareness to interest to intent to purchase.
We've long played with shopping cart analysis to upsell and cross-sell, but today's eye-in-the-sky, over-the-shoulder surveillance gives us an edge we didn't have before: The ability to classify our customers based on their behavior.
CUSTOMER SEGMENTATION
Sign up for a newsletter at any maternity or baby-focused website and you'll be asked when the baby is due or how old your infant is. The needs of a pregnant woman and a new mother change almost weekly. This industry knows every woman will go through the same stages and segmenting those women by month is simple.
It's a bit more complex to segment your customers when they are buying wrenches. But Snap-on Tools, purveyor of high-end automotive repair paraphernalia knows it can be done. Sending the same salesrep to talk to the same automotive service technicians month after month made it clear that these customers move through an occupational arc, choosing their specialties along the way. Each specialty requires different mechanical and electronic implements to help them get the job done.
Detailed information on tools and their use in the Snap-on online catalog coupled with online training turn those salesreps in the field into career counselors. By recommending an educational path to a technician and following his progress through the courses, an unique bond is formed. CRM? Sure - if you help your customer advance their skills, and track their progress, you're at the ready to fulfill their needs as those needs arise.
WHAT YOU DO INSTEAD OF WHO YOU ARE
Overstock.com is a closeout retailer offering discount, brand-name liquidation merchandise to the tune of a couple of hundred million dollars per year. CEO Patrick Byrne is a big proponent of clustering. He wants to know which of his customers are the same and how they differ. But he's not a fan of demographics.
"When you add up everything you know about your online customers, you can get rid of education, income, children, and the rest of the demographics." Byrne said. "Demographics are foggy data. You can only guess and surmise why people who live in the same postal code might or might not shop the same way, want the same stuff or be willing to pay the same price.
"But behavioral data is sharp," he enthused. "Customers' behavior is a signpost to their needs, so we don't cluster people based on who they are or what car they drive, but by their needs as expressed through their behavior."
How an individual uses a retail site provides more insight into how they might be persuaded to buy than their martial status, age, or income. "Men on a diabetes website will click on an electronics ad seven times more often than the same ad on all other sites. Why? You'll never know - you can only surmise. And it doesn't matter! Just take note and make use of that knowledge."
Byrne offered another example. If somebody buys electronics on their first trip to the site, they always buy electronics during the second visit. If a first time buyer does not buy again within 45 days of the first purchase, they are lost forever. So what can you do with that information? Make sure the electronics buyer isn't given too much of a discount on his next visit and send a special offer on the 44th day if they don't come back at all.
CRM FROM THE OTHER END OF THE TELESCOPE
Web analytics gives us yet another window through which to view the customer. But Dianne Binford, Director of Consumer Direct Marketing at Nine West wants to turn CRM on its head. "A 360 degree view of the customer is all well and good. But we also need to give the customer 360 degree view of the brand."
Integrated marketing means ensuring that the direct mail piece, the television ad, the in-store displays and the website all look alike. Binford is adamant that customers see a united front when they look at Nine West no matter what angle, no matter what method and no matter what media.
When you combine Overstock's behavioral clustering, National Semiconductor's hands-on approach to customer care and Nine West's desire to integrate their countenance we move into a realm of microbranding.
Microbranding is the art of determining what type of company an individual customer is most likely to respond well to and presenting that face to that customer. Every time that customer sees the brand, in whatever venue, it looks cohesive and familiar and is tailored to them at that point in time.
Amazon was first to offer books based on collaborative filtering. If you and five hundred other people liked the same 10 books, then chances are pretty good that you'll like additional books those people liked.
We have reached the end of the practical road when it comes to data capture. We can now collect more data about an individual during a single website visit than we can realistically use.
Web analytics systems have become sophisticated enough to track every mouse movement, every click, and every keystroke. Rather than merely recording which links you click, we can now see which links you considered clicking when you hovered over them with your mouse. We can see how long it takes you to absorb a page. We can tell when your hand leaves the mouse - a sure sign that you took a break from your web surfing.
For purposes of measuring the effectiveness of an individual page, this is an absolute gold mine. Every mouse twitch and every nuance of a visit to your website can be trapped and played back But for purposes of building a profile of who you and what your needs might be, there is simply too much data. So we need a balance between what we can record and what we can use.
LET TTHE COMPUTER DECIDE
Let's say you buy a pay-per-click keyword on a search engine or create a banner ad. People who click can be directed to one of several landing pages. You can then track which page is convincing more people to buy.
The specific page seen after clicking on a specific online promotion contains a goodly number of modifiable components:
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Window size
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Background color
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Font styles
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Font sizes
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Over all layout
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Subsection layout
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Headlines
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Tone of copy
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Length of copy
And yes, the list goes on
A classic testing method suggests coming up with a combination of all of the above that you feel is the best possible and trying it. Put it online and measure everything. Then tweak it. Pick one (and only one) variable and change it (and only it). Then put your new landing page online and try it again ... and measure everything again.
The hard part is keeping your hands, and the hands of your creative agency, the Java programmers in the back room, the receptionist, the CEO and everybody else away from all the other variables. Change only the background color, or only the font and nothing else. That way, over time, you'll find out which variable makes the biggest difference. But you can also employ the computer to do that for you.
Several vendors are offering optimization systems to create a testing matrix. According to Optimost, they can, "generate up to 1 million permutations of the creative execution. Through sophisticated experimental design techniques, Optimost will then test certain combinations of variables to arrive at the optimal values along each parameter."
In other words, it's their job to figure out which variables matter, which variable values are improvements, and which variables barely move the needle. The more people touching down on your landing page, the faster their system will show you which combination of text, graphics and layouts is getting the most people to do what you want them to do.
All THE WAY TO LOYALTY
An Internet tracking system can be built to chronicle how the majority of people are attracted to a website and feed results back to an advertising system so that only the most attractive promotions are reproduced. Darwinism at the speed of light.
A better system can be built to track how the majority of people are attracted to a website, how they wander through its pages and how they do or do not buy. This system can watch which promotions result in the most profitable sales. It can feed results back to an advertising system so that only the most profitable promotions are repeated. It can feed results back to the website design team for insights on how to improve navigation. It can help online merchandisers determine which website elements might have the largest positive impact on conversion rates.
It takes one more step however, to turn this marketing machine into a customer relationship management engine. This near-perfect system needs to have a longer term view of the outcome. Instead of being programmed to reproduce the promotions, navigation and merchandising with the most profitable sales, it would detect which generate the most profitable customers. It needs to look all the way downstream to lifetime value.
Your customers are coming to your website for information, transactions and to get help. Are you making the most of the information they leave behind?
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