July 29, 2004, 12:00 AM

Talk, Talk

Live chat gains traction as retailers figure out how to use it.

By Mary Wagner

Live text chat was just another one of those whiz-bang Internet bells and whistles when it appeared on e-commerce sites about five years ago, and it could have stayed that way. Like Flash-powered home page intros that proved frustrating for repeat visitors or community features that didn’t catch on with users or didn’t deliver real value to site operators, chat could have remained nothing more than an intriguing novelty that receded from broader use. Instead, chat evolved and is proving its potential worth.

Some online marketers using live chat say it’s getting them the results they’re looking for. Its cost per customer contact can be cheaper than phone or e-mail, depending on how it’s deployed. It can improve response times compared to other means of customer contact and, when used strategically, can improve the top line by guiding waffling online visitors to a buying decision and even additional purchases.

Working through challenges

But those who’ve enjoyed success with chat have worked their way through some challenges to get there. For as chat’s real utility on commerce sites has become clearer with site operators’ increasing experience, so have the issues that that can hinder its usefulness. Its cost can represent a barrier to implementation, with licenses for narrowly-draw applications coming in at a few hundred thousand dollars and $400,000 to $500,000 for CRM solutions that fully integrate chat with co-browse, e-mail, phone functionality and a self-adjusting knowledge base that adds to its intelligence with every new customer interaction.

Sites like LandsEnd.com wrap live chat into the customer experience to help drive more revenue, while sites like eBay.com and Amazon.com use it successfully to avoid the need for a call center. But while some sites have mastered live chat over the past five years, others are still figuring out how to make it work, and yet others are trying to figure out if it’s even the right vehicle for them.

In its annual merchant survey at the beginning of this year, Chicago-based consultants The E-Tailing Group found that of 350 e-commerce merchants, 25% had live chat on their sites. Merchant reviews on the feature’s value were mixed, ranging from the enthusiastic to the lukewarm. Yet among 40 features they believed important to add to their site, merchants listed chat within the top 10. “It’s on people’s radar screen,” says E-Tailing Group president Lauren Freedman. “More people are interested in it.” So what about the seeming dichotomy between the mixed reviews on its value and the fact that chat also is in the top 10 of features to add? One reason, Freedman speculates, could be that sites lukewarm about chat didn’t execute it well.

“The presence of a feature on a site is interesting, but execution is the only thing that matters,” says Freedman. That means that online marketers aiming for a successful live chat deployment must first ask themselves what they hope to gain from it and whether they can support the cost structure needed as well as the back end elements to deliver a positive experience for customers, she adds. “Then once you decide if you will support it, you have to ask if you can train your people to use it, and can they handle the breadth of questions customers will ask through chat?” Freedman says. “Live chat is great if retailers are good at it, but if you are bad at it, like any customer service feature, it can hurt your brand.”

Taking advantage of evolution

What makes for a good execution of live chat? Where retailers have succeeded in using this tool online, they’ve taken advantage of its evolution on several fronts. Those who’ve used it the longest have gained an understanding of how and when to use it and have refined its deployment to work for them. Call center reps’ abilities are evolving along with the product. Retailers can now choose from chat that integrates with call center functionality such as phone routing or package deals that fold chat into an integrated product that blends chat, co-browsing, e-mail, and phone functionality in one interface that also ties in a self-adjusting knowledge base.

At live chat pioneer Lands’ End, evolution has actually had the effect of reducing customers’ use of live chat. Lands’ End was the first major retailer to implement online live text chat when it added it to its web site in 1999, using technology from WebLine, now owned by Cisco Systems. It’s still a key part of the online sales effort and drives better-than-average results, according to manager of customer services Angie Bellinder. Customers who engage Lands’ End Live on LandsEnd.com are 67% more likely to make a purchase than visitors who don’t use the feature. And among those who convert after using live chat, the average order is 8% higher.

Not as hot

Yet customers’ use of Lands’ End Live has dropped off from a few years ago, when one of its original functions was to give shoppers on dial-up connections a way to contact the company without having to disconnect from the web. “There’s more broadband out there now,” says Bellinder, who also speculates that the rate of use has dropped as customers become more educated about using the site.

In fact, educating customers is the other key utility of live chat on LandsEnd.com, and it’s a major reason Lands’ End continues to develop, promote and support the service on its site, featuring Lands’ End Live on every product page where buying decisions are made. Live chat on LandsEnd.com is integrated with a Call Me Back feature in which shoppers can request a phone call from an agent. Calls are typically returned within seconds, at which time the agent can launch a co-browse interaction. Bellinder says a high percentage of those who engage live chat wind up using the co-browse feature as part of their session. Collaborative browsing “has become a great educational tool for our customers,” she says. “If a customer comes to our site and is not able to complete a transaction, we can actually use it to educate them.”

Potential cost savings

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