September 28, 2005, 12:00 AM

Lets Talk

After years of talk, live chat customer service may finally be happening.

Retailers have been fascinated for years with the idea of providing live chat, instant customer service to their online shoppers. But it’s definitely been a market waiting to happen. Time may now be catching up to live chat.

"Most people who shop online today are computer savvy and prefer the experience of asking somebody right there and then in instant messages about products we carry, shipping, returns policies, and things like that," says Kelly VanEschen, sales and customer service manager of Niche Retail, which conducts up to 100 live chat sessions a day. Niche Retail’s 14 e-retail web sites include SpareBed.com, JoggingStroller.com, ChildCarriers.com and GolfPushcarts.com.

Growth by category

For online retailers, the ability to provide fast, high-quality service to a customer can make or break a sale. Consumers shopping on the web are looking for convenience and speed. The last thing they want is to have to navigate through a retailer’s automated voice-response system or wait a day or more for an e-mail response from customer service.

That’s why live chat is earning the interest of Internet merchants of all sizes. Recent surveys by consultants The E-Tailing Group have shown the proportion of large users of live chat to be holding at about 25%. But president Lauren Freedman says she expects that number to grow. "It will grow in the fourth quarter this year," she predicts. "We’re seeing more in apparel, for instance, and we’ll probably see growth by category."

With live chat, a consumer clicks an HTML button on the retailer’s site to set up an immediate direct connection to a customer-service agent. Using real-time text messaging, the agent and customer exchange information. In another model of live-chat-click-to-call-back-the retailer gives the customer the option of submitting a phone number to the agent, who then immediately calls the customer.

In either case, the agent typically sees the web page the shopper is viewing, and can answer product questions, guide the customer through the site or even enter the customer’s shipping and billing information during checkout.

Personalized service

At its best, live chat can boost sales significantly. "Anywhere from 10% to 15% of shoppers who are just browsing will actually buy if they’re engaged in a chat, versus 2% across the rest of the site," says John Sweeney, senior director of product management and marketing, Sento Corp. Typically, about 5% of people contacted will accept the invitation to chat, he says.

Live chat also gives retailers the ability to address customers’ needs on a personalized basis, increasing customer satisfaction and engendering loyalty, experts say.

But live chat may not make sense for all retailers, particularly merchants selling low-margin items. And a poorly run live chat program can hurt both a retailer’s reputation and bottom line. Consumers waiting excessively long periods for responses from live chat agents are likely to be just as frustrated as customers put on hold when phoning a customer service department. "For the people who do live chat well, it’s really great, but for the people who don’t, it’s a detriment to their brand," Freedman says.

While the general population of online shoppers is growing in sophistication, as Niche Retail has experienced, the market is also absorbing a lot of young shoppers who are moving into their prime buying years and are looking for the same experience at retail sites that they have experienced elsewhere growing up. Live chat, therefore, is especially popular with shoppers between the ages of 18 and 25, says Greg Fettes, CEO of 24-7 INtouch, which partners with Seattle-based InstantService Inc. to provide live chat technology.

"This group communicates using texting and instant messaging," he says. "They don’t even talk on the cell phone anymore, they text on the cell phone. When they go to a web site, their natural reaction is to go to the chat type of environment."

A strategic decision

For the best results, live chat must be deployed strategically. In the early days of live chat, too many retailers approached every web site visitor with live chat, a practice that led to higher costs for little return, says Gregg Freishtat, CEO of Proficient Systems Inc., a web analytics provider.

"It’s like putting an 800-number all over your web site," he says. "All of a sudden you realize you’re losing money because people who are not valuable are calling just as much as people who are valuable."

Many retailers avoid that problem by placing click-to-chat buttons only on the pages featuring high-priced items, such as jewelry and high-end electronics. Others are adopting so-called proactive chat in which a live chat window is sent to the most valuable customers at selected points in the shopping session.

Web analytics play a key role in proactive chat, helping the retailer identify which customers to approach, says Kevin Kohn, executive vice president of marketing at LivePerson, a provider of live chat services through its Timpani Sales and Marketing product, which Niche Retail uses. Analytics also help retailers know when to contact the customer by flagging behaviors indicating the shopper has questions or is running into problems completing the purchase.

For example, a shopper bouncing back and forth between two digital cameras might not be sure which model best suits his needs. An invitation to chat with a customer-service agent knowledgeable about cameras could keep the customer from exiting the site and making the purchase elsewhere. "What’s powerful about it is the visitor is engaging with a sales agent who can probe and ask the right questions that help the visitor get the most out of the experience," Kohn says.

Upselling and cross-selling

For a large online retailer, proactive chat can boost conversion rates to as much as 25% among shoppers who enter into the chat dialog, Kohn says. Live chat also opens up opportunities for upselling and cross-selling. "Because we’re engaging in a conversation where we’re asking them about what they’re interests are, what they’re looking for, we can point them in the direction of what accessories they might be wanting," Kohn says.

Retailers using the Timpani proactive chat product on average experience a 30% lift in average order value, he says.

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