Can We Talk?

With some trial and error, online retailers find the payback in live chat

You can increase your sales and cut down on those troublesome abandoned shopping carts with just a little chat. Especially if the merchandise you’re selling is large, expensive, or complicated—or all three.

Just ask Amy Dean, Internet manager for Jackie Cooper Imports, a Tulsa, Okla., dealership that carries luxury autos: Mercedes-Benz, Volvo, Infiniti and Porsche. She handles all Internet sales and sells a vehicle to four out of five customers that she engages in live text chat—a conversion rate that’s the envy of her colleagues who have desks in the showroom.

Tenfold increase in conversions
Al Hurlebaus, senior director of electronic commerce for CompUSA, Dallas, has seen conversions increase eight- to tenfold among customers who seek out chat representatives rather than trying to figure everything out on their own. And customers apparently are happy to see that chat button on the company’s product pages: According to surveys, they say the ability to contact customer service reps through chat is the fourth best thing about CompUSA’s web site, after product selection, service and convenience.

Scott Perry, CEO of EverythingFurniture.com, Corona, Calif., has seen a “significant percentage” of his customer-service interactions move from phone or e-mail to chat since he added the feature in March. “Everyone likes it,” Perry says. “People can be shopping at work, and they can communicate regarding their order without having the boss overhear. And some customers are still on dial-up modems. They can get more information without having to hang up the computer and call.”

Live chat—communicating with customers through real-time text messaging rather than phone or e-mail—is a tricky thing to implement well. Customer service representatives have to compose and type their responses quickly, accurately and grammatically—a much higher performance standard than for either phone or e-mail reps. They must be knowledgeable about a wide range of products (or be sitting near people who are). They have to be adept at multi-tasking. And there have to be enough of them so that one rep isn’t juggling more than two or three sessions at a time during peak periods. Otherwise, the frustrating wait time between answers is likely to alienate the customer and defeat the purpose.

Use of chat is still fairly low in retail sites, according to the Forrester Research/Shop.org report “The State of Online Retailing 2006.” Only 21% of retailers reported using live chat on their sites. But those who have it, like it: 56% of users rated chat a “very effective” tool. (The only strategy that rated higher in effectiveness was having an outlet section on the site, which scored 67% “very effective” among sites that had tried it.)

When to use chat
“A large part of chat’s popularity is driven by the consumer,” says Forrester senior analyst Sucharita Mulpuru. “For the most part, the kind of consumers who are shopping online now are not familiar with text messaging, and they prefer to pick up the phone. In another 10 to 20 years, the story will be different, as the IM generation become shoppers.”

For commodity merchandise or items with a low unit cost, chat is not necessary or worth the money at this point, Mulpuru says. A complex purchase can benefit most, she says, as long as the representative has all the information at hand—and is a real person. “I used a chat tool at the IKEA web site and asked a specific question, and it sent me back an answer that was obviously from their knowledge base. It was clear that there wasn’t a human being on the other side,” she says.

Experts say judicious use of chat—putting the button near the point of sale, rather than plastering it everywhere—is the key to seeing payback. “Chats aren’t necessarily shorter than a phone call,” so saving money, per se, shouldn’t be the goal, says Zachary McGeary, analyst with Jupiter Research, New York. Jupiter surveys show that chats average 7% longer than a phone encounter. Chat might even cause a retailer to spend more on customer service, in order to attract representatives with the quick wits and nimble fingers that make for good chatters. The payoff comes with increased sales, whether it’s a better conversion rate or bigger orders.

Prescreening chatters
Conversion rates go “through the roof” once a customer gets into chat, says Joel Skretvedt, president of CYMedia Group, Richmond, Va., an online marketing firm. That’s particularly true when the representative can identify and approach a hesitant customer and has the authority to sweeten the deal. “If a consumer has responded to a chat invitation, they’re relatively close to buying,” he says. “If the representative can offer an incentive like free shipping or a discount, your conversion rate can jump 15%, and the average order size jumps, too.”

For customers who request a chat session, Skretvedt recommends having a prescreening feature, similar to a voice mail menu, to match them with the most knowledgeable rep for the topic at hand. “It makes the chat time a lot shorter if the rep knows the answer to the question right away,” he says.

Chat has been the topic of intense interest in online retailing almost from the start—and some market leaders like LivePerson Inc. and InstantService Inc., have been offering a live chat product for some time—because of its obvious use a customer service tool. But retailers have experimented with different ways of using it, some more successfully than others. As the Shop.org numbers indicate, take-up has been relatively low. But by now some best practices in live chat have emerged and it’s not uncommon for retailers to redeploy chat after a failed implementation a few years ago, says Jupiter’s McGeary. “Retailers didn’t get as much of a cost savings as they had hoped for, especially when it was used to answer low-complexity questions,” he says. “Now people are leveraging it as a sales and marketing tool, and finding consumers within the context of a purchase—on a product page, or maybe after they’ve started a shopping cart.”

EverythingFurniture.com is on its second go-round with chat. The first time, back in 2002, live chat was an intriguing gizmo, but it actually made more work for the customer support staff, says CEO Scott Perry. Rather than replacing phone or e-mail, it gave customers the idea to use all three at once, in hopes that at least one message would get through. It was confusing for the staff and expensive for the company.

Getting the idea
Perry decided to channel everything through the telephone. He removed the chat and e-mail links and left it at that, until last March, when he decided to take another chance on chat. Now there’s a chat button on the site menu, so that it appears on every page.

This time, the customer base was more sophisticated, and got the idea. About 75% of chats are sales-related, and those often occur when the customer has filled his cart and has one last question before he pushes the checkout button. The other 25% involve problems with existing orders.

Perry has become more sophisticated, too. A few months after getting chat going with an application service provider, he looked at his costs and decided to bring the software in-house. On the recommendation of a competitor, he purchased a package from Kayako Software, Punjab, India, for $599—about the cost of paying for one month of ASP service for his six customer service representatives.

In addition to having chat on the main sales site, Perry has created a separate site, Everythingfurniture.net, for customer service. Visitors can either initiate a live chat or submit a trouble ticket that gets assigned to one agent until it’s resolved. The Kayako software integrates all those functions, so that even if the customer’s agent is out that day, any representative can pick up on the customer’s problem and have the complete history of the exchange at hand. “It’s a much more efficient way to handle things,” Perry says.

CompUSA started offering customers a chat option in June 2005. The first two months were a rich learning experience: mainly, the company learned just how many customers had questions during the shopping and checkout process. Particularly frequent were questions about training classes, extended warranties and other service products, which was a sign that the information on the site wasn’t enough for customers to make a decision to buy those services, says senior e-commerce director Hurlebaus. Chat feedback also led the company to beef up information on many of its product pages.

The best news: Customers who clicked the chat button on a product page were eight to ten times more likely to end up buying something than non-chatting customers, and their average order size was 30% higher. Customers making chat inquiries during checkout were four times more likely to see their purchase through to “Buy.” And those who have chatted are more likely to turn into repeat customers.

The accidental chatter
CompUSA’s chat vendor is InstantService, Seattle, and the company tracks its chat performance with analytic software from Coremetrics Inc., San Mateo, Calif.

At Jackie Cooper Imports, Internet manager Amy Dean handles all the chats that come in (though an assistant monitors the chat screen if she’s on the phone or away from her desk, and summons her if a chat customer appears). The dealership became involved with chat somewhat by accident, because the CEO of its chat vendor, SmartMax Software Inc., of Tulsa, happened to have bought a car there. He and Dean fell to talking about the company’s SightMax chat product, and the sale was made. The product has been installed for about a year, and now she says she wouldn’t be without it. Originally the chat button appeared only on the home page, but a recent redesign has put it on every page. She says the software has more than paid for itself.

“People who do a live chat are serious buyers,” Dean says. She gets one to five chats a day, and 80% of them are looking for a vehicle. (The others are existing customers who want to schedule service or have other questions.) “Some are not very Internet-savvy and want me to tell them what we have. Others know exactly what they want.” Inquiries come from all over: she has sold to customers in Canada, New York and California. While some of them might have gotten in touch by e-mail if the chat option hadn’t been available, “there are definitely some customers that I wouldn’t have gotten without chat,” she says.

Who is that lady?
Occasionally she’ll invite customers to chat. If they click the “decline” button, Dean’s chat screen display turns their IP address red, so that she knows not to bother them again. “Most of the time they don’t accept or decline,” she says. “They just close the box.”

Like all relationships, those between chat representatives and their customers can take unexpected turns. The fetching blonde that’s the face of chat for the SightMax product has caused Dean some embarrassment. Not only does the occasional car shopper ask her for a date, but one day she ran into one of her customers when she went out for pizza with a crew of salespeople from the dealership. Seeing their matching Mercedes polo shirts, he asked if any of them knew Amy Dean. When Amy ‘fessed up to her identity, he said accusingly, “You don’t look anything like your picture.”

Elizabeth Gardner is an Riverside, Ill.-based freelance business writer