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
Lands’ End didn’t disclose what it paid for its chat and co-browse features, but retailers will find that cost varies considerably depending on how much capacity and functionality they want to buy, and how they use it. Many are attracted by the potential cost savings to be had in handling queries via live chat vs. handling them by phone.
H.A. Schade, vice president of products at CRM technology provider Kana Inc., cites industry estimates placing web self-service CRM at a cost of pennies per customer session, an e-mail about a dollar and phone call resolution at $25, depending on the complexity of the phone interaction, how long resolution takes and how many people on the marketer’s side get involved in resolving the query. Schade says text chat falls in at less than phone resolution, depending on a variety of factors. For online marketers looking to ration the approach and put it where it generates the greatest return, emerging best practices suggest live chat is used most effectively when it’s offered after the customer has tried self-service, typically in connection with higher-value transactions, he says.
Schade says that a knowledge base with complete information about the company, its products and its policies should be the foundation of any CRM strategy. Given that, “Offering chat after someone already has been offered a way to serve themselves online will be more successful approach for the retailer,” he says. “You’re more likely to have success from a cost-effective customer service standpoint than by offering chat to everybody.”
Schade says the effectiveness of text chat is generally measured in terms of improved customer service, but that’s not the only metric. Some multi-channel Kana customers, seeking to encourage greater use of the online channel, are offering text chat more often and to a broader group than they otherwise would. “They are using it as a way to drive adoption of the online channel, so they are also seeing improvement in online adoption rates, and increased cross-sell and upsell opportunities,” he says.
Similarly, at CRM technology and services provider Talisma Inc., director of product management and strategic alliances Daniel Sears says chat is most cost-effective when it’s used strategically. Talisma, which provides a software suite that integrates knowledge-based text chat, co-browse, phone and e-mail communication management capacity, has seen some retailers boost conversion rates by a factor of three to four times the phone-supported conversion rate when they add live text chat—even more when chat includes co-browsing capacity, he says.
Pre-sale benefits
That lift depends not just on making live chat available, but on using it where and how it delivers the best results. For example, the ability to use chat is beneficial in pre-sale activities, he says. “If customers have a question about the product, e-mail is a non-real-time medium. If customers call, the agent may not be able to help because he isn’t where the customer is on the site,” he says.
Supporting live chat with co-browsing capacity puts the customer and the agent at the same place online, and it can raise conversion rates by a factor of seven to eight times that seen with phone support only, he adds. “A customer can get into text chat; say he wants this bike, these tires, these brakes, this wheel set,” Sears says. “The agent can walk him through a co-browsing session, put it all in the cart, and push it out to the customer. It becomes very powerful because that is very similar to a store experience.”
Proponents argue that fully-integrated solutions blending chat, co-browse, e-mail and phone functionality with a self-adjusting knowledge base in one interface delivers the functionality that allows marketers to strategically resolve different types of customer queries through the appropriate—and most cost-effective—channel. While part of what’s propelled Lands’ End to consistent top-notch performance—sales across channels were $1.6 billion last year, with Internet sales coming in at 30% to 40% of that—has been a willingness and ability to lead with new technology, other retailers not operating on that scale have other concerns.
“This industry is undergoing a real evolution now. Things are changing rapidly and it seems that every six months there is a new product, a better system, a cheaper system,” says Bob Koehler, who as customer service director oversees the web-enabled call center of multi-channel retailer Sierra Trading Post. “Some companies would say otherwise because they’ve been doing this for a number of years, but I think some of these solutions are in their infancy.”
For that reason, Sierra Trading Post recently decided to wait out developments over the next few years. After looking at end-to-end enterprise solutions that fully integrate chat, phone and e-mail with an automated knowledge base in one call center interface, it went in another direction. Satisfied with its existing phone contact management system and not willing to scrap it, Sierra Trading Post instead decided to use the live chat functionality bundled into new e-mail management software it acquired from Cintech LLC., at about a third of the estimated $250,000 to $300,000 cost of other systems he’d investigated, according to Koehler.
“We have automatic call distribution here with good phone switching software that was already paid for. We’d have had to scrap some of that,” he says of the decision to go with Cintech.
Simplifying the approach
Though the phone solution it already had in place was performing to expectations, Sierra Trading Post still needed a better way to mange e-mail query volume that had grown from 8,000 to 12,000 per month over the previous year. The Cintech e-mail management product it chose incorporated up to 50 chat function licenses as part of the package, in contrast to the chat provider Sierra Trading Post had been using. That provider’s license fee was deemed so high by Sierra Trading Post that to save costs, the company already had reduced its original 12 chat licenses to four. The same four IDs were being shared by a larger group of call center agents who traded off on a regular schedule.
But now, “Everybody that I have trained for chat will use their own name. It will simplify things, and we can expand the number of people using chat,” Koehler says. “Cintech was willing to make adjustments to make it work almost identically to the chat provider that we had been using.”
Koehler says his call center costs have risen overall because the new e-mail management system was “moderately” expensive. But his experience of going from paying a premium for chat licenses to getting them packaged in with his e-mail management system illustrates his point that the industry is evolving rapidly. “When we picked up the original chat provider, it was at what was the going rate,” he says. “But with things evolving every six months, the marketplace is more competitive.”
Koehler says live chat is Sierra Trading Post’s call center’s cheapest method of customer contact. His reasoning is that agents get though more sessions more quickly than when responding by phone or e-mail because they can handle four or more chats simultaneously. Agents respond to queries too complex for chat resolution with a request to deal with the query by e-mail or phone. Thanks to the new e-mail management system, e-mail response time drops to as low as minutes during the call center’s posted operating hours, 5 a.m. to 10 p.m., he says.
Know the audience
The most critical piece of advice Gartner Inc. research director Esteban Kolsky gives clients considering live chat is to make sure they know what its use will be before they spend the money on it. “If you are going to spend $450,000 plus maintenance plus the cost per transaction of having an operator ready to go, you are not going to recoup what you invest unless you have high usage,” he says. “But many who implement it don’t know the audience for it and just hope the usage is there.”
While noting that less expensive chat solutions do exist, Kolsky’s opinion is that the most strategic use of chat requires a high degree of automation including a “chat bot” that can pull answers to lower-level queries from a database. That leaves the live chat channel to serious online customers more likely to drive revenue through the interaction.
During a time in which technology vendors have worked to create live chat technology and retailers have experimented to discover its best use, Kolsky notes that chat’s popularity has ebbed and flowed. “Chat is the closest thing to the Phoenix I’ve seen. It keeps growing, dying, and being reborn,” he says. ”But I believe there is a lot of value in chat if marketers do it right. I’ve always maintained that this technology is going to make a difference in customer service.”
mary@verticalwebmedia.com
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