Success In Retail Requires Improved Targeting of Customers and Constant
Refinement of Tactics, Says Compete
BOSTON, AUGUST 28, 2001 - Research from Compete, Inc. has found that
Half.com has made surprising inroads on retailing giant Amazon`s turf, but
to succeed further, needs to refine its customer acquisition strategy and
work more effectively with niche sites. Compete foresees that eBay`s
planned entry into retail will increase the direct competition between
Amazon.com and Half.com - each will have to spend wisely to win the war for
customers. Each player must refine its tactics to better target paying
prospects since customer acquisition costs are the most significant drain on
profitability for online retailers.
"In this difficult economic climate, it`s critical for all online retailers
to focus and refine customer acquisition efforts," said Derick Sutton, Vice
President, Compete Advisory Services. "In the battle for online retail
supremacy, Amazon and Half.com must identify and reward those referral sites
that deliver the greatest number of customers and eliminate efforts spent on
unsuccessful relationships. By examining online retailing purchase
patterns, we have found that most paying customers come from a small
percentage of referral sites. It behooves Amazon and Half.com - and all the
online retailers who aspire to survive in hard times - to focus their
efforts on the segments that will pay off strategically."
Over the past three months, Half.com has made a concerted effort to attract
more visitors to its site through a mass market referral program. It has
quickly amassed traffic by leveraging the strong brand and devout customer
following of its parent, eBay, through prominent placement of links on
eBay`s homepage. According to Compete, nearly 20% of conversions in June
2001 occurred when a customer began a session at eBay.com or Half.com. In
addition, Half.com formed a partnership with Buy.com to obtain a branded
presence on its site to sell used music and movies. These efforts helped
attract 17.3M visitors in June 2001 or 82% of Amazon`s traffic in the same
time period.
However, in order to make better inroads against Amazon`s competitive
position, Half.com needs to convert a greater percentage of site visitors
into buyers. According to Compete`s research, 50% of Half.com customers
came from only ten sources. To broaden its customer base, Compete
recommends that Half.com target its customer acquisition efforts to more
precisely defined customer segments and develop relationships with
appropriate niche sites that serve specific customer segments or specific
consumer interests.
In contrast, industry leader Amazon is extremely successful in converting
browsers to buyers. By relying on its strong brand, advertising, and an
extensive network of niche-oriented "Associates" sites for customer
referrals, Amazon.com converted browsers to buyers at a rate of five times
that of Half.com in June. Amazon`s June traffic reached 21 million visitors
while its active monthly customer base grew by 12.3% to 1.6M.
>From the Amazon-Half.com competition, Compete recommends that other online
retailers take away lessons for their own online strategies in order to more
effectively attract their target customer base and reduce customer
acquisition costs:
· Monitor partners: Constantly evaluate relative performance of partners
sending visitors to a retailer`s site, particularly partners that refer
visitors who become buyers. Re-negotiate partner compensation to accurately
reflect the value of these relationships.
· Target media buying: Focus expenditures on sites visited by users in
target demographics who have purchased frequently at competitor sites.
Companies have to focus on path and conversion analysis to determine the
optimal means of appropriating these users.
· Adjust media spending: Instead of general advertising on a site, pick
specific sub-domains and pages at referral sites that generate targeted
customer leads.
For the Compete report, "Divergent Paths to Customer Acquisition: Lessons
Learned from Retailers Online; Recommendations for the Future," please visit
http://www.compete.com/news/news.jsp
About Compete
Compete delivers recommendations based on customer behavior to help clients
improve online and offline sales and profits. The company analyzes customer
actions on competitor sites to maximize retention, loyalty, and
profitability, and visitor behavior across the Internet to provide
actionable insight on customer attraction, pricing, product mix, alliances,
site design, and media planning. Clients access a Web-based subscription
service and contract for professional advisory services that address
specific business issues in their industry. Compete licenses clickstream
data representing the on-line behavior of 9 million active online users, the
largest pool available, yet strongly supports individual privacy and does
not license any personally identifiable information.
# # #
Contacts:
Wendy Wolfson
Wolfson Communications
(617) 628-9310
wolfsonpr@mediaone.com
Jill Frankfort
Compete, Inc.
(617) 867-7031
jill@compete.com
Back...
