SPONSORED SUPPLEMENT: Web analytics: The key to profitable online retailing

Internet Retailer Web Design Conference 2009

Just as web retailing is growing up, so are the services that support it. Nowhere is that truer than with web analytics. No longer the province of the tech department, the new breed of web analytics is easy to use for marketing and business managers, allows users to view results of activities outside of their own web site, such as marketing campaigns, gives retailers a cross-channel measure of customer activity, allows retailers to test marketing approaches and web site designs, and is available on an outsourced basis and as licensed software. “Web measurement tools are evolving along a continuum from simple page-hit counters to core business analysis applications,” observes Forrester Research Inc. analyst Bob Chatham in last year’s report “Why Web Site Analytics Matter.”

Research company IDC puts the total analytics market at $257.2 million last year, up 17% from the year before. It projects $417.9 million in 2007, 62% higher than last year, with compounded annual growth of 13.7% from 2001 to 2007. The market is fragmented with 19 vendors accounting for 63% of the market in 2002, IDC says. And while IDC reports that the five largest analytics providers controlled 44% of the market in 2002, up from 39% in 2001, enough small vendors are coming on strong to indicate an expanding market.

Ease of use

Because the web changes the speed with which retailers operate, ease of use is an important development as retailers want to know what’s happening and why—and they want to know it now. “The end user of web analytics has migrated from being in the IT department to being a marketing or business user,” says Rand Schulman, chief marketing officer of analytics provider WebSideStory Inc. “They tend to be slightly technophobic so it better be simple.”

Simplicity can take a number of forms. Often it starts with reports. Omniture Inc.’s Site Catalyst product, for instance, offers what it calls a click map which presents a graphical representation of what visitors did on a web site. It allows a web site manager to view the actual web page and monitor, by virtue of colors and dots on the page, where customers clicked and what actions they subsequently took. “It’s been a huge hit,” says John Mellor, vice president of marketing. “It’s one of the biggest reports that’s run on our system. People love to see how user traffic interacts with the web page.”

Even without graphical representation, analytics vendors are making reports easier to use and understand. NetIQ Corp.’s Webtrends product generates multi-dimension reports so a retailer can measure, for instance, new customers against repeat customers, track buying club members’ behavior against all other customers’, and organize customer actions into any variety of segments that can then be compared against one another. “We can create multi-dimensional reporting without the user having to go to multiple screens,” says Brent Hieggelke, vice president of marketing. “It’s very frustrating to have to go to five, six or seven reports to get the drill-down data that you need.”

WebSideStory’s new HBX—formerly Hitbox—product includes a dashboard that is designed to look like an automobile or airplane dashboard with data represented in analog gauges. “It yields very specific data at a glance,” Schulman says. WebSideStory, which IDC ranks as the largest pure-play analytics vendor and number 3 of all analytics vendors, also provides a site overlay for a representation of what’s happening at the site.

Ease of entry

Ease of viewing is only one aspect of easy-to-use reports, however. The other aspect is data entry, an area where analytics also have made strides. “We have the graphics in the dashboard. All the user needs to do is type in the thresholds,” Schulman says. “They can enter, for instance, the number of leads they got and the dollars they spent to get them, or any other metric they want to measure.”

Webtrends, whose parent NetIQ IDC ranks as the largest analytics vendor, also offers a dashboard with a simple user interface. “It’s a small appliance that can give high-level statistics,” says Jason Palmer, vice president of product marketing and product management. Among the statistics that top executives monitor frequently are sales, category sales, top products, page views and visits. “It’s very easy to produce the top 12 statistics that a senior level executive wants to look at throughout the day,” Palmer says.

At the same time that analytics are becoming easier to use, developers are also expanding analytics’ role. “For multi-channel retailers, a high percentage of the time their customers are touching them in multiple channels. It’s important for retailers to look at linkages between channels,” says Larry Freed, president and CEO of ForeSee Results Inc. “If there is a different series of metrics in place for each channel, retailers run the risk of looking at each channel in isolation.”

ForeSee operates on a different basis from other analytics companies in that it bases its metrics on customer satisfaction through a process that requires direct input from customers and not information gleaned by how a customer behaves on a web site. It employs the American Customer Satisfaction Index methodology. Until now, it has conducted surveys of online users to gauge their satisfaction with the online experience. Now it is rolling out a new service that will employ other methods to measure satisfaction, such as POS data, customer interviews in stores, e-mail surveys and random phone calls to return a view of customer satisfaction across channels.

Cross-channel metrics are important, Freed says, to ensure that the channels get credit for the activities they generate. “An abandoned shopping cart may not be an abandoned purchase,” he says. “The customer may print out the cart, then go to the store to buy the item. But the web site gets no credit.”

Not just nice to have

Further, Freed notes, the web is playing an increasingly important role in a retailer’s success. “A web site is no longer just nice to  have,” he says. “It’s an acute part of a retailer’s business. Web retailing is approaching the critical mass stage.”

The problem with understanding multi-channel retailing and the effects of each channel on the others is, Palmer says, “There are so many different demand generation channels. There are partner networks, search, e-mail campaigns as well as mass marketing efforts. It’s really hard to understand which efforts are driving the different customer segments.” Analytics provide insight to retailers by allowing them to track not only the source of a visitor, but also what that visitor does at the site.

Tracking customer behavior in multiple shopping venues, though, is not the only way in which retailers are using web analytics across channels these days. Webtrends has partnered with Akamai Technologies Inc. to perform geolocation services for retailers. Notes IDC’s report: “The Internet is often incorrectly thought of as being free of geographic linkage. In situations where location is important, this data can be crucial in analysis and planning.”

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Tracking print ads

Knowing that information offers a number of benefits, not the least of which is understanding how effective newspaper ads are. “In the past, it was difficult to tell  how your web site traffic related to local print ads,” Palmer says. “This will really tell you where your traffic is coming from.”

That information can, in turn, have benefits in advertising spending. “This can help you prioritize which markets and which papers you want to advertise in,” Hieggelke says.

While the role of analytics in offline marketing is new, applying analytics to online marketing is a well established practice. But now that role is expanding. Many analytics packages today come pre-programmed to allow marketers to conduct A/B/ tests of online marketing campaigns. “A/B testing is the next level of sophistication for retailers,” Mellor says. With advanced A/B testing capabilities, retailers are no longer at the mercy of time, Mellor says. “Previously, they would measure the click rate, then at the end of the cycle, measure the conversion rate,” he says. “Now they can know in real time where people are landing and what effect product presentation has on conversions.” Meaning, he adds, that retailers can change pages, images or product positioning in reaction to how shoppers are responding to marketing campaigns. “You know within hours which page, product or area is performing better,” he says.

More science than art

Further, having such information can relieve a lot of debate within an organization as to what’s working and what’s not. “Until now, marketing skills have been a healthy blend of science and art,” Mellor says. “The good news is that it can now become more science than art. Most of our customers have a statistics orientation; they understand that the answer is in the numbers. This takes the opinion out and lets the numbers speak for themselves.”

The marketing capabilities of analytics can result in real savings and more effective marketing, providers say. “The end benefit for marketing vice presidents is that they can very effectively allocate marketing dollars because they have all this information at their fingertips,” Hieggelke says.  “They have a complete view so they can decide which campaigns are working. It’s Nirvana for a lot of marketing directors.”

In addition to A/B testing, the new breed of analytics allows retailers to compare visitors to pages and content areas and determine the relationships among the areas themselves and the common characteristics of users. “It can be important to view the relationship between two pages or content sections,” WebSideStory’s Schulman says. “You can learn a lot if you know that one group of visitors viewed Page A, but didn’t view Pages B, E and F.”

For all the sophisticated analytics capabilities that vendors are developing and retailers are employing, analytics often gets down to the basics of web site performance. Many retailers still use analytics to make their web sites better places to shop. Overstock.com Inc., for instance, recently used Omniture’s Site Catalyst to reduce the number of steps in its checkout procedure. “It was a seven-step process that had people bailing out even at the very end,” Mellor says. “They didn’t know if people thought they were done and so they left, or if they were getting tired or what was happening.” Omniture, which IDC ranks as the 9th largest analytics vendor, provided its Site Catalyst product to test various shopping cart configurations. Overstock eventually whittled checkout down to three steps. The end result: more than 70% of customers who started the checkout process completed it.

The future of web analytics may very well be the continued expansion of the application of analytics. Just as it has grown from monitoring and reporting customer behavior at web sites to allow the tracking of marketing campaigns, some see other services becoming integrated into analytics. WebSideStory, for instance, has an arrangement with site search technology provider Atomz Corp. to help retailers understand what customers search for at a site, with that information feeding into a retailer’s merchandising decisions.

Pushing the definition

In addition to the expansion of analytics applications, the definition of analytics is being pushed by ForeSee Results. “Traditional analytics are very valuable, but what we do is fill in the missing pieces so you get a complete picture of the metrics,” Freed says. “Analytics will show you what people have done, but then you need to know what people will do. Until now, that’s been achieved on a trial-and-error basis. We bring a much more scientific approach.”

By interviewing customers, ForeSee can help a retailer understand future behavior and how that anticipated behavior will affect a business. “If 1,000 people come to your site and buy a widget, that doesn’t tell you if they’re going to come back, if they’ll recommend you to others, if they’re coming to the store, if they’ll buy again from you next year, if you met or exceeded their expectations,” Freed says. In fact, ForeSee Results has an agreement with an analytics company to provide combined services so retailers can gain both the measured analytics information and the customer satisfaction information. “Companies are realizing that they need to tie things together,” Freed says. “They’ve been using point solutions and what they need is a global view.”

On-demand offerings

In addition to a broader definition of analytics, another factor in continued growth in the market is the ability of analytics vendors to offer services both as licensed software and on the ASP model, whereby the vendor hosts the application for the retailer. IDC predicts that the two offerings will co-exist in the near term, with ASPs gaining share if retailers have confidence in the security of ASP offerings. “The whole category of on-demand services is exploding,” Schulman says. In fact,  WebSideStory has trademarked the line “on-demand web analytics solutions.” “People do not want to get involved in large enterprise software licensing deals these days,” he says.

In the end, most analytics programs boil down to improving the customer experience so customers take a desired action. And today, that action is not necessarily a sale. It could be any of a number of actions, or even a series of actions. “Users can apply conversion event measurement to anything they want to apply it to—sales, leads, stickiness,” Schulman says. “They need to identify their key site metrics and then tie those to their own definition of a conversion event.”