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In their short history, web analytics have become widely accepted as an important part of conducting retail sales on the Internet. In fact, 90% of senior marketing executives believe that measuring performance of their web sites is important, according to a recent study by the CMO Council.

But understanding the importance of performance measurement and doing something about it aren`t the same thing. The same study shows that fewer than 20% of senior marketing executives have developed measurement metrics. And even the definition of what should be measured varies widely. For instance, only 23% of online retailers define conversion rates the same way and 66% still use click-throughs to measure ROI of a marketing campaign, according to Jupiter Research`s Online Retail Metrics Report. "The industry still needs a lot of education and even simple definitions of terms," says Brent Hieggelke, vice president of web analytics provider WebTrends, a unit of NetIQ Corp.

Delving more deeply

Further complicating the industry is that web analytics continue to delve even more deeply into online retailers` operations. From monitoring how consumers use a web site, analytics have moved into marketing applications, measuring the success of e-mail and search engine marketing efforts. And now, analytics are moving even beyond that frontier. "The marketing department is the point of the spear," says John Mellor, vice president of marketing at analytics provider Omniture Inc. "The use of analytics has pushed broadly across the organization to finance, product development, even human resources. It`s even pushed up into the board room. We have CEOs who look at click maps every day."

Analytics are also moving even beyond the web site to retailers` other channels to measure how the web affects offline sales and how the offline experience affects consumers` attitudes toward and perceptions of retailers. "Understanding what`s happening in multiple channels is still very much an emerging part of the business," says Larry Freed, president of ForeSee Results Inc., a company that uses the American Customer Satisfaction Index to gauge consumers` feelings about retailers. "But there is a huge focus on learning what customers think in a multi-channel environment."

Industry participants say that analytics have finally evolved to the point that they are allowing the Internet to live up to the promise that was apparent to many users as far back as the late 1990s. "The promise of the Internet is that it is the most measurable channel in marketing and sales," Mellor says. "But in 1999, the tools were not around to allow marketers to tap into that. Now the tools have matured. Leading marketers have been using them and now mainstream marketers are following."

The interpreters

Indeed, Omniture is an example of that trend. 2004 sales reached $20 million, Mellor says, more than double 2003`s $8 million. "We`ve had both a tremendous growth in our customer base and expansion of the use of analytics within our existing customers," Mellor says.

As the amount of information that analytics make available grows ever larger, analytics vendors are increasingly taking on the role of interpreters of data. "We used to all be tool vendors, but customers today are taking this very seriously and asking for more than tools and reports," says Akin Arikan, senior product manager of Sane Solutions. "There`s a big gap between giving them piles of reports and having a better web site. There`s a lot more slicing and dicing and question-driven interfaces going on today."

That is driving retailers deeper into the data, he says. "High-level reports aren`t cutting it any more," Arikan says. "Retailers have already gotten all the low-hanging fruit. They already know, for instance, the 10 most frequently visited pages, the most frequent referrers, the most productive keywords. Marketing departments today are much more informed and so they`re looking for deeper information. They`re looking for the ability to drill down and find nuggets deeper in the data."

Indeed, understanding shoppers` motivation, and not just how they click through a site, is a large part of what ForeSee Results believes it brings to the analytics market. "When some people think of analytics all they think of is clickstream analysis," Freed says. "But knowing what and not why doesn`t do a lot of good. Learning from what people say completes the picture."

Looking behind the data

ForeSee Results surveys a portion of shoppers about their level of satisfaction with the online experience, whether the customer was there to shop or for customer service reasons or for other purposes, asking them not only what they thought of the experience but what other actions the experience will prompt them to take and their likelihood to buy from that retailer in any channel.

But Freed also stresses that traditional analytics play a role in understanding how shoppers use a site. In fact, ForeSee now is working with a couple of analytics vendors to integrate their two measurement approaches to obtain an even deeper view of customer behavior. The two approaches can work together, for instance, by using the ForeSee approach to identify first-time shoppers with a low satisfaction score who had intended to buy but did not, and combining those answers with clickstream analysis to see how the customer actually behaved on a site. "You can look behind the data and gain a level of insight that will allow you to fix the problem," he says.

That level of detail is important, analytics vendors agree, and all are offering more than just clickstream analysis. "Not all visitors are created equal," Hieggelke says. "A first-time visitor who comes from a search engine is different from a first-time visitor who comes from an e-mail."

Further, he adds, retailers must understand their sales and conversion rates by customer segments. "Conversion rates in the aggregate are less than useful today," Hieggelke says. "If you really want to improve your conversion rate, you have to get to the individual segments that come to your site. You have to know what specific action to take to get them to convert."

Visual presentation

All that additional information means additional interpretation. And that, in turn, creates further need for vendors to make the data understandable. And thus many have moved toward visual presentation of data, rather than text or spreadsheet presentation, and combining different results in the same report. "Retailers are looking for this to be way easier," Hieggelke says. For instance, he says, WebTrends places click-through and conversion rates in the same report in a visual format. "That gives retailers the whole picture without them having to flip around," he says.

Adding the interpretation capability leads to an expanded role by vendors. Indeed, when Forrester Research Inc. asked web analytics users what was the hardest part about using analytics, 53% said acting on the findings, more than double the 24% who said pulling the data together. "We have to ramp up what we do for retailers, including education, training and consulting," Hieggelke says.

To that end, WebTrends offers 60 seminars a year in Europe, Asia and North America. The seminars have trained more than 10,000 customers and non-customers, Hieggelke says. It also offers a resource center embedded in WebTrends 7, which it released on Jan. 24. That includes audio/video tutorials, white papers and other educational resources.

Omniture is following that same trend with a number of education and training initiatives, including Omniture University, which includes courses from 30-minute executive overviews to three-day, in-depth training classes, and a Best Practices Group, which acts as a consulting organization. It also offers 30 educational webinars a month free to customers. "There`s a real need for education," Mellor says. "We are helping our customers understand the information they are looking at."

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Marketing analytics

The education and training aspect becomes more important as the duties that analytics are called upon to perform become more complex in a multi-channel retail environment, says Arikan, adding that Sane Solutions sees itself as not just a vendor to retail clients, but a partner.

On the marketing front, analytics vendors are offering products and services that help retailers more clearly understand the results of online and offline campaigns. WebTrends, for instance, bought Web Position last spring, a company that helps marketers achieve higher rankings in and understand the complexities of search engine marketing. "Search marketing is still on fire," Hieggelke says. WebTrends sees part of its role as helping retailers understand when to invest in paid search results and when to optimize their pages for natural language results. With the release of WebTrends 7, WebTrends incorporated search marketing analytics into its core product.

The question of which to invest in is complicated by the fact that the answer keeps shifting. Marketers once thought optimizing pages for organic search would get the best results. Then the favor shifted to paid search results as marketers believed paying for clicks and inclusion in search engine indices afforded them more control over the outcome. Though most industry experts say effective, large-scale search marketing programs should include both, now the fashion is shifting back to optimizing for organic results with the belief that consumers put more value on organic search. "Marketers struggle with where to put their money--organic or paid search," Hieggelkesays. "Many believe today that the bigger opportunity is in organic search. We help them figure out how much to put into organic search."

Omniture, too, is pushing into the marketing arena by partnering its SiteCatalyst product with marketing companies. "The next big push for Omniture is to surround SiteCatalyst with partnerships with vendors that our customers are using in their marketing campaigns," Mellor says.

Customer segmentation

In the most recent example, Omniture is integrating SiteCatalyst with DoubleClick Inc.`s DartMail. "It`s much more than a handshake and a logo swap," Mellor says. "It`s deep integration with information passed back and forth between the two applications." For instance, he says, retailers can create segments in SiteCatalyst, then push the detail to DartMail for marketing analysis, such as isolating all customers who visited three times in 60 days, viewed shoes but never bought. That allows retailers to understand how shoppers are using their sites and then create a marketing approach around those subsets of users.

Omniture has similar arrangements with CheetahMail and Digital Impact. "We`ve had a lot of interest from our retailer clients," Mellor says. "It`s one of the primary pieces of functionality that they are interested in." Similarly, WebTrends 7 includes an arrangement with e-mail marketing services provider ExactTarget to provide e-mail analytics.

Mellor adds that the more sophisticated retailers are taking their analytics multi-channel. "It`s really caught on in the past year," he says. "Retailers are measuring the effects of their offline promotions, including TV campaigns, direct mail and print ads."

Sane Solutions, too, is moving more into marketing analytics. In a recent analysis for a shoe retailer, for instance, Sane uncovered that the company was attracting small buyers but not large buyers. Once the retailer had that information, it was able to craft a free shipping offer that enticed customers to buy more shoes at a time. "That`s a sweet spot for the many retailers who don`t have huge marketing departments," Arikan says. "We allow them to get deeper into the data than they might otherwise be able to and learn sales per customer, average order value, the incidence of repeat buyers. We give them finer grain analytics that allow them the opportunity to do better."

Sane also recently began a program of search-engine keyword analytics for a travel customer, and the learnings from that exercise demonstrate the value of applying analytics results to future campaigns. "If someone searches for Washington, you might think it would be great for travel advertisers, and in many cases it would be," Arikan says. "But if someone searches for Washington and the Watergate Hotel, you can be pretty sure they`re not looking for a place to stay in Washington, D.C. It`s in the details where the money is."

Growing awareness

Even though marketing analytics is a relatively new development, Arikan says there is a growing level of awareness among retailers of the importance of applying analytics to marketing campaigns. "Due to the competitive nature of the Internet and the rising prices of keywords at places like Google and Overture, there is a very good understanding of the value of analytics," he says.

Understanding the importance of analytics and marketing results is as crucial offline as it is online. And it`s in going offline that the challenge comes in. Web-based research is easier to gather and to analyze because it`s easier to intercept shoppers while they`re at or leaving an online store and the survey can be presented to them right then and there. In the offline world, retailers must first learn how to contact customers after they have left the store and then entice them to go somewhere to take a survey. Retailers take different approaches to that problem, with some printing pitches with URLs or 800-numbres on receipts and others collecting customer phone numbers or e-mail addresses for follow-up surveys.

As analytics become more important to the success of retailing, breaking down the barriers between sources of data becomes more important--but also more challenging. "There are so many different data silos for online data, in addition to offline data that sits separately," Arikan says. "It`s important to bring those all together, but it`s also been a significant headache." Sane Solutions offers an open data store that can pull online and offline data together. The company has done so for a large drugstore chain which also operates an online presence. "We can take data from analytics and put it into all their other systems, which allows them to make more informed marketing decisions," Arikan says.

Whether the customer satisfaction data is collected online or offline, the analysis is the same, Freed says. "There must a consistent measurement across channels," Freed says. "So when it comes to marketing, for instance, the survey will include such questions as: Why did you come here? What prompted you to look at these products, did you see something in the store that brought you to the web or something on the web that brought you to the store, was it a TV commercial, and so on."

Predicting behavior

From there, the customer satisfaction measure tries to determine customers` future actions, such as their likelihood to buy from the same retailer in the future. "You really have to understand how what a customer does in one channel affects what the customer does in another channel, how customers migrate from one channel to another and how the experience in one channel impacts the experience in other channels," Freed says.

Many analytics vendors report that they are coming off records years and that 2005 is shaping up as even better than 2004. "We`ve had a lot of new customer adoptions," Mellor says. In fact, Omniture reported a big customer win in February when it announced that Sears was deploying Omniture analytics at its web site. "Sears is a bellwether retailer," Mellor says.

And Sears` adoption of analytics is further indication of the cross-channel nature of analytics these days, Mellor says. "Sears is pushing this data throughout the organization," he says.