September 30, 2002, 12:00 AM

Talking It Up

Live chat at has doubled customers’ likelihood to buy and increased their average ticket by 40%.

As its name implies, sells high-tech equipment and gadgets. The company likes to project a suitable image to its equally high-tech-oriented audience and so e-commerce managers are open to new technology. For instance, customers accessing the site get a pretty slick special-deal offer that appears out of nowhere and floats across the screen. Thus when live online chat became an option for customer service, TechnoScout was quick to try it. It was just the kind of thing that TechnoScout’s customers would understand quickly and appreciate.

And they did. Customers who engage in live online chat with TechnoScout’s customer service reps are twice as likely to make a purchase as all web site customers and spend 30% more per purchase than all other customers. “Live chat has been great,” says Joel Skretvedt, director of Internet operations for TechnoScout, the consumer brand of TechnoBrands Inc., Colonial Heights, Va. “We get $40 more when a consumer is involved with live chat.”

TechnoScout’s average sale closed through live chat is $175, compared to $135 for all other sales. Moreover, it converts 113% more site visits into sales when consumers use live chat.

Live chat is gradually becoming more popular throughout the retail industry as merchants learn to leverage an evolving technology, including what’s known as software-driven virtual chat, and as consumers grow more comfortable with it. Although less than 5% of retail web sites currently use live chat, other figures point to growing use. Gartner Inc., the Stamford, Conn.-based research and analysis firm, reports that 40% of web sites representing all industries use live chat. And a recent Nielsen/NetRatings study reports that more than 41 million households use instant messaging, the basis for live chat. That’s 40% of all web users.

Instant gratification

“You can’t emphasize too much the American need for instant gratification,” says Sharon Ward, vice president of enterprise applications and head of the CRM group at Framingham, Mass.-based Hurwitz Group consulting firm.


“Live chat is getting more popular and it will likely become standard on web sites. Live chat customer service can help retailers give that personal touch that consumers want without the expense of the real personal touch.”

The benefits of live chat are hard to ignore. If used properly, it can lead to higher conversion rates and higher sales, while also improving-and cutting the cost of-customer service. And the cost of implementing live chat is low, retailers say. Further, the nature of Internet technology itself is causing consumers to demand such service. “E-commerce allows customers to buy at all hours, so they expect to be able to talk to a live person at all hours,” says Marcia Hicks, senior consultant with Kowal Associates Inc., Boston, which specializes in customer service consulting.

Getting results in terms of improved conversion rates and bigger sales, however, takes a highly trained staff as well as intelligent use of technology. At TechnoScout, Skretvedt attributes improved sales performance to a staff of 16 full-time live-chat operators, who are trained in sales techniques as well as customer service, and the ability provided by LivePerson Inc., the New York-based vendor behind TechnoScout’s live chat system, to make product offers based on customers’ click histories.

As is often the case with companies that are quick to embrace a new technology, TechnoScout’s experience with live chat was not always successful. It first implemented a system more than a year ago from New Channel, but Skretvedt says he found it limited the number of chats reps could engage in with customers. While New Channel would typically engage only about 20% of site visitors, or those who appeared most likely to make a purchase, “we wanted to engage everybody,” Skretvedt says. So last spring he switched to LivePerson, which is designed for a broader range of chat engagements. LivePerson ended up buying New Channel in July, receiving a customer list including a cross-section of Global 2000 financial service, telecommunications and software companies based in the U.S. and Canada.

The change to LivePerson technology was worth it, Skretvedt says. Within 45 days of the switch, he notes, TechnoScout nearly doubled the number of gross sales resulting from live chat sessions.

The live chat up-sell

TechnoScout uses clickstream data to support sales efforts by live chat reps as well as to present new advertising promotions to customers.

TechnoScout’s live chat staff gets instant updates on a visitor’s click history and demographics, enabling reps to make the most appropriate offers while engaging in chat with the customer. “A live chat rep can see where on the web you came from, how long you had been there, if we chatted with you before, and then recommend products you’re most likely to be interested in,” Skretvedt says.

TechnoScout processes over 1,000 live chat sessions per day, Skretvedt says. Sundance Catalog, which sells housewares and jewelry and thus has a less tech-oriented offering, handled about 240 live chats a day during the last week in June, up 65% from a year earlier. Sundance has learned that live chat can support a multi-channel selling strategy: Its heaviest chat volumes occur right after a new catalog mailing.

In addition to higher conversions and a higher spend, benefits of live chat may include the lower cost of chat compared with customer service phone calls, though savings can vary widely based on the type of service customers are requesting. “We have customers whose costs have gone from $6 per customer service incident to about $1.10,” says Mike Lande, CEO of InstantService Inc., Seattle, which provides the live chat technology for Sundance.

But that’s far from a universal experience, experts say. For example, companies that run live chat technology on their own systems are more likely to run higher operating costs per session than companies that outsource their operations, says Esteban Kolsky, an e-services analyst at Gartner.

In a study of 1,200 companies across different industries that use live chat, Gartner found that live chat sessions averaged $7.50, compared to $4.20 for telephone calls.

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