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ASPs are making web site analytics affordable to more retailers than ever before. The next step: Making sense of all the data.
Speaker Michael Crotty shared a story certain to have struck a chord with more than a few Internet retailers gathered at September’s Shop.org Summit. Crotty, vice president of online marketing at Neiman Marcus Group Inc., reported launching a “frenzy” of measurement activity with new web site analytic tools over recent months. The effort generated reams of new data that the retailer in the end found to be less useful than the sales data it already had. His conclusion: “Just because you can measure something doesn’t mean you should measure it.”
Like a sports car intended for street use that can nevertheless reach speeds of 160 mph, a new generation of web analytics is now technologically capable of delivering more analytic power than retailers know what to do with, going deep into customer behavior. By contrast, log files, an earlier and still commonly-used method of collecting and analyzing customer activity on web sites, generally can capture traffic to various areas of the site, but not follow a customer’s movements within a site, or more importantly, their meaning.
“Now that we have all this information, the next piece of the puzzle is how to leverage these reports to make changes to optimize the site,” says Jupiter Research Inc. analyst Matthew Berk.
Reviving a debate
Helping to pile up that mountain of data are the increasing number of web analytics solutions available in an ASP model. With user-friendly formats that enable marketers and merchandisers to pull data rather than having to rely on IT staff to do so, and a relatively low cost of entry, ASP solutions are putting sophisticated analytics within the reach of retailers unwilling to buy enterprise software to do the job.
The initial cost of ASP analytics may be as low as $15,000 versus software that can be upwards of $100,000, according to Jupiter.
The ASP vs. software debate is a replay of the old lease vs. buy argument. For an ASP service, retailers pay quarterly or monthly after the initial set up based on traffic volume. Over time, they could wind up paying roughly the same in ongoing expenses as they would for software they could book as a capital expenditure. But ASP solutions also offer time- and resource-saving benefits by delivering reports that don’t require software maintenance and that are immediately useable.
“When you have a small department and limited tech resources it’s nice to have someone take care of that for you,” says Nathan Miller, e-commerce manger at Northern Tool & Equipment Co., which uses Marketforce, an ASP analytics tool from Coremetrics Inc. Retailers like Miller are helping to drive up the ASP side of the analytics market at a rapid pace. Jupiter Research estimates that by 2006, ASPs will account for 29% of all analytics spending, up from 10% this year.
Asking new questions
The new analytics tools are a response to new demands from Internet retailers for the type of customer behavior measurements long available in the brick-and-mortar realm. Aberdeen Group analyst Guy Creese says much of that demand is the fallout from dot-com failures that hauled freestanding and freewheeling Internet retail operations back into the old-line retailers from which they’d spun out. “The minute that occurred, retailers started asking the kinds of questions they’d asked for years about customer segmentation, for example, that were new to this arena,” Creese says.
But the point when retailers were seeking those measurements was also the point when the dot-com investment market dried up and the economy turned. Retailers have struggled to prioritize technology investments since then and many have turned to ASPs. Analytics, new to the industry and with little entrenched base, offered a ready opportunity for many to try out the ASP model.
“CFOs got into the act and saw they could spend a quarter of a million to get a web analytics solution or they could look to an ASP solution with a service level agreement they could cancel if they weren’t getting the results they wanted,” Creese says. “After being seen as a ‘lite’ solution a few years ago, ASPs have gotten better at offering customized services.”
The scientific method
Adopting an ASP approach has made a lot of information available very quickly to retailers because the companies running the ASPs know what they are doing; there is no ramp-up time for an internal technician to learn the technology. And that’s also made it possible for retailers to amass piles of reports which still produce no gain if they don’t yield intelligence that leads to action.
One of the most effective ways to do that is to put the brakes on broadscale “because we can” measurements and start small. Retailers have only to look at how scientific inquiry is conducted to find a model that works in the application of web analytics.
“Some of the most successful retailers approach their use of analytics by thinking about it in terms of an experimental method,” Berk says. “They have a hypothesis, they ground it in data, and then they make one or two modifications to the site to measure the change.”
Take Dartek.com, the online arm of discount computer cataloger Dartek Inc. The 6-year-old web site ventured beyond log files into more sophisticated web site analytics only six months ago when it signed on for HitBox, an analytic tool offered as an ASP by WebSideStory Inc. Dartek, which serves medium and small businesses, home office and individual consumers, started in April with HitBox and this summer became a beta user for the company’s recently released Commerce analytics product.
Separating web visitors into new and existing customers, Dartek found that while the conversion rate among customers of record was on target, the rate among first-time buyers who’d gone as far as starting a shopping cart lagged. “New customers were coming, then bailing out,” says JoAnn McNeely, marketing projects manager for Dartek.