March 5, 2004, 12:00 AM

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

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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.”

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. 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.”

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