The Series B round for Witherspoon’s Draper James brand was led by San Francisco-based Forerunner Ventures.
Once seen only as a customer service option, live chat now is becoming a sales tool.
When online retailers first adopted live chat, many saw it as a less expensive way to respond to customers’ questions than the telephone or e-mail. But increasingly e-retailers are discovering that using live assistance techniques to answer a customer’s question at just the right moment can mean the difference between a sale and an abandoned shopping cart-and can lead the consumer to spend more.
With that in mind, more e-retailers are putting a customer service representative a click away. That click in most cases initiates a text chat session, like an instant message exchange; in some cases, the customer is prompted to type in a phone number so an agent can call.
These live chat and click-to-call services can increase interactions with customers by up to 20%, JupiterResearch estimates, and involve other costs. But the added revenue far outweighs the costs, says Sam Bruni, director of customer experience at skiing and outdoor gear retailer Backcountry.com.
Up the conversions
Live chat produces a conversion rate of 15-20% at Backcountry, roughly 10 times the 1.7-2.0% buy rate for all customers, Bruni reports. It also produces higher orders. In one week this spring customers who chatted ordered $224 on average, versus $135 for the site overall. “We’ve taken what would be viewed as a consumption center-customer service-and turned it into a profit center,” Bruni says.
Backcountry is not unique-56% of retailers that used live chat said they found it a useful tool, according to the State of Retailing Online 2006 survey by research and consulting firm Forrester Research and retailers organization Shop.org. But live chat is still relatively new-and click to call even newer-and many e-retailers are still feeling their way, trying to decide, for instance, whether to engage consumers in chat or wait for them to ask for help.
Only a minority of e-retailers offer live assistance. An annual survey of the top 100 online retailers by consultants The E-Tailing Group found 29 offering live chat last year vs. 27 the year before. The survey asked about click to call for the first time in 2006 and found only three sites using it.
But vendors say demand is building. About 40% of the small and midsized businesses signing up with call center operator 24-7 INtouch request live chat today, 10 times the rate of a few years ago, says Greg Fettes, president and CEO. 80% of those businesses are retailers. Live chat accounted for 1% of the company’s revenue three years ago, 5% last year and should reach 10% this year, Fettes says.
Many retailers initially offered live chat only on customer service and help pages, says analyst Zachary McGeary of research and consulting firm JupiterResearch. They were trying to reduce the cost of answering customers’ questions, figuring an agent who could handle only one phone call at a time could respond to several common questions simultaneously via chat. But McGeary says self-service features, such as Frequently Asked Questions pages, have proven more cost effective for handling routine queries.
Today, he finds, more retailers use live assistance to boost sales, especially of pricey or complex items that consumers weigh carefully. “For the most part, when companies are looking to deploy chat, they’re not looking at contact deflection, they’re looking at targeting consumers when revenue is at stake,” McGeary says.
Agents can boost sales at the moment of purchase by suggesting add-ons, such as a memory card with a digital camera or a carrying case with a laptop, says Kevin Kohn, executive vice president of marketing at live chat provider LivePerson Inc. He says LivePerson clients typically report average orders go up 25-30% when a customer chats.
HP Home & Home Office Store, the e-commerce site of computer and printer maker Hewlett-Packard Co., illustrates the shift from using chat for customer service to sales. HP initially put chat buttons only on customer service pages, but found consumers asking sales-related questions. The company upgraded to a platform from Talisma Corp. last year and now offers on every page four assistance options: live chat, click to call, a toll-free number and an e-mail address.
HP says sales are up, especially from click to call, but would not provide details. Other retailers also report a positive impact on sales. Computer equipment retailer CompUSA says those who chat are 10 times more likely to buy than those who don’t, and that their average order is 50% to 80% higher. PlumberSurplus.com says chatters are twice as likely to buy, although the plumbing supplies retailer does not find an increase in average order size.
But results and practices vary. Headsets.com, which sells phone headsets and accessories mainly to businesses, uses live chat to answer questions, not to sell. “For most customers it’s not a convenient ordering mechanism,” says Mike Faith, CEO. “What it’s good for is asking questions and getting information back.”
The top online retailer Amazon.com, says live chat was not well received by customers in a test a few years ago. Click to call is a different story. Amazon has replaced the toll-free number on its site with a click-to-call service from eStara, a unit of e-commerce platform provider Art Technology Group Inc.
The reason? The agent who calls back already has the customer’s account information on screen-the customer has to sign in to get assistance-and knows what page the customer was viewing, information the agent would not have if the customer called a toll-free number, says an Amazon spokeswoman.
Consumers seem to like chat. An E-Tailing Group survey found 72% of online shoppers considered live chat either “very” or “most” important when buying gifts online.
And an online survey last fall of consumers who had been in touch with a contact center in the past year by Genesys USA found 31% preferred live chat to speaking on the phone. Among those 18 to 39 years old, that went up to 43%, suggesting chat’s appeal for consumers accustomed to instant messaging and text messaging on cell phones.
What it costs