Online retail is still retail

Transcription

1 IBM Online Retailing Whitepaper Retail Online retail is still retail The tools are different, but the principles of selling online are the same as those learned over many decades of bricks-and-mortar marketing.

2 2 Online Retailing Many retailers believe the internet has opened up a new world that is vastly different from the traditional storefront environment. While there are significant differences between the two channels, the underlying business principles remain the same. Lessons learned over years of traditional marketing and merchandising can readily be applied online. Marketers are well familiar with the merchandising strategies and tactics behind the design and layout of modern supermarkets. Flowers and the bakery are generally placed at the front of the store to create warmth and a welcoming entry point. Essentials such as milk and bread are at opposite ends of the store so customers must navigate the largest possible number of messages and offers to get from one to the other. Merchandisers know that impulse buys significantly increase the average spend per visitor. Creative offers buy one, get one free or today-only specials strategically placed at eye level also increase revenue. How did retailers work out these strategies? They watched and tracked customers through the store, tried different things, replicated the ideas that worked and eliminated those that didn t. And they kept watching and analysing to fine-tune their strategies. Lessons learned in traditional merchandising can be applied to a website the core principles are exactly the same. Tracking visitors online is easier and less creepy Visitors come to an online store through different doors and make their way to different parts of the site. The retailer s job is to find out what paths they follow and maximise their visit experience. From the customer s point of view, they should enjoy visiting the site and get what they want out of it, so they will come back again and possibly refer the site to friends. The retailer also wants to maximise revenue or its share of the customer s spending while they are visiting the site. Supermarkets pay researchers to watch customers behaviour as they move through the store and draw conclusions from the results. Online, this is much easier and customers don t get the feeling they are being watched. Retailers can automatically track site visitors paths and clicks through a website and see where they came from and went to afterwards. It is easy to tell the difference between new visitors and returning visitors, and between customers who visited the site as a result of a marketing program such as a search engine link, banner ad or newsletter or if they came directly by typing the address of the site. As customer behaviour changes over time and retailers add new pages, products and services to their websites, they can continuously monitor how visitors interact with the site, and make changes to quickly and efficiently respond to market and business needs.

3 Online Retailing 3 You have their attention now what? Web marketing discussions in Australia and New Zealand often focus on getting more hits to the site, the equivalent of getting more people into the store. To do this, retailers typically use search engines, either by buying keywordrelated advertisements on search engines paid search or by designing their sites and the language they use to improve their position in search engine rankings natural search. Many companies spend significant amounts on paid search. The equation is obvious: more hits equals more potential customers. But once people visit a website, how do retailers know the site is doing the job it needs to do? How can they demonstrate a return on investment for their online advertising? Tracking online advertising performance One common technique is for a banner ad to lead to a landing page for that specific campaign, which makes it easy to measure the number of hits to that page. After measuring this response rate to the ad, a marketer can decide to keep, change or get rid of the banner depending on the result. The next step is to follow what site visitors do after clicking on the ad and visiting the landing page. By keeping track of this, marketers can attribute the outcome of each site visit such as buying a product or filling in a form to the banner ad marketing campaign. Of course, customers can be tricky they might follow other links or paths on the website after clicking on the ad. Some may call the phone number listed on the website rather than transacting online. Some may even visit the site, go away for a while, then come back either directly or via search engine. Site owners need to track all these interactions, so they can attribute the results to the original banner ad and properly measure the return on investment of that campaign. A customer might visit a retailer s website many times over the lifetime of their relationship, responding at different times to different campaigns and stimuli. For example, a new visitor might initially click a banner link, place an order with the call centre and then respond regularly to quarterly campaigns and spend an average $150 each time they visit. Knowing so much about a customer is gold for any marketer. The power of many harnessing customer input for website design Whether a landing page is built by an advertising agency, a specialist firm or inhouse, the process is similar the marketing team defines the requirements and feeds those to the creative designers, and then some technical people build it. When designing online advertising, some organisations use A/B or multivariate testing trying out different creative ideas and seeing which plays best before implementing a new campaign broadly. This pre-testing leverages the power of the most important and influential designer of the site the customer. Can marketers capture the same kind of input from customers across a whole website? By understanding the paths site visitors follow, marketers can increase the number of relevant offers they make to customers as they move around the site, just as supermarkets maximise the number of promotions they can expose shoppers to by putting the milk and bread at opposite ends of the store. Technology is available to tag each component of a landing page so the marketer can track each visitor, recognise them when they return and summarise the results of their visits into useful reports.

4 4 Online Retailing Separating the milk from the bread By tracking customer visits and visitor behaviour on the website, marketers can analyse the trends that develop over time. Just as in a supermarket, different groups of users will gravitate to different parts of the site, and tend to follow similar paths. By understanding the paths site visitors follow, marketers can increase the number of relevant offers they make to customers as they move around the site, just as supermarkets maximise the number of promotions they can expose shoppers to by putting the milk and bread at opposite ends of the store. Site owners can often identify the desired outcomes, such as sales or referrals, from these site usage patterns. For example, a prospect who comes to the site directly, clicks on products, browses around and reads a review may generate more revenue, on average, than one who comes to the site and looks up specific product features. Knowing this, marketers can herd visitors down the paths that will generate the best outcome for each visit. They can deliver relevant campaigns and offers which will increase average spend for the visit. It is the online equivalent of putting the milk and bread at opposite ends of the store. In essence, measuring and averaging the results of groups of customers activity on the website can help online retailers fine-tune the design of their sites to maximise the outcome for the customer and the business. This is a process of continuous improvement web marketers constantly analyse the performance of their sites and tweak them at least weekly, sometimes daily. A market of one an individual and a collective Another way of looking at a website from a marketing viewpoint is to think of it as the Melbourne Cricket Ground (MCG). It is a big place, visitors stay for a relatively short time, they come from many different places and they get into the ground in a variety of ways. At and Australian Rules football game at three-quarter time, the scoreboard shows the attendance for the game say, 75,000 on a good day. This is the equivalent of hits on the website; it tells a marketer the number of people at the ground but says nothing about the individuals or their habits. If the volume of visitors increases over time, that is generally good. If it goes down in an unseasonal way, that is probably not so good. But this is a very high-level and unsophisticated way of measuring the success of a sports ground or website. It says nothing about the value of the site or the extent to which any marketing campaigns have driven the increased attendance. To gain a deeper understanding, let s think about John. John goes to the MCG each week his team plays. He parks his car in the city, catches a tram to the ground, always sits in the Southern Stand about four rows back from the fence. He buys a beer at quarter time and a pie at half time. If his team looks like winning, he stays for the whole game, otherwise he heads off at three-quarter time to beat the traffic. There are 75,000 Johns at the MCG on any match day each with a different story. As a result, there are two ways for a marketer to consider John: As an individual a specific opportunity who, by knowing about him, a retailer can market to in a way that maximises the chance of making a sale. As a collective grouping together all those with a similar profile to John who do the same things, and whom the retailer can market to as a collective. Online marketers can use both these approaches, depending on the circumstances.

5 Online Retailing 5 An individual In one visit to the ground, John spends around $58. This is probably not enough information to make informed marketing decisions. If John goes to 11 games during the season, he will spend around $372 on entry tickets over the course of a year. Adding the pie, beer, tram and parking increases the total to $640. Over 10 years, his lifetime visiting value is more than $6,400. By offering him four items to buy during the year a magazine from his club, a pad to sit on, a scarf and a rain cover the stadium could significantly increase his annual spending and his lifetime visiting value. Similarly, an online marketer can understand John s spending habits and recognise him when he returns to the website. Knowing who he is and what he likes, a retailer can deliver campaigns and offers targeted to him as an individual. By automating and replicating the process, online retailers can do this at a very low cost per contact. This makes it possible to target not only the top percent of prospects, who might normally warrant such attention, but also the remaining 80 percent. A collective If the MCG could identify 5,700 people who park their cars in the city like John does, and attract 30 percent of them to park at the ground instead, it could increase its share of their overall spending by nearly 30 percent. By understanding the group trend, it could define a new product offer, such as a special parking space close to the main gate, for this group of people. LIVE profiles hold the key The tools for marketing online are different to those used in the real world, but the underlying business principles are the same. The advantage of online tools is they make it easier to assemble accurate and detailed information about customers behaviour and preferences. LIVE profiles review and act on visitors reactions to site content, site search effectiveness and overall site layout. They measure and act on campaign results over multiple touch points. Even as customers traverse the web, call centre and offline channels, marketers can keep track of who they are and which defined groups or market segments they fall into, and how effective their marketing has been. For more information If you would like to learn more about IBM's ecommerce solutions, please contact rlm@au1.ibm.com or phone Alternatively you can visit ibm.com/smb/au/websphere or for analytics-specific information, Online marketers can similarly pool people who enjoy similar activities and market to these broad groups. They might define a specific offer or product and directly market to the whole group by or post. Knowing about the behaviour of the group and targeting the campaign increases the chances of success. Over time, marketers can accurately predict the outcome of a campaign.

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