Cross Selling Online

The central focus of Gartner’s Symposium/ITxpo this week in Orlando is all about implementing what they’ve recently dubbed as a “pattern-based strategy”.

According to Gartner, a pattern-based strategy “provides a framework to proactively seek, model and adapt to leading indicators, often-termed ‘weak’ signals that form patterns in the marketplace.”  For the past several years Baynote has been committed to helping companies identify these patterns with technology that lets them tap into the collective intelligence of customers visiting their websites. This is something that transactional based systems such as business intelligence (BI) and complex event processing (CEP) simply haven’t been able to deliver. Here’s why:

1) For years BI, CEP (more recently) and other related technologies have helped organizations become much more efficient by automating their interactions with customers. However, in the process of creating huge economies of scale, they forced companies to lose the “mom and pop” touch that consumers expect when they walk into a local hardware store or restaurant. In failing to create digital mom and pop experiences, online retailers and publishers have placed unnecessary emphasis on promoting popular products and content, thereby losing out on profits to be gained from merchandising their long tail products.

2) In addition, these so-called “predictive” applications have historically prioritized the wrong set of indicators, often identifying consumer trends weeks, if not months, after the fact. For example, e-commerce transactions lag other more relevant indicators, such as online comparison shopping, by months. Only by tapping into the power of the collective is it possible to see early signals, spot trends and develop strategies around them before your competitors catch on. This holds particularly true for long tail products. Our customer US-Appliance tapped into the implicit behaviors of its website visitors to merchandise colored washers/dryers months before Home Depot and Best Buy began promoting similar products in their stores.

In Gartner’s recent report, entitled “Introducing Pattern-Based Strategy”, they view “the collective” as being critical to developing a pattern-based strategy. We couldn’t agree more with their position:

The collective comprises individuals, groups, communities, mobs, markets and firms that shape the direction of society and business. The collective is not new but technology has made the collective more powerful — and enabled change to happen more rapidly. The explosion of social software has enabled groups and individuals to rapidly form and rally to a cause — often resulting in significant societal changes.

The result for business is a cacophony of rapidly evolving demands, expectations, inputs and transactions, as well as an opportunity to not only react, but to seek signals of change from the collective. Market trends, some subtle, others strong, are masked by noise, and many enterprises are failing to proactively detect the patterns they rely on to direct future strategy and support investment decisions. In addition to failing to detect these patterns, enterprises are not utilizing new resources to proactively seek signals of change nor do they understand their power to influence individuals and communities.

Val Sribar, group vice president of Research at Gartner, sites Amazon’s and Netflix’s use of recommendation engines as good examples of organizations leveraging collective intelligence to support their pattern-based strategies. Sribar agrees with Baynote that recommendation engines identify new patterns in behavior as customers browse and purchase. While Amazon and Netflix are highly popularized cases, we’ve helped hundreds of other well known brands tap into their collective customer networks to significantly increase revenue through cross-selling and upselling, and higher customer loyalty.

We’re excited to see Gartner take a leadership position on this important issue and look forward to working with them and our customers to bring best practices related to collective intelligence to the forefront of modern business strategy.

I’ve just returned from the Shop.org Annual Summit in

Las Vegas. Despite it being in Vegas and having mild distractions lurking around every corner, I managed to see a good deal of the conference content and not miss any of the sessions I was supposed to lead or participate in.

Many continue to ask whether eCommerce growth has peaked. With countless consecutive quarters of double-digit growth, one has to ask these kinds of questions. Well, the data suggests it has not peaked. According to Forrester analyst Sucharita Mulpuru, ecommerce will continue to grow at a rate of 25% annually for the next many years. The reason? Online retailers not tackling the basics.

As the holiday season approaches, and since it’s football season (thankfully), it’s only appropriate that we talk a bit about blocking and tackling fundamentals. Forrester and other pay mention to the following:

 

1) Completing the Transaction

Amazingly, some leading eCommerce websites are seeing transaction failures as high as 12-14%. For comparison purposes, the airline industry which is hardly the gold-standard in service sees has delayed/cancelled flight rates of about 6%. There are $ millions left on the virtual table as consumers are driven to alternative channels to make their purchase.

2) User Experience

Snazzy front ends that are engaging and interesting may draw some attention, but don’t forget the basics of making it easy to browse, search, add to cart, and purchase. ‘Pretty’ is good, but usable is better.

… and finally…

3) Product Recommendations

The only technology that Forrester recommended were recommendation engines.  Recommendation engines help retailers dynamically up-sell / cross-sell / merchandize their products.   With thousands of products and millions of visitors to an online retailer’s website and automated solution to this is a necessity, but measure the impact so you can truly understand the hard-dollar impact it’s making.

So make sure to do your homework and invest in the basics of selling, merchandizing, and completing transactions.Also, I wanted to give some credit to Jason Billingsly over at Elastic Path. He presented an eye-opening and incredibly engaging session on leveraging social media for eCommerce. If you have a chance, check out his session at Online Market World in

San Francisco in early October, you won’t be disappointed.

On the internet today, people seem to be able to buy just about anything. Have you ever stopped to wonder about that? I mean, I’m not buying personalized garden gnomes, are you? How do these vendors survive? The answer is simple: they’ve put their faith in Long Tail economics and I think its time that we all started to do the same. Why? Because selling more of one thing may not be as lucrative as selling one of more things- and we can show you how to do it. Better yet, we can show you how to let your customers do it for you!

Let’s start with a little history: years ago, before the internet, we went to the store to buy everything. Shelf space was limited so stocking popular items was the best way to make money. Today however, online vendors have an unlimited amount of “shelf space” allowing them to stock not only the popular items, but also the not-so-popular items whose individual sales taper off to create that eponymous Long Tail. These items might not sell like the latest Justin Timberlake album, but the theory behind the Long Tail tells us that you’ll always sell at least one- which means that if you sell one of enough of these items, you could make more revenue than if you DID just sell the latest Justin Timberlake album. Plus, your profit margin and customer satisfaction is much higher with these unpopular products than the popular ones. Take a look at your own site; you’ve got your own long tail too- but are you making the most of it?

The key to tapping into your own Long Tail an achieving a double-digit lift in revenue is to make on-target product recommendations to shoppers and identify your up-sell and cross-sell opportunities. This is done most accurately and easily by understanding like-minded peers and the Wisdom of Crowds. This Wisdom of the Crowds is garnered by observing a site’s invisible crowds or silent groups of like-minded peers whose intent is determined by their implicit behavior instead of their explicit feedback. Just think of it like taking those annoying magazine surveys…do you really exercise daily or watch less than 2 hours of TV a week? We didn’t think so. But by harnessing the implicit wisdom of these invisible crowds and essentially letting your customers sell for you, retailers can understand true buyer preferences and intent rather than using misleading clicks to inaccurately determine their interest. This way, vendors can tap into their own Long Tail.

We’ll be speaking more on this topic as well as giving some helpful tips you can use right away to tap into your own long tail at our session, Profit from the Long Tail: Let your Customers Sell for You, at the Web 2.0 Expo in San Francisco. Please stop by to listen or visit us at booth #5 in the expo’s LongTail Pavilion.