Ecommerce Revenues

Last week I had the opportunity to deliver a keynote at eTail West in Palm Desert where I spoke to retailers about how they can maximize revenues by using the collective intelligence of their Web site visitors to personalize the customer experience in real-time. I chose this session topic because increasingly, brands are struggling to adapt and personalize the online shopping experience to their customers’ evolving needs. Retailers need real-time customer insight and the ability to respond automatically with a more personalized online experience that mimics the experience they get when walking into a local hardware store or clothing boutique. This creates happier, more loyal customers, and ultimately increases profits.

After attending the event for four years, I’ve had the opportunity to see first-hand how the market has shifted over time. The discussions at eTail West in the earlier years were primarily about how to manage, measure, and increase transactions. But most retailers have this figured out by now, so their focus has shifted to maximizing their revenues in new ways.

Naturally as the market has matured, retailers have grown to be more concerned with customer experience and service, so it’s no wonder that the three consistent themes at this year’s event were multi-channel customer experience, personalization, and recommendations. Online retailers are looking for new ways to increase their revenues and to achieve better personalization and customer targeting. They are also looking for new ways to maximize revenues by deploying the recommendations they already have in place in a much broader sense. Now that retailers have reaped the benefits of traditional product recommendations, they understand the capabilities these technologies have to tackle the newer issues, such as navigating social elements of their sites and the ongoing quest to improve search.

Just as the market has matured, so has Baynote. Each year at eTail, we’ve seen interest in our approach grow. Listening to the conversations of the attendees and the other speakers this past week, it was clear to me that Baynote’s time has come as retailers hone in on providing a superior customer experience and ultimately how to create happier, more loyal customers.

Perhaps the best evidence of this was a survey I conducted during my presentation. I asked the crowd: “Raise your hand if you think your best salesperson can outsell your best customer?” The result? Not a single person in the room raised their hands. When I asked another question: if the happiest customers are the most important to increasing their revenues; almost every single person in the room agreed. This demonstrates just how powerful peer-to-peer brand advocacy has become to retailers and the bottom line.

I left Palm Desert thinking about what an exciting time it is to be involved in the e-commerce industry, and how proud I am that Baynote’s customers are setting the standard with more sophisticated personalization approaches that are transforming the customer experience as well as their online businesses.

There’s been a lot written on this blog and in the media about how e-tailers can increase sales by tapping into the collective wisdom of their site visitors to optimize the customer experience. While the role that manufacturers play in the online retail channel is pivotal, their vantage point has has been missing from the majority of industry articles and blogs focused on this topic.  This is mainly because manufacturers have been relatively uninvolved in ecommerce strategies for the most part – until recently. Proctor & Gamble’s entry into direct sales through their eStore earlier this year reinforced our belief that the business concept of collective intelligence does not just apply to e-commerce companies.

P&G’s eStore was prompted by a mediocre year in online sales for the consumer goods manufacturer. According to a recent article by Andy McMains of AdWeek, less than one percent, or $500 million, of P&G’s $79 billion in global revenue last year stemmed from online sales via sites such as walmart.com and amazon.com. Through the eStore, P&G hopes to learn from consumers how to better market their products and improve online sales across all e-commerce channels. One of the main goals of this initiative is for P&G to learn about consumer buying patterns and share this customer intelligence with its retailer partners to boost sales.

eCommerce is unique in that Websites allow retailers to quickly identify consumer shopping patterns, and automatically adapt their merchandising programs based on this insight. This is simply not possible in brick-and-mortar stores. With Baynote’s technology, for example, retailers such as Urbanoutfitters.com and Bluefly.com are able to more quickly recognize even the most unexpected trends, such as consumers purchasing two seemingly unrelated products, and then personalize product recommendations in real-time. This improves the next shopper’s experience, builds loyalty and boosts sales.

Since most products are currently sold via retailers rather than directly by manufacturers, manufacturers are often left in the dark on the valuable data that their retail partners can obtain about consumer behavior. While brands have been able to utilize the Internet well to engage with consumers via email marketing, social networks, online product reviews, and a slew of other activities that require their explicit feedback, they have not had a direct link into the less obvious but often more telling data that ecommerce affords. This includes leading, often termed “weak” signals about consumer intent that can only be gleaned from the online shopping experience. Think clicks and hovers, not hard transactions.

This new online environment should enable P&G to monitor and respond to shifting consumer trends in real-time, and we are looking forward to seeing how their customer engagement initiative will change the overall online retail landscape. We predict that the insight gained from eStore will improve both indirect and direct sales, as P&G will be able to better collaborate with their distributers on why certain products are selling well, and how to improve upon the merchandising and online sales strategies. If managed well, the P&G eStore should also allow the manufacturer to bring innovative new products to market significantly faster based on real-time visibility into the online browsing behaviors of their customers.

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.

A new post on InternetNews.com reveals the findings of a new report released by Verizon advising companies on technologies to leverage to cut cost for surviving in the 2009 economy.

 

Software-as-a-service (SaaS) is one of the technologies the company [Verizon] picked. Many businesses are turning to the category of product to cut costs, avoid the expenses of installing and maintaining on-site software.

Check out the latest Baynote Mob Commerce webinar on how eCommerce companies can reduce costs and increase revenues with the Baynote SaaS platform.

Long Tail Economics is about diversifying products and services in order to sell less of more. Doing this increases the amount of options to appeal to more customers. However, diversifying your product line and content often creates more opportunities for users to get lost on a website. Users that don’t quickly find the products, services, or content that they are looking for will seldom spend time fishing for the right page. More than likely, your customers will hit the back button and search elsewhere for their intended targets. A high bounce rate ultimately results in missed revenues.

Improving the user experience on your website serves both you and your users.

What does this mean for websites?

eCommerce:

Delivering the best products at the cheapest prices will drive traffic. However, price and product selection are just parts of what creates a sticky eCommerce site. Here the user experience is greatly measured by the ease of finding products and information about products. Difficulty finding this information will result in bounce back. Furthermore, delivering products that compliment and support the user’s selection provides both increased revenues and a more complete product offering.

Marketing/Lead Generation:

50% of website visitors leave after the first click. Companies continue to spend big bucks on driving traffic to their website without giving the same attention to conventions keeping their users from leaving. A website must have dynamic and robust mechanisms in place to effectively determine the intent of visitors. Delivering the right content, downloads, or forms increases conversion rates significantly and decreases the bounce rate.

Support:

Enhancing customer self-service websites reduces customer support cost in addition to providing a complete customer experience. While maintaining a substantial amount of content is important, ensuring the timely consumption of relevant content drastically reduces bounce rate by empowering your users.

For those of you out there who might not have seen this yet, Jack wrote an article for Foundread.com this past week all about succeeding as an entrepreneur. The article, Get Psyched! Why Understanding Your Right Brain Will Help You Succeed, offers some of Jack’s hard-earned wisdom in the start-up game, including some tips and tricks to overcome the common hurdles of those who are striking out on their own. In the article, Jack discusses three key fears of first-time entrepreneurs- losing your ideas, the fear of hearing ‘no’ and the fear of vulnerability- and offers ways to overcome them without losing sleep. Well worth the read if you’re thinking of taking that next step or even if you’d just like a few tips on being successful from a pro!

With so much money spent on eCommerce, a lot of sophisticated technology has gone into managing this gigantic market from UI design to number crunching to business intelligence. However, a large majority of eCommerce sites lack a more basic and deeply rooted foundation in the human psyche that drives our desire for consumption–that is to “keep up with the Jones.’” But keeping up with the Jones’ is about more than social competition with our neighbor: when many people have tried and liked something we gain confidence that we too will like it. I want what they’ve got because many others have tried it and liked it too. I feel at ease with my purchase decision because it is “safe,” socially speaking. eCommerce, like much of human activity, needs to be a group activity. We need to feel the community and receive support from the community. Individual humans, regardless how much we believe in individualism, are powerless and cannot survive in this world for long by ourselves. Yet for most eCommerce sites, you cannot see another soul there while you are online- and that is where the biggest opportunity for eCommerce site owners lie.

We call the thousands of parallel online shoppers on your site the “Invisible Crowd.” They are your untapped, unleashed hidden community that can boost your online sales by as much as 15% to 50%, as experienced by our customers! Don’t believe the numbers? Amazon.com generates 35% of its revenue by products with user recommendations. The majority of Netflix rentals happen in the same way… Interestingly, they are just scratching the surface of community power but with a major flaw: they are relying on the thing that is least reliable – explicit human feedback, such as a survey with a misleading survey bias. A true Community Guided Web needs to tap into the implicit behaviors of shoppers because “Actions speak louder than words!” With implicit behaviors, the true community power is discovered and used to generate more sales and larger transactions. Then the “silent majority” is heard and served!

It’s easy to say but hard to capture the needs of the silent majority. Yet as a business, it is a must-do. After all, if you can’t serve the majority, your business is not going to go far. In the coming weeks, we’ll discuss some of the key hidden social science principles that can profoundly change your eCommerce business in the way that mirrors real world commerce with the efficiency and reach of eCommerce. Stay tuned…

- Jack