Understand Online Behavior -- Or Die

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By Matt Cutler
Co-founder, NetGenesis

Imagine being a custom tailor and trying to fit a customer’s clothes without taking measurements. Sure, you could make a best-guess, but you’d never really provide that customer with a proper fit. As a result, you’d lose business.

That’s exactly what 77 percent of all online businesses are doing. According to Forrester Research, only 23 percent of companies improve online operations by using data associated with how customers use their Web sites. As experts agree and the brick-and-mortar world has demonstrated, understanding and reacting to customer behavior is the best resource for acquiring and keeping customers.

Forrester leaves us with the sobering pronouncement that fewer than 200 business-to-business sites will be standing in 2003. Will understanding “E-Metrics” be a key differentiator for survival?

Brick and mortar companies use well-understood, well-defined metrics to describe business performance and understand success. While e-business shares many principles with the offline world, Web sites require a fundamentally new approach and perspective to business analytics.

Today, while many e-businesses are struggling with the concept of hits versus page views for measuring success, forward-thinking sites have begun to adopt new E-Metrics. These sites are drilling deeper into customer interests and segments to track individual click-stream patterns and behavior, using the data to target marketing campaigns and communication. Increased customer knowledge helps e-businesses improve customer retention, build a more loyal customer base, and increase ROI.

Online marketers know they need to do more than simply measure “click-through” rates and loosely defined “hits.” The key is to gain a fundamental understanding of customer preferences and purchasing lifecycles. In short, businesses need information to help them understand what’s really taking place with their e-business. Businesses should be asking themselves:

* Who are our best customers?
* What channels bring them to us?
* What are the drivers of purchase behavior?
* Which marketing initiatives generate the most profitable customers?
* Which products or services present cross-sell and up-sell opportunities?
* Which online customers buy from offline channels?
* What changes will make our site more customer-focused?

In this “down-turned” economy, e-commerce sites are keenly aware that customer relationships are critical. The nature of e-business creates unprecedented amounts of user information. Web analytics companies measure e-customer behavior in the context of the broader business.

Measuring, interpreting, and acting on information enable companies to create tightly coordinated supply chains and appropriate pricing models to maximize customer satisfaction, organizational efficiency and profits. Winning B2B e-commerce companies can harness the power of E-Metrics to more intelligently plan production, coordinate supply chains, manage inventory, customize promotions for buyers, and lower order processing costs for a better return on their online investments.

The data-gathering power of the Web demands a new calibration for measuring success. This development is helping businesses define, identify, and extract information to understand how to operate sound e-business strategy. Evaluating E-Metrics helps a business to:

* Segment and profile customers for optimal targeting and personalization
* Understand customer lifecycles to develop customer acquisition and retention programs
* Develop real-time marketing programs to cross-sell and up-sell customers
* Evaluate Web content, track the success of marketing campaigns and refine spending levels
* Enhance site design and navigation to improve browse-to-buy ratios and retention rates
* Reduce the costs of serving customers

The bottom line is that understanding E-Metrics enables business professionals to dramatically improve the ROI of their Web initiatives.

Matt Cutler co-founded NetGenesis in 1994 and serves as chief e-business intelligence officer. This story originally appeared in NewMedia, an internet.com site. For a research report on E-Metrics, click here.