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Turning Customer Behavior into Business Behaviors that Drive ROI

WAW Aug.5th, 2009WebTech Analytics

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Agenda

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Four Business Models + OneFour Stages of Customer Life CyclePredictive AnalyticsSummary

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Four Business Models

Online Commerce Advertising Lead generation Customer Support

WAW Aug.5th, 2009

Online commerce model is one of the most well understood of the four business models, simply because this is where the majority of the money is spent and made. Any Web site that sells products, services or information fits into this model and each of these sites have similar challenges. Fundamentally the challenges are the same-- attract visitors to the Web site, show them the value proposition and get them to convert. The onlinecommerce model is typified by a focus on all four stages of the customer life cycle; new customers need to be reached and acquired, the act of purchasing is the conversion and obviously it is strongly desired that these customers are retained.

Advertising business model is one typified by attracting visitors to a Web site who will read content and at the same time, theoretically, view and respond to advertising. The basis for making money on advertising sites is the ability to sell electronic advertising in cost-per-thousand (CPIvI), cost-per-click (CPC), cost-per-acquisition (CPA) orsponsorship models. While it is very important for advertising Web sites to reach and acquire new visitors on anear constant basis in order to have an expanding audience to serve advertising to, the act of conversion is typically less dear on these Web sites, often limited to the act of signing up for a newsletter or email list. Perhaps the most important component of the customer life cycle for the advertising business model is retention, keeping audience members coming back time and time again.

The lead generation business model is typified by the presentation of information about a product or a business in the attempt to gather contact information for the visitor. The general idea is that, if the visitor is interested enough in the content the Web site provides, and if the value proposition is clearly presented, the visitor is more likely to provide personal information such as name, email address, and so on. Important performance indicators for the lead generation model mostly focus on the reach, acquisition and conversion end of the customer life cycle as retention is usually driven via external (email, phone) contact after thelead is generated..

Customer support business model is typified by a Web site designed to help visitors answer questions about a product or service without having to pick up the telephone and generate a costly phone call to a support department. For the most part, customer support is integrated into one of the other models already discussed-rare is a Web site that focuses solely on customer support after a product has been purchased without also trying to get the visitor to purchase additional products (online commerce model) or to generate some kind of lead (lead generation). Still, because the customer support model focuses mostly on the retention phase of the customer life cycle it is worth differentiating. Also, while the other business models are driven financially by the idea that "more page views are usually better the customer support model tends to be the opposite, the more quickly the visitor can find the information they are looking for the better.3WebTech Analytics

The Four Stages of the Customer Life Cycle

Reach

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Reach, in advertising terms, is the likelihood or potential that you will be able to gain a prospective visitor's atDepending on the vehicle you use for advertising, this can be quantified in a number of different ways:

Number of people who:see banner impressions served on a Web sitesearch for a keyword that you bid onsee an article written about your company or productssubscribe to a newsletter you sponsor or advertise in a newspaper or magazine you advertise insee a billboard advertising your business or productswatch a commercial you run on televisionreceive a piece of direct mail you send

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WAW Aug.5th, 2009ReachAlthough you might have developed the best communications material on the market, if your Web site does not deliver on the promise made in this material you will experience large dropout volumes. Reach techniques must reflect the purpose and capability of Web sites -- because anything else misleads people as to the content of the site.

Hurol Inan in Measuring the Success of your Web siteHerein lies the difficulty in measuring reach within your Web analytics program, each metric is both easy and impossible to accurately quantify. Few applications have the ability to automatically measure impressions served across multiple marketing channels. Reach is often tied closely to acquisition; while we cannot measure the number of people who read a message we can infer this value from the percentage of people you are able to acquire. Practically speaking, most of the measurements of reach discussed in this book are those tied to the actual acquisition of visitors.5WebTech Analytics

WAW Aug.5th, 2009KPIs Recommended for Measuring Reach Overall traffic Volume Ratio of new to Returning Visitors Percentage of New Visitors Campaign Metrics Interested Visitor ShareOverall traffic volumes, to ensure that you are tracking large spikes or dips in the number of page views being requested. Ratio of new to returning visitors as an indicator of changes in the overall makeup of your audience. Percentage of new visitors, to observe the effect of changes to your marketing reach and acquisition efforts. Average pages viewed per visitor, to check whether dramatic changes in your overall traffic volume are due to a similar change in the number of visits to the site. Similarly, some businesses will want to monitor interested visitor share. Top five or ten error pages and the number of times each is seen by visitors to quickly resolve problems in the visitor experience. All campaign metrics presented in this chapter. 6WebTech Analytics

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The Four Stages of the Customer Life Cycle

Reach Acquisition

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If reach is a measure of the likelihood to gain a prospective visitor's attention, acquisition is the measurement how successful you are in driving them to action; the number of people who click on a link or type a URL into their browser and arrive successfully at your site. While some may argue that acquisition is better measured in terms of a visitor arriving and at least starting some activity of value, it is the author's opinion that A) any visitor who arrives at your site after responding to some type of advertising has the potential to complete an activity of value and B) sometimes simple metrics are more powerful and in most instances it is much simpler to measure the act of arrival or response. Statistics used to measure acquisition are primarily focused on the source of traffic---what referring domains, search engines, search keywords, and so on - are bringing visitors to you. Campaign analysis tools extend this measurement and allow for the qualification of visitors---and in the process bleeds over into the measurement of conversion.7WebTech Analytics

WAW Aug.5th, 2009KPIs Recommended for Measuring Acquisition Average number of page views Page "stickiness" Response rates for all active campaigns The top three to five referring domains Average time spent on site Percent new visitors to alert you to significant changes in your new visitor acquisition programs and their effect on your overall traffic. Average number of page views per visit for all visitors to ensure that your content consumption stays relatively stable. Stability in this metric is an indirect measurement of the user experience on your Web site. Page "stickiness" for your home page and key entry points into the site to watch for dramatic changes in "stick" and immediate bailout. Response rates for all active campaigns to determine when a campaign has effectively run its course and needs to be replaced, refreshed or simply ended. Cost-per-acquisition and cost-per-click for active campaigns to ensure that you are not paying more than you can afford for any campaign. You should create a column for "maximum CPA/CPC" so that you can clearly see if you have exceeded that limit. The top three to five referring domains and volume of traffic you receive from each to watch for changes in referring traffic patterns. The top five to ten search keywords and phrases and the volume of traffic you receive from each to watch for changes in visitor interest as expressed by external search. Average time spent on site and percent of visits under 90 seconds should be watched closely and correlated to any inbound marketing activity.

Keep in mind that each of these will not be necessarily interesting as raw numbers; the most important aspect of any performance indicator is the relationship between the current and previous measurement. Simply a leading indicator of changes happening, each of these KPls is designed to alert you to the fact that some aspect of your visiting traffic has changed and more research is warranted.

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WAW Aug.5th, 2009The Four Stages of the Customer Life Cycle

Reach Acquisition Conversion

Conversion and activities leading to conversion are the reason that you have your Web site; the successful completion of specific activities by visitors that somehow contributes positively to your online business. Conversion can be measured a number of different ways for a variety of different activities. As a reminder, a successful conversion does not have to be an online purchase.

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WAW Aug.5th, 2009KPIs Recommended for Measuring Conversion Conversion rates for any processes Campaign conversion rate for any active campaigns Cost-per-conversion for the campaigns Segment conversion rates Conversion rates for any processes that can make or save you money or that are critical to your customer's experience on your Web site Campaign conversion rate for any active campaigns, or if you have too many to reasonably watch, for your most expensive active campaigns Cost-per-conversion for the campaigns you have decided to track Segment conversion rates for key or critical segment conversions

10KPIs Recommended for Measuring Conversion(Additional when selling on-line)WebTech Analytics

WAW Aug.5th, 2009 Your site-wide conversion rate New and repeat site-wide customer conversion rates Percent of orders from new and returning customers Site-wide average order value Sales per visitorYour site-wide conversion rate, all purchases to all visits or visitors New and repeat site-wide customer conversion rates Percent of orders from new and returning customers Site-wide average order value and that for new and returning customers Sales per visitor, for comparison to your site-wide conversion rate

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WAW Aug.5th, 2009WebTech Analytics

WAW Aug.5th, 2009WebTech Analytics

The Four Stages of the Customer Life Cycle

Reach Acquisition Conversion Retention

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Retention is the measurement of the activities of your repeat visitors, whether they are back for support information, back to purchase again or just back to do additional research. Being able to segregate these visitors such that you can better understand their behaviors and habits will allow you to better respond to their needs and market additional products and services to them. Visitor segmentation tools are critical to understanding different classes of repeat visitors.Even after you have spent the time and money necessary to reach, acquire and convert visitors you still need to work to keep them coming back. It is very easy to find studies talking about how much more valuable repeat customers are than first time customers, how they spend more money, how they tell their friends about you, and so on. The hard thing is to actually get customers to repeat, perhaps because there is very little loyalty on the Internet.12WebTech Analytics

WAW Aug.5th, 2009KPIs Recommended for Measuring Retention The ratio of daily to monthly returning visitors Percent returning visitors Loyalty measurements for groups of returning visitors Activities of "retained" visitors The ratio of daily to monthly returning visitors, as a quick measurement of the average frequency of return for all visitors. If you are tracking "retained" visitors you should then track this KPJ for the retained visitor segment as well. Percent returning visitors to ensure that your new/returning visitor nux is in line with your new/retention marketing spend. Loyalty measurements for groups of returning visitors such as "2nd through 5cl, return ever" to monitor for large changes in visitor loyalty. Activities of "retained" visitors (differentiated from "returning" visitors using visitor segmentation tools) including number of page views, number of visits and 13WebTech Analytics

WAW Aug.5th, 2009TURNING CUSTOMER INTERACTIONS INTO MONEY PREDICITVE ANALYTICS

Using existing web analytics data and applying it toward anticipated future behaviors

The sheer wealth of information that can be gleaned about todays customersand then applied toward anticipated future behaviorsis staggering. Failure to take this information into account is like leaving money on the table, or worse. You could simply hand it over to your competitors.14WebTech Analytics

Using Predictive Analytics to Achieve Greater ROI

WAW Aug.5th, 2009Smart Companies:

Measure performance improvement

Conduct business case models for IT investments, such as analytics While business intelligence enables companies to measure customer behaviors, it is essentially a record of the past and usually reported at an aggregated level. But a more urgent and cutting-edge approach is competing on predictive analytics.

Predictive analytics enable a business to look forward, and make educated decisions that anticipate the future needs of customers. It combines the known numbers with critical insight to solve problems, achieve business objectives, uncover hidden patterns in customer behavior, and then use the combined knowledge to inform activities that can improve performance.

Recent industry report studied dozens of companies and hundreds of predictive analytics projects. It found that the median ROI for the projects that incorporated predictive technologies was 145 percent, compared with a median ROI of 89 percent for those projects that employed only traditional analytics.

Todays smart companies use data, and the insight gained from it, to predict customer behavior. These smart companies then leverage this predictive knowledge to introduce new processes and actions that drive changes incustomer behavior to increase enterprise profitability and mitigate risk.15WebTech Analytics

TheContinuousROI Cycle

WAW Aug.5th, 2009The ROI Cycle leverages leanings across the entire customer lifecycle providing a more complete pictureof the ROI.The more accurate way to measure the effects of predictive analytics initiative is to look at theROI Cycle, the cycle begins with customer data. This data feeds the equations that will predict customer value. Next, this combination can inform customer surveys to gauge customer attitudes, expectations, and preferences. With that knowledge, marketing departments can avoid activities that devalue customer relationships and focus instead on increased dialogue. This yields more qualified leads for the sales department.

Customer insight can also give contact center agents more complete information to handle customers and reach out proactively with more relevant offers. More relevance in marketing and service creates increased customer satisfaction. Satisfied customers are more willing to recommend the product or company and finally have the propensity to spend more and spend more often. Throughout the ROI cycle, the company is generating a positive return on investment through the insight provided by predictive analytics.16WebTech Analytics

CASE STUDYT. ROWE PRICE

WAW Aug.5th, 2009Started analytics to keep up with competitors using online tradingAnalytics could not provide a complete picture of what the customer was worth to the Company, or what they would be worth in the future

By 2003, TRP needed a deeper level of customer intelligence. It needed to move from traditional analytics to gain the ability to predict what customers would do in response to marketing activities. Then it needed the context of profitability to the firm, the visitors worth trying to keep.

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IMPLEMENTATION

WAW Aug.5th, 2009Took existing data and parsed it into more actionable segmentsCombined this data with qualitative techniques that defined primary, secondary and tertiary personasCompany now had enough data to accurately predict the value of newly defined segments

Qualitative techniques (personas) uncovered new, multi-dimensional customer segments such as retirement planners and High asset customers. Creating personas is a qualitative technique that builds a model of the ultimate customer that considers total spend, profitability, attitudes and behavior.

High Asset customers were defined as holding more than $1 million dollars in assets. They demanded more individual attention. As a result, a special wealth management engagement strategy was created

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OUTCOME

WAW Aug.5th, 2009 By understanding their current and future needs , we could predict what would be in both the customers and company's best Interest Predictive analytics has led to new approaches for a variety of customer segments

They are now managed on a customer lifetime value model that predicts behavior over a two five year period, depending on asset profile as well as goals.

For example, a new customer that has young children is encouraged to set up tax deferred college funds. Older, high asset customers are encouraged toward estate planning and advice. This mix of customer data and insight gives contact center agents more relevant information to acquire, convert, engage and retain more customers. Retention is a major benefit of predictive analytics

Generates incremental revenue when the agents have the most current information to up-sell and cross-sell additional products

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Establish Well-Defined Business Goals Define, Monitor and Continually Measure ROICompeting on Predictive Analytics

WAW Aug.5th, 20091. Well-defined business goals will lead to higher ROI for predictive analytics because the scope is focused and more accurately measured. For example, for a retailer, a broad goal would be to increase sales. A more targeted and actionable goal would be drive sales from high-value customers. As the goal gets more specific, the tacticsfrom marketing materials to point of sale strategiesbecome more distinct and measurable.

Predictive analytics has led to new approaches for a variety of customer segments. They are now managed on a customer lifetime value model that predicts their behavior over a two- to five-year period, depending on asset profile as well as goals.

2. Smart companies commit to continually monitoring and measuring return on investment for their predictive analytics projects.

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Getting Started with Your Predictive Analytics ProgramThree Questions To Ask Today... 1. What is my number one customer-based business goal?2. What does my most valuable customer look like today and what will they look like tomorrow?3. Who has the potential to be my most valuable customer?

WAW Aug.5th, 20091. Predictive analytics will center a company on an achievable outcome that can improve profitability. Rallying around this goal will provide a starting point for the predictive analytics journey. Attracting new customers is a solid goal. But refining that goal to understanding the behaviors of the high-value customers that churn is more focused and more measurable.

2. A company that can answer this question can assign characteristics that include numbers and behaviors. Developing an ever-richer profile of your best customers will yield benefits throughout an organization.

3. To answer this question, the organization must understand the characteristics of their most valuable customers first. Then they need to understand what will motivate customers in the growable category to build a deeper relationship with the company. Is it a different product mix, customer experience, delivery method? What is the potential of these growable customers and what is the cost to meet these latent needs?

4. The unacceptable answer here is everybody. Analytics initiatives need funding, boardroom priority, and a way to break down communication silos. The sponsor needs to be a senior-level executive who can garner enterprise wide support.

5. If a company is honest about it, this is a simple question with a very telling answer.21WebTech Analytics

WAW Aug.5th, 2009Getting Started with Your Predictive Analytics ProgramFive Things To Do Tomorrow...Create a customer persona. Craft marketing campaigns that will grow the value of that persona.Identify your analytics champion. Rank five customer-based business goals. Fine tune the definition of the numbers that will prove that theyve been achieved.1. Create a customer persona. Build a model of the ultimate customer that considers total spend, profitability, attitudes, and behaviors.2. Craft marketing campaigns that will grow the value of that persona. Heres where predictive analytics can define marketing activities. For example, a company that knows it is trying to grow a customer group that is young and technologically wired will want to consider mobile marketing. It will also immediately recognize that expensive in-store promotions or TV ads will not grow the value of this group.3. Identify your analytics champion. A C-level executive should be accountable for analytics investment and results. A single sponsor, or evangelist, can ignite the passion for predictive analytics.4. Rank five customer-based business goals. Make them specific to customer groups and make sure they have a financial outcome. Grow sales by 10 percent is too general. Grow high-income new customer revenue by 10 percent is a goal that can be supported by customer intelligence and informed by analytics.5. Fine tune the definition of the numbers that will prove that theyve been achieved. Focus on the ROI cycle and the incremental return on the predictive analytics initiatives. The high income, new customer initiative can be proved by return on marketing investment, revenue increases, and customer satisfaction surveys. Businesses need to know what to measure before goals are set.22WebTech Analytics

WAW Aug.5th, 2009The Business Imperative for Predictive AnalyticsCompeting on predictive analytics has never been more urgent. Wide-ranging changes in nearly every aspect of business Makes customer behavior a critical need-to-know application.

Any company can generate simple descriptive statistics about aspects of its businessaverage revenue per employee, for example, or average order size. But analytics competitors look well beyond basic statistics.These companies use predictive modeling to identify the most profitable customers.

Companies that break this need down to its most basic business applications and accurately monitor and measure ROI for predictive analytics will embrace change rather than being displaced and made irrelevant in the marketplace. They will not only be able to predict customer results, they will be able to predict the future.

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WAW Aug.5th, 2009Four Business Models + 1Intranet Analytics: Promoting Best Practices to Business Stakeholders An analytical understanding of how people use their intranet is the most important way business leaders can learn how to improve its return on this investment Position as The Employee Community based on increasing expectations on the part of users that sites should be built by an online community for an online community. Ultimately, the purpose of community-building on an intranet is to advance specific business objectives, such as enhancing information sharing and knowledge management Use Web 2.0 functionality for blogs, message boards, forums, chat rooms. Shared space for virtual project management, event calendars and classified ads generate great content and valuable web metricsMost important metrics are not just page views (71%) and unique users, but also community posts (67%) and registrations (63%)Source: Online community metrics 2007 24WebTech Analytics

WAW Aug.5th, 2009Thank You

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