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Web Retailers Get Better View of Shoppers’ Habits

CHICAGO TRIBUNE – The next time you shop at your favorite online store, do not be surprised if you are asked how the kids are doing before being offered the exact thing you want in just the right size and color.

Simply giving shoppers a cookie for their PC when they visit a site is not enough anymore.

These days, online retailers are using software tools that highly personalize the shopping experience in an effort to more frequently woo customers.

The new approaches are a far cry from the days of counting visitors to a Web site. Now, as the Internet continues to evolve as perhaps the richest source of information on consumer behavior, marketers want to tap that potential to pinpoint what customers want.

Online merchants have gone from counting visitors to finding out precisely what their customers want in an effort to make shopping as pleasant as possible–and, of course, to gain more insight on how to appeal to consumers

“We collect every single session of behavior,” said Brett Hurt, a vice president for Coremetrics Inc., a Burlingame, Calif., firm that monitors online shopping habits. “We’ll capture all of those actions, and we store it in a customer-centric profile.”

Coremetrics collects and analyzes data sent from clothing retailers Eddie Bauer, Ann Taylor, Newport News and Victoria’s Secret, among others. “It’s like watching them looking through the catalog,” Hurt said. “We can see if certain styles appeal to them. So far we’ve created 1.3 billion profiles.”

Sifting through all this digital data is called Web analytics. And while retailers still rely on cookies–electronic tags that are placed on customer’s computers–to collect data about visitors and build individual profiles, the skill comes from smartly aggregating and determining how to use that data.

For example, this pool of information can be used to build customer loyalty, measure advertising performance, cross-sell products and even determine the best sizes of khakis to stock.

Several companies offer variations of the technology, including Chicago’s SPSS Inc., NetIQ Corp., Websidestory Inc. and Coremetrics.

Software from SPSS prompted cruise operator Royal Caribbean International to completely rewrite its Web site–twice.

“We noticed that the number of people booking versus completing was a big discrepancy. Booking a cruise was found to be too complicated,” said Elizabeth Arno, a senior business analyst for the cruise line. “Changes have resulted in a 20 percent increase in efficiency.”

Web analytics also offers useful insight into customer behavior. Royal Caribbean noticed a predictably high cancellation rate after the Sept. 11 terrorist attacks. But there was also a huge increase in traffic from bargain hunters looking for deals.

“These people knew a lot of companies would offer discounts to bolster the inevitable drops in business,” said Arno. “They were mostly first-timers who had never been on a cruise before.”

Linda Oestmann, a 7th-grade teacher from Hanover Park, doesn’t mind the idea of Web sites having her personal information. In fact, she prefers it since it means she does not have to re-enter the information.

“I see it as the same as if I walk into a Marshall Field’s,” Oestmann said. “They see me shop and they may know who I am. But I prefer to shop online whenever I can since it takes less time out of my day.”

Although the process of collecting data sounds invasive, marketers say the goal is not to snoop but to offer more precision in their advertising efforts and customer service.

“But it also has to be placed in the right context for the consumer and used in the right way,” said Adam Sarner, an e- commerce analyst with Gartner.

“Customers will part with any information if they get some value out of it,” he said, citing casinos as a good model. “You get free food if you spend a lot of money. Everybody gets it.”

Still, he believes there will be legal battles in regard to privacy issues. In one prominent case, Toys “R” Us was investigated in December 2000 for misuse of customer information and a lack of adequate disclosure that it collects information.

The case was settled and the company agreed to revise its privacy policy and put it in a more conspicuous place on its Web site.

Sarner believes there will be more examples.

“We predict there’s going to be an Enron of privacy and some company is going to go too far,” he said. “It’s going to be all over the news. It will affect the company’s brand.”

Web analytic companies also offer programs that allow the same information to be shared with other sales channels, including stores, catalogs and call centers.

SPSS recently released a text-mining tool called LexiQuest that can analyze the notes typed into the computer by call center staff. By mating LexiQuest with another SPSS product called DataDistilleries, notes can be turned into cross-selling suggestions and delivered to salespeople while they are talking on the phone.

Essentially, the software acts like a sales manager looking over the salesperson’s shoulder and making suggestions.

“Of course, the final decision on whether to use the recommendation remains at the discretion of the salesperson,” said Colin Shearer, SPSS vice president.

“This is because the rep knows things that the modeling doesn’t. For example, if the customer is in a hurry you don’t want to keep them too long.”

Shearer said this multichannel approach has resulted in sales gains for European clients during software trials. Dutch financial- services provider Spaarbeleg increased business from call centers by about $38 million.

“It all comes down to a holistic approach: a 360-degree view of the customer which allows you to make the right offer at the right time and through the right channel.”

Mark Fanelli, a vice president at credit service firm Experian, believes marketers also need to look beyond just “who” to target but also consider the “how,” “what” and “when.”

Knowing when to contact customers and in what way (e-mail, direct mail or sales calls) is as important as finding more customers.

So the need for more detailed information will grow, Fanelli said, since this multidimensional approach can only be achieved by leveraging large amounts of customer data.

“It is the next step in evolution and achieving one-to-one marketing.”