CONCLUSIONS PAPER

Tips from the Trade Competing on Web Analytics

Updated insights from a webcast in the Smarter Marketing series Presented in association with the American Marketing Association and SAS
Featuring:

Eric Peterson, CEO and Principal Consultant at Web Analytics Demystified Inc. Larry Wadford, former Senior Director of Loyalty and Direct Marketing, Office Depot Michele Eggers, Manager in the Customer Intelligence Global Practice, SAS (moderator)

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

As the economy pulls out of its multi-year slump, the online channel remains a persistent bright spot. According to estimates from the US Department of Commerce, retail e-commerce sales (adjusted for seasonal variation) reached $46 billion in 1Q2011 up about 2.6 percent from the previous quarter. E-commerce sales rose 17.5 percent from the first quarter of 2010, compared to an increase of 8.6 percent in total retail sales in the same period. Still, e-commerce represents only a sliver of total retail sales volume about 4.5 percent but the share has been steadily rising for the last decade (source: US Department of Commerce, Quarterly Retail E-Commerce Sales, 1st Quarter 2011, press release issued May 16, 2011). With millions of customers willing to use a most inexpensive contact channel, companies stand to benefit from this growth in a big way. How can they reap the full potential of their Web channels in the context of the total marketing strategy? How can they fully exploit the power of the Web to build the brand to contribute to overall company marketing programs not just add incremental sales as an adjunct channel? How can you move beyond clickstream tracking and counts of page hits to deliver truly meaningful and useful insights? Smart marketing leaders are asking these questions. An entire field of Web analytics has emerged to sort out the answers. This was the topic of a webcast hosted by SAS and the American Marketing Association, bringing thought leaders together to discuss challenges and best practices in the industry.

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

In the one-hour, interactive webcast: Eric Peterson, CEO and Principal Consultant at Web Analytics Demystified Inc., discussed best practices based on his 10 years as a practitioner, consultant, analyst and author. Larry Wadford, former Senior Director of Loyalty and Direct Marketing at Office Depot, described his experiences with Web analytics for the companys $5 billion e-commerce operation. Michele Eggers, Manager in the Customer Intelligence Global Practice at SAS, emphasized the importance of using data not just for reportings sake but to drive more effective business decisions. The panelists started by asking a rather provocative question.

Is the original concept of Web analytics already obsolete?

According to the official definition set forth by the Web Analytics Association, Web analytics is the measurement, collection, analysis and reporting of Internet data for the purposes of understanding and optimizing Web usage. This was a good definition at the time, when the field of Web analytics was still young, Peterson said. Increasingly though, we need to reflect on the fact that our online channel can tell us a tremendous amount about the whole customer experience. We can do so much digitally that can then be extended back into the larger enterprise. The WAA definition doesnt necessarily reflect the true opportunity. Wadford agreed. This definition is about 90 percent there, but we need to leverage Web analytics beyond just understanding and analyzing Web usage. We should take the understanding of customers that we can draw from the Web and leverage that across all customer contact points, including conventional direct mail, the in-store experience and even the call center. Theres a lot more that can be done to utilize the information we derive from the Web. At its most basic level, Web analytics can provide much-needed visibility into online marketing, such as: Response, conversion and retention rates for online campaigns. How well Web pages, content and functionality are engaging and retaining customers. Where critical online navigation paths are difficult, confusing or broken. Where online visitors come from, and which sites send the best traffic. Which landing pages work and which are ineffective or broken. What campaigns, sites and pages help sell the most products.

An entire field of Web analytics

has emerged to try to meet the needs of marketers, but invariably, many of these solutions focus on understanding the performance of websites and not actual customers.
Eric Peterson CEO and Principal Consultant Web Analytics Demystified Inc.

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

At a more sophisticated level, Web analytics show even greater promise. For example, you could model the traffic and revenue impact of changing site design or search engine keywords, and use that information to modify other forms of advertising. You could use multivariate cluster analysis and predicted lifetime customer value models to mine huge data sets for opportunities, and pursue them through the most appropriate channel(s). You could avoid costly mistakes by using marketing mix analysis to understand the relationships among online and offline channels. And you could use information about online visitors search and navigation habits to improve catalogs, store layouts and merchandising decisions. The potential is enormous, but before reaping these benefits, there are hurdles to overcome.

Why Web analytics has not yet lived up to its potential

Many organizations dont collect all the Web data they should. Only a few years ago, barely one-third of companies even included Web data in their customer databases. That picture has changed dramatically as organizations see the value in online data to create a more complete view of customers, markets and competitors. In an informal SAS webcast poll, 23 percent of respondents reported that their organizations at least measure website hits. More than one-third also track clickthroughs, unique visitors and likes. Another 26 percent said their organizations measure repeat visitors, followers and comments. (Source: Marketing Measurement: Less Talk + More Action = Better Results, webcast co-sponsored by SAS and the American Marketing Association, February 2011). Granted, the audience for a marketing measurement webinar is a biased sample. The actual figure is probably lower, Peterson suggests, significantly lower in companies that are less mature in their traditional direct marketing methods. When Web data is lacking in the customer view, business decisions are made without full context often even without the closely relevant context. Would you try to expand your business, open new stores, without first consulting your chief financial officer and his/her organization? Peterson asked. No, youd never do that, but organizations put up websites, launch new online marketing initiatives and go screaming into social media every day without checking to see if analytic intelligence supports the move as a good decision. If they even include Web data, few companies actively analyze and use it. Analytics is hardly a new concept within the business, Peterson said. Unfortunately, the concept of digital analytics analysis focused primarily on data generated in the online channel is often found to be lacking, especially when compared to analysis in the offline world.

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

This situation is ironic, Peterson says, given the tremendous amount of data flowing from the online channel. Despite the fact that the customers being tracked are the exact same customers we analyze in the offline world, few companies have given nearly enough thought to the integration of online and offline data, and instead treat their analytical efforts as independent, run in silos, focusing on a single aspect of the business, instead of squarely on customers and prospects. Companies that purport to use analytics are often just churning out more reports. We all have lots of online data to sift through, lots of reports to look at on our website usage, but what information really matters? Eggers asked. What insights will ultimately have an impact on your companys bottom line? Its not enough to know how many visitors came to the website or how many pages they visited. You need to connect that to the so what factor. What do these counts mean, in terms of sales value, customer experience and business decisions? Panelists agreed that the practice of Web analytics has been long on report surfing and short on genuine insight. The history of digital analytics is largely a story of glorified reporting interfaces that helped businesses parse, process and present the details of visitor clickstreams, Peterson stated. First-generation Web and digital analytics applications do little more than aggregate and summarize trillions of online interactions. To be fair, most companies find value in this aggregation and summary as a source of information regarding their ongoing site development, marketing and advertising efforts. Whats more, in the right hands, this data can have a profoundly transformative effect on a businesss approach to digital media First-generation Web analytics werent designed to provide real business insight. The first generation of website analytics technologies focused largely on page tags. Consequently, the field of Web analytics initially focused on elements such as page navigation, or understanding which pages are driving sales, Peterson said. Firstgeneration tools are typically used to identify opportunities for improvement in digital media, focusing narrowly on improving the online customer experience. Very few of these tools provided the information needed to drive broader business decisions. Which Web visitors are the best customers in the companys stores? How can you leverage the information customers provide through the website to improve other communications? How can you measure the effectiveness of marketing efforts across channels, including the Web? The mountains of spreadsheets with their tallies of hits and views just didnt answer these questions. Second-generation Web analytics tools go a step further to ensure that an opportunity is real and measure the effect of marketing strategies and website changes. Drill down tools help reveal the potential impact of actions on customer segments. Testing tools help assess alternative approaches and measure the responses.

A little over a decade ago, I got my

start in this sector; everybody was heads-down focused on technology. Practitioners focused on How can we process more log files; how can we generate more and more reports?
Eric Peterson CEO and Principal Consultant Web Analytics Demystified Inc.

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

But a more sophisticated third generation of Web analytics practice is at hand, and moreover, technology is only part of the picture for companies wanting to succeed in this space.

Nine tips for competing on Web analytics

Collectively bringing more than three decades of Web analytics experience to the table, our panelists offered their recommendations for how to evolve from first- or secondgeneration Web analytics to the third generation needed today. 1. Set a road map. This evolution is not something you can ad hoc or gee whiz together, Peterson said. Take the time to figure out where you are today, where you need to be, and set a strategy. Ask, What investment do you have in technology today, what investment do you have in people today, and how can you get from where you are to a practice that actually informs the business? As an author of books, I hate to say this, but I dont think its something that you can sit down and read a book and understand. You have to do it. You have to bring the organization together and say, We need to invest more heavily in competing on digital analytics, so where do we start, and how do we get there? 2. Address issues of people, process and technology. There are great technology solutions out there, in terms of data mining and modeling, but organizations need to be cognizant that you cant just plug-and-play the technology and instantly expect magic stuff to happen, said Wadford. Just as the race car cannot function without a driver and pit crew, Web analytics tools require commensurate focus and investment in people and technology. Peterson agreed. The great innovation that has happened over this decade is that an increasing number of companies have figured out that its not just about the technology. Its about an equal measure of people to do the analysis, process to govern the analysis and technology to power the analysis. A small but increasing number of companies are really getting this right. 3. Dont try to integrate everything. Well-intentioned efforts to collect every bit and byte of information and store it in massive databases are not the answer, Peterson said. Ive never seen a company be successful when they try to slam everything together and then come back to it after the fact and try to mine out insights. Integrating online information into customer databases and analysis is best tackled as an iterative process, Peterson said. The guidance I typically give clients is to find the one or two things that you can pull out of the online channel and achieve some successes using those nuggets of information in analysis. Perhaps you take page-view data from the online channel, marry that with sales data from your transactional systems, and tie that together through your loyalty program to connect the dots.

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

Which product page views led to sales of that product, regardless of channel? What clues can we get from page views that did not lead to sales about what customers aspire to buy? What kind of offers can we make to convert that desire into a purchase? Start with small successes such as this, Peterson said, but absolutely, do not try to integrate everything. 4. Exploit what has already been done. Web analytics practitioners have largely been spreadsheet renegades, Peterson charges, shunning formal analytics tools on the belief that they can analyze Web data with more immediacy and clarity themselves. Only recently are we starting to see statistics manifest in Web analytics solutions, Peterson said, but few organizations are exploiting the work that has already been done in the broader organization. It is time to stop acting as if Web analytics is something different and unique, and start to treat it as an analytical practice for the business. Customer lifetime value, A/B testing, actionable KPIs, propensity to churn, multivariant testing, stepwise regression analysis, forecasting, likelihood to convert analytics is the same, online and offline. All of that has been done for decades. In many cases the technology required has already been deployed [in the organization] and is staffed by analysts who havent looked at online data simply because nobody has asked them to! Armies of statisticians and SAS analysts have been deployed across the globe; integration and modeling expertise exists among hundreds if not thousands of consultants; and most importantly, the necessary statistical techniques are well-understood and taught in most colleges today. Although the largest niche vendor in Web analytics has only a few thousand customers, there are 50,000 customers using SAS Analytics. If that expertise is available to your organization, put it to work for online analytics, said Peterson. It simply makes sense to ask, Where else in our organization might we get leverage from the money weve already spent? 5. Establish analytics expertise within the marketing team. If it exists within the organization, bring it into the Web marketing effort. If you dont have a statistician or a team of statisticians, youre not going to succeed, said Wadford. Getting all the data from core metrics in and of itself is not going to solve any business problems. You really have to get the analytics support of at least one statistician on your team to mine that data and turn it into insights that can be transformed into recommendations for senior management. 6. Focus on the customer, not the channel. Web analytics practitioners have often held tight to the traditional WAA definition of Web analytics: a process to analyze the online channel alone, Wadford said. The prevailing thinking was, Were Web people, were about Web analytics, and were going to try to solve our little problems. Its not a little problem; its a multichannel customer problem. If there is anyone out there doing this in a channel-specific way, they just wont succeed. Thats the short answer.
6

Direct marketing is an established

science. We need to recognize that in the online world. We need to study the work that has been done ahead of us and do a little bit more of that. Itll happen incrementally; some people will go into it kicking and screaming, but I dont see any possible outcome for the digital analytics industry that doesnt involve doing more capital A analysis of the data on a five-plus year planning horizon.
Eric Peterson CEO and Principal Consultant Web Analytics Demystified Inc.

Take a good hard look at your

organization and ask, Do we have the resources to actually take that data and turn it into insights? If you dont have a statistician or team of statisticians, youre not getting the return you should be getting from the data youre collecting from all the various tools.
Larry Wadford Former Senior Director of Loyalty and Direct Marketing Office Depot

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

Office Depot was not immune to business silos, Wadford conceded. There was a time in the past when the separate business units were not integrated. The online channel was more focused on converting online traffic, and within conventional direct marketing, it was all about focus on the channel. That was in the past. The organization had put all of those silos aside and made the focus not on the channel but on the customer. With that change, Office Depot was able to look at the customer completely independent of channel. An agnostic look at purchase history independent of the purchase channel of preference is important to best service customers needs with the right offer and relevant information. With a set contact strategy for this, Office Depot saw incredible increases in share of wallet and in retention. Through greater interaction and cross-pollination, there have been so many insights from the Web data that Office Depot was able to integrate into segmentation and offer strategies in other vehicles as well. This [customer-centric view, enabled by a loyalty program] was an absolute requirement. It is the only way that you can get the maximum return from your marketing investments in all channels. 7. Evolve from data to insights to recommendations. If youre a Web analytics practitioner, ask yourself a hard question: Do I produce reports or do I produce analysis? I may have analyst or some type of analytics in my title, but do I really produce analysis that looks at relevant business problems? Am I delivering insights and recommendations, or just data and information? Just asking that question, starting that conversation, is a good place to start, said Peterson. If the answer is I churn out mountains of spreadsheets, there is a lot of opportunity to move up the value pyramid. Imagine a pyramid, and at the base of the pyramid is a huge volume of data, but it increases in value as you move up. When you stop talking about 100,000 page views, and you start talking about five page views per visit which monetized at x CPM and contributed y revenue back to the business on an average basis, that gets people more interested, Peterson noted. But thats not the place to stop. There is a tier above information, and thats insight. Why did this key performance indicator change? Why is the number getting better? Why is the number getting worse? At the top of the pyramid is recommendations. Recommendations are what management wants from the digital analytics team. They want you to bring your domain expertise, your understanding of these systems, your understanding of the customer, the integration of the data across channels as necessary, and to be able to say, We have 100,000 page views, representing an average of five page views per visit, which has declined 20 percent month to month because of this; here is what we think we should do to correct it, and here is how we will measure that the recommendation is a good one.

If you have different departments

established in different silos, they need to get together and establish a common foundation for understanding and segmenting the customer. That becomes the stepping stone to doing more effective marketing in all channels.
Larry Wadford Former Senior Director of Loyalty and Direct Marketing Office Depot

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

Thats where businesses need to increasingly turn their efforts to generating insights and recommendations, not just producing more data. 8. Integrate mobile Internet and social media. Social and mobile channels are definitely hot, representing vast new sources of customer information and contact, Eggers said. Social networks reflect communities of people who are influencers and followers, additional channels we can incorporate into a comprehensive understanding of the customer. But from a Web analytics perspective, it is still an emerging art to incorporate that information not only into the Web analysis process but into overall, cross-channel marketing strategies as well. Mobile [Internet communication] creates a unique set of challenges in that its not quite as easily measured as a traditional website, Peterson said. JavaScript doesnt run on all platforms, cookies dont work on all platforms, and there are concerns from a privacy perspective. Those problems are going to have to get banged out before we can get really deep into the analysis. All of these problems aside, I believe very strongly that the ultimate outcome is that companies will treat the mobile Internet as yet another channel. I dont think anything is gained by creating another silo for mobile or another silo for social. A couple of years from now, we will be analyzing mobile data side by side with fixed Web data, side by side with customer data gathered through our loyalty programs, and well have a more complete picture of the visitor. 9. Prove the case to get executive buy-in. Executive-level support and funding is not a given, Wadford said. If you were to go to C-level executives and ask them if they compete on analytics or not, every one of them would say, Of course I compete on analytics. The reality is they think they do, but they do only to the extent that they have the teams and the technology in place to do it. That means the real answer is often going to be, We have lots of facts about our Web operations, but not correlated across channels or by customer. We have the information we need to tweak the website but not to optimize our enterprisewide marketing strategies. If thats the reality in the organization (and it often is), marketing analysts have to make a case for getting the investment in people, process and technology to move to a higher level of analytical maturity. You have to have the courage to put together a business case what these resources are going to be able to allow you to do and be willing to be held accountable, Wadford said.

TIPS FROM THE TRADE COMPETING ON WEB ANALYTICS

Closing thoughts
As the Web becomes an ever-increasing proportion of total sales, we will see Darwinism in action, said Wadford. Some companies will fall by the wayside if they dont get more integrated across their marketing vehicles and business channels. To succeed in a more competitive e-commerce environment, companies will need to create a more comprehensive view of their customers, set more strategic key performance indicators, embed more advanced analytical techniques into the drivers of business decisions, and begin exploring how new media avenues, such as mobile and social media, fit into cross-channel marketing and analysis. The current state of digital analytics is untenable over time, said Peterson. Companies across the globe have put too much faith in the power of reporting systems and not enough focus on the process of mining those systems for insights. Companies that persist in treating online and offline as separate and different will begin to cede ground to competitors who are willing to invest in the creation and use of a strategic, wholebusiness data asset. These organizations are using third-generation digital analytics tools to effectively blur the lines between online and offline data tools that bridge the gap between historical direct marketing and market research techniques and Internet-generated data, affording their users unprecedented visibility into insights and opportunities.

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