Kevin Hillstrom: MineThatData: Multichannel Retailers and Conversion Rates

Pundits spent a lot of time telling us that multichannel customers are the most valuable customers. This finding has become largely unusable.

The concept of multichannel customers becomes very interesting, when explored via conversion rates online.

When you get to work on Monday, try this exercise.

Step 1: Segment your online visitors, from February 1, 2006 to January 31, 2007. Segment them into the following classifications:

Those who purchased online, in catalog, and in stores during that time period.
Those who purchased online, and in catalogs during that time period.
Those who purchased online, and in stores during that time period.
Those who purchased in catalog, and in stores, during that time period.
Those who only purchased online during that time period.
Those who only purchased via catalog during that time period.
Those who only purchased via stores during that time period.
Those who had not purchased, but had visited the website multiple times during that time period.
Those who had not purchased, but had visited the website just one time during that time period.

Step 2: For each of the nine segments listed above, calculate the following metrics:

Number of Households.
Number of Households who visited the website during February 2007.
Average Number of Visits per Household Visiting, during February 2007.
Total Number of Visits, during February 2007.
Percentage of Households Purchasing Online During February 2007.
Percentage of Households Purchasing In Catalog During February 2007.
Percentage of Households Purchasing In Stores During February 2007.
Percentage of Households Purchasing, Any Channel, During February 2007.
Online Conversion Rate (Total Online Purchases / Total Online Visits), February 2007.

The magic of this type of analysis is that the multichannel executive gains an understanding of who is visiting her website, how her customers use the website, and how much more effective the multichannel retailer's website is at converting online customers.

Even better, the multichannel executive will learn that the website is frequently used as the research tool for offline purchases. We hear that customers use our websites in this way all the time --- this reporting is a first step in understanding how different customer segments utilize the site to purchase merchandise.

Multichannel CEOs and CMOs: We spent a lot of time integrating purchase data across channels during the past decade. Integrating clickstream data with multichannel purchase data is another logical, important, and necessary step in the evolution of mulitchannel marketing.

Web Analytics Experts: This is a really good time to expand your skillset beyond clickstream and funnel analysis. Your future depends upon being able to segment customers at one point in time, and then measure customer performance over a future period of time.

Labels: Conversion Rate, Database Marketing, Multichannel Retailer, segmentation, Web Analytics

2 Comments:

At 3:38 AM , pint4mh said...: I think your blog post is great as I think that most web analytsts will not be making such segmentations during their daily work. Perhaps over a 6 month period or seeing general trends. Perhaps when businesses employ web analysts full time then this will be a viable and very informative way of looking at web analytics. Personally I hope this time comes soon and not just in the US.

Keep up the good work.

Matt Hopkins

Scl Analytics
At 11:17 AM , Kevin Hillstrom said...: Thanks for you rocmments, Matt.

In my industry, the vast majority of web analytics work is based on analyzing the session when a customer visits the site. Our analysts focus on improving the conversion of that one visit.

For many companies, it is very likely that "best" customers visit all the time. Their individual visit conversion rate is meaningless. What is meaningful is whether the sum of all web visits add value to total sales and profit, over the course of a period of time.

For instance, a customer could visit the website 50 times a year, purchasing twice, for a four percent conversion rate.

Maybe the brand does something that really improves the customer experience, causing the customer to visit the site more often. The customer now visits 100 times, purchasing three times, for a three percent conversion rate.

Of course, this is an exaggeration. But you can probably see the point.

I'll take 100 visits and 3% conversion over 50 visits and 4% conversion any day of the week.

Yet, web analytics gurus focus all-too-often on the 4% conversion rate.