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Visitor Conversion, Initial and Repeat  Drilling Down Newsletter # 35
July 2003

Drilling Down - Turning Customer
Data into Profits with a Spreadsheet
Customer Valuation, Retention, 
Loyalty, Defection

Get the Drilling Down Book!
Also available online through Amazon and Barnes & Noble - but it's a lot more expensive at those places than at Booklocker!

Also check out:

The Marketer's Common Sense Guide to E-Metrics - 22 benchmarks to understand the major trends, key opportunities, and hidden hazards your web logs uncover.  I wrote this manual with Bryan Eisenberg of Future Now, the visitor conversion specialists.  To find out more about this topic: click here

Prior Newsletters:

In This Issue:
# Topics Overview
# Best of the Best Customer Marketing Links
# WebTrends "Take 10" on Retention
# Question: Conversion, Initial and Repeat
Topics Overview

Hi again folks, Jim Novo here.  

This month we've got the usual "best of" Customer Marketing article links, a look at  visitor / customer retention measurements and reporting for web sites, and a question on visitor conversion from a fellow Driller.

After the last issue I got a storm of e-mails from people asking how they could get their questions answered in the newsletter.  That's easy, just ask!  And don't worry about asking the tough stuff, I never give out the name of the person asking or the company you are from.  All questions published in the newsletter are "sanitized" and refer only to the industry. 

Got it?  Send your questions here.

Let's do some Drillin'!

Best Customer Retention Articles

This section flags "must read" articles moving into the paid archives of trade magazines before the next newsletter is delivered.  If you don't read these articles by the date listed, you will have to pay the magazine to read them from the online archives.  

Note to web site visitors: These links may 
have expired by the time you read this.  You
can get these "must read" links e-mailed to
you every 2 weeks before they expire by subscribing to the newsletter.

Practical CRM
Expires July 30, 2003  Target Marketing
It is absolutely essential for you to do two things before you address CRM - determine how you will segment your customers and find out what the current and potential value of each segment is.  That's it; everything else flows from there.  Don't develop a plan, buy software, or do anything else until you understand the building blocks of customer value.  If you need help with this area, my Simple CRM program is very Practical too!

Hey Jim, did you read any other great articles lately I might have missed?

I Want My QVC
No Expiration Date  CIO Magazine
Man, is it ever refreshing to hear an opinion like this.  CRM is all about better execution, not cross-selling.  You build loyalty by always being better than the other guy, not with irrelevant product pushing.  And part of knowing what is relevant is understanding "who" and "why."  QVC only tries to upsell 15% of their customer base each month.  Why?  You can bet it's because those are the right people to upsell.

WebTrends: Take 10 on Retention

At the end of the Web Retailing Example I made the point that tools are now available to track the Recency and Latency of web site visitors and customers.  WebTrends then asked me to create a special presentation for them showing specifically how these tools could be used.  The result of this project is the "Take 10 on Retention" package, which includes a 10 minute presentation on the strategy and reporting behind increasing web customer ROI, a white paper, and three case studies demonstrating bottom line results.

Here's the idea in a nutshell: when you make investments, you expect the value of them to rise in the future.  You have web investment choices to make - ad design, media, building out content, etc.  Retention metrics tell you which of these investments are the most likely to generate increased profits in the future.

Click here for the Take 10 on Retention
If you are a consultant, agency, or software developer with clients needing action-oriented customer intelligence or High ROI Customer
Marketing program designs, click here

Questions from Fellow Drillers
If you don't know what RFM is or how it can be used to drive customer profitability in just about any business, click here.

Visitor Conversion: Initial and Repeat

Q:  Hi Jim, I was wondering if your book could help increase the percentage of visitors who buy from us.  We sell educational materials.

A:  Can you give me a more specific definition of "educational materials"?  Are we talking pens and notebooks, books, courses?  And which book are you asking about?  There's two, the E-Metrics book and Drilling Down.

Q: For different IT Technologies like Java there are certification exams offered by vendors like Sun.  We provide software which help people prepare for these exams.  Like Kaplan's GRE prep on CD-ROM.

A:  Got it.

Q:  Our pricing per product ranges from $60 - $90.  Our visitor to conversion ratio at present is around 0.6% and we see a GREAT scope in improving this.  Are there any standard industry conversion ratios?  Preferably in domain related to ours?  Any idea of Amazon's visitor to buyer conversion ratios?

A:  Well, for retail here are the latest stats I have seen:

Retail Entry-to-Sale Conversion Rates

0-1% conversion


1-2% conversion


2-3% conversion


3-5% conversion


5-10% conversion


11-20% conversion


20+% conversion


Didnít know conversion


Source: E-Tailing Group's 1Q 2003 research of 200 online commerce sites

I have a new client, a major name brand retailer in the US, that averages .51% on visits.  One of my first clients, a small specialty retailer, now averages 9.1% on visits.  So the averages are all over the map, and tend to increase as the niche you are playing in gets smaller.  More competition, lower conversion.  There are always exceptions.  Amazon's conversion rate was reported in 2001 to be near 15%.  Another report in 1999 said 8.3%.

The exact nature of how Amazon conversion was measured in these cases is unknown; it probably was estimated from public records.  Obviously, if you measure conversion rate using unique visitors instead of visits (I prefer visits), the rate goes higher because the base you start from is lower.  

My guess is that the 15% number is on unique visitors and the 8.3% number is on visits.  But then you get to have  a long discussion on defining a "visit" or "unique visitor."  What is the time period for defining unique, the past year?   Does entering an affiliate store where the book art / description is pulled from the Amazon site count as a visit, even though the "visitor" is not at the Amazon site?

So the best thing to do is pick a measurement that makes sense for your site, stick with it, and use your own data as a benchmark, rather than comparing it to anyone else.  The combination of your products, web site technology, and traffic streams is most likely unique to you and the best measure of success is your own benchmark.  The E-Metrics book covers the measurements and techniques you can use on a website which are most likely to lead you to converting visitors into buyers at a higher rate; it's all about the "front end" of the customer conversion issue.

None of the stats above break out new versus repeat customers, and this can obviously make a big difference.  You want your first-time buyer customer to come back and buy again; these "back end" kinds of issues covered in the Drilling Down book.  You can't manage this issue unless you measure it, and my guess is that for your business, the primary repeat purchase metric you should start with is Latency.  You can read about Latency in this free tutorial on the web site.

Latency triggers off the time between customer events, so for example, the number of weeks between purchasing the first sim and the second sim, the second sim and the third sim, etc.  Look at your multi-buyers and measure the average time between purchases; this is where you start.  

Let's say it is 8 weeks.  Set up a "sniffer" or report run that looks at every customer each week, and flags those customers whose last purchase was 9 weeks ago; send these people a promotion (1 extra week for "slippage").  If you send the promotion before this, you risk giving discounts to people who would have bought anyway.  If you send it too long after this threshold, you risk the customer has already defected and is no longer interested. 

The above is a very "blunt force" example of Latency; it doesn't take into account different "pacing" by different customer segments.  So for example, customers on the "Cisco track" might have an average Latency between courses of 6 weeks; customers on the "IBM track" might have an average Latency of 10 weeks between courses.  You don't have to figure out why this is true, it's enough to know it is true.

So the second step is to look at multi-buyers by segment to determine Latency, and proceed as above.  If you choose a segmentation scheme like "track" and you don't see any clear patterns, you may have the wrong segment scheme.  You should see a "bell curve" around the average Latency.  If there are a too many "outliers," or the bell curve is lopsided, you have a piece of it but there is something else going on.  

For example, the truest segment might be "track by price."  If you now look at Latency that way and get a near perfect bell curve, you nailed it.  Other variables might be occupation, country of origin, and age.

Latency is covered in the Drilling Down book, but it is the same material that is at the link above.   Another of the major models in the book is Recency, it is also available as a free tutorial on the web site.

The third major behavior model is called RFM, and then there is a hybrid of all these models I developed called LifeCycle Grids.  Those two are covered only in the Drilling Down book (hey, I can't give it all away free, I'd have no business!) but you can read an overview of these models here.

Hope that helps!

If you are in SEO and the client isn't converting the additional visitors you generate, you can help them make it happen - click here.

That's it for this month's edition of the Drilling Down newsletter.  If you like the newsletter, please forward it to a friend!  Subscription instructions are top and bottom of this page.

Any comments on the newsletter (it's too long, too short, topic suggestions, etc.) please send them right along to me, along with any other questions on customer Valuation, Retention, Loyalty, and Defection here.

'Til next time, keep Drilling Down!

- Jim Novo

Copyright 2003, The Drilling Down Project by Jim Novo.  All rights reserved.  You are free to use material from this newsletter in whole or in part as long as you include complete attribution, including live web site link and/or e-mail link.  Please tell me where & when the material will appear. 


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