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Retailers Rethink Online Strategy

The data is in, and the findings are clear:

· For most retailers, e-marketing is simply another channel versus a separate business, and should be treated that way.

· The basics that work in other channels will also produce the best results in e-marketing with appropriate interpretation. Consumers are simply unwilling to rethink the entire way they interact with retail shopping or advertising.

As a result, look for a lot more integration this year of Web sites, push e-mail and online surveys with other customer marketing efforts. Over the past few years, many retailers organized their e-marketing as a separate business or business unit with an expectation of selling it to take advantage of high market cap rates. While the hope of astronomical returns has long gone, a focus on integrated marketing has returned.

You will see a widespread shift of e-marketing responsibilities moving to customer relationship management managers. With this move, customers will gain consistent messaging across channels and push e-mail will be used almost exclusively for support of other marketing initiatives. Best uses will include supplemental marketing to less profitable segments, presell of catalogs, targeted private sale announcements and sale reminders.

Relevance. While you will see more and more personalization, you are likely to see a decline in “extreme targeting.” Telling a customer that if she bought the yellow skirt she might want the blue and yellow stripe blouse is not creating relevance: It is simply annoying, patronizing and contrary to all fundamental learning in customer response. To create a response you must be relevant but also of broad enough appeal to make a connection.

You will see relevance at just the right level in retail loyalty program microsites. Retailers will help make their retention investments pay off by creating password-protected microsites that offer exclusive services and information for top customers.

Ease of shopping. Without question, retailers have found that investments in navigation improvements and service-oriented conveniences have provided a better return than the newest online technologies (like rich media). In addition to frequent navigation updates, look for online services to dramatically expand. Those that offer both a perceived customer benefit and immediate customer upgrade will start becoming standard practice: top picks from retail experts, recommendations by customers, auto refill of rapidly consumed products, order tracking, location of the nearest store with in-stock inventory.

Consistency with known experience. Smart online marketers have finally accepted that it is extraordinarily difficult to change the way customers interact with their known shopping or retail advertising experience. This will play out in a decrease in advertising that requires customers to click for more information, and the introduction and use of online advertising that tells the whole story without customer intervention.

More importantly, look for extraordinary gains in technologies that mimic the consumer offline experience. All retailers can participate in this, since the options range from inexpensive and easy to implement, to leading edge and costly. The following is a quick rundown of experiential tactics that will increase in 2002, organized from least to most sophisticated:

· Online personal shoppers.

· Enhanced product detail (ability to click on object to change colors, view construction, read an excerpt, etc.).

· Virtual models (for clothing retailers).

· Rotating 3-D product displays.

· Virtual shopping aisles (with the ability to view whole aisles, select an item, rotate the item, read the label, etc.).

Optimized communications. You will see a strategic change in push e-mail this year. From the strategic perspective, e-mail will start being used consistently as a key communication approach for less valuable audience segments that might not otherwise receive personalized communication.

And making the return on investment on e-mail even more attractive are the 2002 distribution prices, which are coming way, way down. Because of a glut of software, the 10 cents per e-mail you paid last year might well be less than .01 cent this year.

Many retailers have made it fairly comfortably through the recession by discounting heavily. In fact, retail spending and consumer confidence have been higher than expected due largely to the wide availability of low priced goods. Without question, by now you have seen and will continue to see a much greater focus on price reductions in e-marketing.

Throughout this year look for:

· Expanded space for daily specials on retail home pages, and more specials throughout the site.

· Targeted specials that are offered to customers either after the order is completed or in an e-mail follow-up (targeting is generally based on overstocks or new “instant” analytic models).

· Clearance items organized as their own clearance section and available at all times.

· Free shipping offered more often for early shopping, top shoppers or minimum baskets.

· An expansion of push coupons for offline retail shopping.

· Discounts for second choices when an item is out of stock.

Many economists attribute higher than expected online sales in Q4 of 2001 to the events of Sept. 11, conjecturing that consumers wanted to stay away from the crowds. These economists imply that the online buying story would be stronger if this activity had been due simply to increased interest; that the bump in activity will not sustain if it is because of Sept. 11. However, retailers recognize that they have many new online customers and are working hard to keep them.

We are seeing an increase in aggressive new customer programs, with immediate efforts to lock in the second purchase. This second online purchase is critical to obtain because it establishes a consumer pattern. Once consumers make the second purchase, retailers are far more likely to retain long-term than one-time purchasers. However, if a customer shops a retailer both online and offline, the second natural purchase period online may be driven by a need to avoid stores during busy shopping periods.

Smart retailers have new customer conversion programs that use both fulfillment media (within shipments) and push e-mails to drive a second purchase. Not only do they time these promotions to coincide with the very next period in their typical repurchase cycle, but they also follow-up at the next major shopping season.

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