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Hollywood captured retailers’ dilemma in 1947 when it showed R.H. Macy in “Miracle on 34th Street,” trying to win customer loyalty through a series of programs centered on his Santa Claus.

Despite changes in technology and that online shoppers spend 53 percent of their holiday budget via the Internet, the dilemma for online retailers is little different: What programs will bring shoppers back to my site and increase my revenue during the crucial fourth quarter?

According to Nielsen//NetRatings, weekly shopping sessions at online retailers rose to 462.5 million in 2005, up 33 percent from the 2004 holiday season. How can online retailers capture their customers’ attention in a crowded market and make the shopping experience positive for the consumer yet profitable for the retailer?

Let’s examine two activities that retailers looking to drive revenue in Q4 can engage in: building repeat sales and driving incremental revenue streams through upselling and cross selling.

Customer acquisition is important in any holiday retail strategy. But as e-commerce matures, retailers also should look to build richer relationships with existing customers. Loyalty and rewards programs provide an excellent avenue to increase customer trust.

This is especially valuable as customer acquisition costs continue to climb. It is more important than ever to maximize each customer’s transaction, and increasing gross margin is tough in the frictionless environment of the Internet.

Research shows that customers in loyalty programs spend more. Working with a partner, retailers can have loyalty programs integrated with their site, offering valuable programs under their brand name. For example, retailers might wish to let consumers receive savings and cash rebates from participating online merchants.

Such a program lets consumers enjoy cash rebates and a sale price guarantee while retailers get increased revenue via a cash-back reward to encourage future repeat purchases on the site. The program gives retailers a revenue bump during a crucial period as well as a customized program that provides true value, thereby creating a lifelong shopper.

Ken Burke is CEO of MarketLive Inc., a Petaluma, CA, provider of e-commerce retail technology. E-mail [email protected]

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