Recency: Visitor Conversion, Initial
Drilling Down Newsletter # 35: July 2003
Drilling Down - Turning Customer
Data into Profits with a Spreadsheet
Customer Valuation, Retention,
Get the Drilling Down Book!
Also available online through
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but it's a lot more expensive there than at Booklocker!
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
Download a free white paper on the topic:
Marketer's Common Sense Guide to E-Metrics
In This Issue:
In This Issue:
# Topics Overview
# Best of the Best Customer Marketing Links
# WebTrends "Take 10" on Retention
# Question: Conversion, Initial and Repeat
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
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
can get these "must read" links e-mailed to
every 2 weeks before they expire by subscribing to the newsletter.
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
Hey Jim, did you read any other
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 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
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,
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
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
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
A: Well, for retail here are the latest stats I have
Entry-to-Sale Conversion Rates
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
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
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 - why don't you do this now while you are thinking of it? Subscription instructions are at the top and bottom of the newsletter for their convenience when subscribing.
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 right here.
'Til next time, keep Drilling Down!
- Jim Novo
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