It has been a long time coming, but during the last year many companies finally mastered the science of processing transactions on the Internet. Now, the smartest companies have started shifting their focus to the art of personalized, online marketing. Why? Because the number of companies competing for the attention of an ever-growing pool of Internet users has skyrocketed. Slick graphics and snazzy Web sites are no longer enough to drive transactions. Customers are demanding product variety, strong customer service and simple transaction procedures.

In response to these growing customer demands, companies are turning to the idea of individually targeted marketing messages and services, which depend directly on detailed analysis of customer data. Hence the newest trend in Web marketing – clickstream analysis, or the instant collection and analysis of data as customers visit and explore a Web site.

The Web has made it possible to track every move a customer makes when visiting a particular site. Software can monitor their actions in real time and build a pattern of their likes and dislikes. Marketers are excited by this concept because, if executed correctly, companies can actually begin to understand exactly how a customer arrives at a purchase decision. They can identify the factors that influence how and why people buy their products. With this information, marketers can alter the design of their company’s Web site, highlighting targeted products and services. By getting closer to their customers and instantly responding to their needs and demands, companies can reach the holy grail of marketing – true one-to-one customer interactions.

The idea behind clickstream analysis is similar to attaching a video camera to someone’s head while they are reading a magazine. By recording and analyzing the articles selected, the advertisements scanned and the speed at which their eyes track across the page, we could develop an in-depth understanding of their interests. With this information, we could customize the magazine to cater to the reader’s individual preferences. We could charge more for advertising because we would know how to target individual readers rather than a broad group. We could also increase our cross-selling abilities by presenting related articles, ads and services directly to targeted readers.

It sounds amazing, but this analogy falls somewhat short of reality. Clickstream analysis raises obvious privacy issues, which we don’t need to detail here. Suffice it to say, some customers are scared of "big brother" tracking their online comings and goings. Companies that step over the line will find themselves alienating customers rather than building loyalty.

Many customers, however, are receptive to exchanging information for relevant offers, customized services and smoother processes. While clickstream analysis is definitely in its infancy, some companies have started to leverage its limitless potential. Most companies doing business on the Internet see the real- time analysis of customer data as critical to their online strategy.

Components of Clickstream Analysis

There are several key components to clickstream analysis. Referral analysis looks at how a visitor arrives at a given Web site. This is most relevant in tracking the use of outside links to your site. In many cases, companies are contractually bound to pay commissions to organizations hosting links to their site based on the use of those links. Even without such fees, companies need to know which links to their site are most effective so they can plan future marketing strategies. How are your partners positioning you? Who are your most effective partners, and how can you reward them? Are there specific ISPs that drive a significant portion of your site referrals? Answers to these questions can help companies tailor content for specific visitors to their Web sites.

Repeat visitor analysis, another component of clickstream analysis, tracks how and when visitors return to a Web site. Studies have found that sites designed to personally recognize a customer’s return visit have better "browse-to-book" ratios. Orders on such sites tend to be larger and more frequent. Repeat visitors can easily become a company’s most loyal followers, and their behavior on your Web site should get special attention.

The path to the purchase is also key to understanding Web behavior. By analyzing how customers come to place an order (or when they abandon an order), companies can understand how their site and content strategy are received by customers. Such traffic analysis can help companies adjust the organization and content of their site. For example, a company might find that customers are abandoning orders because it takes too many clicks to complete the transaction, or it might find that it is missing cross-sell opportunities because it closes transactions too quickly.

A Steep Learning Curve

The key challenge for organizations today is the learning curve associated with clickstream analysis. While the right tools make the collection and storage of clickstream information fairly simple, the analysis of that data can be difficult. Part of the difficulty stems from the chaotic nature of the Web – users can often reach and explore sites in a variety of different ways, sometimes from multiple computers. The architecture of a Web site can also affect clickstream analysis.

There are also a myriad of challenges and options involved in collecting customer data. Some software vendors stress the importance of "network sniffing," or tracking access to the network. Others focus on building Web logs and server plug-ins. Capturing all of the relevant customer data usually requires a variety of methods and software packages.

Many companies start small, at first letting their analysts gain an understanding of the Web site and what information can be captured. From there, companies typically expand the type of data they collect and move on to sophisticated analysis. With the right Web architecture and dedicated analysts, firms should be able to test new content, analyze the results and continually refine their sites.

Ultimately, companies will need to link their clickstream data back to their main marketing database or data warehouse. Many companies have established their Web operations as separate divisions, but to perform true multichannel analysis they will need to bring their online and traditional channels together to ensure seamless customer experiences across all channels.

Over the next few articles we’ll talk more about campaign management and personalization in the Internet world and how customer data analysis can drive these endeavors. We’ll also take a closer look at several data analysis vendors and their solutions. In the meantime, as customers surf to and from your company’s Web site, remember that the key to earning their loyalty comes not from pushing products at them, but from listening and responding to their needs.

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