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Primary Knowledge Inc. went from a fledgling start-up based on the heretical proposition of outsourcing the huge data piles of clickstream and transaction data generated by web sites to a thriving 40-employee company. Best of all, it's gaining real insights into the real cost of acquiring customers and the web user experience. Marketers are realizing they have to get their act together in data and need decision support systems to rationalize moves in the market and make informed decisions.

The last time we met Peter Adams, CEO of Primary Knowledge Inc. in New York, he was running a fledgling start-up based on the heretical proposition of outsourcing the huge data piles of clickstream and transaction data being generated by web sites.

Well, he’s got 40 employees now and just signed up Babygear.com. Business is great, life is fine, and people are terrific, in other words.

Best of all, he’s gaining real insights into the real cost of acquiring customers, and the web user experience.

“The tide is turning,” he says, against offline media like TV, radio and billboards for customer acquisition. “People are turning to online campaigns affiliates, banners, distribution deals because they’re more measurable.”

So the TV networks may be in for a shock. “So much has been spent on radio and TV and print by dot-coms that they’re seeing these venues as being just too crowded, and they’re moving to media that doesn’t have that problem. If you can’t get on TV and radio you’ll go to the Internet, which is also measurable and optimizable.”

Smart sites are also beginning to look at what Adams calls “the hole at the bottom of their bucket,” the customers who are lost after being acquired. If you can reduce your churn rate or the number of abandoned shopping carts even a little bit, it will have a bigger impact on your bottom line than a Super Bowl ad.

Many sites, flush with cash, have been putting off this work, but they can’t any longer. “If you have high churn you have no hope of lowering your cost of acquisition at some point you fall off a cliff.” Many sites don’t know when they’re getting repeat customers, or how their customers behave when they’re not buying.

The answers to these questions may lie in log files, but just as Adams expected when he launched, many companies don’t have the expertise in-house to do the analysis. It’s not a lack of software or programming, but a lack of understanding as to what’s coming out at the other end of the program that is holding these sites back.

Some of the answers turn out to be simple. Being upfront about shipping charges and taxes before presenting the final bill can raise the number of carts that complete the check-out. Others aren’t so simple. It turns out one of the biggest reasons more carts are being abandoned is the rise of new shopping bots like iChoose that offer last-minute price comparisons, and a little pop-up saying that if you want to buy something, there’s a lower price elsewhere.

Many marketers also fail to tag their outgoing emails so they know what’s being done with them. Are they creating sales, or aren’t they? Once you do these kinds of things, however, you have to analyze the data, grab the insights, and use them, Adams says.

“People are realizing they have to get their act together in data, and they need to have decision support systems that allow them to rationalize moves in the market and make informed decisions. We’re seeing people issue RFPs to get their house in order.

“At the end of the day what marketers want is answers. They don’t care about the data. They want to know what it means.”

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