Web Analytics for Retailers: Part 1

One of the first questions clients usually ask is, “Do we have the right Web analytics solution?” For retailers, we recommend they first have the right person in place before investing in a new analytics solution. A recent Jupiter Research (a Jupitermedia Corp. division) study revealed only 27 percent of online businesses surveyed don’t have a dedicated tech person on staff. Yet 63 percent don’t have a dedicated analytics staffer.

Jupiter Research asked executives to identify the top challenges facing their sites. Three of the top six are the need to collect, understand, and act on data.

The Art of Web Analytics Interpretation

There’s an art to Web analytics. First, you must ensure reporting is set up to answer those questions you want answered. Do you want to exclude search spider activity? Is a page refresh counted as a page view?

What do you want to know? If you’re not sure, don’t just ask some IT guy to set up your reports or run them in “default” mode (as so many do).

Retailers Lag Behind

Unfortunately, many retailers either don’t have the tools or people to benefit from their Web analytics. Successful online retailing depends on consistent and regular test, measure, and optimize cycles. The e-tailing group inc. found 14 percent of respondents in a 2003 survey didn’t know their conversion rates, and 43 percent didn’t know their shopping cart abandonment rate.

Online businesses must emphasize running things by the numbers. As the e-tailing group points out, “The most frequently used measurement methods were based on sales results and site activity/traffic reports, many of which are overly simplistic in nature.”

Implement Key Performance Indicators

Retailers must first establish key performance indicators (KPIs). These are the backbone of ongoing optimization efforts. KPI reporting is really the only meaningful link between the numbers you generate and your business goals. Jupiter Research’s Eric Peterson elaborates on the qualities that compose a useful key performance indicator:

• Offers a succinct definition that summarizes the nature of the relationship between the data that are compared (meaningfully compared, naturally!)
• Establishes an expectation for performance by using business-relevant comparisons over time
• Is capable of revealing a meaningful change in activity for a selected period
• Is capable of influencing remedial action

Some useful KPIs for online retailers include sitewide conversion rate; percentage of new and returning visitors; sales per visitor; average order value; average number of items purchased; shopping cart abandonment rate; and repeat order rate, which can help on the way to calculating lifetime value.

Most of these metrics have some correlation to your P and L statements. Most also provide an incomplete picture of customer behavior. Allen Crane, Dell Computer’s senior manager of business process improvement, says, “The Holy Grail is a suite of quantifiable, actionable e-metrics that capture behavior patterns and accurately relate them to the key transactional business levers of units, revenue, and margin.”

Start With Reporting Basics

Not all reports are created equal. Many products allow users to generate custom reports, making millions of potential reports available. Even at their default setting, hundreds of reports are offered — too many to start taking action. So let’s get a sense of the first five reports retailers should be looking at:

• Single page visits. This report is one of the most critical. Monitor key entry pages, such as home page, category pages, and important landing pages, to ensure visitors aren’t just landing and exiting without any additional action on your site. This would indicate either the page wasn’t relevant to visitors or they couldn’t find what do to next.
• Entry pages and exit rates. Monitor traffic sources, what site pages visitors enter on, and if any entry pages have high exit rates. A top-50 retailer we worked with recently had a category page that was a top entry pages (for a common, under-$30 product). Yet the page had a 91.3 percent exit rate. We found the cause was the product image; once it was replaced, the exit rate dropped to 61.5 percent. A page originally a cause of visitor frustration now accounts for a healthy income stream.
• Traffic by product category and individual products. Determine if key product families get the visits they deserve. If a key product category that’s critical to the bottom line is underperforming, consider restructuring navigation.
• Products by search engine. This report helps evaluate activity based on the most recent search engine activity. It tells you which search engines people use to find your products and what kind of income they generate. Use this report for search engine optimization (SEO) and ranking.
• Scenario/shopping cart analysis. How do visitors move through the various stages of the shopping cart and checkout process? Obviously, you want to reduce the number of visitors who abandon the process. We know from the Fireclick Index the average shopping cart abandonment from December 2003 to March 2004 was upwards of 70 percent across Fireclick’s client base. If you have a cart abandonment issue, review the 20 tips to reduce abandonment.

This list isn’t exhaustive, yet it provides a glimpse of the power and flexibility Web analytics can offer retailers when it comes to monitoring and optimizing Web sites.

Next week, a look at more complex reporting and how it can improve online sales.