VideoIf the first decade of E-commerce found companies exploring fresh possibilities, the next will be marked by their growing understanding of a critical new reality: customers are now in control. From their vastly increased ability to compare prices and service levels of various competitors to their willingness to publicize good experiences and slam bad ones to their newfound ability to exert control over product development and design, customers are king. This is true not only in the expanding but still-limited world of E-tail, but across the commercial spectrum, as a company's brand, reputation, and, ultimately, success become nearly indistinguishable from the experience it provides via its Web presence.
This poses a number of challenges for companies. Although it's been 10 years since people first began clicking away on Amazon.com and eBay, understanding how to convert a (human) browser into a paying customer remains largely a mystery. And even if a company improves on that front, does it miss seeing the forest for the trees, given the success that some have had in leveraging the Internet not only to sell more widgets but also to open up new commercial vistas? And what of unhappy customers who take to the blogosphere to vent their frustrations? How much damage can they do, and how should a company respond?
Using E-business to boost the sales of core products remains a priority for many companies, of course. And increasingly, they are finding that to do that they must become more aware of how different the online channel can be in terms of buyer behavior and preferences. JoAnn.com, the E-tailing arm of $1.7 billion arts-and-crafts retailer JoAnn Stores Inc., for example, was surprised to find that of all the promotions it tried to sell more sewing machines online, the one that worked best was a deal in which people who bought two sewing machines saved 10 percent on the sale.
Who buys two sewing machines? Turns out online shoppers do. "We initially thought, why waste a week's worth of sales on this promotion?" says Martin Westreich, CFO of the company's online division, in El Segundo, California. "As it turned out, one person in a sewing community simply called another and said, 'Here's this great deal.' We got a 70 percent increase in conversion rate for consumers who clicked on that promotion."
Its own research had shown the company that Internet buyers tend to wander around arts-and-crafts sites, message boards, and blogs researching products and comparison shopping, and the company wanted to find a way to entice consumers to stay longer on its site and eventually buy something.
But even though Websites can be tweaked quickly, testing various pitches and presentation methods to discover what works best can be costly and time-consuming. Would a photo of one sewing machine invite consumers to explore further, or would they respond more readily to two sewing machines? Maybe three blue sewing machines with "lowest prices" prominently featured? Or a single, very large photo of a gleaming silver sewing machine with the words "free shipping" emblazoned across it? "It's important for us to know what works best, since these are $250-plus items and they are a popular item to buy online," says Westreich.
The problem in traditional AB testing — where one week you test concept A and the next week you test concept B — is that "by the time you get to the data you need to make a decision, you've missed the boat," Westreich explains. So JoAnn.com opted for "multi-variate" testing, in which multiple page designs were tested simultaneously by San Francisco's Offermatica Corp., a hosted service that allows companies to rapidly compare different marketing ideas, from pricing promotions to products, by charting the labyrinth ways in which consumers navigate a Website. Hence the discovery that "buy two and save 10 percent" was the landslide winner.
JoAnn.com learned a simple lesson that other E-tailers are taking to heart: consumers act differently in the online world than they do in regular stores. Companies that continue to market to consumers with hidebound retail concepts stand to lose big. Tower Group estimates global E-tail sales reached $360 billion last year and are rising at double-digit percentage increases annually. Forrester Research predicts online sales in the United States will increase at a very healthy 14 percent annual clip for the next five years, and stresses that online sales are but one facet of an online presence. Forrester analyst Carrie Johnson cites a "huge shift in philosophy" as companies realize that the Web is not just a sales channel but an important way to enhance customer service and increase loyalty. For example, Forrester found that 65 percent of consumers have researched a product online and then purchased it offline, accounting for more than $100 billion in in-store sales.
One Click and They're Gone
"The days of 'push or pull' marketing are over," says Fareena Sultan, associate professor of marketing at the College of Business Administration at Boston-based Northeastern University. "Companies that take an advocacy position, that try to understand what consumers are looking for, create trust. If you're seen as antagonistic, as pushing products consumers don't need, you won't survive. Consumers have other choices. If you make their shopping difficult, one click and they're gone."
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