What every business needs

E-business advise based on profiling and personalizing.
Written by Nora Isaacs, Contributor

A top-notch team, a bulletproof business plan, and a fine-tuned delivery system won't keep your company on top. If you can't find new clients to do business with, or if customers buy once and never return, it won't be long before you're forced out of the game.

You can't ignore the numbers: 75% of Internet shoppers abandon their carts without buying. Where do those buyers go?

Of those who don't follow through, 39% skip the purchase altogether and 26% buy from competing sites.

Another 17 percent spend their money with offline merchants.

Business buyers are becoming disenchanted with e-commerce too. And although companies with fewer than 100 employees spend $45.2 billion a year online, a little more than half are dissatisfied with the customer service they receive.

Getting your piece of the action doesn't have to be hit or miss. Thanks to the Internet, it's easier than ever to pinpoint the individuals and companies that are most likely to do business with you. Here's how to make your customers happy - and keep them coming back for more.

The key is focus

"Securing new customers is a more difficult chore than it's ever been in my 35 years of business," says Richard Kurtz, president and chief operating officer of the Deerfield, Illinois–based manufacturing company Alltech Associates. "There was a time when people were willing to wait a day or two for a solution."

So customers need a quick fix - and businesses need customers. But acquiring new buyers is expensive. Routine advertising such as direct mail, banner ads, and renting e-mail lists costs between $70 and $250 per customer. The Internet Advertising Bureau reports that online advertising expenditures have grown from $1.9 billion in 1998 to $4.6 billion this year. And the Boston Consulting Group and Shop.org found that e-tailers spent an average of $82 per person last year to acquire new customers, while offline companies spent only $31 per person. Yet only about a quarter of the average Internet retailer's customers are repeat buyers.

After spending a fortune on customer acquisition tactics - from randomly placed banner ads to overpriced television commercials - online and offline companies are taking a more precise approach to finding new customers. Instead of massive ad blitzes, new software and services let you focus specifically on your company's target market.

Smart profiling

What's the key to finding customers who are most likely to spend their money with you? Develop a customer profile, says Ken Sethney, founder of the Sethney Group, an Internet-strategy consulting firm in Laguna Beach, California. Specfially, Sethey says, "ask if the person who buys is an individual or a purchasing director."

That's where demographic mapping comes in. Sophisticated mapping of demographic data can show you exactly where your best markets are. Anysite.com produces thematic maps and creates detailed demographic reports using online databases separated into categories like population, age, sex, race, income, employment, and consumer spending. The service starts at $995 per user per year. Tetrad's excellent demographics package PCensus lets you profile potential customers based on descriptions of the population in a certain area, or target new customers by describing the kinds of customers you want to attract. The software starts at $495, depending on what features you choose, and you can request a free evaluation CD on Tetrad's site.

Don't think that just because you've flushed out potential customers with demographics numbers, you're home free. Now it's time to turn those shoppers into buyers. That's where profiling and personalization come in. "Profiling is really the missing link in a lot of companies' customer acquisition and retention programs," says M.H. McIntosh, president of the MacMcIntosh Company, a business-to-business sales and marketing consulting firm in Redondo Beach, California. "[Companies] tend to put their money on the table and roll the dice without really understanding where the odds of success are the highest."

When the San Francisco-based pet supplies site Petstore.com (which re cently merged with Pets.com) went looking for customers, it first turned to the usual channels: offline advertising and partnerships with similar companies. Then the Petstore marketing team decided it would be more efficient to turn the visitors the site already had into buyers. Petstore chose Coremetrics eLuminate, a service that analyzes Web site traffic and lets sites customize the shopping experience. Monthly cost for the service depends on the size of your site and how many vi sitors it has. There is also an activation fee, which starts at $6,000.

"It gives you new insight into how customers are using the site," says Anna Barber, vice president of product management at Petstore. Now, after a consumer buys dog food, for instance, eLuminate stores and analyzes the purchase information. The next time the dog owner visits the site, he is greeted with a personalized page that shows dog toys and accessories as well as dog-specific specials.

eLuminate provides a unified view of visitors. That is, the technology allows a company to see not only what customers bought, but also where they went while browsing - and perhaps most important, where they didn't buy. That data becomes invaluable in targeting the customer and influencing his behavior the next time he visits.

Make it personal

Yearly budgets for online advertising have soared 141 percent since 1998, according to the Internet Advertising Bureau. But much of that is cash down the drain.

"In the online world, we see people spending a disproportionate amount of customer acquisition money on advertising," says Rich Clayton, vice president of marketing at Angara, an Internet marketing service. "People doing things like banner advertising, affiliate networks, and e-mail sweepstakes measure success by traffic—not by how many new customers that banner ad created."

With Angara, Clayton hopes to change all that. The company's network of over 100 million demographic profiles first identifies an e-commerce site's users. From there it personalizes the experience by generating a unique start page for each user.

'I' is for instant promotion

Traditional methods like advertising and direct mail work to build your customer base over time. The Net, however, offers your company the ability to snag new business immediately. Sending potential customers e-mail with a direct link to your purchase page, or personalizing someone's view of your Web site based on his past purchases, helps you create an instant connection with your clientele.

After banner ads, direct e-mail has become one of the best ways to draw new customers, both to Web sites and to real-world business locations. Despite a checkered reputation, the technique is here to stay. Forrester predicts that by 2004, marketers will send more than 200 billion e-mail messages annually in the United States, generating a $1.6 billion opportunity for e-mail list owners and $3.2 billion for email marketing service providers. That's a full inbox.

Luckily for besieged Internet users (your customers), the face of e-mail marketing is evolving. Jim Nail, a Forrester analyst who covers the industry, says that the next step in e-mail marketing is personalization, where email messages will be sent based on a profile of the recipient, analysis of buying patterns, and tracking customers' Web behavior.

Clothing retailer Lands' End clued into this technique early, hiring Reponsys.com to handle its e-mail marketing campaign. Rather than putting its customers into groups based on predictive modeling or buying habits, however, Lands' End allows customers to choose how much they want the company to know about them. Potential buyers receive information and updates tailored to a brief profile they complete on the Lands' End site. About 1,000 new e-mail subscribers sign up for this service every day.

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