13.2 Understanding Customer Behavior in the Internet Age

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Internet-Enabled Business Intelligence
By William A. Giovinazzo
Table of Contents
Chapter 13.  Swimming in the Clickstream

13.2 Understanding Customer Behavior in the Internet Age

When it comes to understanding customer behavior, we can see that the brick-and-mortar stores have their strengths as well as their weaknesses. This is where the power of the Internet comes into play. As we said above, the Internet gives us a tremendous advantage, because the Web server records everything we do over the Web. The retail brick-and-mortar store could not tell us where the customer went in the store or what may have been in the market- basket that was taken out. Using clickstream analysis, we can observe and record these behaviors.

With e-commerce we are doing more than just mimicking what we have done with brick-and-mortar. To repeat what we have been saying all along, in a solution, the elements of the solution are changed by one another. This is true with analyzing customer behavior. In Chapter 12, we talked about how we could use the Internet to manage our relationships with our customers. Part of that management is the ability to measure our effectiveness in reaching our customers. Let's look at Figure 13.1 to understand the some of the ways in which we can use clickstream analysis to understand customer behavior.

Figure 13.1. Measuring customer behavior over the Internet.

graphics/13fig01.gif

One of the things that market-basket analysis in the brick-and-mortar world could not tell us was how the customer got to our store. We never really knew what drove them to our location, whether it was word-of-mouth or an ad that they may have seen. As seen in Figure 13.1, in the Internet-enabled world, we can track how a particular customer gets to our site. Customer A, for example, is responding to an ad received in an email. In the past, customer A may have purchased a power drill or some accessory related to a drill. Later, when our site is running a special on drill bits, we send an email informing him of the offer. Once he has had a chance to review the products, he may decide that he isn't interested in any of the bits. While visiting the site, however, he decides to purchase a book on woodworking. In this example, we can link a specific sale to a specific campaign.

In the brick-and-mortar world, companies go to great expense in deciding where to put a store. As the saying goes, the three most important things are location, location, location. How are customers finding our site? Are they finding us as the result of a search engine, a banner ad placed out on the Web by the marketing department, or were they referred to our site by a partner? This all speaks to the virtual neighborhood of our site. We can understand our virtual neighborhood by understanding how customers got to our site.

As we look at the types of activities we proposed for reaching out to customers, we see that by using clickstream analysis, we can measure the effectiveness of each. As we consider these, here are some of the analyses we can perform:

  • Are members of online communities purchasing product?

  • Is our top tier of customers members of online communities?

  • Where do most of our customers come from?

  • Are customers being referred to our site by our partners ?

  • Are customers coming to our site from search engines?

  • How effective are email promotions?

  • Is a particular promotion profitable?

  • Is our recommendation engine generating sales?

  • Does adding links to sites create sales?

  • Are the answers for questions dependent on a particular product?

  • Are the answers to these questions dependent on demographics of the customers?

The answer to each question is in the clickstream. It is like a prospector panning for gold. As we sift through the data, we can pick out the gold nuggets of information. The remaining sections of this chapter discuss how we do this.


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Internet-Enabled Business Intelligence
Internet-Enabled Business Intelligence
ISBN: 0130409510
EAN: 2147483647
Year: 2002
Pages: 113

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