DATA MINING

If your budget is generous, you can leverage the information you already have to better predict your customers’ behaviors and to track business trends. Data mining discovers patterns and relationships hidden in your data that allows you to see emerging trends and patterns and to help you to develop better relationships by leveraging this knowledge. Your ability to discover and analyze your data will give you the knowledge to grow your business with useful and meaningful information. It’s almost guaranteed that at least some of your competitors are using data mining techniques to locate high-value customers in order to increase sales and minimize fraud.

Businesses sit with enormous databases holding various customer data (scattered all over the enterprise). These databases contain, not only a customer’s name, address, and email, but also data on their buying trends (what they’re currently buying), their surfing habits, the technology they are using, etc. The key to success is unlocking and applying that valuable information. With the right tools you can send quick inquiries into the vast array of information found in your traffic logs, advertising reports, shopping cart, etc., and perform real-time analysis of that data, allowing you instantly to capture information about a customer’s behavior. Using this technology, scouting through your various data sources, amassing the data, and then turning it into actionable information, allows you to use the data to deliver value-added marketing. However, mining the data contained in your business’s databanks isn’t for the fainthearted. It is expensive to implement and for staff to use the data mining tools requires extensive training.

However, when properly used, data mining helps you to gain insight into the (evolving) requirements and needs of your customers through analyses of customer data throughout the entire customer life cycle: from identifying prospective customers to extending and maintaining customer relationships. Then use it for developing and executing personalized, customer-centric marketing programs — programs that truly optimize customer relationships and deliver the highest possible return on investment.

For example, your marketing people might want to know the number of customers who saw the new widget banner ad on your website’s FAQ page exactly three times before they clicked on it. Maybe it would be useful to find out how many times a customer will search for something before they decide that it can’t be found on your website. If your website requires registration somewhere within the purchasing process or uses technology to differentiate anonymous potential customers, the likelihood of using mined data increases exponentially.

Establishing a data mining program is time-consuming, expensive, and requires the amassing of clean data (from log files, email and ad servers, and customer databases) before any analysis can begin. This can be done in-house or outsourced depending on your needs and budget. Next, since data mining builds models to analyze and predict behavior of customers by focusing on associations and patterns hidden in data, you need a staff that is well trained in data mining techniques.

BestProcesses.com provides an example of how data mining saved an e-commerce company money and helped it to understand its customers. The e-commerce business is a publisher of Internet reference books. It experienced a 30 percent loss in its customer base, causing the company to contemplate several courses of action, including converting its books into online databases at a cost of more than $30,000. After completing a data mining project, the company discovered the problem was not as dramatic as originally thought. The substantial decrease was actually an error in tracking customers. Data mining saved the company from incurring a needless expense.

By comprehensively analyzing data, e-commerce operators can see a bigger picture of what their visitors do and where they go. You can use that information to direct visitors to specific pages within your websites and to present them with personalized content. This helps to increase page views, lengthen visits, and increase sales.

Personalization

Personalization (one-to-one marketing) has the potential to completely revolutionize how a web-based business markets its product to customers and maintains its customer relationships. What exactly is personalization? It is a compilation of detailed behavioral knowledge of individuals and/or groups of individuals with certain like-behavioral characteristics and the use of that knowledge to personalize a customer’s online experience. To put it another way, personalization is the management of the customer relationship on an individual customer basis, but carried out in a mass production sort of way. With the help of personalization tools, you can entice your customers to stay on your website, make purchases, click on ads, etc. This, in turn, can lead to more sales, larger sales, more frequently returning customers. Customer benefits include easier access to products they care about — ease of shopping is something customers remember, so they will come back.

For the most part, personalization is more than a MyWidgetPage offering. Instead, when properly used the personalization program is tied into a data mining program, which enables a website to serve individual customers personalized ads and perhaps a re-ordering of a web page’s content (which is accomplished in real time) to match that customer’s behavior and shopping patterns.

To implement an effective personalization effort on your website you must establish clear goals to point the way toward what to personalize. It takes careful planning. You must be able to predict the wants and needs of the individual customer and target what you want to accomplish with the implementation of personalization on your site.

Do you want to increase customer loyalty? If so, add personalization in such a way as to influence repeat traffic. Are your website’s products/services something that customers usually feel that they need to research and evaluate prior to purchase (a refrigerator, automobile, etc.)? If so, personalize any portions of your site that can help in the customer’s decision-making process. Of course, to do this properly you need to determine how your customers gather information before making a purchase.

Know your customers: Some will know what they want when they first click on your website. Others should be gently led into an information-gathering process that can aid them in their comparison shopping.

Customer Categories. Your personalization tools need to be able to trace the paths and gather information regarding individual customers who visit your website. In general, customer behavior breaks down into five categories:

1. The impulse buyer (no research).
2. The brand conscious customer (little research).
3. The customers wanting the best value for the money (extensive research).
4. The price conscious customer (extensive price comparison).
5. The window shoppers.

Be prepared to engage the customers in each of these categories so that they will stay on your website and eventually make a purchase. To do this, lay out a different motif for each customer category.

Privacy Issues. Personalization tools can be abused. For that reason, personalization has a “bad rep.” These tools must be used with care, or you may find that you have alienated a serious percentage of your market share. Do not secretly profile the customer, do not send spam, and do not trade in personal information that you do not have the right to collect.

Personalization tools can provide much good — when used responsibly. For example, they can be used to create a unique session focused entirely on an individual customer’s needs, employing techniques to cross-sell, up-sell, and perform goal-driven configuration on a one-to-one basis. Thus you can present your products/services to individual customers in terms that are almost too good to refuse.

Use personalization to understand your customers’ interests, and provide them with solid unbiased information on those interests (without charge or obligation). If your customers like what you are delivering, you have a valuable commodity — a repeat customer.

If you think data mining and personalization tools are in your e-commerce business’s future check out:

• Megaputer.com’s PolyAnalyst 4.6. This comprehensive and versatile suite of advanced data mining tools incorporates the latest achievements in automated knowledge discovery to analyze both structured and unstructured data. (The megaputer.com site also has a good data mining 101 section.)
• Insightful.com’s StatServer, a web-based decision support system based on S-PLUS, one of the premier tools for data analysis, data mining, and statistical modeling.
• DeepMetrix Mining Visitor Intelligence Service (www.deepmetric.com), this is a hosted service. It might be just the ticket for the less technically inclined e-commerce operator.
• MarketMiner.com offers an automated, informative data mining tool that automatically produces a complete marketing analysis from, for example, customer demographics, sales, or response data from a past direct marketing campaign.
• Unica Corporation’s Affinium Product Suite (www.unicacorp.com) is a fully integrated marketing automation suite designed to allow businesses to leverage customer information across multiple data sources and interactive touchpoints.