4 Problems with E-Commerce — and How to Solve Them

NEW YORK — Think of the stereotypical used-car salesman: Pushy and cunning, he'll do and say anything to get to you to leave that car lot with a set of keys. No matter how much (or, sometimes, how little) he knows about the cars he's selling, far worse is how little he knows about you, the customer. As much as we'd like to think that that sales environment is unique to the used-car industry, it's not. According to a keynote presenter at the Web 2.0 Expo here this week, some misguided companies are treating online customers with the same level of obliviousness and bad behavior.

[Editors' Note: For more coverage of the 2010 Web 2.0 Expo, see Associate Editor Lauren McKay's previous news story, and her related blogpost.]

Charlie Kim, the founder and chief executive officer of New York–based startup NextJump, took the keynote stage this week to talk about the data behind e-commerce and how it can ultimately save companies from becoming that bumptious salesman we've all come to loathe. According to Kim, the data that's wrapped up in e-commerce processes can not only drive sales, but also create a personalized experience for each and every shopper. Sophisticated analytics, however, are required to unlock the power of that data.

Analytics, Kim told the audience, is what enables NextJump to provide online rewards programs and loyalty campaigns to more than 30,000 merchants — and to witness the e-commerce replication of some all-too-familiar bricks-and-mortar challenges. "One of the most interesting notions that we have watched is a similarity between online and offline," Kim said. "A lot of bad behaviors in offline commerce translate to online." Identifying those problems, he asserted, is the first step toward developing solutions.

The problems:

  • Pushy Sales: In the real world, Kim said, the equivalent is the used-car salesman -- or the seemingly dated pitchman on local television. "Remember Crazy Eddie screaming at you, ‘Buy this right now!' ?" Kim asked. When looking online, that same pushiness seems to permeate a lot of Web sites. Sites with tons of pop-ups and banner ads are virtually screaming at every visitor. This, Kim remarked, is "not good for the consumer."
  • No-Service Sales: At some real-world stores, you walk in and are overwhelmed by the number of options. You don't know where to start and there's no salesperson nearby to help. A common challenge with many e-commerce sites is having way too many links and destinations upon arrival, overwhelming the eye. If a consumer doesn't know where to begin and is too bewildered by content, she may just leave.
  • No Data: "When you don't have data, you end up spamming users because you're broadcasting untargeted advertising," Kim said. In the physical world, you see this in your mailbox everyday -- fliers, promotions, junk mail. Take a look at the Spam folder in your email and you quickly see how many data-challenged companies still exist.
  • Wrong Data: "Too much data is a problem a lot of companies have, but 'privacy breach' is what we tend to hear the most," Kim said. "In today's world, which is data-saturated, before you know it you have a lot of content, a lot of unmonetized users, and a lot of unusable data." A company poorly using (or, worse, blatantly misusing) the massive amount of data at its disposal can annoy consumers or cross the line in terms of privacy.

The solutions:

  • Segmentation: "It's critically important," Kim said. "Not all consumers should be treated the same — they're all different in value." Even the most basic forms of segmentation, he noted, can produce good results. Kim told the audience that the  simplest, most-effective form of segmentation involves dividing customers up into first-time users, high-value active customers (who drive 80 percent of profits), and inactives. If you take first-time users through the "tunnel of love" in the first 30 days, Kim said, they're likely to become active customers.
  • Targeted Value: Customers don't all want the same thing, Kim said, and even the ones who do won't all behave the same way. That's where analytics comes in: Products such as NextJump's PTPS (Price Time Product Service) can help a merchant target the right offer to the right customer — often without resorting to price cuts that damage top-line revenue. Not all value-added offers, after all, have to involve a price discount. Some of Kim's examples:
    • a fashionista who prefers a one-of-a-kind design over an off-the-rack discount; 
    • a workaholic who values expedience over cost; or
    • a single and affluent individual who wants to be pampered above anything else.
  • Listen and Serve: Think and act like a concierge at a hotel. Listening to your customers and providing proper service may help resolve any privacy breach, Kim said. Give customers the ability to tell you what they want. Remind them about deals and promotions — if they've asked that information.
  • One Chance: Kim insisted that everyone forgets the power of opportunity: You only have one chance to get it right, so be right from the beginning. Kim recommended a microscopic examination of details such as when customers are most likely to buy. For example, he warned, don't try to market apparel in July, when consumers are more inclined to spend toward travel, not clothing. With sophisticated tools, marketers can identify the specific day that a deal or promotion might have the most impact.

What's the nirvana that companies aspire to? Kim told a quick tale about his favorite restaurant. At his 10th visit, the restaurant owners took notice. Now, every time he eats there, he's presented with a free glass of wine and free dessert. "In the online world, I believe we can do better," Kim told the audience, "We can do a lot better than 10 visits before you treat the customer like the valued customer that they are. Data and project engineering is the key to it."

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine.

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