7 Juli, 2000

Methods of Determining aMethods of Determining aSuccessful Web SiteSuccessful Web Site

Peter Peter StaggStaggDirector/Principal ConsultantDirector/Principal Consultant

MidnightMidnight––online (ACT)online (ACT)Canberra AustraliaCanberra Australia

www.midnight-online.com.auwww.midnight-online.com.au

7 Juli, 2000

What is Midnight-online?What is Midnight-online?

!! Small enterprise.Small enterprise.!! Used as an entry to the e-commerce field.Used as an entry to the e-commerce field.!! Starting small to ensure all processes areStarting small to ensure all processes are

operating before increasing product range.operating before increasing product range.!! UtilisesUtilises SAS technologies to monitor overall SAS technologies to monitor overall

performance of the internet business.performance of the internet business.

7 Juli, 2000

What is an e-commerce web site?What is an e-commerce web site?

!! Uses the internet to sell products or services.Uses the internet to sell products or services.!! Has an exchange of funds facility for theHas an exchange of funds facility for the

purchase of a product/service.purchase of a product/service.!! Does not necessarily have a standard store frontDoes not necessarily have a standard store front

attached.attached.!! Has minimum stock on hand if any.Has minimum stock on hand if any.!! Has a worldwide customer base that can easilyHas a worldwide customer base that can easily

access the “store.”access the “store.”

7 Juli, 2000

What e-commerce is worthWhat e-commerce is worth!! US e-commerce turned over US$ 33 billion for 1999.US e-commerce turned over US$ 33 billion for 1999.!! For the current year in the US it is expected to reachFor the current year in the US it is expected to reach

US$ 61 billion.US$ 61 billion.!! Western Europe experienced a revenue increase ofWestern Europe experienced a revenue increase of

more than 200%, still only 0.2% of the retail market.more than 200%, still only 0.2% of the retail market.!! By end of 2000 it is expected to reach US$8.9 billion.By end of 2000 it is expected to reach US$8.9 billion.!! The estimated value for Australia in 2000 is to doubleThe estimated value for Australia in 2000 is to double

to AUS$1 billion.to AUS$1 billion.!! E-commerce sites are not guaranteed money makers.E-commerce sites are not guaranteed money makers.

www.shop.orgwww.shop.org

7 Juli, 2000

Determining the success of a webDetermining the success of a website is not done by the number ofsite is not done by the number ofhits, nor by the number of saleshits, nor by the number of sales

made.made.

7 Juli, 2000

Questions we must askQuestions we must ask

!! Who are our customers?Who are our customers?!! Can we compare our site to other sites?Can we compare our site to other sites?!! Are our advertising campaigns working?Are our advertising campaigns working?!! Can our hosting service handle the traffic?Can our hosting service handle the traffic?!! How well are we doing?How well are we doing?!! Do we have realistic expectations?Do we have realistic expectations?!! What else can we do for our customer?What else can we do for our customer?

7 Juli, 2000

Why these questions?Why these questions?

!! Increase market share.Increase market share.!! Start a new business gain market share.Start a new business gain market share.!! Stock control.Stock control.!! Marketing.Marketing.!! Business decision support system.Business decision support system.!! Create and monitor a customer relationshipCreate and monitor a customer relationship

management strategy.management strategy.

7 Juli, 2000

What is our market?What is our market?

!! Australia’s population was around 19 millionAustralia’s population was around 19 millionpeople in 1998.people in 1998.

!! UK population was 59 million in 1997.UK population was 59 million in 1997.

!! USA population is estimated to be 273 millionUSA population is estimated to be 273 millionthis year.this year.

7 Juli, 2000

PC at home and has web access

!! 1996 24% of Australian households owned a PC1996 24% of Australian households owned a PC!! 1998 30.8% of Australian households owned a PC1998 30.8% of Australian households owned a PC!! 1998 7.8% had internet access1998 7.8% had internet access!! That’s around 1.4 million peopleThat’s around 1.4 million people!! People using the internet for e-commerce ??????People using the internet for e-commerce ??????

Source Australian Bureau of Statistics

7 Juli, 2000

A suitable systemA suitable system

!! Reflects the needs of business operation.Reflects the needs of business operation.!! Provides statistics on all processes of theProvides statistics on all processes of the

operation in real time.operation in real time.!! Is able to give growth forecasting.Is able to give growth forecasting.!! Must be able to provide customer, stock andMust be able to provide customer, stock and

financial information.financial information.!! Intelligent to derive cross selling opportunitiesIntelligent to derive cross selling opportunities

to the customer online.to the customer online.

7 Juli, 2000

What the customer seesWhat the customer sees

7 Juli, 2000

Behind what the customer seesBehind what the customer sees

!! Shows only what the customer is spending with you.Shows only what the customer is spending with you.

!! Must be proactive to serve the customer.Must be proactive to serve the customer.

!! A total corporate activity for the customer. OneA total corporate activity for the customer. Onecustomer, many departments, one voice.customer, many departments, one voice.

!! Good CRM knows about customer, competition, asGood CRM knows about customer, competition, aswell as themselves in a product, need and serviceswell as themselves in a product, need and servicesbasis.basis.

7 Juli, 2000

Web Server DataWeb Server Data

Sales RecordsSales Records

FinancialFinancialRecordsRecords

MembershipMembershipRecordsRecords

Supplier DataSupplier Data

Call Call CentreCentre

ProcessProcess

0

2 0

4 0

6 0

8 0

1 0 0

Ea s t We s t N o rth

Report GeneratorReport Generator(SAS System)(SAS System)

ReportsReports

GraphsGraphs

Data Repository

Data Extraction Data Extraction (SAS System)(SAS System)

7 Juli, 2000

Customer Relationship ManagementCustomer Relationship Management

What is it ?What is it ?

Why do we need this?Why do we need this?

7 Juli, 2000

What is it?What is it?

!! Objective is to match the service level andObjective is to match the service level andcustomer intimacy provided by the store keepercustomer intimacy provided by the store keeperof the 1800’s for a mass-of the 1800’s for a mass-personalisedpersonalised customer customerbase.base.

!! Collect and leverage customer information toCollect and leverage customer information tocreate new customer and product segments andcreate new customer and product segments andeffect effect organisationalorganisational, management and process, management and processchange.change.

META Group www.META Group www.imtimt.4cmg.com.4cmg.com

7 Juli, 2000

What it is about?What it is about?

!! Gathering and Gathering and utilisingutilising information about information aboutcustomer customer behaviourbehaviour is critical to accelerating an is critical to accelerating anorganistation’sorganistation’s growth and building market growth and building marketleadership.leadership.

!! OrganisationalOrganisational and process changes are needed and process changes are neededto manage and extract value from customerto manage and extract value from customerdata.data.

!! Use to anticipate and lead Use to anticipate and lead organisationalorganisationalevolution.evolution.

META Group www.META Group www.imtimt.4cmg.com.4cmg.com

7 Juli, 2000

The BCG report statesThe BCG report statesThe battle to dominate online retailing in WesternThe battle to dominate online retailing in WesternEurope is heating up with three types of playersEurope is heating up with three types of players

––European incumbentsEuropean incumbents–– European start-ups European start-ups––US online retailersUS online retailers

All fighting to capture market share.All fighting to capture market share.!! Unless European retailers become more aggressive in Unless European retailers become more aggressive increating innovative e-commerce businesses they willcreating innovative e-commerce businesses they willcontinue to lose their share of their market to morecontinue to lose their share of their market to moreexperienced US competitors.experienced US competitors.

www.shop.orgwww.shop.org

Methods of determining a successful web site.

Peter StaggDirector / Principal Consultant

Midnight –online (ACT)

OverviewMidnight-online was created to be an Internet retail company. It is a small company in the earlystages of establishing a presence in the Internet arena.

Midnight-online’s primary purpose is to retail a variety of products and services across theInternet to a worldwide customer base. This includes the national and local customer base.

There are many products which can’t be sold to the overseas market and therefore are restrictedto a localised market. This is due to import restrictions or incompatibility with the electricalsystem.

The purpose of this paper is to show how we will be making use of all gatherable data to ensurethat the web site maintains a high profile on the Web customer’s shopping list.

We have chosen the SAS Institute products to build the reporting systems that will determine theeffectiveness of the site’s design, product range, its ability to keep customers returning to the site,and to plan critical customer relationship management (CRM) strategies.

The Internet is fast becoming a new way of doing business. It has exploded in the past few yearsfrom a text based communication system to a full multimedia and data communications networkwhich now covers most of the world. Wherever there is a telephone connection, there is the abilityto connect to the Internet.

One of the forces that has helped develop the Internet, is e-commerce. The ability to marketproducts and services across a network direct to a consumer has created a way to increase salesand reach out to a larger market.

Many of the e-commerce giants of today rely heavily on web statistics. It can be a very costlyexercise to collate statistics and monitor trends. However many companies have available theresources to collect statistics and design marketing and advertising strategies based aroundthese. Companies have been formed solely to monitor web activity and sell web advertising tomeet this demand.

But what about the small commercial sites? Midnight-online is not a large company. It has a smallnumber of staff and a limited budget. That does not mean, however, that the strategic needs likegathering statistics and developing CRM strategies should not be addressed. Indeed without thisimportant information, it would be easy to make a mistake that could mean the end of thebusiness.

Midnight-online currently operates on a Windows NT4 network with Microsoft’s InternetInformation Server as the main development web server. This is used to design, develop and testthe web pages before uploading them to the web hosting service.

It is also used as the repository for storing the SAS tables used to build the reports. As therequirements and the need for more development increases, we will have separate server foreach system.

Currently, we are running SAS Version 8, with the introduction of SAS/IntrNet ! into the systemcurrently being evaluated. Microsoft Visual Interdev is used as the main web page developmentpackage. It has the ability to write SQL server databases. Our web host service is geared towardsan NT4 environment and has the capability to support the web site’s requirements.

After in-depth research we found this to be a suitable environment in which to develop acommercial web site.

What is an e-commerce web site?Before we can discuss what statistics can be gathered, we should now define what is an e-commerce web site for the purpose of this presentation. An e-commerce web site :

" Uses the Internet to sell products or services

These sell a selected range of products and services to a variety of consumers over the web.They utilise Internet technologies by applying them to the buying and selling of products andservices.

" Has an exchange of funds for the purchase of a product/service

In many cases this is done by credit card transactions either interactively or on a “payment ondelivery” basis. Some may even have a COD payment method.

The ability to provide secure and encrypted links between the customer and the web site hasboosted the use of credit card transactions as the preferred option when making purchasesover the web.

" Does not necessarily have a standard storefront attached

There are e-commerce web sites that do not have a storefront where people can drop in offthe street and purchase products. In most cases many may not even be located in a standardretail area, instead, being merely an office in an office block. Some have even started in aback room of a house and have grown to be very successful companies.

Some companies “attach” a web site to their business framework, but do not consider it amajor part of their business structure and instead use it as a public relations medium. It neednot be a large site, or have a large range of products on offer.

" Has minimum stock on hand, if any

Such sites order their products directly from the suppliers on an as needs basis. This methodmeans that they do not hold any stock except for that which is bought in and then shipped outimmediately to a customer. In some cases the product is shipped straight from the supplier tothe customer.

This reduces a large percentage of overheads that is usually tied up in stock that may or maynot move.

" Has a worldwide customer base that can easily access the “store”

A connection to the Internet means that the customer can shop at any e-commerce site atany time they choose. For example, a person in Australia can purchase from an e-commercesite in England without having to consider the time difference.

Both types of retail organisations sell products and/or services to a consumer. The differenceis that a web customer can be anywhere in the world.

Both a conventional retail store and an e-commerce store sell products and/or services to aconsumer. The difference is that a web store can service a customer who can be anywhere inthe world and can shop on an e-commerce site 24 hours a day and 7 days a week.

What are the Big Questions?Now we have made that definition, we must determine what we need to know.

What questions do we need to ask and what answers are we looking for, in order to determineour information gathering strategy?

Without first deciding and planning the statistics we wish to generate, the data items that wecollect can be useless and may not provide an accurate indication on the operation of the website. For example, the ability to cross reference and link purchasing records to customer’sprofiles will provide statistics that only give a narrow view of the overall operation of the business.We need to know more about what is happening on the web site.

Four questions we can ask are:

" How well are we doing?

How many people are coming to the site and how many are registering and purchasingproducts?

Are people returning to the site?

" Can we compare our site to other sites?

Is it possible to look at our competitors’ web sites and compare what we have in product linesand prices to gain an edge?

Are our prices higher or lower than our competitors’?

Is the look and feel of competitors’ web sites changing frequently?

N.B. These statistics can only be gathered manually by going to competitors’ web sites and comparing our site totheirs. A long and tedious activity but it delivers good competitor information.

" Are our advertising campaigns working?

How much are we spending?

Are we spending our advertising budget effectively?

Which component of our advertising is doing well, or not working effectively?

Can we concentrate on some other initiatives to increase sales?

" Do we have realistic expectations?

When we make a marketing strategy, is what we planned and estimated being reflected bythe statistics.

Are we making our sales and membership targets?

There are more questions we can ask, but these are the best ones to start with. Using these as aguide we can now start determining what data to collect for analysis. Now we need to considerwhere we can source this required data.

How can we find out about the people who hit the site?We need to know about those people who are hitting the site and what they are doing when theyget there. We can then identify trends that will direct the design of the web site and determinewhat is encouraging people to return to the web site and thus increase sales.

To do this we collect data from various sources such as:

" Logging systems

Most logging systems are a good source of primary data about what site the personcame from and where they are going.

Depending on how the logging system is set up and who the web hosting service is, thelogs can capture data such as browser and operating system information, ip address,country of origin, referring URL, time on each page and destination URL. Small tomedium sized e-commerce sites use large web hosting companies to host their site. Aspart of the service, these hosting companies provide activity logs to all of the companiesthey host.

" Questionnaires

Ask the person who is browsing to fill in a questionnaire about themselves and theirexpectations about the site. This may be a simple point and click question or a text entrybased response. These questions should not be intrusive but should be able to able toask important demographic information such as age, sex, income range, country ofcustomer and occupation.

It is always a good idea to leave room for a memo or free text entry that the potentialcustomer may wish to enter. This gives the opportunity to provide additional informationthat the questionnaire did not cover.

" Java applets

There is a range of java applets that are either available or can be made that sit in a pageand record actions details etc of the movements the person browsing the web page, or

the site. These applets can record the path a person takes while viewing the site as wellas capturing information regarding the customers computer.

" Purchasing/sales records

Purchasing and sales records are the mainstay of many traditional reporting systems.These records are only a partial indicator of the performance of the web site.

Visitation records will show you that people are coming to the site, product movement willshow whether people are buying and what products they are buying.

These purchasing/sales records should show:

o What products were purchased?

Knowledge of what products were purchased may enable us to obtain bulkpurchase savings which we can pass on to customers.

Different product types may incur different delivery costs, are there products notmoving as much as other products?

o Where was it sent?

Is there a geographic concentration of purchasers that need to be speciallyserviced?

Is there a supplier close by who can be utilised more effectively than the onecurrently supplying products to that customer group?

Can we make savings on shipping costs?

Will the courier company be able to deliver products to the customer group in amore efficient and cost effective manner than is currently happening?

o When was it purchased?

Can we detect a purchasing trend?

Are there products being purchased at certain times of the year?

Is this related to seasonal or holiday period?

Should we pre-purchase an amount of these products to ensure supply?

Is there a particular time of the day/week that products are being purchased?

Was it during product promotion?

o Is our pricing right?

Are we aggressively pricing our products or are the prices too high?

o Do we need to expand on that line of products?

Is there a range of products that will complement the current range?

Can we market accessories that will aid in boosting sales?

" Email requests

Always have a “contact us” facility. It is an essential part of the site.

Emails may contain information about what a customer wants, a complaint or any otherkind of feedback. Any feedback is important. Even the complaints are to be consideredimportant. A complaint can mean there is a weakness somewhere in the businessstructure. If this weakness is allowed to continue it may end up being major cause ofcustomer loss and therefore loss in sales and profit.

What can we find out about the people who hit the site?We have seen that there are many ways in which we can gather information on what people dowhen they access the web site. What information do we want to collect to ensure we have abroad view of the operation of the site?

Information we need to collect can be classified into :

" Demographics

Who are the people coming to the site?Age, sex, income range, country?

" What pages did they visit?

Did they surf around or did they just stay on the front page?

" When did they visit?

Did they visit on weekends, day, night or varying times?

" Why did they come here?

We must determine what advertising strategy is working, or should be implemented toattract new people to the site. This would tell us if the campaigns are encouragingregistered users to return back to the site to make purchase.

We would also need to determine whether they hit the site to browse or have an intentionof making a purchase with or without an advertising campaign.

By determining the reasons for people coming to the site we can form an advertisingstrategy and use product promotions to keep people returning back to the site. We canlook at our strengths and weaknesses and take appropriate action.

" What were their reasons for coming to a site like ours?

When people come to a site like ours why are they coming?

Are they intending to make a purchase?

Are they just browsing?

Are they making price comparisons?

" How did they come to the site?

What did they use to come to the site? Advertising banner, word of mouth, searchengine, email?

Tracking activity will indicate how well the site is performing. If it is too graphics intensive or thereare too many levels to reach certain information, then people will “click off” the site. If they do thiswithout becoming members we could pop up a questionnaire to ask why they left without joining.

We must be careful when doing this that we do not turn people off from becoming a member orreturning to the site.

Analysing the information: What we get out of it.

In order to make use of the data we need to process it and normalise it. The information will firstbe used to report on who are our customers, what do they need and how we can meet thoseneeds.

We can measure purchasing trends and link them back to the members. We can determine anyseasonal or special purchasing trends that will allow us to gear up and prepare for high volumepurchasing fluctuations that have been indicated by previous activities.

We use this to determine what products are not selling and if any products should be availableonly during certain times of the year.

This information will allow us to source products from suppliers in an efficient logistical, andfinancially viable way to enable higher sales figures, greater profitability and increasemembership numbers as time progresses.

The reporting system is divided into two component areas. The component for registeredcustomers i.e. those who have signed in and can be identified to the system either throughsigning on to the system or through a cookie that is kept on the customers computer, and thecomponent for non registered customers, i.e. those who have not yet joined up as a member andcannot be identified. This provides comparison data and indicates the effectiveness of recruitmentto the site.

This information will be the key point in the development the first Customer RelationshipManagement (CRM) strategy.

" What is a CRM strategy?

A Customer Relationship Management strategy is usually viewed by many places as howto meet the customers needs. However this is a very broad view of the concept. Bydetermining our customer profile and the needs of the customer, we can beginformulating a CRM strategy. It is a method to improve service, retain customers, createnew customers and increase profits to maximise returns by developing customerrelationships. The customer is the integral part of any equation and is more demandingthan ever before. They have also discovered they have the power to make or break a

business. They can vote with their “feet” or in this case their “mouse”. No customer, nobusiness.

Businesses now must become customer focused rather than product focused.

Meeting the needs of the customer is not just outward looking to the customer, but alsolooking inwardly to the organisation and its structure. The changing needs of thecustomer may force the company to change is direction or its structure.

Customers move to organisations that meet their needs. A company that is not dynamicand fails to meet the needs of the customer will find competitors that do will win over theircustomers. The annual strategic planning meeting has been replaced with the dynamicCRM concept making the organisation a dynamic and flexible one. The concept that “ithas worked for us in the past” has been outdated for a long time.

The information revolution has created the ability to allow companies to frequently selfevaluate themselves. This self check not only internally but also externally, ensures thatinvestments and strategies can be appropriately directed to increase the chances ofsuccess with the customer.

" Why do we need a CRM Strategy?

Without a CRM strategy we cannot find our high value customers. We do not want towaste resources on low value customers. That is, people who do not buy frequently or atall. We can determine churn/retention ratios, profitability analysis as well as refining thecustomer profile.

Why is such a thing like a CRM strategy valuable to a small company like Midnight-online? The answer is quite simple. With a limited budget we need to target medium tohigh value customers that will make frequent purchases. This needed turnover ofproducts is essential in ensuring the business becomes successful.

We start with a CRM strategy that has been researched and developed over a period oftime, during which the initial design of the web site is being formulated, it is expected thatboth the strategy and design will need to be updated soon after the web site is launched.

For this reason we need to identify our customer segments just as quickly. As soon asthese are identified we must commence the marketing campaigns. These marketingcampaigns have been designed from the statistics captured off the web site for eachcustomer group.

The initial outlay of developing a strategy would not be considerable, yet it must be seenas an investment that would reap rewards as long as we maintain an understanding ofthe customers’ needs. This means the investment is ongoing as is the process of settingour strategic direction. As we increase in size, in a customer and organisational scale, theamount invested should also be comparable to match the growth and ensure thestrategies are carried out successfully.

Not only must we do things right, we must do the right things. We can only do those if weuse techniques such as demand forecasting and customer profiling. We will be able toefficiently market to our high value customers. Being a small company, this can be arapid and effective process.

This does not mean that the company will change direction every time a change is found,but instead recognise these changes and prepare to meet any large changes head on.

What we are using to analyse all the data" Data sources

There are several data sources that are used.

o Microsoft SQL Server 7

Microsoft SQL server will hold the resultant data from form entries. These formentries are questionnaire pages. These pages are initially the screen that peoplecome across while the web site is being developed. This page will ask for emailaddress, some demographic information and suggestions as to what they would liketo see on the site. This data will be analysed as part of the CRM strategy. It will alsobe used to email people when the site is up and ready for business.

SQL server will also store purchasing and marketing records. These will be used toconfirm orders, delivery and the completion of orders. Some tracking information willalso be stored in an SQL database.

o Web activity logs

Web activity logs are supplied by the web hosting service. This is in the form of a flattext file that can be imported with ease into a variety of database systems. The filelists information such as referring page, time spent on each page, country of personbrowsing and the URL the person moved on to.

" Software used for reporting

As mentioned before Midnight-online has decided to use SAS software. This is due to thewide functionality SAS software has and gives. The ability to import and read other fileformats, create a variety of reports, and transforming the data into a series of data martsfor storage.

We will be using SAS/Access ! and ODBC drivers to read the SQL server databases,and transform the data into SAS tables that are stored onto a local server. As thesetables increase in size they will be migrated to a series of summary tables in a data mart.

Tables will be linked together to monitor the sales activity of the registered users. Othertables will be designed to monitor the activity of the website for non-registered users. Thiswill give an activity comparison between registered and non registered users. Each tablewill be analysed individually or as part of a relational database. This will allow us toproduce a series of reports and performance stats that calculate the site and pageactivity.

The majority of the reporting was to be undertaken by building a SAS/AF! application togenerate the graphs and report tables. However with the release of SAS/EnterpriseGuide ! we will be building applications based on the capabilities of SAS/EnterpriseGuide !. This means developing SAS/AF! screens to provide the reports is replaced bya complete system.

SAS/Web Hound ! is due to be released in Australia soon, we will be evaluating it to useas another reporting system. This product has the ability to create reports, read in logging

and activity data and store the processed data into a series of tables that we can use tomonitor performance.

This information is critical for us to continually self evaluate the site by providing answers toquestions like:

o Is the web hosting service capable of handling the traffic?

Do we need to consider having our own web server installed to run the site?

Should we consider another web hosting service instead?

What the min, max, ave response times when accessing the server?

o When are our peak times?

Best not to take the site down for maintenance work right in the middle of peak times

When is the safest time to drop the server/site for any upgrades?

o What has our growth been?

Are we actually growing as we predicted?

Are we getting people to make purchases and become members of the site?

Do we need to do more to increase sales?

o Did our advertising and marketing campaigns have any affect on the volume of traffic?

Using references in an email campaign or other kind of marketing campaign, was therean increase in the number of hits on the site?

What ratio is comprised of responses/hits to the campaigns?

Did sales increase within a defined time frame after the campaign launched?

o Where is our greatest concentration of customers?

Is there a customer group(s) that can be better served by changing or creating astrategy?

Can we find suppliers close to those groups that will be able to supply at better rates if weuse them?

Can we do the same with couriers?

With all this information available we can now set about running a web site and developmarketing strategies that we hope will be successful in putting the site well placed on the area ofe-commerce.