Today's Business Crossroad: Core Customer Knowledge

The management adage, "You cannot manage what you do not measure," recently has evolved with e-business to include the addendum: "You cannot measure what you do not define." Yet defining specific metrics for measuring the success of a Web site is a daunting task.

The inability to identify proper criteria and meaningful calculations is hampering the e-business world's capacity to determine the value of corporate Web sites and to set appropriate budgets for their development.

The Landscape Has Changed

Senior executives in today's cutting-edge e-businesses face intimidating challenges as the Internet community races headlong into the new millennium. These executives have labored to build highly dynamic, heavily personalized, customer-centric e-commerce destinations that are a far cry from the static 'brochure-ware' Web sites of 1996. Today's top sites strive to establish true one-to-one relationships with customers, often generating unique site experiences for each user.

As the Web makes good on the oft-repeated promise of providing a fundamentally new customer communications channel--and as e-business managers travel further into the realm of the unexplored--both day-to-day tactical execution and long-term strategic vision become more challenging and more critical.

However, e-business managers lack many of the core tools and techniques for successful management. What types of customers are driving profitability? Which Web technology investments yield the greatest return? How can we best respond to new and potential competitive threats?

In bricks-and-mortar businesses, senior managers have a significant arsenal of fundamental metrics that reveal major trends, key opportunities and hidden hazards. These executives can manage by the numbers to confidently plot strategy and navigate through unfamiliar and volatile business conditions. Unfortunately, e-business executives faced with unfamiliar and volatile business terrain--while embracing new techniques like one-to-one personalization and viral marketing--have comparatively vague measures on which to base their decisions.

Where E-Business Departs from Traditional Business

E-business is real-time business, and the indicators of marketplace trends are recorded as they happen. A banner ad placed on a portal site generates click-through statistics within seconds. An improvement in the navigability of your Web site instantly changes shopping-cart activity. A press release that used to take weeks to have a barely perceptible effect on your company's brand and bottom line now can, within hours, impact your market's propensity to buy.

With the Internet lowering the cost of switching from one vendor to another, and with the ability to customize the Web experience for each site user, focusing on the customer becomes mission critical--and the value of knowing customers as discrete individuals is tremendous. The Web gives us the ability to capture, store and act on information about individual customers as a competitive advantage. With customer data we can customize the Web experience for each user, accurately predict buying patterns, customize products and services to meet specific customers' needs, lower inventory carrying costs, and ultimately keep customers for life. The result will be the ability for first-movers to lock customers into long-term relationships through increased customer satisfaction and increased profits. If vendors are nimble and readily can meet new client requirements as they occur, the motivation for those clients to find other vendors will be low. Laggards beware.

Enter E-Metrics

The business community knows how to measure income and profits and the proverbial bottom line, but is still struggling with what NetGenesis terms 'e-metrics'--metrics for measuring Web site success. As an industry, we have identified a variety of measurements that give us specific counts of particular elements, but these alone do not add up to a clear and comprehensive picture of success.

The opportunity to analyze more than just customer information is ripe for exploitation. The tide of customer expectations is rising faster than ever. Today we are struggling to compete, armed only with customer profiles that cover such minimal data as gender, zip code, number of visits and a few preference profile elements. Tomorrow, we will focus more on the interaction rather than just the information delivered during the interaction. Customer profiles will include information on how much customers know and how they like to communicate.

The problem in the online realm is that customers are invisible without clear definitions of a user or a visit. People come to your site, leave footprints and move on. But those footprints are merely an indication they were there. They tell you nothing about the people who made those marks. Unless you know who are casual callers and who are loyal devotees, you cannot tell if your promotion and conversion efforts are working to your benefit or not.

The Customer Life Cycle (CLC) starts with reaching your target market and progresses towards an established loyal customer base; along the way you have to acquire, convert and retain your customer. And, of course, avoid abandonment, attrition and churn as much as possible.

With e-metrics, you have the opportunity to approach the Web from an objective, systematic perspective. You can move from trial and error, to trial, measure and improve. You can become a customer confidante, a partner in commerce, and a trusted member of the customer's value chain.

Faster service, lower costs, higher customer satisfaction, improved retention, stronger loyalty--these are the promises of standardizing on e-metric definitions, tracking customers as individuals, leveraging customer profiles and harnessing the power of the Web to cater to customers in the most effective way possible.

Those who are first to embrace customer-centricity have a front-of-the-line advantage over the laggards. Companies that shift their focus to a customer-centric orientation will find it easier to attract new customers. The cost of switching to another vendor will skyrocket as buyers divulge more information to secure the best discounts and the best services. Converted customers will become less and less willing to start the education process with a competing vendor.

There are a number of terms we use as part of e-metrics:

Stickiness: Stickiness is the composite measure that captures the effectiveness of content in terms of consistently holding users' attention and allowing them to quickly complete their online tasks. Stickiness can be calculated by multiplying the average duration of a site's visits, the frequency of those visits and the total site-reach achieved.

Slipperiness: Slipperiness is equivalent to low stickiness. A slippery section of a site is one where visits are short, visitor frequencies are low , users are few or some combination of these conditions.

Velocity: Velocity is the measure of how quickly a user moves from one stage of the customer life cycle to the next. Clocking the prospect qualification process gives the average amount of time it takes for a member of a given market segment to pass from awareness, through deliberation, to decision.

Freshness Factor: The Freshness Factor (FF) is designed to measure how often content is refreshed vs. how frequently users visit the site. The FF can be calculated by dividing the average content refresh rate by the average section visit frequency.

For more information on e-metrics, see the 60-page report, E-Metrics Industry Study at http://www.netgen.com/emetrics.