April 16, 2002

In the Bag

Merging online and offline data is now the key to unlocking lifetime customer value. But where do you begin?

By Kwong Sai

A long-held belief among marketers is that the "best" consumers have a set of permanent characteristics that distinguish them from the rest of the population. The elements of customer behavior have changed over the years — from demographics (age, education, and income), to psychographics (attitudes), and even to geo-psychographics (location, attitudes, age, education, and income) — but the principle remains the same: Who you are defines what you buy or do. Indeed, a fundamental understanding of who your customers are can unlock all the potential value they have for your business.

This principle hasn't changed even with the growth in e-commerce. In fact, online technology has simply allowed marketers access to a deeper level of understanding about their customers.

The conventional way to peek into your customer's mind involves consumer behavior research such as focus groups, panel discussions, and surveys. However, before spending a fortune on traditional methods, you should consider the fact that you are already standing behind a one-way mirror: Your customers are answering your questions right now by what they do or don't do on your Web site.

By observing and analyzing online data, you can spot the clusters of behavior related to the decision process, and infer people's genuine needs and motivations from their behavior. You can identify which pages of your Web site visitors are viewing, what paths they are taking within your site, and how long they are spending on each page and on the site. You can also determine when they are visiting your site and how often they return.

However, the value of this information is magnified when you are able to combine it with traditional offline data such as account, transaction, and call center information. Even with the phenomenal growth of e-commerce and the Internet, it is important to remember that the Web is just another channel that is now available to the consumer. Consumers still have offline activities, and you should analyze their online activities in conjunction with them.

People used to believe that online and offline consumers were mutually exclusive. However, what we have seen is that most consumers do both: Some will use the site to research information about products or services first before going to a store to purchase. Others will do everything online unless they need customer service, in which case they will seek a live customer service representative. By merging these two distinct consumer "personalities," your company will have a more complete picture of what your customers are doing on an individual basis. This is critical because without looking at both types of behavior, you only get a partial look or understanding of the consumer. This understanding is the key to accurately characterizing and measuring the value of a consumer's online presence and its benefit to the company's overall goals and objectives.

In this article, I'll describe a basic framework and approach to merging online and offline information and making sense of it. As with any data integration project, there will be unexpected quirks and exceptions to the rules that will require innovative solutions. But the key is to establish a strong logical foundation for the data relationships in order to help overcome those exceptions.

How to Merge Online and Offline Data

Now that this objective is clear, the question becomes: How do you do that? Indeed, IT and business executives with online and offline operations are now wrestling with the challenge of integrating online data with offline data. For example, many companies use their online platform to generate offline sales. These companies usually sell products that you wouldn't necessary buy online, but that you would research online before purchasing (such as automobiles and real estate).

This integration is also becoming critical for companies that need to measure cost savings generated by their Web operation (through customer self-service, for example). This is where Web activities and call center data are essential in measuring incremental value.

In most cases, the offline data is more organized and normalized than the online data depending on how many legacy systems have to be integrated. Usually the first obstacle is to make sense of online data.

Configure your Web server correctly. A Web server, when properly configured, can record every click on your site. Every click in the clickstream can be associated with the user's IP address, resource requested (URL), user agent, referrer, timestamp, HTTP status code, and cookies, if used. This approach is usually the first challenge because log files are inherently difficult to decipher; the amount of information stored in them is considerable and is captured in a fragmented format. There are companies in the marketplace (such as SageMetrics Corp., Synera Oy, and CentrPort Inc.) that can help process these files if you lack the resources to do so internally, but a general rule of thumb is that the more standard and organized the log files are, the easier and more cost effective it will be to manipulate your data. If the files are in a standard format, you can write programs to automatically extract and process the data. However, if the format is constantly in flux, that process becomes very manually intensive and time consuming.

Capture critical data in log files. You also need to make some critical decisions up front about what data should be captured in the log files and how the information is grouped. Usually, critical data is not captured, so the opportunity to garner valuable insights is lost. For example, search engine functionality is valuable in this regard: The customer is telling you exactly what he or she is looking for and how you can optimize your site to provide that information if necessary. However, most companies do not capture search engine content (that is, what the user types in the search box).

Use data to your advantage. In addition to capturing critical information, you should consider what that information means as well. A typical site may contain several hundred pages, and simple reporting tools, such as those from Accrue Software Inc. or WebTrends, can give you a high-level count of how many page views or visits were recorded for each page. However, there is little value in looking at reports just at a page level. Rather, each page should be supporting a business function, such as customer service, research, registration, or purchase processes. Instead of reports that tell you how many page views a particular URL received, a more relevant report would say how many visitors used various sections of the site. This approach is more relevant because you may discover that there could be correlations of the different sections that can drive certain actions such as sales or registration.

Furthermore, information presented in a silo perspective yields the least value. The more you can understand the relationships among different pages and the dynamics behind them, the more powerful that information becomes. Understanding that people who view a Flash unit about the product and FAQ section are more likely to purchase your product is more valuable then just looking at the number of hits for each URL. The mapping of what each URL means to the business function is the key to understanding online data; otherwise, all you are ultimately left with is hundred of reports containing mounds of data that do not answer any of your questions.

Group your visitors. Grouping visitors is the most critical goal in integrating online data and offline data, and perhaps the most challenging. The term visitor can be defined differently for each company, but the ideal definition is this: A visitor is a unique person who comes to your site, and whose activity you are able track regardless of when and or how many times they visit. You may not know anything else about that person, but you are able to group all of his or her particular visitor activities and look at them historically. If you are unable to do so, then the term visitor"is defined only for the session. In essence, instead of being able to identify one user who visited the site five different times, you would only be able to identify five different users that came to your site five different times. You would have no way to know that these visitors are actually the same user.

How you define your customers will determine whether you can integrate that data. Remember that in standard database architecture, data tables are connected based on logical primary keys. Thus, in the case of online and offline data, the problem is fairly straightforward: How do you identify a customer online and offline, and connect the two different sets of data for that same customer?

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