Webtrends Analysis v Action Research

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Table of contents

Executive Summary 3

Customer action 4

In summary 7

Internet marketing 8

Online marketing tools 9

Risk aversion 10

Moving online 11

Analysis and action 12

Ad-hoc analytics 13

Analytical typologies 14

Conclusion 16


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Executive Summary2009 is forecast to be something of a difficult year for businesses. Web based businesses, according to some commentators, are best placed to survive or even prosper in this environment as customers tighten their purse strings and make more informed decisions about how and where to spend their money. With consumer behaviour altering so drastically, the following research provides many considerations for marketers looking at how best to improve customer insight and commercial performance.

This is the second in a series of research projects conducted by Loudhouse Research on behalf of Webtrends. The previous project was conducted in 2006 and reflected a confidence amongst marketers in a buoyant economy, where weaknesses in marketing analysis and action appeared largely offset by positive business performance. In 2008, the research has been extended beyond the UK, France and Germany to include Italy, Sweden and Australia and reveals a very different prevailing mood.

Whilst the enthusiasm to market and sell to customers online continues unabated, the need for online customer insight has never been more urgent. With an average of (UK) 22% of marketing spend invested in online marketing, businesses are clearly relying on these efforts to deliver tangible benefits. 27% of respondents even see internet marketing as a way of overcoming the challenges that an economic downturn presents.

Highlight Statistics

Better data analysis needed65% of respondents believe that better data analysis would help to inform decisions that drive sales

Risk analysis47% of (UK) respondents see internet marketing posing a higher risk than traditional marketing, risk being defined as outcomes harder to predict and a higher chance of failure.

Lack of actionRespondents are more likely to ‘monitor’ than ‘act’ upon or react to internet data – 79% of businesses capture internet traffic, but only 30% modify websites as a result of traffic analysis


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Customer action

Figure 1: From the following, what types of internet-based marketing tools does your organisation use? Chart shows those

using tools always or often

Web 1.0 Web 2.0

E-Direct mail49%

Internet Forums 10%

Blogs 8%

Twitter 4%

Online Advertising

40%

Web Analytics39%

Better data analysis is seen as critical in helping to inform decisions that drive sales by 61% of respondents. A host of technologies and analysis tools are readily available to the internet marketer to support this process but clearly a gap exists between their availability and adoption and their effective utilisation.

In an online environment harnessing and utilising customer data can make all the difference in converting “lookers” into “bookers” and bolstering the bottom line. The agenda has moved on from simply knowing who to target, only 31% of businesses stated that they had problems understanding their internet audience.

The aim now is to better understand how to deal with customers via the internet and evolve business processes accordingly. For example, 79% of online businesses are now capturing internet traffic, whilst only 30% are actually modifying their websites as a result of traffic analysis. Part of this transition is developing a culture of customer conversation via a Web 2.0 environment. As shown in Figure 1, this is something that many businesses have yet to grasp.


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One of the biggest challenges facing online businesses is transitioning off-line products and services online – an area that less than half of respondents (41%) who do so are satisfied with. Wholesale switchovers between offline and online and the integration between multiple channels have proven to be particularly painful learning curves for a number of businesses. The main challenges during the transition process are considered to be changes in business processes (53%) and keeping up with customer demand (38%).

Knowing what tools to use presents a number of challenges to businesses. Indeed, half of respondents (47%) consider that their internet strategy is inherently riskier than traditional marketing approaches whilst only 25% think it poses less risk. How these risks manifest themselves and are effectively managed can make the difference between sinking and swimming in an online environment.

In the current economic environment, measuring and maximising value remains a marketing imperative. Areas where ROI cannot be easily determined are likely to see slowdowns in spend with channels which deliver on spend more likely to avoid. The survey shows that satisfaction with ROI from companies using web analytics is 77%, against an average of 58%.

Internet-ROI

58% of businesses are satisfied with internet marketing ROI…

This increases to 77% for business that use web analytics


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Figure 2. What do you consider is the best way of closing the gap between data analysis and business action?

Online marketers readily recognise that there is room for improvement when it comes to their web analysis efforts and are keen to make these improvements and enhance the business value that internet marketing can bring. Currently, just over half of online marketers (58%) consider that they are effective at turning internet analysis into business action.

The single biggest barrier to action is considered to be a lack of knowledge and expertise (48%), followed by funding and financial constraints (38%). The pace of change in the internet arena results in many of those in the field of online marketing left wanting when it comes to having the necessary skills to develop a business strategy. Indeed, having more knowledgeable staff is considered the best way to closing the analysis / action gap by 42% of respondents [Figure 2].

9%

2%

5%

6%

8%

23%

42%

0% 10% 20% 30% 40%


More knowledgeable staff

More training and awareness

More comprehensive data

Better data analysis programs

Removal of process bottlenecks

Emphasis on analysis in company culture

Other

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In summaryMarketing is under enormous pressure to prove its worth to the organisation. With significant budgets being ploughed into all things internet, it is critical to know which initiatives are contributing to the bottom line or enhancing the company’s brand. Web analysis should no longer be seen as an introverted naval gazing exercise, but a dynamic process that can inform business decision making. Now more than ever, it is vital that customer insight underpins business decisions.

Ultimately, marketing is about understanding customers and using tools such as web analytics to support this objective, puts online marketers in the best position to prove their worth and survive, if not prosper, in the economic downturn.

Information generated by passive and active customer interaction online creates a wealth of valuable data for organisations but the extent to which this is capitalized on is seen to vary widely from business to business. Those companies where the culture is driven by data and customer insights would seem to be best placed to capitalise on the opportunities held by internet analysis in unlocking customer revenues.

Methodology

Findings from the Webtrends Analysis & Action Research are based on 300 interviews with online marketing managers in businesses with more than 250 employees. 50 interviews were conducted by telephone in each of UK, France, Germany, Italy, Sweden and Australia.

All respondents in the survey rely upon internet marketing to either sell directly to customers via e-commerce (40%) or engage them with sales and marketing activity.

The research was commissioned by Webtrends and conducted by Loudhouse, and independent research consultancy based in the UK.


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Internet marketing Despite economic pessimism, internet marketing continues to grow as businesses recognise the importance of cementing their online presence for the eventual upturn in the economy, whilst spend on traditional advertising mediums such as TV and radio is in decline.

In 2008, £1 in every £5 spent on marketing in the UK went on internet marketing [Figure 3]. In Australia, similarly a fifth of marketing investment was ploughed into internet marketing. At the other end of the spectrum, France invested €1 in every €9 on online marketing. In terms of sector, media and marketing companies not surprising lead the way in investment (17.6%), although they are closely followed by public sector (17%) and business services (17%) with leisure and hospitality businesses trailing behind (14%). Budgets for online marketing have increased for 30% of companies and stayed the same for 43% in the past 12 months. In 2006, the majority of companies in UK, France and Germany (42%) were spending less than 10% of their marketing budgets on online marketing.

Figure 3: Given marketing spend overall, what % of the overall marketing budget is invested in internet-based marketing each year?

12 %

20 %

14 %

16 %

15 %

17 %

22 %


All

GB

Germany

Italy

Swede

Australia

France

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Online marketing toolsOnline marketing has undoubtedly evolved at a pace over the past few years. Much of this change has come with the advent of social media and a proliferation of new marketing models. The extent to which some of these tools are now used is shown in Figure 4.

Four tools emerge as the most frequently used – e-direct mail, online advertising, web analytics and optimised search, with many social media applications being used far more sporadically. It appears that blogs, viral marketing, podcasts and Twitter, although growing in prominence amongst consumers, have yet to be properly harnessed as communication tools by companies.

As with all new media, some people are quick to reject the old and welcome the new with little consideration for overall marketing objectives, audience demographics and customer preferences.

Figure 4: From the following, what types of internet-based marketing tools does your organisation use?

e-Direct mail

Online Advertising

Web analytics

Optimised search

Online competitions

Website e-news sponsorship

Viral marketing

Internet forums

Blogs

Podcasts

Twitter

3% 9% 24%

6% 7% 16%

3% 4% 17%

3% 7% 14%

3% 5% 10%

5% 8%

2% 9%

15% 23% 24%

19% 20% 24%

20% 20% 25%

21% 29% 17%

Always Often Sometimes


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Risk aversion Assessing the perceived risk associated with internet marketing, as opposed to traditional marketing tools, provides a useful insight into how companies are approaching these media. Overall, Figure 5 shows that 47% of respondents consider that their internet strategy is riskier than traditional marketing approaches whilst only 25% believe it is less of a risk.

When looking at risk aversion across Europe, it is interesting to note that the UK is more likely to assign risk to internet marketing than its mainland European counterparts. There are a number of factors that will influence risk for internet marketers. The UK represents the largest advertising market in Europe and also has a greater percentage of its population connected to broadband than the other comparable territories. In this sense, there is more to lose for UK marketers investing in online marketing as the stakes are potentially higher.

In addition to high stakes, risk is also clearly associated with those markets that are evolving at a slightly slower pace, for example Italy. With fewer companies adopting internet marketing activities in general in this region, the ‘unchartered’ waters of sophisticated online marketing may play a role in raising risk concerns.

Figure 5: Would you say that your strategy for internet marketing is generally higher risk than the traditional

marketing tools that you use? That is to say the outcome is harder to predict and the chances of it failing to meet

expectation are higher

46%

32%

54%

54%

38%

56%

47%

30%

34%

26%

34%

28%

20%

29%

24%

34%

20%

12%

34%

24%

25%

Hig h e r t h a n tra d itio n a l T h e s a m e L o we r th a n tra d itio n a l

All

GB

Germany

Italy

Sweden

Austalia

France


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Moving onlineMarketers not only face the challenge of keeping up with the latest online marketing developments but also the challenge of integrating online and offline marketing efforts so that they support and complement rather than contradict each other. For example, offline marketing such as direct mail and print advertising can drive customers online to purchase whilst many offline purchases are the result of research that customers initially undertake online.

41% of companies are satisfied with the transition process from offline to online. Some of the challenges in transitioning from offline to online marketing channels are highlighted in Figure 6. The main challenges relate to changes in business processes (53%) and dealing with customer response and demand (38%).

Targeting internet customers per se does not present a massive challenge in its own right. Rather, it seems that companies are challenged not by the ‘whom’ to sell to but by the ‘how to sell to them’. A third of businesses (31%) admit that they struggle to capitalise on internet sales opportunities due to the complexities of understanding a web-based audience.

Figure 6: From the following, what would you consider to be challenges in this transition from offline to online?

15%

23%

24%

36%

38%

53%Change of business processes

Dealing with customer response and demand

Change required in positioning and product/service for internet medium

Lack of internet marketing skills

Product/service not competely suitable for online sales

Greater transparency of internet skils


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Analysis and actionFigure 7 shows how often respondents conduct different types of online marketing evaluation. Whilst a significant proportion of companies claim to capture and monitor all aspects of website traffic to establish website effectiveness (79%), fewer are capturing and monitoring all aspects of internet generated customer data (50%). A culture of looking is much more pervasive than a culture of learning – with relatively few organisations actually taking action as a result of this analysis. Only 42% often modify content as a result of user analysis and only 30% are modifying the website itself as a result of traffic analysis.

Without the links between analysis and action, there is a danger that poor online marketing continues unchecked and a clear formula for success remains elusive. This is perhaps why 61% of respondents believe that better data analysis would help to inform decisions that drive sales.

Figure 7: How often do you undertake the following online marketing activities

11 %

13 %

18 %

25 %

50 %

56 %

19 %

23 %

24 %

25 %

23 %

23 %

29 %

33 %

37 %

22 %

14 %

12 %


Capture and monitor all aspects of internet trafficto establish website effectiveness

Capture and monitor all responses to outbound online marketing

Capture and monitor all aspects of internet generated customer data

Modify content for e-marketing as a result of user analysis

Integrate off-line CRM systems with internet customer data

Modify website as a result of traffic analysis

Very Often Often Sometimes

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Ad-hoc analytics The survey suggests that sophisticated web analytics remains largely absent as those companies who do use it, do so on a sporadic basis. Figure 8 shows the adoption of web analytics tools by country. Across the sample, where web analytics is deployed frequently (those using analytics always / often), satisfaction with internet ROI increases from 58% to 77%.

Although this sentiment is encouraging, the frequency of deployment shown in Figure 8 suggests that web analytics still lacks strategic rigour. Arguably, analytics is an ‘always on’ function when used in its full capacity, with ad hoc equating to either lack of processes internally to undertake web analysis, or rudimentary software in place with low-level automation. In essence, the ‘always’ respondents are those adopting web analytics to its full potential.

Figure 8. From the following, what types of internet-based marketing tools does your organisation use (Web Analytics shown)?

6 %

18 %

14 %

20 %

28 %

28 %

20 %

18 %

16 %

20 %

20 %

24 %

24 %

18 %

26 %

22 %

28 %

28 %

UK

Australia

Italy

Germany

France

Sweden


Always Often Sometimes

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Analytical typologies

Encouragingly, analysis of internet activity is seen as important and considerable amounts of time is dedicated to this within many companies. Getting full visibility of customers’ internet activity is only one part of the equation; being able to take action and effect business change based on said information is even more important. The Webtrends Analysis v Action Research evaluates companies on each of these two parameters and categorises respondents into one of four different typologies depending on whether they score themselves low or high on each of these criteria.

At one extreme, there are companies that have zero visibility of what is and is not working when it comes to online marketing. Ostriches literally have a head in the sand approach with very low visibility of customer data and consequently nothing concrete to base business decisions on. At the other extreme, Eagles are characterised as having good visibility of internet customer data as well as being particularly effective at taking this information and using it to change business practice. Eagles know what metrics to analyse and importantly what to do with these metrics that will result in better customer engagement and increased sales.

Figure 9: Four segment types based on how companies answer the following questions:

How often do you capture and monitor all aspects of internet generated customer data? Very often / often = High , Sometimes / rarely / never = Low

How effective would you say your company is at taking the information generated by analysis of internet data and using it to change business practice? Very effective / effective = High ,

Neutral / less than effective / very ineffective = Low

High

Low

Woodpeckers19%

Ostriches23%

Eagles33%

Pigeons25%

HighLow

Capture / monitor all aspects of Internet

generated customer data - Visibility / efficiency

Effectiveness at taking info and analysis and

using it to change business practice


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Between these two extremes, are another two typologies – firstly, Woodpeckers are mechanical and productive in their approach to producing reports and analysis but suffering from analysis paralysis. They struggle to actually take any action based on this analysis. Finally, we have an interesting group classified as Pigeons. This group of companies operates in quite simplistic marketing environments with little investment in analysis tools and decisions based on little or poor quality information. Figure 10 shows the incidence of each of these typologies in each country surveyed.

Of course, the typology may be highly appropriate for any specific business, but for many the aim will be to ensure that internet (customer) data and business process are as evolved as possible in order to maintain a competitive edge in future. All the respondents in the survey rely on the internet to either sell directly to customers, or as a key marketing tool. Therefore, poor quality information and poor processes can only be detrimental to broader commercial strategies. Ultimately, it will either equate to additional operational cost or lost revenue. Figure 10: Incidence of different analytical typologies by country

21%

26%

33%

35%

36%

44%

33%

32%

24%

27%

26%

26%

19%

25%

15%

30%

19%

17%

15%

17%

19%

32%

20%

21%

23%

23%

21%

23%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

All

UK

Germany

Italy

Sweden

Australia

France

Eagle Pigeon Woodpecker Ostrich


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Conclusion Real customer insight and effective action comes from following a circular pattern of best practice [right], which is notably absent from many of the businesses included in the survey.

The key to success with any internet strategy is to ensure that best practice is assimilated into a meaningful plan of action for a business, taking into account company limitations, opportunities and needs. All companies seek an omniscient view of customer activity and the internet holds a tempting key to achieving that aim. However, turning the potential into meaningful action, as the survey suggests, is where the majority of problems reside.

At a regional level, the UK makes for an interesting case study against other regions. It has the highest level of spend for online marketing, and the highest percentage (44%) of ‘Eagles’ in the sample, described in this study as the most effective users of online customer information. Despite also having the most extensive penetration of web analytics tools, the UK also has the greatest sensitivity to risk associated with online marketing? Interestingly, it also has the highest number of respondents (1 in 5) strongly agreeing that there is ‘too much analysis and not enough action’ regarding online marketing.

Whilst other countries with less momentum behind internet marketing and web analysis also express risk aversion, the UK story suggests that even experience and investment can still leave marketing cautious about tackling the internet.

Web analytics best practice model

Changes in operational and commercial processes impact

customer behaviour

Effective monitoring and data capture facilitate a greater capacity for

analysis

Well structured analysis identifies operational and commercial development

needs


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It is fair to say that most businesses with a vested interest in e-commerce or online marketing have a range of tools at their disposal. However, most rudimentary analysis tools provide only the ‘vital’ signs of web activity. In the same way that checking ‘fuel gauges’ and ‘speedometers’ gives little knowledge about car performance, so hit rates and page impressions can only take web analysis so far.

Amidst the typologies discussed in the report, there appear to be two key challenges to overcome. Firstly, to introduce sufficient analysis and rigour to the process of understanding an internet environment, then to take that insight and apply it to the business. As referenced by the UK’s sensitivity to internet risk, coupled with a (slightly) more advanced approach to internet marketing, customer knowledge alone cannot overcome commercial challenges.

However, with the right integration of ‘analysis and actions’, there are clear opportunities for internet businesses to flourish. The key is to ensure that internet analysis and commercial actions are integrated at every level. This means that systems, processes and people are operating towards common goals in a collaborative environment. Without this cohesive view, any investment in improving web knowledge and insight will fall short on performance and expectation.

For further information on the Analysis v Action report, or web analytics, please contact Colette Wade at Webtrends: [email protected]


Webtrends Analysis v Action Research

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