Wednesday, January 23, 2013

Consumer Analytics: It’s not about who your customers are, it’s what you know about them


In this techno-advanced world we live in, today, more and more consumers are reaching for their mouse, rather than their car keys to go shopping. From toilet paper, to wedding rings, consumers today enjoy the convenience, and often lower prices that can be found by shopping online. Shopping online allows consumers to quickly compare products and prices, and read reviews posted online by fellow online shoppers. Due to the growing popularity of online shopping, it’s more important than ever for online retailers, or e-tailers, to know all about the people visiting their site, such as how they found their site, how long they were on their site, why the left their site, and in many cases why they didn’t make a purchase on their site. Consumer analytics allows e-tailers to better understand their visitors, and with this understanding, find ways to improve their website appearance and functionality, and more effectively reach out and advertise to the people most likely to make purchases on their site.

What are Consumer Analytics?

Consumer analytics providers are typically B2B software companies that develop and market software to any company that has a website, and wants to understand the habits of its users. The analytics software does this by giving e-tailers visibility about their website’s traffic. The information that can be retrieved with the software includes information about each user, such as the physical location of the online user, the cyber location (website) the user came from, the time of day the user visited the website, the products the user looked at, and a click stream of each user on the website. Analytics packages also allow e-tailers to study information at a group level such as volume, and peak times. Looking at the information on a group level allows e-tailers to study demographics, and segment their customer base.

So Much Information, No Significance

Actually, when used properly, analysts can use the information provided to them by their analytics software to make important business decisions. The software allows analysts to track attrition, improve their website to be more functional, make sales forecasts, and identify low-profit customers. Once they have this information, they can make adjustments to their operations to optimize their websites and maximize profitability. E-tailing giants such as and use consumer analytics every day to gather information so they can run tests, and make adjustments to their websites to make their sites more user friendly, and increase profitability.

Legal Issues

In recent years there have been privacy issues surrounding the world of web analytics. As the science of consumer analytics continues to develop, e-tailers learn more and more about their customers. Some online consumers get uneasy when they think about all the information online businesses know about them. Congress has signed bills to protect consumer privacy such as the Commercial Privacy Bill of Rights Act of 2011, and the Stearns Consumer Privacy Protection act of 2011. These bills protect the privacy of consumers by limiting what information websites can gather, retain, and sell to other websites.

Key Players

According to, the top three web analytic providers in January 2013 are Coremetrics, Unica, and Omniture. All three of these companies have been around for over a decade, providing business solutions to businesses on the web. Google Anlytics is also an up and coming analytics provider. Coming into the analytics scene in 2005 when Google bought Urchin Software Corp, Google Analytics is a free, and powerful analytics tool e-tailers can use to optimize their website. There are also research institutions involved in the development and advancement of consumer analytics. For instantance, Wharton Consumer Analytics Initiative, WCAI, is a research group at University of Pennsylvania who prides itself as the world’s leading research center in consumer analytics. Focusing on matching academic knowledge with industry applications, WCAI is a huge player on the scene, having an enormous impact on leading executives when it comes to data-driven decision making.

What direction is the Industry Going?

As data becomes more refined and readily available, technology becomes better, and the science behind data-driven decision making continues to develop, consumer analytics will enable e-tailers to make faster, better decisions. Going forward, unless legislation prevents this, e-tailers will know more about us, and our shopping habits. They will then be able to exploit this information to tailor their advertising to get the most bang for their marketing buck.


1 comment:

  1. Great high level post on consumer analytics. In particular, I like how you point out that not only do "traditional" companies like Google use consumer analytics, but also many of the retailers we purchase from on a daily basis.