Saturday, January 26, 2013

Hitting the Right Target: Customer Analytics in E-commerce

When you shop on an e-commerce website, you often need to set up an online account in order to check out. If you want to browse the products, some websites require you to create a user account to log in before you can see their goods, such as,, etc. Why are e-commerce businesses so obsessed with obtaining customers’ personal information and how do they make use of it? This Youtube video [1] has the answer. 

What is customer analytics?
E-commerce companies keep track of and analyze the products you view, pages you visit, your purchase history, your home address, etc in order to summarize your buying habits, predict your future purchase actions and tailor their marketing strategies. The process and technologies of analyzing customers’ data to generate useful information that leads future actions are known as customer analytics. The picture [2] bellow clearly shows how customer analytics directs businesses marketing strategies. After customers’ original data merge with existing data, they go through data mining and customer analytics techniques such as predictive modeling and marketing segmentation. The knowledge generated from this process is used to decide customers’ preferences and purchase patterns, so that companies can send out coupons and discounts to appeal potential buyers.

What is the current state of customer analytics?
Although customer analytics is detrimental for today’s companies to win over customers, many businesses struggle to make the best use of it.  Forrester customer intelligence analyst Srividya Sridharan summarized the current issues of using customer analytics in her report “The State of Customer Analytics 2012”:
  • Companies still measure the success of customer analytics with easy-to-track marketing metrics rather than deeper profitability or engagement measures.
  • Companies lack professionals who have the analytical skills to manipulate data in creative ways.
  • Predictive analytics is underemphasized and most companies stick to descriptive analytics and other traditional analytics.
  • Companies are eager to try social analytics, despite the long established customer analytics techniques such as segmentation and targeting models. [3]
What is the future of customer analytics?
The futuzre of customer analytics lies in predictive analytics. According to the Global Customer Analytics Adoption Survey [3], only 40% of respondents started using predictive analytics less than three years ago and more than 70% of respondents are still using traditional analytics like descriptive analytics. This situation will change before long. Zaman [4] points out that the shift of customer analytics will move from traditional analytics to predictive analytics so that companies can foresee the trends and customer behavior.

In conclusion, in this competitive business world, customer analytics with a focus on predictive analytics is the key to gain and retain loyal customers.



1 comment:

  1. It does seem that predictive analytics is highly tauted and under utilized. It would be great to see stats on predictive analytics and profitability segmented by industry, sector, and predictive models/methods.