Filling the Hole in the Bucket
by J.G. Sandom

The fervor of dot-com advertising during the last year, the unbridled rush to acquire new registrants or customers to satisfy investor expectations and pump up stock value, and the relentless homesteading zeal to build Net brands all are trends that have contributed to today's inordinate focus on acquiring registered members or customers.

But, whereas acquisition has driven the marketplace and, historically, monopolized the mindset of most online ventures, progressive marketers are realizing that building long-term relationships with customers is the key to migrating from a predominantly revenue-focused model to a model centered on generating profits.

Offline marketers have known for years that it takes six to seven times more capital to acquire a new customer than to grow one. Indeed, 80 percent of any given company's profits are generated by 20 percent of its customers. In other words, not all customers are created equal. The challenge, then, is to determine which group of your customers is likely to deliver the greatest value over time, and to market to them accordingly. In short, it requires a migration of focus from acquisition to retention and loyalty.

Keeping tabs on the so-called "Mr. X"
Whereas many marketers believe that it is imperative to identify individual users before their lifetime value (LTV) can be quantified, the sophistication of today's site tracking and session data analytics tools have made it possible to quantify the value of even unregistered users.

Server-based site tracking software such as WebTrends, Accrue, and SAS--combined with decision sciences applied against user logs and session data--now provide Web marketers with the ability to place individual unregistered users (Mr. X) into specific value-based segments. Further, marketers no longer have to perform match-backs linking receipts (sales) data recorded offline with online click-streams to predict user behavior and define user value. E-commerce has provided marketers with the ability to monitor that data in real time and to match it automatically to individual click-streams.

Thus, you can:

• track an unregistered cybernaut's entry into a site;
• drop a cookie on him (Mr. X) and follow his click-stream through the site;
• map his behavior against historical data to place him into a value segment; and
• market to him accordingly.

Obviously, if this unregistered user was subsequently to register either by filling out a form survey revealing something about his declared value or through an explicit behavior such as an online transaction, you would further be empowered to define his value and validate your assumptions about the unregistered Mr. X.

What is the value of this exercise? Clearly, if you can quantify a user's value, you can treat him differently. You can, and should, invest more in communicating and building a relationship with a high-LTV user than with a user who has little or no value.

Mastering the decision sciences and increasing site stickiness
Of course, all this is predicated on your ability to leverage the decision sciences effectively, something that direct marketers have been doing for years. You can, for example, predict who is most likely to convert or to attrite (abandon the site), as well as determine not only the value of the cybernaut in question but also the most valuable referring URL, content, offer, or session.

Once you understand these variables, you can both alter the site (improve the navigation and/or content, for example) and begin to dynamically alter your dialogue with the individual in question.

Also, even before you can begin to customize your dialogue with an apparently high-LTV cybernaut, you must first ensure that he stays on the site long enough for you to assemble the data required to quantify his value. Here are a few helpful tips on building stickiness, a measure of the degree to which users remain on any given Web site.

Functionality value vs. look and feel
Whereas attractive and aesthetically pleasing sites do tend to encourage users to stay longer and to return more frequently, ease of use, content, and functionality are the real drivers. Also, according to Nielsen//NetRatings, portals such as Yahoo, Lycos, and AltaVista all are in the top 10 sticky sites when ranked by page views. Why? Such portals not only are functional as search engines but also include targeted content areas that afford relevancy to large numbers of users. Interestingly, EBay, ETrade, Amazon, and IWon.com list even higher when it comes to "Minutes per User per Month." This clearly is a manifestation of their highly targeted functionality value.

Time sensitivity
Sites that alter their content frequently are far more likely to engender stickiness than those that don't. Although this seems obvious, few sites leverage content areas that are intentionally ephemeral. A new auction, a new stock quote--these time-sensitive offerings are a way to attract users and keep them entertained. It follows then, that adding a traffic-watch function, a weather function, or some other time-sensitive content area to a car site, for example, would enhance its stickiness.

Feedback
Another stickiness-enhancing gambit that is far too underutilized is the invitation to customer feedback.

Surprisingly, you do not need to offer cybernauts costly incentives to get them to talk back. Often the value exchange required simply is honoring the cybernaut's opinion; end users want to tell you what's on their minds. Nor does this have to be handled via complicated and expensive customer care solutions (such as inbound/outbound email, push-to-talk, or fancy call-back systems).

Tools such as Recipio enable you to build customer communities online through which opinions can be monitored and displayed in real time. Cybernauts can see (via bar graphs and other compelling graphical systems) what others in their community feel about key issues, and they can vote themselves.

Relevancy rules
Research has shown that relevancy significantly enhances stickiness, thereby promoting customer retention and loyalty. Once you have identified your high-LTV cybernaut, make sure you continue to surprise him with new content--content that reflects your understanding of his individual needs and interests. And don't restrict this dialogue to your Web site.

Relevant messaging can and should be delivered via outbound email and/or to the burgeoning array of today's pervasive devices such as IP-enabled cell phones and PDAs. The more you change your messaging to meet a cybernaut's needs, the greater the relevancy, the more the end user will return to continue the dialogue.

Patching up a bucket full of holes
Marketers are beginning to understand the value of retention and loyalty vs. acquisition. Why keep filling the bucket when it's full of holes? Churning your target base to get higher member or customer numbers may impress your VC, but it won't win you loyal customers or enhance your profits. Don't be afraid to leverage "cyberanalytics" even if your target audience is anonymous; you can still generate value from such an exercise.

Look to the techniques described above to enhance your site's stickiness. A sticky site will ensure that you can learn the value of each cybernaut, and, armed with this knowledge, you then can dynamically alter your dialogue to deliver the relevancy and value that not only will retain them as customers, but will also keep them loyal.