Measure for measure

Think the traditional means for measuring print catalog performance — square-inch analysis — is obsolete in the world of e-commerce? Guess again.

You might be ready to argue that simple formulas based on finite presentation space no longer hold true for online catalogs. But even with the infinite space of a Website, it’s still important to maximize real estate.

In print, catalogers analyze for optimum page count and density, forcing hard line decisions around item and SKU counts, says Judith Roberts, president of e-commerce consultancy Estrategyfirst. “The point at which items could no longer support their advertising costs was clear. Online, with the lower per item presentation cost, we can generally keep more items — so our challenge is how to keep them organized in a way where customers will see and find them,” says Roberts.

There are other similarities, Roberts points out. “Using squinch for print analysis, we made sure that items were worthy of placement in highly productive locations, such as covers, inside spreads or as large features.”

Online, the rules don’t change. Web merchants must make sure they look at lift and sell-through when items are on the home page, called out in banners and links, and when represented in key cross-sell and upsell locations, she says. “Like the smart cataloger, a savvy online merchant knows what lift to expect with this extra merchandising boost and will quickly replace items that don’t merit the extra space allocation.”

That’s not to say there aren’t differences in Web vs. print. The increased complexity of product discovery online makes the process of evaluating performance more difficult in some ways and easier in others.

On the one hand, shoppers navigate through products on paths that vary infinitely; on the other hand, more data are available than ever before to map those paths — and maximize their earning potential.

Another powerful upside? There’s no need to wait months or even quarters to see results. “Online, we can more easily dedicate virtual page space to testing — especially the impact of creative changes or category and SKU extensions — and measure and respond very quickly,” says Roberts.

The first step is a robust analytics package that tracks not only clicks and hits, but chronicles shoppers’ journeys through the site from arrival to checkout. Software providers such as Omniture and Coremetrics offer in-depth reporting, and even free provider Google analytics provides deep insight into data. Budget is no excuse: It’s crucial to invest in analytics if you want to quantify your site’s success.

CLICK MAPS ARE KEY

In print, we measure a single page’s profitability in terms of product revenue vs. cost. Online, the equation is more complex, with some links leading indirectly to sales. The key to keeping track is the click map — an analytics tool that maps where on pages shoppers click most, and which clicks generate revenue.

For example, a click map may use shaded overlays to highlight popular page regions, with the deeper red areas signaling links that receive more traffic. For each region, the map may list not only the number of clicks, but also the amount of revenue and revenue per click, as well as units and orders.

But click maps don’t merely track sales tied to merchandise; they also reveal indirect revenue — a feat impossible in the print world. For instance, a click map might show that shoppers who clicked the “customer service” link at the top — which leads to a page that has no merchandise on it — ultimately went on to place orders; the customer service link is credited with a portion of that revenue.

Click maps offer concrete evidence of the power of effective content, from customer service and shipping information to consumer reviews, in-depth product descriptions, buyers guides, and other brand-boosting content.

To add another dimension to your page analysis, marry click maps to information about shoppers’ paths through the site. Whereas in print it’s impossible to know the exact impact of a page except as a driver of sales for the featured products, online the depth of reporting reveals the earning potential of precise paths regardless of the logic of the sequence.

But be prepared for in-depth reporting to expose new vulnerabilities and pose new challenges. The page flow report may reveal which subsections lured shoppers to explore further. But the report might also uncover a statistic not evident in the click map reporting: Of all the possible clicks from the home page, perhaps the second most common behavior is to leave the site altogether — failing either to engage or to purchase.

The site owner then faces a challenge: Adjust the array of navigation options, merchandise, and promotions in an attempt to decrease that bounce rate — without alienating the majority of customers, who are successfully navigating to products of interest.

Despite the caveats, developing a baseline page rate for your site is crucial.

Start with a few key pages. Data from industry researchers and scores of merchants show that the following are your e-commerce site’s “hot spots”:

The home page


Although search engines are increasingly driving shoppers directly into interior pages, your home page is still the single most popular entry point to the site — making it a key gateway to all your offerings. In general, the three hot spots on the home page are:

  1. Above the fold. Eyetracking studies conducted by marketing research firm MarketingSherpa show that more than 60% of shoppers tend to view only what’s immediately visible in their browser windows when pages load.

  2. In the “golden triangle.” Western bias toward processing information left to right makes the top left the default position shoppers view first, MarketingSherpa found. As a corollary, the right-hand column is most frequently overlooked — and display type advertising there is especially ineffective.

  3. Anchored around main images. Shoppers use images as a starting point and scan surrounding text first. Create effective page regions by incorporating images with well-designed directive text that entices shoppers with action verbs and timely offers.

The category page


The pages shoppers view when they click on primary navigation categories are key for exposing the bounty of products available; they’re also increasingly popular as landing pages from search engines.

Pay particular attention to the use of promotional callouts. Use the main content area to highlight multiple offers with attractive images and accompanying text — you’ll cater to a variety of shopping needs and boost visibility of key product groups.

You should also look at category-specific navigation links. MarketingSherpa found that 47% of shoppers prefer to rely on navigation to browse the site; eyetracking data shows it’s a key visual aid, and “good navigation increases the likelihood of a sale.” Within categories, calling attention to specific brands or product families within the navigation space is an effective way to boost visibility.

The internal search results page


With 53% of shoppers relying on the site search box to find products, according to MarketingSherpa, the display of items on search results pages is crucial. Critical areas:

  • Simple, not advanced, search: Only 5% of shoppers resort to advanced search, MarketingSherpa found; whatever features you want to highlight must be available through the basic search.

  • Display of the top row items: MarketingSherpa’s eyetracking studies show these products garner by far the most attention and clicks on the search results page.

  • Filtering and sorting tools: Let shoppers determine the sort order — and thereby choose which items appear in the crucial top slots — by offering advanced sort and filter tools.

  • Revenue: For each page, calculate revenue per click, overall percent of revenue generated and percent of traffic for major regions — including navigation, main image and kicker promotion slots. Your numbers will differ from those of other merchants; the key is to establish a starting number against which you can compare future performance.

  • Paths to and from the pages: Study these to discover your site’s major thoroughfares — and its dead ends.

PRODUCTS AND CATEGORIES


Once you have a firm understanding of the pages that perform best, the next step is to monitor individual product performance — and apply the power of key promotional locations to boost sales. Just as in print, the mix of layout elements — images, text, callouts of color options, on vs. off model displays — affects the space versus revenue equation, online, the deployment of promotional kickers, navigation links, and text promotions factors into the success of individual products.

Analytics reporting provides a robust breakdown of individual product and category performance. Calculating the overall conversion of visits to orders, as well as the contribution to revenue, assigns concrete dollar figures all the way down to the item level.

But as in print, the picture is incomplete without tying performance to placement: Is a poorly selling item visible on the main category page, or only on the third page of the index page? Has it been excluded from cross-sells?

At the category level, analytics data can reveal the performance of particular segments of products; use this information to drive the creation of new promotions that match shoppers’ priorities.

Another benefit to robust product and category analysis: Unlike in print, there’s an opportunity to quantify and justify the inclusion of “long tail” products — those items that may not be top sellers, but that may drive niche sales. Even a small number of sales can collectively contribute to the bottom line.

Generally, you can err on the side of keeping items, says Roberts, “but you have to make sure these products both further the overall brand mission, and don’t distract from a persistent search for winning categories and best seller additions.” Items that start popping up as successful even when they are deep in the site deserve a close strategic look, she says.

To maximize tracking of product and category performance:

  • Again, start small. Initiate in-depth analysis on your top 10 — and bottom 10 — products, and the top three categories.

  • For each product you track, note its position in the default listing at the index level and in search results for key terms, as well as the location and duration of any promotions that lend it the spotlight.

  • Move products into key regions on the home page and category page, and track performance closely; over time, you’ll develop a baseline understanding of the lift you can expect from prime placement. If products are highlighted but fail to meet the baseline, reconsider whether they’re right for your customers.

  • Mark the creation and removal of seasonal categories, and track them closely to establish a baseline for year-over-year analysis.

COST CONSIDERATIONS


To arrive at a profit margin for pages and products, you need to track not only revenue, but costs. Beyond a product’s basic carrying cost — stocking, storage and tracking inventory — consider the price tag for the site’s overall functionality: Are your product offerings so complex that they require additional photography to display all their features, or customization tools to guide shoppers through options?

But there’s a still more indirect cost to consider — the price of poor usability. Shoppers typically leave a site if they can’t find what they need after four seconds, according to Jupiter Research; does the addition of niche products and categories outweigh the loss of visitors that might result?

To capture the true costs of your products and pages:

  • Divide development and vendor costs by the number of products and site categories to accurately assess profitability.

  • Compare metrics such as pages per visit and time per visit to revenue; if shoppers are paging through a number of products and spending many minutes on the site without purchasing, it’s a sign that your site might be confounding rather than enabling.

Developing a baseline for page, product, and category profitability is no small task. But there is a payoff: benchmarks for your business. By applying the principles of square-inch analysis and taking advantage of the robust data online analytics has to offer, you’ll accurately track your way to higher sales.


Ken Burke is chairman/founder of MarketLive, a Petaluma, CA-based provider of e-commerce technology and services.

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Measure for measure

The road to developing a successful metrics, measurement and benchmarking program starts very much like any successful plan in that it has to have a champion. A metrics program champion needs to be a senior level person within an organization, such as a VP distribution. In addition to the champion, larger organizations will benefit from having co-champions (e.g. warehouse manager and key supervisors). Initially, the program should be developed and driven from the top. As the development progresses, it is important to achieve multilevel ownership, bringing others into the mix for their input.

The champion and his core team first need to determine what to measure, and this is where the challenge can begin to feel overwhelming. Following are a few tips to make this challenge a little more manageable:

Don’t worry about the data sources (yet). This should come after the best metrics have been determined, or else decisions can be tainted (e.g. measuring what is easiest to obtain, rather than what is most meaningful).

Start small. Starting big often times leads to delay, confusion and lack of direction.

Document a structure and development metrics categories for measurement, ensuring a balance between types and levels of metrics.

For example, many companies measure quality by lines, rather than orders. If a company ships 10 orders with 100 lines, and ships a single order with one mistake (e.g. one less unit than ordered), then they are achieving 99% line accuracy, but only 90% order accuracy. If order accuracy is important to the customer base, which it typically is, a distributor would be misled in believing they had 99% accuracy by using the line calculation.

Another example is the highly seasonal business that only measures distribution costs as a percentage of sales. Over the year they see wide fluctuations due to varying sales revenues, while fixed costs (e.g. building, equipment, etc.) remain stable. Though this is a meaningful financial metric, a highly seasonal business will also benefit from measuring distribution labor costs as a percentage of sales and inventory carrying costs as a percentage of sales. The percentages for these metrics should not fluctuate as dramatically over the year, as distributors correctly adjust labor and inventory by season.

Once the goals are in place and the metrics are being measured, they must be communicated and analyzed, with the end goal being action for improvement. Metrics are typically best communicated through reports, and they must remain easy to understand by all. It is important to communicate these reports to all personnel within the distribution operation, and posting specific results in specific process areas where all will see them is a good method. Higher-level metrics will want to be use up upstream as well.

Ultimately, measuring KPIs will flush out specific areas for improvement that will require root cause analysis to develop the solution. It is important to track not only the metric results, but also the improvements (as this is what pays for all of your efforts). Benchmarking internally is a proven method of measurement and can be at the person level (comparing one person to another doing the same process), process level (comparing same processes on different shifts) and company level (comparing DC’s).

Dan Graville is vice president of material handling and supply chain service provider Fortna.

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Measure for Measure—Shipment Beats Delivery

What’s the better benchmark when it comes to shipping the customer’s goods? Is it when the order ships or when the order is delivered? It seems not even distribution center managers can agree. According to a recent survey by the Warehousing and Education Research Council (WERC) more distribution center managers measure “on-time shipment,” rather than “on-time delivery.”

The DC Measures 2006 study conducted among more than 900 distribution center managers and was authored by Karl B. Manrodt, PhD, and associate professor at Georgia Southern University and Kate Vitasek, managing partner of Bellevue, WA-based Supply Chain Visions. Vitasek says one reason is managers prefer to track when an order ships is because it’s easier to track. “It’s much tougher to obtain reliable data on precisely when the order was delivered.” And, given the respondent base of DC managers, it could be that this measure more accurately reflects their daily responsibilities, she says.

Perhaps a bigger issue, Vitasek says, is the apparent lack of consensus regarding what constitutes on-time delivery. When asked whether their customers defined on-time delivery differently, nearly 69% responded “yes.” How much variation could there possibly be in the definition of “on time?” Apparently, quite a lot: Many respondents (63.1%) indicated their customers simply defined an on-time delivery as a delivery on the requested or agreed-upon day. But others were more exacting—26.9% of the respondents said that “on time” meant delivery at an appointed time, or at least within a 30-minute window of that appointed time. Still others reported different definitions, including or “By 4:00 PM” This lack of agreed-upon standards and definitions goes a long way toward explaining why some suppliers have difficulty delivering “on time.”

For the full study, visit www.WERC.org

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