Internet retailers track wrong data, paper argues

June 29, 2000

LINTHICUM, MD, June 30 -- Internet retailers pay too much attention to the total number of hits to their sites and not enough to data about their best customer prospects, according to a paper given earlier this month during a marketing convention of the Institute for Operations Research and the Management Sciences (INFORMS®).

The authors also maintain that online merchants gain more by examining how individual consumers' purchasing behavior changes over time, and that it is possible to track this evolution in a way that helps target likely purchasers. "Capturing Evolving Visit Behavior in Clickstream Data," is by Wendy W. Moe and Peter S. Fader of the Wharton School of the University of Pennsylvania. "Summary measures such as the number of hits per month provide little insight into individual consumers' behavior," says Prof. Fader. "The online shopper's behavior may evolve over time. Understanding the nature of this evolution provides valuable knowledge that can influence how a web store is managed and marketed."

Unlike the bricks-and-mortar environment, where only purchases are easily observable, the Internet allows marketers to understand their customers better by analyzing visiting patterns. The authors note that it is important to gain a better understanding of online visiting behavior since studies show that most internet retailers are unable to achieve conversion rates greater than 5%. In contrast, nearly every trip to a traditional grocery store results in a purchase.

In response, the authors demonstrate an "evolving visit model," which estimates how likely and when given consumers will return to an online store as they gain experience with a website. The model shows if intervisit times tend to speed up or slow down over a consumer's history, and how these changes vary across people. It is based on Internet clickstream data.

Their observations allow the researchers to forecast future store visits in order to anticipate and manage website traffic.

One result of their research is confirmation of previous studies that find that consumers who frequently browse online are the most likely to make a purchase on any given online shopping visit. Hence, online retailers that target frequent shoppers and study this target group's evolving behavior stand a better chance of increasing their sales.
-end-
The INFORMS Marketing Science Conference 2000 took place at the Anderson School at UCLA from June 23 to 25. The theme was "Marketing for the New Millennium." The co-chairs were Randolph Bucklin and Donald G. Morrison of the Anderson School.

The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 12,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications. The INFORMS website is at http://www.informs.org.




Institute for Operations Research and the Management Sciences

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