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Copyright 2001 Steven Chabotte
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Data mining is the art of extracting nuggets of gold from a set of
seeminngly meaningless and random data. For the web, this data can
be in the form of your server hit log, a database of visitors to
your website or customers that have actually purchased from your
web site at one time or another.
Today, we will look at how examining customer purchases can give
you big clues to revising/improving your product selection,
offering style and packaging of products for much greater profits
from both your existing customers and an increased visitor to
customer ratio.
To get a feel for this, lets take a look at John, a seller of
vitamins and nutritional products on the internet. He has been
online for two years and has made a fairly good living at selling
vitamins and such online but knows he can do better but isn't sure
how.
John was smart enough to keep all customer sales data in a
database which was a good idea because it is now available for
analysis. The first step is for John to run several reports from
his database.
In this instance, these reports include: repeat customers, repeat
customer frequency, most popular items, least popular items, item
groups, item popularity by season, item popularity by geographic
region and repeat orders for the same products. Lets take a brief
look at each report and how it could guide John to greater
profits.
- Repeat
Customers - If I know who my repeat customers are, I can
make special offers to them via email or offer them incentive
coupons (if automated) surprise discounts at the checkout stand
for being such a good customer.
- Repeat
Customer Frequency - By knowing how often your customer buys
from you, you can start tailoring automatic ship programs for
that customer where every so many weeks, you will automatically
ship the products the customer needs without the hassle of
reordering. It shows the customer that you really value his time
and appreciate his business.
- Repeat Orders
- By knowing what a customer repeatedly buys and by knowing
about your other products, you can make suggestions for
additional complimentaty products for the customer to add to the
order. You could even throw in free samples for the customer to
try. And of course, you should try to get the customer on an
auto-ship program.
- Most Popular
Items - By knowing what items are purchased the most, you
will know what items to highlight in your web site and what
items would best be used as a loss-leader in a sale or packaged
with other less popular items. If a popular product costs $20
and it is bundled with another $20 product and sold for $35,
people will buy the bundle for the savings provided they
perceive a need of some sort for the other product.
- Least Popular
Items - This fact is useful for inventory control and for
bundling (described above.) It is also useful for possible
special sales to liquidate unpopular merchandise.
Item Groups - Understanding item groups is very important in a
retail environment. By understanding how customer's typically
buy groups of products, you can redesign your display and
packaging of items for sale to take advantage of this trend. For
instance, if lots of people buy both Vitamin A and Vitamin C, it
might make sense to bundle the two together at a small discount
to move more product or at least put a hint on their respective
web pages that they go great together.
- Item
Popularity by season - Some items sell better in certain
seasons than others. For instance, Vitamin C may sell better in
winter than summer. By knowing the seasonability of the
products, you will gain insight into what should be featured on
your website and when.
- Item
Popularity by Geographic Region - If you can find regional
buying patterns in your customer base, you have a great
opportunity for personalized, targeted mailings of specific
products and product groups to each geographic region. Any time
you can be more specific in your offering, your close percentage
increases.
As you can see, each of these elements gives very valuable
information that can help shape the future of this business and
how it conducts itself on the web. It will dictate what new
tools are needed, how data should be presented, whether or not a
personal experience is justified (i.e. one that remembers you
and presents itself based on your past interactions), how and
when special sales should be run, what are good loss leaders,
etc.
Although it can be quite a bit of work, data mining is a truly
powerful way to dramatically increase your profit without
incurring the cost of capturing new customers. The cost of being
more responsive to an existing customer, making that customer
feel welcome and selling that customer more product more often
is far less costly than the cost of constantly getting new
customers in a haphazard fashion.
Even applying the basic principles shared in this article, you
will see a dramatic increase in your profits this coming year.
And if you don't have good records, perhaps this is the time to
start a system to track all this information. After all, you
really don't want to be throwing all that extra money away, do
you?
Steven Chabotte is president of Big-Web Development Corp, a
company specializing in the development of email productivity
and marketing tools for the web. Steven can be reached at
webmaster@maxsponder.com or you can visit our
website at
http://www.maxsponder.com
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