In-Depth

Find the Key: Web Analytics Unlock Data Warehouse and Web Technology Investments

• By Jack Hafeli
• 12/01/2000

The evolution of new technology, particularly the Internet, has enabled new means for the collection of customer-centric, relationship-based data. The Internet provides firms of all sizes with a network architecture that enables common connectivity, standard browser interface, reduced training expenses, low cost of deployment and virtually maintenance-free operation. And, unlike products and services, pricing and market positioning – all of which are often openly available for competitors to view and learn from – customer information captured and evaluated via Web analytics can be kept within the confines of an organization. There, it can be integrated with existing internal information, such as purchasing and customer demographics, and applied to knowledge-based decision making.

The role of the mainframe is more integrated than ever in this open environment, serving as the central point of distribution for massive amounts of critical information (see Figure 1 on page 31). When used in conjunction with each other, the Internet, as a network platform, and a mainframe-based customer-centric data warehouse provide a powerful closed-loop approach to gathering and analyzing data. And while converting or building a customer-centric data warehouse may, at first, seem an enormous task, the effort can pay off handsomely in the long term by giving organizations a more complete view of their individual customers.

With this knowledge in hand, data can be interpreted and acted upon to enhance customer interactions and relationships, and to support the organization’s overall business strategy.

Whether they understand and accept it or not, all organizations today are "information" companies, regardless of whether they are dotcoms, manufacturers, retailers, distributors or service organizations. As businesses worldwide recognize the strategic value of information, particularly Web-based data, using Web analytics to manage and interpret that unique information for competitive advantage is critical.

At best, "Web analytics" is a fairly generic term. It can take on very different forms depending on organizational priorities, economics, vertical industry nuances, competition, corporate culture and other influences. It can encompass analyzing the way visitors interact with or navigate your Web site, tracking ongoing relationships with Web site visitors, or analyzing e-commerce sales activities.

Two key trends are fueling the evolution of Web analytics as a potential tool to enhance competitive advantage for any company. First, a growing number of companies now view information as a strategic component of their businesses.

Secondly, use of the Internet as a network platform is becoming much more common in today’s business world. This provides firms of all sizes with a network architecture that enables common connectivity, standard browser interface, reduced training expenses, low cost of deployment and virtually maintenance-free operation. As a result, the Web is now a source of customer information that can be tapped for clues about how to conduct business, and supplement intelligent decision-making moving forward. In fact, a recent Information Week article cites e-business intelligence as one of the key drivers behind the projected growth – $150 billion in sales by the year 2003 – of IT investment in data warehousing.

A robust business intelligence technology strategy tied into the overall business strategy is the most effective way to enhance the value of Web analytics. Specifically, a Web-based data warehousing delivery strategy can further leverage all the information generated by and available to an organization, including insights gleaned from analytical applications, such as Web analytics. For any company that wants to leverage its investment in mainframe-based data warehouse and Web technologies, integrating Web-based data with a customer-centric data warehouse and Web analytics is key. Combined, these technologies can affect a faster return on equity and lower risk.

Specifically, a Web-based delivery strategy can be directed to three key groups within the business: employees, supply chain partners and customers.

At first glance, for an organization’s internal audience, Web analytics simply enable traditional client-server based analytical applications to run over the Internet. In addition to having a new platform to run on, the Web gives employees a means to interact with customers, suppliers, investors, the media and others. When integrated with a truly customer-centric data warehouse, the Web acts as an added source of information about customers, giving users a whole new dimension of data they can use to personalize their customer service efforts and customer relationships in general. For example, in the business-to-business realm, organizations can use Web analytics to determine who their most profitable customers are, and respond accordingly to them during every encounter.

The Web has also caused other, more dramatic shifts in the way employees analyze information to make business decisions. Instead of a handful of analysts who spend the majority of their time poring over data, Web-based data warehousing technology makes information affordably available to many users throughout the enterprise, allowing them to analyze data, and generate reports to help facilitate day-to-day decision making that is more accurate and efficient. Web access gives them the tools they need to perform necessary business functions accurately and efficiently.

For example, the financial information systems group at FedEx Express implemented new data warehousing technology that would allow for more effective capture of higher quality financial data. Users throughout the enterprise needed to be able to quickly analyze the data, and produce financial plans and reports that accurately reflected the company’s business status. In addition, they needed realtime access to complete, high-quality data, a streamlined reporting process and the ability to quickly produce more detailed, accurate business plans and reports.

A Web-based data warehouse "hub," as well as division-specific reporting published via the corporate intranet, enables the company’s 600-plus users to drill down into performance metrics related to specific lines of business. The data warehouse also ensures that they have access to clean, integrated data. Web-enabled interfaces for planning and reporting give users all over the world realtime access to quality data and analyses. Equally as important, through the effective utilization of Web analytics – which allows for more detailed, comprehensive and streamlined reporting processes – FedEx’s planning cycle has been dramatically reduced from six months to seven weeks.

In addition to data warehouse applications within the enterprise, intelligent e-business can be leveraged for better information collaboration and integration throughout the supply chain.

The growing field of Collaborative Planning, Forecasting and Replenishment (CPFR) is one example of leveraging intelligent e-business. CPFR standards, created by the Voluntary Inter-industry Commerce Standards (VICS) organization, the same council that established and maintains EDI standards and UPC coding, allow supply chain partners to work together to the benefit of all parties. A Web implementation of CPFR standards allows supplier-manufacturers and retailers, for instance, to compare and fine-tune product forecasts, thus improving forecast accuracy, reducing inventory levels and costs, improving or eliminating out-of-stocks and increasing sales. One study citing results of pilot implementations by Syncra Systems Inc., showed that supply chain costs were reduced by 30 to 35 percent, and revenues for both the supplier and the retailer were increased by 10 to 50 percent.

Particularly in the area of customer relationship management (CRM), Web analytics truly represents the next generation of technology-enabled interaction. (See Mark Sweiger’s E-Business column on page 18 to understand the changes CRM is undergoing, including clickstream technology.) In using Web analytics to reach customers, information needs and capabilities have become much more than simply counting the number of visitors to a Web site. A more thorough understanding of customer acquisition, conversion and retention are key drivers for online business. Understanding buyer behavior patterns on your site, the effectiveness of advertising and promotions, and how to best leverage cross-sell and up-sell opportunities are all critical components to driving online performance.

Furthermore, the delivery of analytical solutions can extend far beyond interaction with current customers. Using data stored in the warehouse, an organization can initiate proactive information exchanges with financial analysts, shareholders, the media and even the general public. Web analytics can provide anything from very straightforward analysis to more sophisticated intelligent e-business solutions that allow an organization to incorporate thresholds that invoke a change of activity or prompt the user to provide more information.

Because organizations can now collect information from many new sources, and use it in many new ways, those that come up with the most creative ways to integrate all the data and make use of it in every customer encounter will reap the greatest benefits. By integrating Web-based customer data with mainframe data and back-room transaction processing, an organization can truly leverage the technology to generate new business. Ultimately, these personalized customer interactions can create opportunities for additional transactions, bringing in added revenues that would otherwise be impossible to realize.

Taking the technology one step further, data warehouses can be built to include proactive analysis mechanisms that not only evaluate specific thresholds, but then actually make recommendations to the users, giving them immediate access to alternative solutions.

For example, Blockbuster Video’s Web site registers information about its customers, including movie rental history, favorite performers, the movie genres they like and other profile information. When new movies are released, for example, Blockbuster notifies customers via Web, wireless or voice broadcast technology, giving them the opportunity to reserve titles for rental or purchase.

In essence, this very scalable system uses a "permission marketing" technique to give users the opportunity to specify their needs, and define their preferences. In response, the system then proactively interacts with its customers, creating opportunities for additional transactions. The cost of the interaction is pennies. By comparison, the resulting return on Blockbuster’s data warehousing investment is huge.

Remembering a few key points can help ensure a successful business intelligence strategy built upon effective Web analytics:

• Begin with a customer-centric data warehouse system and be sure that all of the information systems available to your organization are integrated.

• Be sure to tie the Web analytics strategy into the organization’s overall value proposition.

• Recognize that information in and of itself can be strategic, and can offer a competitive advantage to those organizations that establish systems for sharing information across the enterprise.

• Remember that Web analytics can significantly contribute to the evolution of intelligent e-business by actually simplifying the complex, and creating opportunities for proactive interaction with customers.

• Web analytics extends beyond analyzing clicks to integrating information about online activity with internal customer intelligence, giving users a unified understanding of the customer.

• Take the time to fully understand the scope of the proposed business intelligence application.

• Remember that the data will be useless if not tied to a business metric.

• Take steps to ensure that the source data will be clean and accurate.

• Always take a stance in favor of those who will use the system; think like a customer.

• Be creative about ways to use the information that’s been collected.

• Start simple and keep development of the system active and ongoing. Be prepared to make changes.

Web analytics truly represents the basis of next generation interaction between internal audiences, supply chain partners and customers. The technology can arm many employees within an organization with the tools they need to become analysts. It can enable collaboration among multiple players in the supply chain, and it can create opportunities for additional transactions and proactive, personalized communication with a diverse group of customers. Ultimately, it can be the key to competitive advantage for any organization doing business in the rapidly changing landscape of the new, Internet-driven economy.

About the Author:

Jack Hafeli is Director of Consulting Services for ThinkFast Consulting Inc. (Chicago). He can be reached at jhafeli@thinkfast.com.