Insurance and Government and Technology and Media & Marketing and Small Business

RETURN ON TECHNOLOGY: Is your Web site a cost or an investment?

October 29, 2007

I don't particularly like to shop, but I like seeing how other people shop, especially online. There are always so many surprises.

Of course, the big research is in e-commerce, where buyers spend money online. Studies show the number of people willing to buy online is growing steadily. The Census Bureau shows a consistently upward trendline through August 2007 (www.census.gov/mrts/www/ecomm.html). Most experts seem to believe that not only are more people throwing down their plastic electronically, but established shoppers are buying more frequently.

However, the government isn't tracking something that could be far more interesting to businessfolk who own ordinary sites, and that's how much their online efforts drive offline sales. Even a tiny but professionally done site can run into hundreds of dollars, and the tab goes up rapidly from there as you add content management, search-engine optimization, usability testing and Web analytics. These things may add value most of the time, but none of them can definitely answer the basic question: How much does a "brochureware" site add to your overall sales? Is your site, in other words, a cost or an investment?

It's tough to tell. Many visitors like to shop as I do, anonymously and without assistance. They'll hop onto your site and your competitors', comparing not only your rates and offerings, but subliminally soaking up some impressions about you, too. Then they buy at a physical location. But unless you can connect a warm body at the cash register with their online uniform resource locator (URL), you won't know if it was your site that brought them hither, or the guy dressed up in a costume and waving a sign with your name on it next to the street who did it. You can ask, but it slows things down when you're interrogating customers.

There have been sporadic attempts the past several years to figure out how much online investment drives offline sales. A consumer survey conducted in 2004 by The Dieringer Research Group (www.thedrg.com) concluded that consumers spent at least $1.70 offline after doing online research, for every dollar actually spent online. An even bigger study done by Yahoo! and comScore, and reported on bitmouthmedia.com(www.bitmouthmedia.com), found even grander results: $16 in-store for every dollar spent online. Consumers who were exposed to online advertising were likely to respond to it offline, so the study said.

The problem with these studies is that most aren't specific to an industry, much less to individual organizations. The Yahoo! study, for example, used five major retailers, including J.C. Penney and OfficeMax. But what about insurance companies or manufacturers of consumer goods? Such studies are usually performed by industry groups, if at all. Few small or midsize businesses perform their own surveys.

I think the reality on the ground is that for small businesses-or even smaller, microbusinesses-the amount of sales magnification you can expect from an online presence is highly variable. Lots of factors enter into it, such as how often consumers shop for your services or products, how much consumers feel a need to shop for your particular offerings, whether they found you online rather than from another source, and so forth.

It's also possible that many visitors check you out after getting a word-of-mouth referral from a satisfied customer. Research shows that some companies benefit from having ads, frequently updated content and product information, while others just lose money providing those things.

It's always good to know if you're getting offline traffic from an online source, but it can be difficult to know. Some businesses, especially small service companies, can just ask outright, because they have to sit with the prospect for a while anyway before the sale. But often, the salespeople ask the wrong question. They ask, "Where did you hear about us?" rather than the more informative, "Did you look at our site before visiting us?" You might want to know where the sale started, but you definitely also want to know where it meandered through.

There are other strategies for connecting a browser with a point of sale. Some sites have special 800 numbers that appear only on their sites, so calls on those lines presumably came as a result of an online contact. Others offer incentives like discounts available solely through their sites. Still others have offered a kind of reserve, where they set aside merchandise for a limited time for you to come in and touch.

Years ago, companies that placed classified ads in the backs of magazines would add something to their address, like "Dept. 106," which was actually code for the magazine itself, so the seller knew where his buyer was coming from. You need to do something similar with your Web site, so you know if it's making you money or costing you money.



Altom is an independent local technology consultant. His column appears every other week. He can be reached at timaltom@sbcglobal.net.
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