Should You Advertise Higher Priced Goods To Mac Users?

June 26, 2012/in Blog/by Tim Flint

The WSJ recently had an article in which it identified that Orbitiz was showing higher priced hotels to Mac users, because Orbitz discovered that Mac users were spending up to “$20 to $30 more a night on hotels than their PC counterparts”. What in essense is going on is a type of price segmentation that is happening more and more every day as there is more data available for merchants to be able to discriminate with. This has happened for a while in other direct marketing industries where based on demographic data on a user they will show different offerings. The reason this is getting so much buzz now is because it is people are more interested in how their data is being used and because this looks like the beginning of another round in the culture battle of Macs vs. PCs. The Mac owners are saying that they do this because they feel you pay for what you get, and the PC owners are mocking the Mac owners as sheep who will buy anything with a higher priced tag.

Learning To Segment Pricing

As a business owner you don’t care about the cultural battle; you want to find the way to maximize your profits while giving your customers what they want (Mac users want pricier hotels and PC users, according to Orbitz, want the cheaper option). So before you spend tons of money having your development team figure out a way to show your more expensive goods and services to Mac users, take a look at your own data.

How To Find Purchase Behavior Difference: Mac vs. PC

The wonderful part about today’s technology is that you have some really simple tools to help you figure this out for yourself. For this example we will use the most ubiquitous tool available: Google Analytics.

The first thing you have to do is to segment your audience between Mac Users and non Mac Users. Below is a screen shot of how I set up a custom segment in Google Analytics that combines all of my Mac users, both mobile and desktop users.

The full regex match (which is cut off in the above image) looks like this: iOS|Macintosh|iPhone|iPad|iPod

You can choose desktop only, but for this example we are going to compare all Apple OS’s against everything else, as you can see below. The only change is that we change “include” to “exclude” and then rename the segment.

So now that we have created our segments, we want to go ahead and see the differences in ecommerce statistics between the two groups. Below is what Google gave me for a given time range.

What Google is showing is that for this ecommerce site that the average order value for Mac Users is in fact higher than their non Mac counter parts. At this time I am thinking maybe there is something to this thing that Orbitz is doing. But, if you look closer you notice that the conversion rates between the two groups is very different. There are many tools online to determine if this is a significant difference in conversion rate. I used the linked UserEffect tool and got a statistically significant difference in conversion rate between the two groups. So Windows users for this site are more likely to convert, but this still doesn’t answer the question Orbitz asked which was do Mac users spend more on average. What we need to do is test the significance of that average order value number.

Average Order Value Statistical Significance

To do this you need to download the transaction data for both non Mac and Mac customers, because you need to be able to determine the variance in order value. You can download this data by going to conversions > ecommerce > transactions in Google Analytics. Once there, Google only lets you export 500 rows of transactions at one time, so to keep it simple I ensured my date ranges were under 500 transactions.

Once you get the order values for each set of customers in Excel you need to perform a t-test so that you can compare the means of the two groups. This t-test will give you the p-value that you will use to determine if the difference in average order values between the groups is significant. Yout formula in excel should look like the following:

=t.test(array of group 1, array of group 2,two-tailed distribution, two-sample equal variance homoscedastic)

This gave me a p-value of 0.15 for my example. Since this is greater than .05 or a 90% confidence interval we are going to think of the difference in the means here as a random event. So for this site there really isn’t a reason to pull an Orbitz and program the site to show Mac users more expensive products because the purchase patterns are essentially the same, but that might not be the case for your site. So check it out. However, running the analysis did teach me something which is that for the site in the example that we should make sure the website is functioning properly for Mac users to ensure that we aren’t losing conversions from an improperly functioning site.

Test Other Differences

Now that you have the experience to figure out if you should treat Mac users differently you can apply this same logic to compare other groups. You can ask questions like:

Should you treat visitors differently from different parts of the country?
Do new visitors or returning visitors spend more?
Etc.

So check it out and find out how you can perform the price segmentation like every economist expects businesses to do.

Let us solve your analytics problem.

How Newfangled NBA Analysis Is Like Web Analytics

June 25, 2012/in Blog/by Tim Flint

Everybody is looking for an edge by using analytics these days. You hear new “Moneyball” type stories every week it seems, and frankly I love them. So, I will try and highlight them for you when I come across good articles showing ways people are using analytics to gain an advantage in their business.

This week there was an article going around conveniently titled “Moneyball 2.0” or the full title “Moneyball 2.0: How Missle Tracking Cameras Are Remaking The NBA”. This was a timely article related to new advances in using missile tracking technology to track NBA players. The technology gives teams the ability to track everything on the court to find out things such as how many times Kevin Durrant dribbles be fore he shoots, accuracy of shots depending on if they were uncontested or not, etc.

The ten NBA teams using this data are pouring over it trying to understand it in a way that will give them an edge on the competition. Unfortunately, the article won’t say what the data has changed about how coaches and players approach the game, but maybe that is where we need Michael Lewis to step in.

When I look at the types of analysis they are performing, it looks very similar to conversion analysis in the web world (i.e. if x and y happen does it lead to z ,also known as a basket). Questions like if KD dribbles three times what is his FG% are very similar to if a web visitor visits three pages what is the likelihood of them purchasing. And just like with web analytics, the real world is going to need to take this data and ask deeper questions to figure out what is important in changing the way they play the game because the first questions you ask of the data aren’t going to lead to the answer you need to improve your business, whether it be the NBA or selling guitars. You have to weigh all possibilities that lead to conversion or “baskets” and not just the obvious ones.

This is why I think in the future you will be seeing a lot of web analysts moving the talents to “South Beach”, sorry I mean offline. Web analysts have been looking to find ways to understand the root cause of conversions and finding what influences conversions for more than a decade because this was one of the first industries in which every mom and pop had enough data to start doing more advanced analysis. And they have been leading the way in deeper analysis. For example, instead of just focusing on last click attribution, more and more internet marketers are focusing on all the possible influence points that lead to a conversion. This is the same type of analysis the basketball teams are looking for, the ability to look at all the various data points and see what matters. This experience will transfer well into new fields and help grow those fields faster.

photo credit: darkmatter

Website Credibility And An Apartment Search

June 21, 2012/in Blog/by Tim Flint

My wife and I have spent all day yesterday looking for a new place to live because we will soon be moving our business to Indianapolis. This has been an all-day marathon event and while it seems like every place is the same after a while, you still come away feeling one or two places are potentially the right one. A big part of the reason these one or two apartments or rentals stand out is because of the trust and credibility that the apartment and its staff portray.

Normally, when you go to a new apartment to look at a possible new home, your first stop is the leasing office. But, your first impressions of the apartment are built before you even park. As we drove into a complex my wife looks at the cars – do the tenants care about the look of their most visible possession? Are the grounds nicely kept? Is there a maintenance man carefully tending to the complex, etc.?

Then once you park and talk to the agent, you think; do I trust this leasing agent? Does he or she smile? Are they pushing me into some style I don’t want? Do they appear to know what they are doing?

All of these things affect the buying decision, but for the most part they have nothing to do with where you live. But, the trust you offer is really part of the product as well, because no one wants to do business with someone they don’t trust.

This is even more critical when dealing with businesses online because people are naturally even more distrustful of people they have not meet in person. Because of this you need to work even harder to garner trust with your online presence. So how do you do that?

There are a lot of simple tips that will help you gain more of your visitors’ trust. A few of them are listed below:

Display your phone number prominently- visitors want to see that you are only a phone call away.
Display a real address- visitors will be more trusting when they find out where you are from and that they know where to send any physical inquiries.
Actively post online through your blog- while many people think blogging’s main purpose is to gain traffic through search, more often it is a trust symbol to demonstrate expertise and display personality.
Actively participate in social media- participating in social media such as Facebook and Twitter shows that someone is home and that people have more than on option to get ahold of you and care about their product or service.
Professional web design- the design of your site shows your professionalism just like the way an apartment complex who keeps nice grounds shows theirs.
Site security- just like all the gated apartment communities proudly promote their security, your company can display its security credentials on its site.

There are many more ways to build trust online, but most importantly, ask yourself if you would be willing to do business with your site. And remember as trust increases, so does conversion.

photo credit: <a href=”http://www.flickr.com/photos/chanc/375349032/”>Christopher Chan</a>

Selling Marketing Strategies as an Asset and Not Just an Expense

June 1, 2012/in Blog/by Tim Flint

Dealing in web analytics you are often asked about how to convince a client of the particular value of some web strategy or tactic. The strategy and tactics that people want valued are things such as a new website redesign, content marketing, social media marketing, SEO, etc. Trying to convince a financially minded client of the values of these items can be a frustrating experience. Questions can come up like, how am I supposed to make money with what you are charging me? What’s the ROI? How long till it is profitable? What’s my return? Clients often see these strategies as expenses and if they don’t see an immediate relationship to a bottom line then the project is a no go. If the client sees the project as an expense, you’re doing it wrong.

Here’s the deal, finance people, “business types”, look at expenditures in two different ways.

The two different expenditures are:

CapEx & OpEx

CapEx, or a capital expenditure, is an expense that creates a future benefit. CapEx usually involves items such as the purchase of buildings or equipment. These items also have a useful life beyond the tax year. CapEx is evaluated by the finance guy through tools such as NPV or IRR, which lets you evaluate the rate of return you get from a project over time. The finance guy is fully expecting that in the beginning years the investment might be a losing proposition, and might not make money for a few years, but they still expect a big payoff. OpEx on the other hand is an operational expense. These are items that you spend money that don’t have long term value. This includes things like sales, paperclips, cost of goods sold, etc. While some of these items might make you money, they have no future value and cannot be resold. The projects are generally evaluated by the immediate return they make (a sales commission) or as a necessary cost of doing business (paperclips). When looking at the difference between CapEx and OpEx, it is important to remember that you can’t resell a sales commission that you paid or try and resell a media buy you made last month, because the money is already gone.

What are you actually selling?

The question is when you are selling internet marketing services what are you selling? Are you selling an asset (CapEx) or an expenditure (OpEx)? Different marketing strategies make up the opposite sides of this question. A new website is an asset, while a PPC campaign is an expense. Both, will hopefully make you money, but once you stop the PPC campaign you stop making money and you can’t sell your PPC campaign. The website on the other hand will continue to make you money for years to come.

So what things can you or your clients spend money on for your business online that is an asset and what is an expense?

Let’s briefly talk about each one of the above and see why it is (or why it should be) either an asset or an expense to a finance manager at yours or your client’s company.

Assets

Website: A website is an incredible asset in today’s world. Your website is the equivalent to purchasing a building in this information age. If you have a good domain and website, it only will grow in value. As you market it the value grows even more as it builds search engine prominence. The engineering on a site can be the basis of your business for years to come. If any business in this day and age treats a website as just some expense, they are mistaken and will suffer as software eats the world. Most businesses are starting to come around to seeing their website this way, but many are still looking at it as just another media buy.

Blogging: A good blog on a site helps bring in links to your site and creates a following. Gaining links is like building more roads to your business, and we all know the prices of real estate with the best locations and the best access are higher than those out in the boondocks. The best part is blogging also builds authority. Sites will gain traffic from strong blogging efforts for years to come, and it will open doors for you that you couldn’t have entered otherwise through your thought leadership. Blogging is a true asset purchase. It doesn’t payoff in the beginning, but over time it raises your property value.

Email Marketing: People have been paying for customer lists for more than a hundred years. Everyone wants access to someone else’s customers and the better customer list you have the more money you can earn from your subscribers by cultivating the relationship. Email in the beginning might not be hugely lucrative, but as you curate the conversation each email can turn into a gold mine.

Video Marketing: Much like blogging, this content builds links, shows up in search engines, establishes credibility, and has a long term payoff. A partner of mine recently launched a video for a client that had huge success in the beginning. But, the full value of that video won’t truly be realized for a few years as it will keep coming up in searches. While there might have been a big initial rush of visitors, the real value will be a year from now when visitors who saw it before will come back because they want to buy the product in the video.

Mobile Apps: Mobile apps are just like your website, they provide value over your long term. This again is one area business are starting to see the long term potential. Hardly anyone is looking at their app as something they burn through. They build them for the long term connection to the customer or the long term sales potential.

SEO: Finally, how could you forget about SEO? How many times have you told your clients not to expect results over night? You tell your client this, because you need them to see SEO as an asset. Even if you have your the client pay a monthly fee for your services which might make it seem like an expense, assets in the physical world have monthly mortgages. You and your client or business know that if you get in now and spend time making their business showing top results in Google that the value they get from the site will grow like the value of a home in a hot real estate market.

Expenses

PPC, Banner, & Facebook Display: I’ll keep this quick by combining these three categories from the chart. All paid media is an expense. Always has been and always will be. That doesn’t mean though that it isn’t a good business move. But, it just can’t be considered an asset. You might be saying, but what about the branding value? There is something to say for that, but I would say that has more to do with the creation of the content then it does the purchase of the media.

Social Media Marketing: I hesitate to put this here, but unless you are creating new content to be shared on social media you are working as an expense, because if you aren’t giving your users content then you are using social media as a customer service channel and a PR channel. While these efforts can build the brand, they are more closely related to the cost of doing business.

Turing Insight Into Sales

So how do you take the understanding of CapEx based marketing strategies and use it to convince your client or boss? I will only focus on the CapEx items, but you show it in the numbers. Work hard to use the tools available to you to present an IRR to your client. If you have baseline traffic numbers, conversion numbers, and margins you can build a model that will show the long time value. You can show your finance minded clients that this strategy provides a return that they wouldn’t get otherwise. Build your case. Research. And you will be able to show your clients or business the true value your strategies will provide them.