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Growth Curve

E-retailers use chat more, and more effectively, as they grow more conversant with its potential

By Mary Wagner

With the holiday season looming, Delight.com co-founder Tracey Tee was looking for ways last fall to boost the efficiency of her already hardworking staff. “The question was, how do we maximize our time with a small staff without overloading them with customer service requests?” she says.

Delight, a company of six employees with annual sales of under $2 million, found an answer in live chat, the technology that enables a consumer to instant-message a question to a retailer via its web site, typing and receiving text responses in a window that opens on the web page.

The communication takes place in real time and lends itself to quick question-and-answer exchanges. It can be a quicker route to answers than e-mail or the phone for shoppers poised to buy but in need of more information first, or for those who want to check on shipping status, return protocol or other issues.

A cost-effective tool

Chat can also can be a more cost-effective way to answer questions than taking phone calls. Agents can juggle chat exchanges with more than one customer at a time, something they can’t do on the phone, and pre-formatted answers to frequently asked questions add to agents’ productivity.

Online retailers have been employing live chat for more than a decade, and 57% of the Internet Retailer Top 500—the leading online merchants in North America by web sales—now use it. What’s more, they are using it in increasingly sophisticated ways, such as by using historical browsing pattern data to determine which consumers on a site are the most likely to become buyers if offered the chance to chat with a customer service agent.

For retailers exploiting chat extensively the payoff can be impressive. For instance, web and TV retailer ShopNBC.com realized a return of $4.19 million in higher sales, lower costs and other benefits within two months on an investment of $1.4 million in a proactive chat program, according to a new study by research and consulting firm Forrester Research Inc. The study was sponsored by live chat technology provider LivePerson Inc.

To be sure, there are complexities to chat, especially when introducing proactive chat, in which the retailer initiates the exchange with a consumer on its site. But retailers small, medium and large are finding benefits in live chat, and many gradually add new ways to use chat once they’ve gotten their feet wet.

Do more with less

For Delight.com, the biggest benefit from its first foray into live chat has been allowing agents—employees who all wear other hats, too—to handle more customer queries in less time. Delight, which sells gifts, launched its chat program in November with software vendor WebsiteAlive. Delight figures chat cuts about 75% off the time needed to resolve a customer question and that live chat has reduced the number of customer calls and e-mails by 30% to 50%.

In addition, customer changes or updates to orders delivered via chat reach staff more quickly than they would by phone or e-mail, allowing Delight to make the adjustments before order processing starts, Tee says. At under $100 per month, chat paid for itself almost immediately, she adds.

Delight could dial up the functionality of its program further. For instance, it chooses to use only one preformatted answer—on shipping rates. But with 50 to 100 chats a day during peak volume periods, Tee is happy to use chat to field shopper questions and not looking, for now, to drive more out of it.

“For a small business,” she says, “it’s been amazing.”

Higher tickets

Abt Electronics, a substantially larger retailer with web sales of $86.5 million in 2008, launched live chat on its web site in 2000, primarily to expand customer service. But over time it’s grown into a tool for increasing sales.

Since 2008, Abt has used chat vendor Bold Software. In 2009 it paid about $10,000 for licenses allowing up to 25 agents, all Abt employees, to use live chat at one time. Agents field product questions, post-purchase questions, and in fact, all queries except tech support and product service and repair questions.

Abt launches a customer survey after each chat, and co-president Jon Abt says feedback is generally positive. More importantly, customers are registering their approval by spending more as a result of interacting with an agent who can offer additional information about complex consumer electronics products.

“Someone may want a television with a Blu-ray player,” Abt says. “Even though it might also be written on page somewhere, our sales and service people can certainly tell them that they’ll need this cable to make this product work with that one, or ask them if they’ve thought about installation,” Abt says.

He estimates a 20% increase in average order value among customers who chat over shoppers who purchase online without assistance. Abt notes that the program offers advanced features including the ability to display all incoming chats onscreen, allowing agents to choose inquiries that best match their skills.

While not ready to dive into proactive chat, Abt has extended the chat link from just product pages at first to every page on the site. It’s also speeded up query resolution time by giving its agents access to 50 to 60 preformatted answers to common questions.

While Abt uses chat to boost sales as well as to answer customer questions, retailer Soft Surroundings relies on it as a customer service tool. Soft Surroundings has long experience with live chat on its web site, using technology from vendor nGenera, formerly known as Talisma.

The retailer of women’s clothing, accessories and home décor has 45 agents in its contact center who chat with online consumers. Call center operations manager Jim Manno wouldn’t disclose what the retailer pays for software licenses and maintenance fees; the retailer hosts the software on its own servers.

Soft Surroundings’ experience using chat for customer service has taught it lessons about how consumers interact differently in an instant-message exchange than they do on the phone or e-mail.

“The chat customer is extremely detail-oriented and very knowledgeable about merchandise and our company,” Manno says. “It’s best to be direct, extremely resourceful and respond expeditiously when chatting with her. By studying this customer profile, we have improved our chat response time as well as our chat service level.”

The retailer has shortened the length of an average chat by over 4% in the past year, largely by identifying more opportunities to use preformatted answers. And over the same period, it more than doubled its chat volume by making chat links more prominent throughout the site.

Boost sales?

The next step is to see if chat can boost sales. Soft Surroundings began offering proactive chat a few months ago, with the offer triggered by a visitor’s behavior on the site. For instance, the retailer might invite a shopper to chat if she lingers on a page for an extended time, or abandons her cart after spending significant time in the checkout sequence.

The rules triggering a proactive chat are so far few in number, and the program doesn’t yet integrate with customer data that links a shopper’s behavior on a page to her prior behavior, purchase history or the behavior of other shoppers. Until it gains more experience with proactive chat, Manno says the retailer will proceed cautiously in adding that kind of complexity—and adding to agents’ workload.

“We don’t know what kind of chat volume to anticipate once we start rolling out a number of proactive chat rules, so we’re taking it slow and seeing what kind of manpower we might need to handle that volume,” he explains. In addition to the so-far small volume of proactive chat exchanges, his in-house team of Internet agents already handles reactive chat, e-mail and, when necessary, phone calls from customers.

Manno also notes that creating the rules that trigger proactive chat invitations requires a lot of coding, and that the work to implement proactive chat had to be balanced with the demands of a recent web site redesign.

“We are still trying to get the final coding completed,” Manno says.”We are not there yet, But we are aware of the possibilities and excited about them.”

Hot prospects

For larger e-retailers, the future of live chat might look something like the program at ShopNBC.com. Unlike many chat implementations that start in customer service and then extend into sales, ShopNBC.com launched chat specifically to grow sales, boost conversion rates, and reduce order cancellation and returns.

The program launched in November 2008, completely outsourced to a partnership of vendors LivePerson and 24-7 INtouch, which together provide everything from the technical platform to the agents.

What makes ShopNBC’s program noteworthy is how the retailer is deciding which site visitors to target for a proactive chat invitation. Instead of just launching an invitation because a customer stays on a page for an extended period, or toggles back and forth between pages, LivePerson technology analyzes the conversion rate of previous shoppers who exhibited particular behavior.

It creates customer profiles that fold in that information as well as other behavioral data, such as time spent on various pages, prior average order size, and customers’ location and demographic information, to categorize visitors into various profiles.

The profiles indicate which current visitors might be prime candidates for a chat and which ones agents should leave alone. Agents can see which visitors are identified as “hot leads,” and LivePerson technology balances how many hot prospects there are with the availability of agents so the retailer does not offer more chat invitations than it can handle at peak shopping periods.

Forrester’s study found that ShopNBC’s chat program increased conversions by guiding shoppers through the sales process to reduce cart abandonment. It also increased average order size, with customers who engaged in chat spending on average 38% more than other customers. Chatting also reduced returns and order cancellations by about 12% and increased return visits, with shoppers who’d completed a chat-assisted purchase more likely to place an order on return visits to the site, Forrester found.

Chat for all

Initially, ShopNBC offered chats only on high-priced products. Based on first-year results, however, it extended chat to all products late last year, and it’s experimenting with adding chat to customer service.

Carol Steinberg, senior vice president of e-commerce, marketing and business development at ShopNBC, says the chat program improves the customer experience. “They are getting their questions answered while they are sitting there and thinking, ‘Should I or shouldn’t I?’” she says. “They get the information at the time they need it so the sale is closed and they become happy customers.”

The experiences of ShopNBC and these other retailers show that there’s more to chat than just a quick way to answer questions. But, as with many things in life and retailing, getting more out of chat requires putting more into it.

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