The right information

Though web analytics is a technology with a rapidly rising profile, it is often poorly understood by business. Getting the best outcomes requires companies to understand their options, both in choosing tools and how they use them. And like everything else in business, web analytics is hard, and thusly it requires thoughtful planning and solid execution to produce the return on investment most companies are looking for.

A common concern among those thinking of deploying analytics is why they should pay for enterprise solutions when free tools such as Google Analytics are available. But the adage “you get what you pay for” is as true in web analytics as it is in life. I personally struggle with the use of the term “enterprise-class” when talking about currently available web analytics solutions but think that if you are going to use this term you should be talking about:

• Robust data integration functionality
  
• Robust visitor segmentation functionality
  
• Visitor-level data analysis capabilities
  
• Powerful multidimensional analysis support

Google Analytics contains none of the aforementioned and thus is not “enterprise-class” using my definition. None of the currently available free solutions provide this level of functionality, nor do I expect them to in the future.

This is not to say that Google Analytics and free tools are inappropriate. On the contrary, tools like GA are often extremely suitable for companies early on in their use of web analytics and are perhaps the best possible solution for organisations still working to determine how web analytics can benefit their online business. But companies need to be very careful to recognise that Google Analytics will not satisfy all of their analysis and reporting needs and thusly they may need other tools at some point in their measurement maturation process.

As a rule I recommend to my clients using Google Analytics that they keep an ongoing list of the questions that GA is unable to answer. When that list grows long, or when the questions become critical to the business, I recommend looking at licensed tools like Nedstat (Holland), Xiti (France), and the US vendors such as Omniture and WebTrends which are well known in Europe. The list can then be used to challenge each vendor to demonstrate how their tools will provide value commensurate with costs.

My recommendation is that companies become familiar with the Web Analytics Demystified RAMP methodology. RAMP stands for “Resources, Analysis, Multivariate testing, and Process”—the four areas every company needs to focus on to get the best results from their investment in web analytics. Each of these categories is critical to experiencing the full effect of web analytics, but again, too few companies have a measurement-based strategic roadmap describing how they plan to be successful.

The benefits ascribed to the use of web analytics are multiple and are increasingly well described by the vendors, analysts and journals like this one. Site owners around the world are using web analytics to dramatically improve the efficacy of online marketing efforts, site design, and the quality of customer communication. Some examples, all drawn from published case studies:

• CompUSA used analysis to document the need for a design change that generated an incremental US$2.2 million
  
• Overstock.com used multivariate testing to generate over US$8 million in incremental revenue
  
• A Fortune 500 travel company used multivariate testing to improve the online booking process, generating an estimated lift of nearly US$30 million annually

Examples like these are increasingly common, and while smaller companies may not appreciate such massive growth in incremental revenue or operational savings, the opportunity is still huge. The reality is that most companies are still working to figure out the internet and how to best connect with online audiences. Web analytics is the best way to make this happen.

But it is not simply a matter of implementing tools and watching the benefits stack up. In my experience, some companies fail to pay nearly enough attention to the process of “doing” web analytics. For some reason people become easily convinced that web analytics software is somehow magical and will solve all their problems without having to invest in defining a strategy for how the software will be effectively used. Web analytics is process intensive – you have to have a solid plan to take advantage of this data, otherwise you simply have more data that too few people understand.

Again, the Web Analytics Demystified RAMP methodology defines how companies should deploy web analytics and which processes merit special attention depending on the type of company and their specific situation. By investing in process, organisations can clarify goals, responsibilities, and an overall strategy for making web analytics work. I focus on the need for process because earlier this year I found that while only eight percent of companies worldwide take a process-oriented approach towards web analytics, a full 50 percent of these companies report a positive return from their investment in web analytics.

Another critical prerequisite for companies hoping to get the best out of analytics is support from skilled staff. The Web Analytics Demystified RAMP methodology starts with “Resources” which are technology and people. Too many companies have made the mistake of assuming that web analytics software is easy to run and that reports and analysis will magically appear and be easily useful. But again, web analytics is difficult and it is smart people that bridge the gap between complex technology and useful results from the investment.

Put another way, all of the major vendors in Europe and the US do a good job of collecting data and packaging up reports. But no piece of software is capable of providing complex analysis of the data in the context of the business objectives, the investment strategy, and the current market conditions. Software reports on data collected, it is up to bright people to connect that data to well considered actions that the business can take and then test the effects of those actions.

The key organisational ingredients for guaranteeing the best returns are again, the right resources, the ability to produce and use analysis, the ability to test decisions using some type of multivariate testing tools, and good organisational process.

Used properly, I think that web analytics is currently critical to marketing and business intelligence efforts, both online and off. The internet has become such an important piece of all our lives, and our interactions therein are largely measurable. Smart marketers are testing campaign creative, placements, and efficacy online before committing the money and resources to build out extremely costly offline campaigns! Just think about it: work with your advertising design firm to ensure high response to a TV campaign as inferred from results driven online through increasingly popular iTV and online video repositories like YouTube and MySpace. Or test a print campaign by using flyover ads showing different images and messages to see which generates the greatest immediate response. In my book this is Marketing 2.0 and where the entire market is quickly heading.

About the author

Eric T. Peterson is CEO and Principal Consultant at Web Analytics Demystified and has worked in web analytics since the late 1990's in a variety of roles including practitioner, consultant, and analyst for several market-leading companies. He is the author of three best-selling books on the subject, Web Analytics Demystified, Web Site Measurement Hacks, and The Big Book of Key Performance Indicators, as well as one of the most popular web analytics bloggers at www.webanalyticsdemystified.com.

A C-level concern?

Conventional wisdom says it is critical that C-level executives fully understand analytics but I’m not so sure. C-level executives have tremendous pressure on them to manage the whole business, innovate and provide increasing shareholder value in what can only be described as a complex business environment. But web analytics is complicated and extremely nuanced, especially when you get into the details like definitions, use of cookies and combinability of data. Given this, I’m somewhat sceptical of the idea that companies won’t be successful with web analytics unless the CEO and CFO understand the investment.

A better strategy, especially in large companies, is to make sure that a senior lieutenant like the Senior Vice President of Marketing accepts full responsibility for making the investment in web analytics successful. By giving this responsibility to someone able to make budget and staffing decisions and who likely has the political clout to make necessary changes, the C-suite can trust that the available data will be effectively used.

Unfortunately, in my experience far too few companies assign responsibility for web analytics to someone senior. This breakdown in business process then leads to the investment in web analytics going under-utilised inside the organisation. Without a strong leader for analytics the data often goes unused, reporting becomes more important than analysis, and multivariate analysis and testing fails to gain widespread adoption.