What online stores still don't know about you

Andrea Orr

PALO ALTO: Here's some good news for everyone worried about Internet privacy: the online stores where you shop really don't know every last thing about you.

In fact, they actually don't know much about you at all.

For all the talk of how Web retailers could recreate three-dimensional, head-to-toe profiles of customers just by tracking their mouse clicks, most online stores now confess they don't have such a clear picture.

"It's kind of like saying it is easy to solve world hunger because you know how to plant food," says Dave Chambers, director of customer relationship management at the online retailer BlueLight.com (http://www.bluelight.com), an affiliate of KMart Corp. .

"There has been a lot of buzz about personalization, and one-to-one marketing, but the reality is we've got a long way to go. Everything that is being reported is well ahead of the actual reality."

A relief to privacy advocates, perhaps. But from a retailer's point of view, the failure to make use of all the data they collect on their customers basically means a wasted effort that costs them unknown amounts in lost business.

To help capture more of that business, a growing number of companies like BlueLight are adopting a software made by the Silicon Valley company, E.piphany Inc. (http://www.epiphany.com).

This week, BlueLight is launching a customized software application from E.piphany that it says will deliver instant feedback from its online store. The data will range from the seemingly trivial, like whether a promotion gets more attention when it is printed in red or orange, to more "substantial" matters like whether the Pokemon special or the limited offer on Martha Steward garden supplies drives more business.

"The real key is not just gathering data," explains BlueLight's Chambers. "Any Web site has tons of data. The key is to be able to use that data to make strategic and tactical decisions.

Like BlueLight, many of E.piphany's customers say they know of no other company that does such a thorough job of synthesizing raw data.

"We have the ability to sift through oceans of information," boasts E.piphany chief executive Roger Siboni, which has among its customers Amazon.com Inc. and Procter & Gamble Co. "Most companies don't have a good handle on who their customers are and what they're doing."

If it seems online merchants like BlueLight or Amazon should be able to figure out all this on their own based on all the information customers willingly reveal, it is ironically the sheer volume of data they have that makes the task so daunting. E.piphany says it supplies a virtual toolkit that can put all the raw facts together.

"They provide high level analytics," explains Ian Morton, an analyst who follows E.piphany for Chase H & Q. "Some of it is common sense and some is more sophisticated. The ultimate value is that they are able to do it in real time."

Because E.piphany software delivers instant feedback, a store could potentially adjust an online promotion the same day it is launched, if, for example, it discovers that $15 coupons attract more shoppers than a 10 per cent off sale.

After stumbling along with the stocks of most other companies involved with e-commerce, E.piphany has recently shown a strong recovery. The company attributes this partly to surprisingly strong financial results reported last month, and partly to the fact that it is really not a pure-play Internet company at all.

Although E.piphany has helped some of the biggest Web merchants understand their customers, it maintains it offers an even more critical service to companies that operate offline and collect customer data from multiple places. As Internet stocks have fallen out of favor, E.piphany has made a point of emphasizing this diversity.

"For us, the Web is only one of a multitude of commerce channels," says Siboni, who also finds relevant material from companies' channel partners and their customer service call centers.

One happy customer from the old economy is Nissan Motor Co. Ltd., which admits it had been almost drowning in unused customer profiles before it discovered E.piphany.

"They help us put together an integrated view of the customer," says Ted Ross, who heads relationship marketing for Nissan North America, which he describes as "the definition of a brick and mortar company."

"We've got data sitting in 12 to 15 internal and a variety of external sources, collected over years and years and years, and we have never been able to figure out a way to integrate it all."

For Nissan, the real value E.piphany provides is connecting information a single customer may leave at a dealership, with what he reveals when he goes to the company's Web site, applies for a car loan or takes his car in for repairs.

"It's pretty easy to send out direct mail, but if you are sending it to someone who has just called to complain about a car, they could get pretty offended," says Ross.

To keep the privacy police happy, Nissan has an opt-in policy in which it will not collect customer data unless the customer gives it permission. Only about 3 per cent do.

Still, it finds the value of that slim percentage immense - if the material is processed properly.

"If we collect data on 3,000 car buyers a month, and multiply that by the $2,500 we make on every car, that is $7.5 million in business we might have missed," says Ross.

(C) Reuters Limited 2000.