Reading the Clickstream

By Rob Luke

Payoffs from tracking online customer behavior have proven elusive, causing institutions to re-think their Web site strategies. Is clickstream analysis ready for prime time?

It's a beguiling notion: interact with customers electronically by interpreting their movement and actions on your own Web site. Often called "clickstream analysis," this technology tantalizes bankers with the promise of improving online marketing, sales and service.

Unfortunately, like so many things Internet-related, the reality is falling short of the promise. It turns out that the information gathered from clickstream analysis is useful only when combined with additional customer data residing elsewhere in the company. Many banks have not yet fully integrated their retail databases and thus have not even reached the proper starting point for clickstream analysis.

But more of an obstacle, perhaps, is rising customer sensitivity about privacy. Many people don't like the idea of Big Brother watching them as they click their way around the Web. Some find it downright spooky to receive, for example, an e-mail alert about mortgages right after exploring their bank's mortgage page.

For these reasons, institutions are recasting the role of clickstream analysis. The lofty goal of sophisticated real-time interaction with online customers is yielding to more modest techniques such as tracking usage of Web site features, gauging the appeal of various products and services, and compiling demographic and behavioral information that can be blended with other data to refine marketing campaigns.

Underlying the tactical shift is a heightened sensitivity to customer concerns about invasion of privacy and overly aggressive marketing. Some institutions have gone so far as to refrain from any sort of clickstream analysis; others use it only for customers who have explicitly "opted in" to such marketing practices.

The downshift to a soft-sell doesn't necessarily mean that banks are losing the online battle, however. By carefully and persistently using techniques such as clickstream analysis to refine their overall Web operations, "banks can provide great value without shoving a product down someone's throat," says Shaw Lively, research manager at IDC, Framingham, Mass.

Still, it remains to be seen whether clickstream analysis will ever catch on with the majority of financial institutions. Only a few of the very largest banks use it today, such as Citigroup, First Union Corp. and FleetBoston Financial Corp. And they have the advantage of being able to deploy expensive technology over a huge online customer base. Smaller institutions may actually be better off skipping costly analytical exercises and simply upgrading their overall Web site capabilities.

No Snooping

A few years ago, at the peak of the dot-com mania, bankers and especially consultants were almost giddy at the prospects of fomenting a marketing revolution with Internet technology. Instead of commissioning laborious and time-consuming consumer surveys and then following up with paper-based marketing campaigns, it was thought that an institution could gain instantaneous insights by observing customer behavior on its own Web site, and then responding to those perceived needs in real time.

Fulfilling this vision of "personalized marketing," however, has proven both difficult and expensive. The biggest operational challenge is getting the various databases within an institution to communicate with each other to form a central customer file, says Karen O'Brien, research manager at IDC, a research and consulting firm. Such a file could then be analyzed, updated and acted upon in real time.

Large banks are the ones most inclined to consider clickstream analysis. But they have been beset with delays in integrating their varied customer databases — especially those institutions that were active acquirers in the last decade. FleetBoston, for example, in recent years has had to assimilate several major bank properties as well as nonbank companies such as its Quick & Reilly brokerage subsidiary. "We suddenly had a lot of different systems to integrate," says director of interactive banking Neal Wolfson. But Wolfson goes on to assert that this integration process is nearly complete, and he predicts FleetBoston will shortly achieve its goal of delivering all its online analysis and services in real time.

Then there's the thorny issue of privacy. Internet users have become increasingly skittish about the degree to which online technology allows companies to track their movements and then bombard them with unsolicited e-mail advertisements. The privacy provisions in the recent Gramm-Leach-Bliley law put financial institutions on heightened notice of the need to protect customer data.

As a result, banks such as Wachovia Corp. (prior to its announced acquisition by First Union) have refrained altogether from collecting any information from their online customers. "It's frustrating because we believe the data could be used in ways that are useful both to the customer and ourselves," says senior vice president Jason Ward, eBusiness director at the Winston-Salem, N.C.-based company. "But the impression that we'd be snooping on them is one we'd rather avoid."

Banks that do use clickstream analysis, such as Citigroup and First Union, only gather information on the online behavior of customers who have "opted-in." In the terminology of privacy law, this means the customer has formally agreed to allow the bank to collect and analyze personal and behavioral information and then communicate with him or her based on those analyses.

These banks also work to allay customer fears that online intruders might access their personal data. Noor Menai, Citigroup's managing director of customer relationship management and consumer portals, says his company has built numerous security protections into its MyCiti Web site that will wall off customer accounts from hackers and any unauthorized use of the data. MyCiti is a consumer banking site where Citigroup experiments with clickstream analysis and targeted marketing for those customers who agree to participate.

Time Lag

Despite all the difficulties, Citigroup and a few other institutions believe the full arsenal of clickstream analytical techniques can improve marketing accuracy — if utilized correctly. One key step is to depressurize things by avoiding immediate customer contact. Menai says MyCiti's online marketing operates on a "comfort time zone" of two to three months, marking the time that bank marketers wait between discerning a customer's need and responding with a specific offer.

The reason for such caution: online businesses have discovered that people don't like being contacted immediately when their Web behavior suggests a propensity to buy something. So rather than making their sales pitches in real time, as soon as the clickstream analysis indicates a propensity to buy, bank marketers are taking a more soft-sell approach. "The first step shouldn't be Ôbuy this,' " says IDC's Lively. "Rather, marketers should display items that will sustain interest and support the decision-making process, like some timely information on the product or service that the customer has just been looking at."

First Union, for example, has developed a monthly e-mail newsletter, called First Union Connect, which contains information targeted individually to each subscriber. The bank compiles this information based on analyses of the clickstreams of Web site visitors who subscribe to the magazine online. In this way, the newsletter is shaped to the preferences of each customer.

Parrish Arturi, senior vice president of online strategy and marketing, describes the newsletter as a way for Charlotte-based First Union to ease into targeted online marketing by "creating a dialogue" with the customer. "We don't use it to instantly promote products and services," Arturi says, although he leaves open the possibility that this policy could change in the future.

Using these kinds of techniques, institutions such as First Union and Citigroup have been able to keep their options open. Experimenting with clickstream analysis in such a restrained way helps them build the hands-on experience needed to exploit the tool's full potential farther down the road.

E-Metrics

In the meantime, people are working to find uses other than real-time interactive marketing for clickstream analysis. After all, online feedback remains a cheaper and faster method of gaining general insights into customer behavior than commissioning surveys, under certain circumstances. "It creates a far better opportunity for the bank to interpret customer needs and acquire the business at a reasonable cost," says Thomas Richards, research director for Meridien Research in Newton, Mass.

Analyst David Reiner says financial institutions can realize "measurable profit" from analyzing Web site behavior if they understand the technology's limitations. Rather than trying to engage in sophisticated predictive modeling techniques, he advises banks to focus more on "e-metrics," or the fundamentals of what customers do online. This would include inferring customers' "lifestyle preferences" based on their Web page selections and the types of ads that work best in specific display areas on the site.

Such e-metrics, Reiner says, can bolster a multi-channel customer relationship management strategy and also help weed out Web site functions that are performing poorly. "The payoff comes from better customer relationships, increased referrals and reduced costs in migrating customer transactions to the Internet," says Reiner, vice president of strategic analysis at Cambridge, Mass.-based NetGenesis, a consulting and software firm.

Whether smaller institutions can justify the expense and trouble remains an open question. David Burg, a Chicago-based director of KPMG LLP, predicts that the more sophisticated versions of clickstream analysis will remain confined to a handful of top banks. NetGenesis' Reiner, however, argues that medium-size banks can also profit from the technology. And James Scurlock, Boston-based director of strategy and senior manager with Cap Gemini Ernst & Young, sees some additional opportunity for a few niche institutions, such as those catering to a high-net-worth clientele, where the profit margin might justify the analytical expense.

But the industry is clearly beyond the point of accepting every new online pursuit as an imperative. The challenge is to marry clickstream analytics with specific activities that advance the institution's goals, and do so in a way that is non-intrusive to customers. That's a big pill that not every player will be able to swallow. Clickstream analysis might be smart for some banks, but as Scurlock says, "not for all retail banks."

Mr. Luke is a freelance writer based in Carbondale, Ill.

Copyright © 2003 by Banking Strategies, published by BAI.

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