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White paper by: Ravi Vijayaraghavan Vice-President and Head - Global Analytics
February 2010
Table of Contents
Introduction The Conversion Funnel Statistical Scoring Model Agent Optimization Chat Transcripts Analysis - Text Mining Conclusion 3 4 5 6 7 8
Introduction
With the coming of age of web as a mainstream sales and marketing channel, companies have invested substantial resources in enhancing their web presence. This includes large investments in web advertising. In addition, companies are looking for ways to improve sales conversion and customer experience for web shoppers. Sales chat is a medium that can provide a lift in both these areas. With the growing popularity of chat as a communication medium, particularly among the new generation of consumers, potential for revenue generation from this channel is enormous.
The obvious analogy is to consider the sales chat agents as a virtual sales force for a virtual store. However, a key difference exists. In a real store there are relatively few visitors and a significant fraction of the visitors come with intent to buy i.e. they are hot prospects. On the other hand, major web stores such as Amazon, eBay and Overstock have millions of visitors every week and an overwhelming majority of these visitors do not intend to buy. They also have the ability to switch from one store to another at the click of a mouse button. Considering the visitor volumes and the low average likelihood to buy, it is not profitable to randomly engage in chat with every visitor. It is imperative to identify a subset of this visitor population that has a substantially greater likelihood to buy. The following case study presents applications of statistical/mathematical models in identifying hot prospects and improving conversion, revenue generation and retail customer experience for a major web retailer.
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Layer 2 - Filter
Customers web behavior Resource allocation
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Identification of hot leads is accomplished using a statistical scoring model. The scoring can be done in real time while the visitor/prospective customer is browsing on the website. The scoring is based on a number of attributes including time of the day, day of the week, geographical location of the customer, product category, exhibited behavior on the web site etc. Figure 2 schematically illustrates the scoring model. Essentially certain patterns of behavior exhibit a much greater propensity to buy than others.
The scoring model essentially estimates a probability of purchase (P(sale)). Statistical and Data Mining techniques such as Nave Bayes, Logistic Regression or Neural Networks are used to develop these scores. A threshold score can be set above which customers are invited to a chat. Based on variations in traffic and availability of agents the threshold score can be modified. As more data is generated, the system learns and the scoring model becomes better at identifying the hottest prospects.
Referral Page
Web Behavior
Hot Lead
Search Engine Retailers Website Comparison Sho pping Site In a P roduct P age Abandoned Orde r Process >t sec on Billing and Shipping Page 2 >t sec on Ord er Revie w Pa ge . . . . . 17 Thursday Friday Saturday Sunday 18 19 20 21 22 23 Recreation & Sports Gifts & Flowers Health & Wellness . . . 48 49 . . . 94 95 0 1 Monday Tuesday Wednesday Home & Garden
Electronics & Computers
10... 11... .
Cable/DSL Corporate
P (Sale) = 0.78
Cold Lead
Dialup
P(Sale) = 0.03
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The more interesting strategic problem is to determine the right number of agents to maximize profits. The scoring model only prioritizes the visitors to the site. It does not automatically provide a threshold score for the hot leads. We provide the threshold score. This in turn determines the number of people invited to chat which establishes our agent staffing levels. But what is the right threshold score? How is it determined?
The customers are being prioritized based on how hot they are. Based on the average order value for a given product type and the probability of a given hot lead to buy, the expected revenue from the transaction can be calculated. To increase the number of chats and hence the overall revenues, we lower the threshold score inviting less qualified leads, at the same time increasing the number of agents. These less qualified customers on an average generate lower revenues per customer i.e. the marginal revenue of these customers is lower. This implies, as we keep adding agents to interact with less and less qualified leads, the marginal profit generated by the additional agents keeps declining. We keep lowering the threshold, increasing the number of hot leads and adding agents till we stop making a marginal profit. To estimate the number of agents corresponding to this, we use an optimization algorithm
Finally, scoring techniques are also used to match the right agent to the customer. The essential concept is displayed in Figure 3 where we see that the agent Raymond is as such a top performer but is particularly skilled in selling Electronics products. We score various product-agent combinations and manage our chat queues and routing based on not just the overall performance of the agent but also on historical performance in various product categories.
The goal here is not just to look at product-agent combinations but to develop a comprehensive scoring model that scores the agent for a set of customer/product attributes and determines the best agent to talk to a given hot lead
2 0 .0 %
Rate
1 5 .0 %
1 0 .0 %
5 .0 %
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1. 2. 3. 4. 5.
Customer emotions and expectations Agent behavior Effort involved in selling various products Reasons for chats not resulting in sales Opportunities for up selling/cross-selling
Example: A sample of sales chats was analyzed to find the kind of effort required to make a sale. The analysis revealed that it required greater effort to convince people when they could not find satisfying answers for their query. Relating this, with the kind of product in question, it was observed that people took time to make a decision when they were shopping for items in the Home and Garden category. It was also observed that people tended to ask for details that could be found only upon close examination of the product. (Some typical questions are, what is the texture of the cloth? what is the feel of the material, How does the back side of the carpet look? What is the material used for the knob?). On the other hand, being well specified, certain electronics items were sold with relatively less effort. It is also important to note that the items that required more details and hence more interaction are ideally sold using the chat medium as opposed to self-service. Consistent with this, it is observed that Home & Garden category had the largest volume and the highest expected revenues via chat among all product categories. Text analysis helps optimize these interactions and also help prepare agents with the right information to help customers.
Similarly, text mining can be used to identify products for which promotional schemes (club membership, special protection plan, extended warranty plan) were easier to up/cross sell. For example, zodiac pendants often sold with children jewelry.
Figure - 4: Categorization of Customer Emotions and Agent Behaviour to Build the Text Analysis Model
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Conclusion
Internet chat is a growing channel for sales over the web and retailers are adding this capability to their websites. However, like in self-service web retailing, success in driving up sales chat revenues and profitability will go to players who use advanced data-driven approaches to drive customer intelligence and chat engagement decisions.
References
ITSMA and PAC, How Customers Choose Study, 2009 ITSMA and PAC, How Customers Choose Study, 2009 ITSMA and PAC, How Customers Choose Study, 2009
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