Wp online-retailing-optimized-2011

SPECIAL REPORT IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report Industry Benchmark Analysis and Best Practice Guide to Maximize Holiday Returns J U N E 2 011Did you like this white paper? Tweet about it! Twitter.

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportTable of ContentsIntroduction 1Trends in Online Shopping 2 Consumers Are Spending More on More Items 3 Mobile Device Usage and Social Media Are Growing 5 Consumer Attention Continues to Decline 7 Carting and Ordering Hit Record Highs 8 Single-Page ‘Bounce’ Visitors Remain High 10Best Practices 11 Focus on the Customer Life Cycle 11 Capitalize on the Mobile Channel 15 Retarget Your Browsers and Abandoners 17 Use Personalized Product Recommendations 20 Cultivate the Social Media Channel 21Make the Holiday Season Profitable 22 Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved.

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportIntroductionThe 2010 holiday season was huge for online retailers. Web merchants racked up double-digit increasesin total site sales and average order value as consumers shook off the effects of the recession. Thoseincreases have continued into 2011, IBM® Coremetrics® Benchmark data shows, suggesting that theupcoming holidays could well be another record-setting season for online retail.Yet pitfalls loom. Consumer attention has flatlined at its weakest levels ever, sinking to new lows in suchmetrics as average time on site and page views per session, according to Coremetrics Benchmark data.Discriminating visitors are spending a lot less time browsing retail sites than they did several years ago.They’re shopping surgically—zeroing in quickly on the items they want—and are more likely than ever to“bounce” after a glance at a single page.Meanwhile, mobile browsing and shopping has surged impressively as consumers indulge in theconvenience and rich functionality of feature-laden tablets and smartphones. Mobile sales as apercentage of overall site business nearly doubled in our reporting period, with mobile shopping poisedto break into double digits by the holidays. Social media visitors and sales have lifted modestly—yet theseshoppers are more than twice as likely to convert compared to overall site visitors.In this fourth annual holiday guide from Coremetrics, an IBM Company, you’ll find in-depth analyses ofkey trends in online shopping and usage based on anonymous data aggregated from more than 500U.S. retailers participating in the Coremetrics Benchmark program. This report also offers best-practiceguidance on how you can adapt to fast-moving trends and make the most of your opportunities duringthe critical holiday season, including a look at: • Trends in key performance metrics over time • Emerging opportunities and challenges in online retail • Proven strategies to maximize success and deepen customer engagement • Key technological capabilities for web analytics and online marketingIn preparing this guide, our goal is to help you, the online retailer, formulate powerful programs and tacticsto take this holiday season head-on.Happy selling! Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 1

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportTrends in Online ShoppingThe holiday season is the proving ground for the strategies, tactics, and technologies that your companyhas in place to boost sales by attracting and retaining customers. The opportunity is huge with online retailsales predicted to increase significantly over the next several years. In support of this, the independentresearch firm Forrester has found: • 83 percent of consumers prefer to shop online than in crowded stores during Thanksgiving weekend1 • 21 percent of online shoppers expect to spend more over the web in 20112Such trends are reflected in our analysis of Coremetrics Benchmark data. The following section of thisreport examines trends in five key areas: • Consumers are spending more on more items • Mobile device usage and social media are growing • Consumer attention continues to decline • Carting and ordering hit record highs • Single-page “bounce” visitors remain highAbout Coremetrics Benchmark. Data in this report is based on Coremetrics Benchmark, whichcaptures online marketing results and commerce data from more than 500 contributing U.S. retailers.The industry’s only peer-level benchmarking solution enables Coremetrics customers to measureperformance against the competition (in anonymized, aggregated form). Coremetrics Benchmark comesstandard with IBM® Coremetrics® Web Analytics at no additional cost.1 Bizrate Insights and Forrester Research, “Online Retail Holiday Study,” December 2010.2 Forrester Research, North American Technographics® Retail Online Survey, Q3 2010 (US), September 2010. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 2

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportConsumers Are Spending More on More ItemsAverage order value (AOV) surged to a new high in our reporting period, hitting a record $204.58 in April2011—up a massive 70 percent from a low of $120 in June 2008. And consumers are buying more itemsonline, reaching a new high of 8.26 items per order in March 2011—nearly double the 4.8 items per orderin December 2008.Between the 2009 and 2010 holiday seasons, retailers saw a double-digit gain in AOV. Order values werealso up substantially on Black Friday and Cyber Monday 2010 compared to 2009, as shown in Figure 1. Holiday Season Average Order Value 2009 2010 % Gain November $ 175 $ 195 11.3% December $ 172 $ 190 10.7% Black Friday $ 170 $ 191 12.1% Cyber Monday $ 180 $ 195 8.3% Figure 1. Online retailers posted double-digit AOV gains during the 2010 holiday season.As the economic rebound continues, retailers have the opportunity to capitalize on consumers’ newfoundwillingness to spend. Smart retailers will not rest on their successes and blindly assume that spending willremain strong past the 2011 holidays, but will aggressively expand their emarketing, web analytics, mobile,and social efforts to maximize returns while strengthening long-term customer loyalty.Retargeting browsers and abandoners with personalized emails and targeted display ads is a proven wayto prompt return visits and conversions among would-be buyers. Product recommendations technologycan contribute 10 percent and more of total sales, Coremetrics Benchmark data has shown, boostingboth AOV and items per order. Strong mobile device support is essential to satisfying the fast-growingpopulation of mobile browsers and shoppers, while social media offers an emerging channel to deepenconsumer engagement and trigger site visits. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 3

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report U.S. Retail: Average Order Value April 2008 - April 2011 $220.00 $200.00 $180.00 $160.00 $140.00 $120.00 $100.00 2008 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2010 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2011 Apr U.S. Retail: April 2008 - April 2011 Average Number of Items Per Order 8.50 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 May Jul Sep Oct Dec Jan Feb Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2011 Apr 2008 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr Jun Aug Nov Mar 2010 Apr May Figure 2. Both average order value and average number of items per order hit record highs in early 2011, signaling opportunities for a banner holiday 2011. Conclusion: Increases in average order value and average number of items per order should prompt savvy retailers to look for ways to smartly engage online shoppers and capitalize on consumer use of social media and mobile devices. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 4

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportMobile Device Usage and Social Media Are GrowingCoremetrics Benchmark data reveals strong and steady increases in mobile device usage in both sitevisits and sales. Though our snapshot is somewhat limited, from October 2010 to April 2011 as mobiledata was first launched in Coremetrics Benchmark at the end of 2010, mobile usage is clearly rising and isa critical channel that no online retailer can afford to shortchange or ignore. For instance, in our six-monthreporting period, the mobile channel as a percent of total site sales nearly doubled, from 3.4 percent to6.5 percent.We expect that mobile site traffic will grow well beyond the 7.6 percent recorded in April 2011 and be inthe double digits by holiday 2011. Sales via mobile devices—at 6.5 percent of all site sales as ofApril 2011—is impressively high and illustrates that consumers are using iPhones, iPads, BlackBerries,and Android devices for more than just finding directions to a store. U.S. Retail: Mobile Site Traffic November 2010 - April 2011 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% Nov Dec Jan Feb Mar Apr U.S. Retail: Mobile Sales Percent November 2010 - April 2011 7.00% 6.00% 5.00% 4.00% 3.00% Nov Dec Jan Feb Mar Apr Figure 3. The mobile channel shows strong growth in percent of both site visits and sales.Site visits and sales by social media visitors were less than 2 percent in our limited reporting window ofOctober 2010 to April 2011, rising incrementally over those six months. Interestingly, as seen in Figure 4,the percentage of social-driven site sales is higher than social-driven site visits (1.6 percent versus1.2 percent respectively in April 2011). This indicates that social visitors (often Facebook fans or Twitterfollowers) are uniquely predisposed to purchasing and are responding to offers exclusively on socialmedia. Though the population is relatively small, it’s a promising segment that retailers are smartto cultivate. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 5

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report U.S. Retail: Social Site Traffic November 2010 - April 2011 1.25% 1.00% 0.75% 0.50% 0.25% 0 Nov Dec Jan Feb Mar Apr U.S. Retail: Social Sales Percent November 2010 - April 2011 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0 Nov Dec Jan Feb Mar Apr Figure 4. Social-driven sales exceed social-driven site traffic, indicating social visitors are highly inclined to convert.A comparison of key metrics across overall, mobile, and social visitor populations reveals some interestinginsights: • Social visitors. They’re more than twice as likely as the overall population to convert, at a rate of 10.7 percent versus 5.2 percent. Many of these social visitors are likely responding to offers, as their bounce rate (62.8 percent) is high and their time on site (3:26 minutes) is low. • Mobile visitors. They’re less engaged than the overall population, with fewer page views, less time on site, lower conversion, and higher bounce rates. Though this is not unsurprising, it does underscore the need for retailers to monitor and optimize the mobile user experience. All Means Mobile Social Page views per session 7.5 4.8 5.2 Average time on site 7:20 3:42 3:26 Conversion rate 5.2% 3.9% 10.7% Bounce rate 35.1% 44.8% 62.8% Figure 5. A comparison of key metrics across the overall, mobile, & social segments of retail site visitors. Conclusion: Mobile and social visitors are rapidly becoming a force to be reckoned with. Retailers need to move fast to ensure they meet the expectations of fickle mobile visitors, and should continue cultivating the important segment of social media users. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 6

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportConsumer Attention Continues to DeclineDespite encouraging gains in AOV, consumer attention hit record lows in the past year. The average timespent on site fell to its lowest point of the past three years in October 2010, down to 7:04 minutes from10:04 in April 2008—a 30 percent decline. Average page views per session also found a new bottom inDecember 2010—7.44, down 45 percent from a high of 13.5 in April 2008.As shown in Figure 6, the new lows are small dips in lines that are relatively flat over the past 1½ yearsafter dropping precipitously from levels of 2008. Discriminating consumers are clearly engaging in surgicalshopping, while the growth of social media and mobile usage and general information overload has cutinto the time that they used to spend on retail sites.To counter these trends and shrunken windows of engagement, retailers should redouble efforts to makesites personalized and compelling. Use of relevant product recommendations, product review sections,and social media are proven techniques to lengthen site visits. Retailers should also revisit fundamentalweb analytics and A/B testing to optimize site navigation and the overall experience. U.S. Retail: Time on Site April 2008 - April 2011 10:33 10:04 9:36 9:07 8:38 8:09 7:40 7:12 6:43 2008 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2010 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2011 Apr U.S. Retail: Page Views Per Session April 2008 - April 2011 14.00 13.00 12.00 11.00 10.00 9.00 8.00 7.00 Sep Feb Mar 2010 Apr May Jun Jul Sep Oct Nov Dec Jan Feb Mar 2011 Apr 2008 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr May Jun Jul Aug Oct Nov Dec Jan Aug Figure 6. Average time on site and page views per session hit new lows in late 2010. Conclusion: A leveling off of consumer attention spans illustrates a new reality of discriminating customers and surgical shopping. Retailers need to diligently test and implement techniques, such as relevant product recommendations and site optimization, to improve these important metrics. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 7

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportCarting and Ordering Hit Record HighsIn another positive development, both shopping cart and ordering sessions reached new highs during ourreporting period. Shopping cart sessions (when a shopper has carted an item) reached 10.9 percent inFebruary 2011, up from a low of 8.3 percent in September 2008. Ordering sessions peaked at 5.3 percentin February 2011 as well, more than double the 2.6 percent of September 2008.But product page views per session fell to a new low of 1.7 in November 2010, trending steadilydownwards in the 12 months preceding, and less than half the 3.7 product page views per sessionof April 2008. Combined, these three data points corroborate observations on the surgical shoppingphenomenon—shoppers are visiting fewer product pages, but they’re carting and purchasing more items. U.S. Retail: April 2008 - April 2011 Shopping Cart Session Percent 12.00% 11.00% 10.00% 9.00% 8.00% 7.00% May Jul Sep Oct Dec Jan Feb Mar Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2011 Apr 2008 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr Jun Aug Nov 2010 Apr May U.S. Retail: Order Session Percent April 2008 - April 2011 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0 May Feb Jun Sep Oct Nov Dec Jan Feb Mar 2011 Apr 2008 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr Jun Jul Aug Sep Oct Nov Dec Jan Mar 2010 Apr May Jul Aug U.S. Retail: April 2008 - April 2011 Product Page Views Per Session 4.00 3.50 3.00 2.50 2.00 1.50 1.00 May Jul Sep Oct Dec Jan Feb Mar 2010 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2011 Apr 2008 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr Jun Aug Nov Figure 7. Consumers are carting and ordering more items, but they’re viewing fewer product pages. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 8

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report Conclusion: Savvy retailers will strive to improve product page views per session, using relevant product recommendations and social media techniques, to capitalize on consumer inclinations to cart, order, and spend.New visitor and shopping cart conversion. Retailers are increasingly successful at converting newvisitors, with new visitor conversions hitting a high of 4.9 percent in December 2010, more than doublethe roughly 2 percent typical during 2008. This metric has trended gradually upwards for more than a yearand reflects growing consumer trust of web sites they haven’t dealt with before, and in online retailin general.Shopping cart conversion, however, has been erratic over the past two years, with less than one-third ofcarting sessions ending in conversion. With no sustained gains in this critical metric, retailers can benefitby applying web analytics for a fresh re-examination of their ordering funnel, and retargeting abandonerswith personalized emails and display ads. U.S. Retail: April 2008 - April 2011 New Visitor Conversion Percent 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0 Feb Jun Nov Jan Feb Mar 2008 Apr May Jun May Jul Sep Oct Dec Jan Mar 2010 Apr Jul Aug Sep Oct Dec 2011 Apr Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr Jun Aug Nov May U.S. Retail: April 2008 - April 2011 Shopping Cart Conversion Percent 40.00% 38.00% 36.00% 34.00% 32.00% 30.00% May Jul Sep Oct Feb Mar 2010 Apr May Jun Jul Sep Oct Nov Dec Jan Feb Mar 2011 Apr 2008 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 Apr Jun Aug Nov Dec Jan Aug Figure 8. New visitor conversions are rising gradually, but retailers haven’t been able to make sustained improvement in shopping cart conversions. Conclusion: Erratic and unsustained movement in shopping cart conversion trends suggest the need for retailers to re-examine their carting and ordering processes, using web analytics to identify key drop-off points. Testing and optimization towards improving this key metric can pay off with sizable increases in top-line revenue. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 9

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportSingle-Page ‘Bounce’ Visitors Remain HighThe bounce rate (the percentage of single-page sessions) has remained fairly steady over the past 1½year, rising slightly over that period and hitting a record high of more than 35 percent in December 2010.Despite remaining flat, the bounce rate is up sizably from 22 percent in April 2008. Multi-page sessionsare down in concert, hitting a record low of 65.5 percent in March 2011.Corresponding with the surgical shopping trend, the elevated bounce rate makes clear that discriminatingvisitors are likely to click away if they don’t find content that’s personalized and relevant. It underscores theneed for online retailers to ensure that landing pages reached from a display ad, email promotion, or paidsearch listing are spot-on with what was advertised.Retailers can also combat high bounce rates with personalized recommendations, product reviewsections, videos, and social media, encouraging visitors to click on. In addition, complementing on-sitesearch results with product recommendations helps ensure relevant search page content and can triggeradditional conversions. U.S. Retail: April 2008 - April 2011 Bounce Rate (Single Page Sessions) 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% ’08 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar ’09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar ’10 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar ’11 Apr U.S. Retail: April 2008 - April 2011 Multi-page Session Percent 82.00% 77.00% 72.00% 67.00% 62.00% ’08 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar ’09 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar ’10 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar ’11 Apr Figure 9. The bounce rate hit a record high in Dec. 2010—conversely, multi-page sessions fell to an all-time low. Conclusion: To improve bounce rate performance, retailers need to ensure that landing page content corresponds with what was highlighted in an email promotion and display or paid search ads. They should also test and optimize page content to entice visitors into clicking through to multiple pages. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 10

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportBest PracticesGoing into the holiday season, how can you take advantage of increases in online sales and AOV, whilecombating the decline in consumer attention? Online retailers that excel will relentlessly pursue theseobjectives: • Learn from a customer’s browsing path over an extended period of repeat visits • Use historical behavior data to optimize all online marketing efforts • Deliver highly personalized and relevant customer experiences across all channels • Invest in processes of continuous improvement to create and execute marketing programs that get better and betterThose best practice principles apply to five areas of strategic focus for the holidays and beyond,which we examine in the next section of this report: • Focus on the customer life cycle • Capitalize on the mobile channel • Retarget your browsers and abandoners • Use personalized product recommendations • Cultivate the social media channelFocus on the Customer Life CycleCustomer-centric marketing has been a theme that has resonated for years in traditional channels: print,media, advertising, etc. In the digital landscape, it has more recently come into the spotlight as customersare becoming more discriminating in their online behaviors and are being exposed to more information.According to data gathered in IBM® Coremetrics® Lifecycle, on average it takes a consumer 6.8 digitalinteractions before converting.Whether it’s through display advertising, email, search, customer reviews, mobile or social campaigns,consumers are exposed to numerous digital channels influencing their online purchases and decisionmaking. As a marketer, it’s important not only to be measuring each of these digital channels, but alsocapturing these individual consumer behaviors over time. While a consumer may have clicked through ona paid search campaign and made a purchase, there were likely a number of other activities that ultimatelyled to the conversion.He or she may have clicked through from natural search to gather information, then been exposed toa display ad, then saw customer reviews, then read about a sales promotion on Facebook—all beforeclicking on that one paid search campaign. By understanding this full customer life cycle, marketers canmore clearly define what campaigns, content, and products influence customer life cycle progression andadjust marketing spend appropriately. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 11

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report Natural Display Search Direct Ad Load Paid Email Search Searched Came directly to Responded to Returned via a Came to the for HDTV the site, bought Newsletter TV Display Ad click. site via Natural on Google. a Blu-Ray player. Clearance link. Picked a Product Search, entered Recommen- discount code dation on site. and purchased. Figure 10. Marketers must understand the journey—the complete conversion cycle and all of the key points of influence—in order to appropriately allocate marketing spend.Furthermore, marketers must be aware of where customers are in their customer journey outside ofunderstanding all of those points of influence. First time visitors to a web site may be responding todifferent campaigns through different channels. A first time buyer may respond differently and perhapshave an affinity for certain products or content on the site compared to a repeat buyer. Each of these ‘milestones’ are an important point to help map the customer journey for your web site. Each retailer may have different characteristics as to what should define a milestone: visits, purchases, product reviews,or perhaps social media. Figure 11. In this Coremetrics Lifecycle report example, milestones are mapped based on shopper frequency. Of the 399,311 visitors over the last 400 days, 239,132 were unique visitors while 8,855 were 3x buyers. Furthermore, 9,995 visitors migrated from 1x buyers to 2x buyers. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 12

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportEven though online shopping may differ over the holiday season as gift shopping is more common than personal shopping, these life cycle analytics provide new opportunities for marketers to retargetcustomers and build loyalty.The IBM® Coremetrics® Explore and new Coremetrics Lifecycle solutions offer the tools marketers need to prepare for the holiday 2011 season and beyond. Some techniques include: • Track customer behavior over time. Versus a campaign-centric or page-view centric analysis, beginning to understand individual customer behavior over time will help to develop the broader context and story for how customers engage with your brand. IBM® Coremetrics® LIVE (Lifetime Individual Visitor Experience) Profile™ tracks customers and prospects as they interact with your business online, across multiple ad networks or via email, video, affiliate sites, social media and more, providing a single comprehensive view of each visitor’s behavior over time and across channels. • Define your customer journey. With the customer behavior information in hand, look at what segments or milestones define your customer journey or what your goal is for how you want customers to interact and engage with your brand. With the right solution, you may even be able to look at segments from last year’s online holiday shopping season to see if certain behaviors, patterns or segments stand out that should be tracked this year. Figure 12. Within Coremetrics Lifecycle, standard out-of-the box reports provide pre-made milestones or you can create your own customized milestones. In this figure, milestones have been mapped based on a more high-level customer journey starting from customer awareness evolving to customer advocacy. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 13

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report • Adjust your marketing efforts based on your customer life cycle. Begin to nurture your customers based on where they are in the customer life cycle. As the holiday season approaches, start looking more closely at the content, campaigns and products that are most heavily influencing their behaviors. Figure 13. In this example, Coremetrics Lifecycle shows that the marketing channel that most heavily influenced the 2x buyer segment was an email campaign. Marketers should pay attention to these analyses to adjust investment appropriately—not only for marketing campaigns, but for web site content and product recommendations as well. As the holiday season approaches, begin tracking these types of reports more closely to make real-time decisions and execute campaigns in response to how customers are progressing through the milestones. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 14

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportCapitalize on the Mobile ChannelThe sizable and ever-rising increases in mobile devices as a percentage of site traffic and sales are aclarion call to online retailers. If you’re not building and executing a mobile gameplan, some clever andenterprising competitor is going to leave you in the dust during the 2011 holidays.The increases revealed by Coremetrics Benchmark correspond with other industry research. For example,ABI Research estimates that U.S. mobile commerce (excluding travel) more than doubled in 2010—to$3.4 billion, up from $1.4 billion in 2009. “The short-term growth of mobile online shopping has beennothing short of phenomenal,” ABI Research said.3Yet retailers have been relatively slow to embrace the mobile channel, according to a May 2011 report byForrester Research and Shop.org. Only 48 percent of retailers reported having a mobile-optimized website, and only 35 percent offered an iPhone app, the firms’ survey found.4With the emergence of tablets and smartphones, mobile devices have become an almost physicalextension of the consumer. Shoppers use devices virtually anywhere, anytime, to browse products,compare prices, check availability and store locations, and hunt for deals. High usage during the holidayscan be expected as harried consumers utilize their devices as shopping tools—and then share theirexperiences on social media while sipping a coffee at a shopping mall.Smart retailers aren’t just throwing mobile applications and functionality at the wall and hoping thatsomething sticks. As in other areas of online marketing, success in the mobile realm depends oncontinuous optimization and measurement, enabling you to prioritize your efforts. “Despite increasingactivity and more strategic spending, inconsistent data and analytics will plague mobile marketers hopingto make a business case for testing emerging opportunities,” Forrester Research observed.5A key baseline is which devices and operating platforms are driving the most traffic and sales for your site.Coremetrics Benchmark data from October 2010 through April 2011 shows Apple iPhone in the leadwith Android closing fast; they accounted for 2.9 percent and 2.5 percent of site traffic, respectively,in April 2011. They are followed by iPad, BlackBerry, and LG, as shown in Figure 14. Apple iPhone Android U.S. Retail: Apple iPad Blackberry Mobile Traffic by Device LG 22.00% 20.00% 18.00% 16.00% 14.00% 12.00% Nov Dec Jan Feb Mar Apr Figure 14. iPhone remains the leader for mobile site traffic, but Android is narrowing the gap.3 ABI Research, “Mobile Commerce Sales Explode in United States: Will Top $3.4 Billion in 2010,” news release, December 17, 2010.4 Forrester Research and Shop.Org, “The State Of Retailing Online 2011: Marketing, Social, and Mobile,” May 2011.5 Forrester Research, “2011 US Mobile Marketing Predictions,” January 4, 2011. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 15

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportThe Coremetrics Explore ad hoc reporting solution and other elements of the Coremetrics platform give you the tools you need to capitalize on the mobile opportunity during holiday 2011 and beyond. Sometechniques include: • Optimize the site for mobile usage. Given the high bounce rate and brief time on site of mobile users, retailers need to aggressively hunt down and correct weaknesses in usability and functionality for mobile devices. Coremetrics technology enables you to pinpoint device drop off points in navigation and conversion, which pays off in both the short term and over time by delivering a satisfying user experience that prompts return visits. • Segment and cultivate your mobile audience. Studies have found that mobile users are generally more affluent and savvy; as such, they represent a particularly valuable customer slice. Segment them as mobile users and then by types of device, products they browse and buy, content they view, and their social media interactions. Building this intelligence gives you a foundation to engage these visitors with personalized emails and mobile-specific promotions. • Test and measure mobile marketing tactics. Delivering marketing messages via text or mobile-optimized display ads, using location data for geo-specific promotions, offering mobile coupons and bar coding, and mobile-optimized paid search and email are gaining traction. Mobile marketing is still young—just 34 percent of interactive marketers were planning mobile campaigns, a Forrester study found.6 If closely measured and adjusted, mobile marketing can be a competitive differentiator, particularly during the promotion-happy holiday season. • Understand mobile in a deep, broad context. Measuring the mobile channel is essential to success. It’s not enough to simply track mobile application downloads—their usage must be measured. It’s critical to understand the extent to which mobile is cannibalizing sales from the conventional online channel. Coremetrics’ comprehensive platform enables you to measure mobile not as a silo, but as a component in an overall digital marketing ecosystem to support informed channel and spend decisions. • Benchmark your industry performance. In the fast-moving mobile race, how well you’re performing compared to your competitors is critical in informing your strategies, priorities, and resource allocations. With Coremetrics Benchmark, you can track your key metrics versus your peers in retail as a whole, or in a number of subverticals such as department stores, health and beauty, electronics, and more.6 Forrester Research, “2011 US Mobile Marketing Predictions,” January 4, 2011. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 16

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report Figure 15. Coremetrics Benchmark enables comparison of your site traffic and conversion rates against industry peers.Retarget Your Browsers and AbandonersSpeed is at a premium during the holiday season. If a shopper leaves your site without a purchase,chances are good it’s to do further research through a search engine or to visit a competitor’s site. Yourwindow to re-engage a customer and drive conversion during the holiday season is shorter than ever.Smart marketers aren’t sitting back and hoping that would-be buyers return. Nor are they relyingstrictly on costly paid search campaigns to interact with prospects. They’re retargeting browsers andabandoners with cost-effective personalized email and targeted display ads to prompt a return site visitand conversion. Coremetrics customers are realizing impressive results by retargeting visitors withIBM® Coremetrics® LIVEmail™ and IBM® Coremetrics® AdTarget: • Targeted display ads: wehkamp.nl, the Netherlands’ largest online retailer, is seeing return on investment (ROI) from targeted display ads that is 15 times greater than ROI from generic banners, and click-through rates for targeted ads that are five times greater than generics. • Personalized email: L’OCCITAnE En PROVEnCE has calculated its revenue from email retargeting at $2.84 per email, versus .11 cents for a control group—a 26-fold increase. Its retargeting conversion rate is 2.43 percent compared to .14 percent for personalized retargeting compared to generic emails. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 17

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportSuch evidence of the payback from retargeting comports with broader industry research. For instance, astudy by the Network Advertising Initiative (NAI) of 12 online advertising networks found that behaviorallytargeted ads are considerably more effective than non-targeted run-of-network ads.7 According to NAI,behaviorally targeted ads: • Generated 2.68 times more revenue than non-targeted ads • Resulted in a 6.8 percent conversion rate for ad clickers, versus 2.8 percent for non-targeted adsWhile retargeting’s primary goal is to reacquire departing browsers and abandoners, it also servesto enhance brand presence, particularly among people who have shown interest in your products orservices. Some strategies to keep in mind: • Strive for personalization and clarity. Retargeting dovetails with consumer propensity for surgical shopping. Done right, it cuts through the informational clutter that confronts shoppers to present a personalized offer and clear call to action. For instance, an email to a shopping cart abandoner is likely to be most effective if it highlights the product left in a cart and invites one-click access to conclude the transaction. For product browsers, a targeted display ad can and should illustrate the products browsed, rather than a brand-level message. • Use advanced segmentation. The best emarketers finely slice their clickstream, customer, and campaign data to maximize precision and relevance. Consider using a funnel approach to determine retargeting type and message, segmenting those who visited high-level category pages, product detail pages, or shopping cart pages. A particularly effective segment can be social media users, given their higher rates of conversion and the word-of-mouth value they offer in sharing their experiences with your brand. Mobile users, high-value customers, and dormant registrants are also good candidates for segmentation and retargeting. • Continuously monitor and optimize. The holidays are a dynamic period, with browsing and buying patterns that fluctuate as the weeks go by. Take advantage of the real-time capabilities of the Coremetrics platform to monitor and optimize on the fly. For instance, it’s beneficial to monitor the effectiveness of targeted display ads by frequency, as once a day may be too little and every 15 minutes, too much. It also pays to measure retargeting email by lag time after cart abandonment, time of day, creative and message, effectiveness by audience segment, and other attributes. • Measure unclicked ad impressions. Look beyond click-through and conversion as the only metrics to monitor targeted display ad performance. IBM® Coremetrics® Impression Attribution enables you to measure the “view-through” impact that unclicked display ads have on conversion. By embedding an impression tag in display ads (or other impression-based assets, such as videos or blog posts), Coremetrics allows you to correlate offsite impressions against web site visits, along with subsequent sales, conversions, and other activities.7 Network Advertising Initiative, “The Value of Behavioral Targeting,” March 2010. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 18

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report Figure 16. Coremetrics LIVEmail allows for the simple automation of email marketing to retarget shopping cart abandoners and other high-value segments. “We firmly believe that retargeting is a valuable way for improving your marketing communications. The ability to speak with our customers on a 1-to-1 basis drives immense value back to our business.” Ewald Hoppen, Senior Web Analyst, wehkamp.nl Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 19

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportUse Personalized Product RecommendationsThe holiday season is prime time for personalized product recommendations. This technology enablesyou to meet the personalization and relevance demands of time-pressed shoppers while capitalizingon impulse purchasing and the higher AOV revealed by Coremetrics Benchmark. Typically, productrecommendations can contribute 10 percent or more of total site sales.Powered by self-learning algorithms, IBM® Coremetrics® Intelligent Offer lets you recommend the bestproducts for segments of visitors based on historical and in-session data, search behavior, wisdom ofthe crowds, and customizable rules. It’s a proven way to put in front of shoppers products they mightnot otherwise have known were available while promoting the 1-to-1 experience that discriminatingconsumers appreciate.Automation spares the costly resources that would be required to operate a manual recommendationssolution, while analytics and reporting lets you monitor and optimize product performance, audiencesegmentation, cross-session conversion, and more. Some best practices used by leading marketersinclude: • Use recommendations across the site. Recommendations are effective across virtually every shopping-related page on a web site, from the home page to order confirmation pages. Coremetrics Benchmark data has found that recommendations on product list and product pages often deliver the greatest returns, generating between 7 percent to 9 percent of site sales. Recommendations on search results pages both prompt sales and ensure that results relevant to a search term are displayed, even if an internal search engine delivered so-so results. • Integrate product recommendations with email. Recommendations need not be limited to just the web site. Use recommendations technology in the personalized email you deliver to customers, whether the email is an order confirmation or spotlights new products or discounts of interest to the shopper. Coremetrics Intelligent Offer’s prebuilt integration with leading email service providers lets you seamlessly incorporate recommendations into your communications. • Aggressively test and tune recommendations. A/B or multivariate testing helps ensure that you get the most out of your product recommendations solution. Key elements for testing include products, page placement, creative, colors, text, and more. Real-time reporting gives you instant insight into performance and allows you to adjust on the fly as the holiday season unfolds. Figure 17. Coremetrics Intelligent Offer enables users to create business rules to govern product recommendations in the holiday season. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 20

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report “The results we’ve seen with Intelligent Offer have been really quite impressive—we’re very happy with our return on investment. Intelligent Offer has created an interesting mix of products that people really seem to like.” Will Bender, Web Merchandising Manager, S&S WorldwideCultivate the Social Media ChannelThe social channel is among the most promising for retailers heading into the holiday season. Thoughsocial is relatively small as a percentage of site traffic and sales, the substantially higher conversion rateof social users testifies to the effectiveness of cultivating social fans and followers, and the use ofsocial-exclusive promotions.Enterprising retailers are looking to capitalize on the trend through the holidays, with more offers aimed at social users, such as Facebook coupons or free shipping advertised only via a Twitter tweet. A continuedfocus on building fans and followers will pay off with incremental revenue in the short term, and overa longer span improve customer loyalty and word-of-mouth evangelism among friends and friends offriends.While retailers are investing in social media, the majority have difficulties calculating the ROI from theirinvestments. This introduces uncertainty into which techniques are most effective for which social mediaand can lead to misinformed decisions on marketing mix and budget allocation. Best practices to makethe most of social media marketing include: • Focus on ROI. Web analytics enables you to track direct click-through and conversion. But to fully understand social media ROI, marketers need to take into account the indirect effect of social media exposure and unclicked media impressions. Coremetrics Impression Attribution lets you incorporate this view-through traffic into marketing attribution models, providing a clearer picture of how effective your social media efforts are. • Aggressively retarget social users. Segments of social media users who browsed your site or carted but abandoned an item are ideal for retargeting via personalized email or display ads. Their higher conversion rates and expressed interest in your brand suggests a likelihood of positive response to post-visit marketing. • Monitor brand and social conversations. In addition to pure ROI numbers, it’s important to know what people are saying about your brand online. Using feeds from Facebook and Twitter, IBM® Coremetrics® Social Analytics enables you to quickly and simply plug into the social conversation. Finding and engaging with brand champions on Facebook and Twitter is a great way to boost engagement and loyalty among your most vocal customers. • Determine your best social media bet. Not all social media marketing is created equal. To optimize performance, it’s important to analyze click-through, page views, conversion, and other metrics by social media channel, be it Facebook, Twitter, YouTube, or microsites. Coremetrics Social Analytics enables you to compare selected business-impacting metrics, based on both click-through and view-through, across various social media, as shown in Figure 18. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 21

IBM Coremetrics 4th Annual Online Retail Holiday Readiness Report Figure 18. Coremetrics Social Analytics enables analysis of business-impacting metrics across various social media. “Without the Coremetrics data, we would have seen Facebook as only obliquely connected with top-line enrollment and bottom-line revenue goals. Because of the data, we can see that Facebook is a significant and subtly sophisticated new front in the development of markets for the university.” Senior Director of Strategic Marketing, Seton Hall UniversityMake the Holiday Season ProfitableBig opportunities await this holiday season, along with big challenges. Now is the time for retailersto rethink their web analytics and online marketing strategies, look critically for weaknesses, and striveto meet consumers’ increasing demand for personalization and relevance by leveraging rich storesof historical and in-session customer behavior data.As this report makes clear, online retailers will also benefit by redoubling efforts to engage important andgrowing segments of mobile device and social media users, and recognizing that clever competitors areright now brainstorming over how they can capture a chunk of your holiday business. We hope this guidehas provided actionable insights that can help you maximize your holiday returns and lay the foundationfor a profitable and prosperous 2012! Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 22

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportCoremetrics for eCommerceCoremetrics, an IBM Company, offers a set of solutions suited specifically for the online retail industry.Through the fusion of customer profiles, web analytics and digital marketing automation, Coremetricsempowers marketers to turn site visitors into repeat customers and loyal advocates by orchestratinga compelling experience throughout each customer’s digital life cycle. To achieve this, Coremetricstracks customers and prospects as they interact with a business’ online presence providing marketerswith a comprehensive view into how consumers are interacting with their brands online over time andacross channels. This unique insight is used to automate real-time personalized recommendations,email targeting, display ad targeting across leading ad networks, and search engine bid management—delivered to customers through any digital vehicle including social, mobile, and web.Through a simple integration with other systems of record such as CRM, advertising, and demographics,Coremetrics enables marketers to further enhance not only their online marketing channels, but offlinechannels as well. The Coremetrics Digital Marketing Optimization Platform includes the following solutions:Coremetrics Reporting and AnalysisCoremetrics Web Analytics is our base analytics solution, enabling marketers to track website activityand cross-channel campaign performance. Coremetrics Explore is an ad hoc reporting solution that provides a complete picture of visitor and customer behavior, enabling marketers to automatically executecampaigns, drill down into granular detail, and create precise and actionable customer segments.Coremetrics Impression Attribution allows marketers to understand how unclicked impressions (displayads, videos, social media presences, etc.) affect behaviors and conversions.Coremetrics Intelligent OfferThe industry’s most sophisticated recommendation engine automatically generates personalized productrecommendations by leveraging the rich, detailed customer information in LIVE Profiles, as well as in-session and “wisdom of the crowds” data. Seamless integration with Coremetrics LIVEmail lets you easily target browsers, abandoners, and buyers with recommendations in emails.Coremetrics BenchmarkCoremetrics Benchmark captures online marketing results and commerce data from more than500 contributing U.S. retailers. The industry’s only peer-level benchmarking solution enablesCoremetrics customers to measure performance against the competition (in anonymized, aggregatedform). Coremetrics Benchmark comes standard with Coremetrics Web Analytics at no additional cost.Coremetrics LifecycleCoremetrics Lifecycle provides visibility into unique, event-driven customer segments that equip marketerswith the most effective tools to cultivate high-value customers. Marketers can track and understand howcustomers progress through long-term conversion life cycles. A life cycle is characterized by milestonesranging for example from first-time visitors to repeat buyers or social advocates.Coremetrics AdTargetCoremetrics AdTarget is a data syndication platform and online marketing application that enablestargeting and personalization of display advertising. Customized for online retailers, it leverages granularvisitor activity captured by Coremetrics to deliver highly relevant display ads that increase visitorreacquisition, power cross-sell and up-sell, and promote customer engagement. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 23

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportCoremetrics LIVEmailCoremetrics LIVEmail solution gives marketers the flexibility to automatically deliver emails to customers based on specified scenarios. For instance, Coremetrics LIVEmail may be configured to generate personalized emails to individuals who abandoned a shopping cart, or to send offers to select customersegments. It features prebuilt best practice metrics for online retailers and integrates with email serviceproviders.Coremetrics SearchIBM® Coremetrics® Search is a pay per-click (PPC) management application that improves top-linebusiness performance, reduces operational costs, and enables data-driven optimization of searchadvertising initiatives. It makes it easy for online retail marketers to identify top-performing keywords,automate and fine-tune keyword bidding, and integrate with leading search providers.Coremetrics Social AnalyticsCoremetrics Social Analytics enables marketers to treat social media as another marketing channel andmeasure ROI and engagement accordingly. Coremetrics Social Analytics provides online marketers witha centralized console for analyzing social media channels and campaigns. As part of the Coremetricsplatform, it allows users to track social channels alongside other online marketing channels to helpunderstand the performance (ROI) of campaigns. Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. SPECIAL REPORT 24

IBM Coremetrics 4th Annual Online Retail Holiday Readiness ReportAbout Coremetrics, an IBM CompanyCoremetrics, an IBM Company, a leading provider of web analytics and marketing optimization solutionshelps businesses relentlessly optimize their marketing programs to make the best offer, every time,anywhere, automatically. More than 2,100 online brands globally use Coremetrics Software as a Service(SaaS) to optimize their online marketing. Coremetrics integrated marketing optimization solutionsinclude real-time personalized recommendations, email targeting, display ad targeting across leading adnetworks, and search engine bid management. The company’s solutions are delivered on the only onlineanalytics platform designed to anticipate the needs of every customer, automate marketing decisions inreal time, and syndicate information across all customer channels.For Additional InformationTo learn more about Coremetrics, visit www.coremetrics.com or call 866-493-2673.Coremetrics has strongly supported online privacy since its inception.To learn more, visit http://www.coremetrics.com/company/privacy.php Corporate Headquarters Coremetrics Europe Ltd. www.Coremetrics.com 1840 Gateway Drive Lotus Park San Mateo, CA 94404 The Causeway Tel: 866.493.2673 Staines Middlesex TW18 3AG U.K. Tel: + 44 (0)8706 006123 Copyright ©2011 Coremetrics, an IBM Company. All Rights Reserved. 5307

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