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Internet Retailer

August 2007

"Let’s talk"

Once seen as a customer service option, live chat has become a sales tool

By Don Davis

When online retailers first adopted live chat, many saw it as a less expensive way to respond to customers’ questions than the telephone or e-mail. But increasingly e-retailers are discovering that using live assistance techniques to answer a customer’s question at just the right moment can mean the difference between a sale and an abandoned shopping cart—and can lead the consumer to spend more.

With that in mind, more e-retailers are putting a customer service representative a click away. That click in most cases initiates a text chat session, like an instant message exchange; in some cases, the customer is prompted to type in a phone number so an agent can call.

These live chat and click-to-call services can increase interactions with customers by up to 20%, JupiterResearch estimates, and involve other costs. But the added revenue far outweighs the costs, says Sam Bruni, director of customer experience at skiing and outdoor gear retailer Backcountry.com.

Up the conversions

Live chat produces a conversion rate of 15-20% at Backcountry, roughly 10 times the 1.7-2.0% buy rate for all customers, Bruni reports. It also produces higher orders. In one week this spring customers who chatted ordered $224 on average, versus $135 for the site overall. “We’ve taken what would be viewed as a consumption center—customer service—and turned it into a profit center,” Bruni says.

Backcountry is not unique—56% of retailers that used live chat said they found it a useful tool, according to the State of Retailing Online 2006 survey by research and consulting firm Forrester Research and retailers organization Shop.org. But live chat is still relatively new—and click to call even newer—and many e-retailers are still feeling their way, trying to decide, for instance, whether to engage consumers in chat or wait for them to ask for help.

Only a minority of e-retailers offer live assistance. An annual survey of the top 100 online retailers by consultants The E-Tailing Group found 29 offering live chat last year vs. 27 the year before. The survey asked about click to call for the first time in 2006 and found only three sites using it.

But vendors say demand is building. About 40% of the small and midsized businesses signing up with call center operator 24-7 INtouch request live chat today, 10 times the rate of a few years ago, says Greg Fettes, president and CEO. 80% of those businesses are retailers. Live chat accounted for 1% of the company’s revenue three years ago, 5% last year and should reach 10% this year, Fettes says.

Many retailers initially offered live chat only on customer service and help pages, says analyst Zachary McGeary of research and consulting firm JupiterResearch. They were trying to reduce the cost of answering customers’ questions, figuring an agent who could handle only one phone call at a time could respond to several common questions simultaneously via chat. But McGeary says self-service features, such as Frequently Asked Questions pages, have proven more cost effective for handling routine queries.

Today, he finds, more retailers use live assistance to boost sales, especially of pricey or complex items that consumers weigh carefully. “For the most part, when companies are looking to deploy chat, they’re not looking at contact deflection, they’re looking at targeting consumers when revenue is at stake,” McGeary says.

Agents can boost sales at the moment of purchase by suggesting add-ons, such as a memory card with a digital camera or a carrying case with a laptop, says Kevin Kohn, executive vice president of marketing at live chat provider LivePerson Inc. He says LivePerson clients typically report average orders go up 25-30% when a customer chats.

HP Home & Home Office Store, the e-commerce site of computer and printer maker Hewlett-Packard Co., illustrates the shift from using chat for customer service to sales. HP initially put chat buttons only on customer service pages, but found consumers asking sales-related questions. The company upgraded to a platform from Talisma Corp. last year and now offers on every page four assistance options: live chat, click to call, a toll-free number and an e-mail address.

HP says sales are up, especially from click to call, but would not provide details. Other retailers also report a positive impact on sales. Computer equipment retailer CompUSA says those who chat are 10 times more likely to buy than those who don’t, and that their average order is 50% to 80% higher. PlumberSurplus.com says chatters are twice as likely to buy, although the plumbing supplies retailer does not find an increase in average order size.

Amazon’s choice

But results and practices vary. Headsets.com, which sells phone headsets and accessories mainly to businesses, uses live chat to answer questions, not to sell. “For most customers it’s not a convenient ordering mechanism,” says Mike Faith, CEO. “What it’s good for is asking questions and getting information back.”

The top online retailer Amazon.com, says live chat was not well received by customers in a test a few years ago. Click to call is a different story. Amazon has replaced the toll-free number on its site with a click-to-call service from eStara, a unit of e-commerce platform provider Art Technology Group Inc.

The reason? The agent who calls back already has the customer’s account information on screen—the customer has to sign in to get assistance—and knows what page the customer was viewing, information the agent would not have if the customer called a toll-free number, says an Amazon spokeswoman.

Consumers seem to like chat. An E-Tailing Group survey found 72% of online shoppers considered live chat either “very” or “most” important when buying gifts online.

And an online survey last fall of consumers who had been in touch with a contact center in the past year by Genesys USA found 31% preferred live chat to speaking on the phone. Among those 18 to 39 years old, that went up to 43%, suggesting chat’s appeal for consumers accustomed to instant messaging and text messaging on cell phones.

What it costs

The cost of live chat depends on how many agents use it and who hosts the service. Jupiter’s McGeary estimates a hosted chat service will cost about $70 per agent monthly for basic text chat, and about $100 for proactive chat that reaches out to consumers. An in-house operation will pay a one-time software license fee of about $1,250 per seat, going up to $1,500 for proactive chat, plus about 18% per year in maintenance fees.

Vermont Teddy Bear Co. has live chat bundled with its customer-facing e-mail service from InstantService. Live chat costs no more than e-mail in slower months when the gift retailer does not use its full allotment of customer response units, says Chris Powell, call center manager. In busier months, there is an additional charge per chat, which Powell did not disclose.

An extra cost of proactive chat is the creation of business rules for when to offer a chat, notes Fettes of 24-7 INtouch, which provides chat through agreements with chat specialists InstantService and LivePerson. That process can cost $10,000 to $20,000, including a 90-day test; he says it makes sense only for online retail sites that get 250,000 visitors or more a month. Fettes is exploring setting up a chat facility in the Caribbean where his costs would be halved compared to his three Canadian centers.

McGeary says retailers can expect to pay about $16 per hour for workers with the writing ability to handle text chat, compared with $12-$13 for a typical agent. In order to make sure a candidate can handle live chat, Bruni says Backcountry puts a job applicant into a separate room and conducts part of the interview via text chat.

The duration of each chat affects its cost. CompUSA figures a typical chat lasts three to five minutes, but that an agent is only typing for 30 to 45 seconds. E-Tailing Group says the average chat lasts just over eight minutes.

While some retailers offer live assistance only during business hours, CompUSA typically offers it 70 hours a week, upping that to 90 hours during promotional periods. CompUSA also is unusual in that it makes the chat button more visible on pages where it figures to have the most impact; the button also becomes more visible when a visitor’s behavior suggests a chat might help lead to a sale.

May I intrude?

Proactive chat remains controversial. CompUSA and Vermont Teddy Bear, for instance, do not invite visitors to chat, fearing that would seem intrusive.

But Bruni says Backcountry has had success with offering chats to customers who act in certain ways, such as repeatedly hitting the forward and back buttons on the browser or going to an FAQ page. To minimize irritation, Bruni says a customer who declines a chat will not be asked again for the next 24 hours. He says 6% of those invited accept the chat; Jupiter says 15% is typical in retail.

PlumberSurplus.com, which recently began using proactive chat, encourages agents to engage visitors browsing in categories that the agents know well. For instance, a specialist in tankless water heaters might propose a chat to someone on that page. About one in five customers accept chat invitations, says Joshua Mauldin, customer service manager.

Mauldin says live chat is an effective way to send a customer information, such as an informational video, or, after getting the customer’s permission, to take control of the shopper’s computer to lead the visitor directly to a page. “It makes for a better web experience than a phone call,” Mauldin says.

PlumberSurplus.com says sales during chats have gone up since its chat vendor, LivePerson, added the HackerSafe icon to its chat boxes, signifying that exchanges are secure. Mauldin says three times more customers now provide credit card numbers during a live chat to complete transactions.

Most retailers say agents can handle three or four chats at a time. Faith of Headsets.com says he likes agents to engage in only one chat at a time to keep up service quality, but that they can handle up to six in a pinch.

Really live chat

Backcountry.com avoids using canned responses, because Bruni believes consumers come to the site looking for people with real expertise in products like skis and kayaks. But Al Hurlebaus, managing director of marketing and advertising, CompUSA, says 70% of the site’s 3,000 chats a month deal with common questions such as site navigation and promotions that can be answered with standard responses. That’s true for about half of queries at Vermont Teddy Bear.

Retailers should limit use of canned responses as consumers choose live chat so they can interact with a person, says Jennifer Bailey, a principal in web site usability consulting firm Red Spade Inc. Bailey also recommends using different colors for the text entered by the agent and consumer, and enabling consumers to print out transcripts of chat sessions.

Her firm’s audits typically show scores in the low 60s on a scale of 100 for live chat services, “which means there’s plenty of room for improvement,” Bailey says.

Given the sales lift some retailers report, getting live assistance right could be well worth the effort.

Susan’s not real, but the sales are

Gourmet Station, a web-only food retailer, can’t afford to pay human beings to chat with customers, says Donna Lynes-Miller, president. But she says an automated program she calls Susan is helping save sales.

When a visitor abandons a shopping cart, a chat window pops up with text that begins: “Susan Says: Hey wait! Please don’t go. Just this once we’d like to offer you an instant $10 savings discount off on shipping!” The customer is given a promotional code and invited to click to get the discount.

The customer also can continue the chat, and language-recognition technology from UpSellit.com Inc. is designed to recognize the nature of the question and provide an appropriate, preprogrammed answer.

Lynes-Miller says Susan can’t answer complex questions, such as what’s the best sauce to serve with salmon. But the discount offer often is enough. She says Susan saved 10.3% of transactions from August to December last year, and has had a monthly success rate of between 11% and 21% this year.

UpSellit only gets paid for successful sales, says Greg Longaker, director of business development. He says the fee ranges from 8% to 15% of the sale, depending on the retailer’s profit margin.

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