Online Behavioral Tracking

In the old economy, marketers pitched products based on past data-buying habits and demographics collected by mule mail, often weeks or months old. But in the Internet economy, anything in marketing is possible – even knowing what consumers want before they do. “The business model of the past was make and sell,” notes David Ross, e-commerce manager at IBM. “Now, instead of make and sell, it’s sense and respond.”

IBM is one of many companies tapping into what many believe is the next big step in target marketing — online behavioral tracking. Tracking’s goal is to know so much about consumers’ interests and preferences that every product for which they see a banner ad, email, or sales pitch will be one they really, really want to buy. “It’s a pretty exciting future,” says Bill Daniel, senior vice president of products at Vignette, an e-business application provider and maker of tracking software that allows retailers to target customers. How exciting? “It goes to infinity,” he purrs.

Infinity, predictably enough, is a long way off, but that hasn’t stopped marketers from salivating. Vignette is one of a few companies (along with net.Genesis and Net Perceptions, among others) that offers “collaborative filtering” software. The software can compile purchasing information on lots of customers, pool them into like-minded groups, and then use the preferences of some to predict the buying habits of others.

For example, say two people who have never met buy a few of the same CDs over time. Would it stand to reason that they might have similar musical tastes? Collaborative filtering bets a marketer can predict that if one buyer likes a particular CD, then the other will like it as well. The obvious plus for marketers is that they have the sudden ability to make dead-on sales recommendations in real time.

Multiply the principle by millions of consumers, and the prospects become compelling. “This is a boon for marketers,” says Gary Arlen, president of Bethesda, Md.-based Arlen Communications. “The old days of up-selling was pretty much about what sales clerks needed to push. Now, marketers can start making guesses on single data points. This is all about focus, and the Web enables it.”

Target marketing and segmentation is as old as direct mail, but the Internet allows marketers to spread data widely and seamlessly. And while direct mail requires time to tally information and target products to consumers in future mailings, cyberspace is a real-time phenomenon, allowing finely tuned up-selling to occur right at the point of sale. In a virtual world, where “driving” to the next retail store is as easy as clicking a mouse, such flexibility has become vital. “Not only do your sales increase, but loyalty increases as well,” says Ken Stockman, vice president and general manager of e-commerce for iGo.com, an online mobile technology outfitter geared to business travelers.