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ROI: Mad to Measure

Calculating the return on E-business investments isn't easy, but that doesn't stop companies from trying.

According to Sandy Carter, worldwide vice president for WebSphere marketing and channel execution at IBM, Mikasa’s insistence on a close analysis of return on investment is part of a trend. “More and more prospective etailers are coming to us insisting upon clearly defined ROI metrics before undertaking a B2C or B2B project,” she says. “In today’s economic downturn, they’re finding they need to be able to justify the business results.”

So far, the metrics match expectations. “The new site enhances productivity,” says Rubin. “Previously, we would receive an online order and then have to manually place the order into our system here, and then we’d have to run the credit card through. Now it goes straight from the Web server to our back-end ERP system, and the credit card is automatically authorized. The only time there is ever any manual intervention is when there are exceptions [for example, if there's a problem with the credit card].”

Carter says IBM works with customers to create and manage structures for measuring the effectiveness of an Internet channel, based on its own experience building its IBM.com channel, through which it sells billions annually. “When we launched the Web site in 1993, we established three key metrics to measure effectiveness — cost savings, shorter timeframes to market, and improved customer service and loyalty,” she explains.

Big Blue continues to measure the effectiveness of the strategy. “For example, we recently learned through research we conducted with J.C. Penney that if a retailer only has a bricks-and- mortar presence, the average customer would spend about $100 a year,” says Carter. “But if the same retailer had a multiple-channel presence — retail, etail, and catalog — the customer spends nine times as much.”

However, that doesn’t mean every brick-and-click business will have the same experience, as Mikasa learned through its earlier etail experience. The previous B2C site wasn’t integrated into the company’s ERP system, it lacked a search function, and its product menu was more snack than dinner. The site also didn’t convey the company’s high-end image. “Mikasa is all about elegance,” says Carter. “We wanted to capture that in the look and feel of the site so that customers could not discern the difference between an online experience and shopping at one of their stores.”

Mikasa measures revenues, customer loyalty, and cost-cutting monthly. While its initial etail effort flopped, it does provide a useful benchmark. For example, the company can compare how quickly customers can search for a particular item on its new site compared with how long it took to find an item on its old site, which lacked a search engine. “If your online catalog is not easy to search, you decrease customer loyalty to the site,” explains Carter. “The number one reason people leave a Web site is poor navigation.”

Erik Redmond, Mikasa’s Internet project manager, notes another customer benefit. “A customer who is in one or our 165 stores may want to purchase a particular pattern that the store may not have,” he explains. “Since each of our stores now has Web access, they can scan the digital catalog for the item and, if they prefer, buy it then and there.”


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