Behavioural targeting: Smart navigation

But OBT goes much further than this. Take, for example, Amazon which builds up a profile of users and then offers recommendations based on that knowledge. Even this, however, is small fry compared with some of the latest developments in the technology, which has been ranked as the number-one area of planned marketing technology investment for 2007, according to Forrester Research.

Omniture, which specialises in online business optimisation and boasts 2,000 clients including eBay and AOL, is one company looking to benefit from this growth. Earlier this year, it bought UK-based Touch Clarity, one of the biggest players in automated online behavioural targeting, in a deal worth £30m.

Touch Clarity's technology combines real-time predictive modelling, data-mining and self-learning software to deliver relevant content and marketing offers to customers based on their online behaviour. This means that a company such as Lastminute.com, for example, could increase sales on its website by 200 per cent by offering targeted messages to users based on hundreds of different variables (see case study, page 32).

Neil Morgan, vice president, marketing EMEA at Omniture, is in no doubt about the growing importance of behavioural targeting. "The big jump in the next five years is going to be automated online optimisation," he says. "Web analytics is exciting and has been growing at an impressive rate, but marketers don't get out of bed and say 'we need web analytics'. They need to increase revenue, or subscriptions or the number of people looking at their ads, by collecting the data and then doing something with it."

The mobile market can make some bold assertions about maximising online behavioural targeting. Richard Marshall, founder and chief executive of Rapid Mobile, explains: "as someone is looking at their phone and waiting for a WAP page to download, a well-designed message can appear that is bang on with the content of the site they are browsing, as well as their age, gender, postcode and exact location in real time."

Companies need to get much smarter about the targeting of their online activity, going beyond the usual demographic considerations to analyse users' declared and actual site behaviour. After all, this is an art direct marketers have been honing for many years.

Charles Ping, head of customer-relationship management at Guardian Newspapers, points out that companies such as Tesco, with its Clubcard activity, and First Direct are well versed in the techniques of behavioural targeting in an offline environment. "Fifteen years ago First Direct would cross- and up-sell products to customers who called its contact centre based on predictive algorithms that sat in the background," he says.

There is nothing new about behavioural targeting - but the challenges of replicating this process in a real-time online environment are considerable. First, there is the sheer quantity of data to be sifted through. Most of the products in this area build up individual, anonymous visitor profiles and then use predictive modelling to target customers with the most relevant product. This process involves the analysis of multiple data sets including search engine criteria, transactional data, onsite clickstream behaviour and any offline data sets that might be relevant. In short, the simple delivery of a relevant message can hide a complex process.

Mailtrack's head of sales and marketing Ray Welsh says to make the most out of data gleaned online, marketers need to know how to put it to good use. The key to success is not only understanding what stage in the buying process a prospect is in, but when a prospect moves from one stage to another. When these trigger points are acted on swiftly and appropriately, they greatly increase marketing effectiveness.

It's little wonder that some companies are approaching this area with caution. "We're starting to use online behavioural targeting, but it's early days really," says Tom Tweddell, head of direct marketing at Avis Europe. "I'm just getting up to speed and lack of experience seems to be a big issue - for agencies as much as brands - because so much of the technology is new."

Depending on how competitive the sector is that a company operates in, the more likely it is to be experimenting with OBT. If the fight for customers is tough, then businesses have to become more intelligent in their targeting. The mobile phone sector is a good example of this. "There has been a decrease in conversion rates, contract rates have risen so people are tied in for longer and the rate of customer acquisition is falling," says Patrick Rona, head of digital at Craik Jones Watson Mitchell Voelkel. "There isn't necessarily any more inventory to buy, so the way forward has to be smarter and more targeted."

The agency worked with mobile operator Orange up until June and last year ran a successful test where different product offers were triggered on its website based on behavioural factors such as the products and services users had previously looked at.

"This market is highly offer driven, so getting the right offer to the right person at the right time becomes even more important. And it pays off," adds Rona, pointing to the fact that Orange saw conversion rates increase by more than 20 per cent during the test period.

This approach certainly seems to work, but it's not necessarily for everyone. Speaking at the Omniture London summit held earlier this year, Paul Phillips, founder of Touch Clarity, advised that online businesses need to have reached a level of maturity before they embark on behavioural targeting. The first level is usability - ensuring the customer experience on a company's website is fully optimised. The second is the use of web analytics. "If you haven't done those two things, then behavioural targeting is probably a jump too far," he said.

As well as online sophistication, companies also need to have a specific cost-per-acquisition business model before going down this route, says Paul Cox, director of commercial services at Mike Colling and Company. "If you are a business looking for a high volume of contacts at a cheap cost-per-contact, then it's not the way to go. The cost-per-thousand is high. If, however, you have a high-ticket item - such as telephony in the contract market, automotive or financial services - and can afford to pay a higher cost-per-contact, then it's definitely the place to go," he says.

Of course, OBT extends beyond the environment of a company's website. Multi-channel activity - where behaviour in one channel automatically triggers an appropriate communication via another channel - is the next phase of behavioural marketing. This approach is most apparent in the coming together of online and email activity, where there are obvious synergies.

E-Dialog, specialist in email marketing, has had plenty of experience in this area, most recently with Boots which uses onsite behavioural data to drive email communications. "More companies are using online data to enhance the communications they deliver," says Simone Barratt, managing director at e-Dialog. "This is being driven by the increased ROI and loyalty that comes out of sending the right message to the right person at the right time."

Event-triggered email can be particularly effective as gambling giant William Hill knows all too well. It had the challenge of converting visitors who had registered on the website into account depositors. RedEye, William Hill's eCRM partner, created a rules-based segment for these hot prospects and set up a four-stage email communication programme. Customers who received the emails proved to be five times more likely to make a deposit than those who received no communication and 1.2 per cent of all initial deposits were generated as a direct result of the programme.

Another example of online behavioural data being transformed into an actionable email strategy is AA Car Insurance. Using RedEye technology, the AA identified users who registered online for a car insurance quote, but didn't purchase its products. The following day all those who had given permission were sent an individually targeted email reminding them of the online discount and including a link back to the site, so they could retrieve their quote details. Those who received the email proved to be 78 per cent more likely to return to the site and buy insurance online.

"Many back-end systems only look at transactional data," says Jonathan Kay, managing director of RedEye. "But most people's online navigation involves research that doesn't necessarily translate into a purchase. That's important data for a company to know and act on."

He adds that RedEye can look at a customer's online transactional behaviour, including products they almost purchased, their navigation and browsing history and campaign responsiveness to devise an appropriate offer.

According to Liam Reynolds, head of data planning at Personal, cookies are essential for real-time, targeted online communications. If used correctly, they can trigger communications that are much more relevant and timely and are therefore far less intrusive than a 'pop up'.

"The challenge companies face is to build trust-based relationships with their clients," he says. "This will ensure that customers will allow companies to collect data of a personal nature, on the understanding that it won't be taken out of context or misused."

The good news is that this relatively new area of online marketing is gaining momentum fast. Those companies that only know about transacting customers could soon be in the dark ages.

POWER POINTS

- Online behaviour technology is the top priority for planned marketing investment for 2007

- OBT allows firms to send customers messages in real-time based on their online activity

- The mobile phone sector is already maximising OBT

CASE STUDY

- Behavioural profiles key to Lastminute success

Client: Lastminute.com

Supplier: Touch Clarity

Brief: To optimise its online revenue through improved targeting

Lastminute.com has built a successful online business by selling a large variety of travel and entertainment products from flights and hotel rooms to theatre tickets and gifts.

The challenge for Lastminute.com was how to optimise its online revenue through improved targeting of its offers and content.

Working with Touch Clarity, the first step was to create anonymous visitor behavioural profiles by bringing together multiple sources of data. This includes the time and day, the referring URL, the search term used to reach the site, the frequency of previous visits and history of the individual's click-stream behaviour.

When a user visited the site this ensured that the most relevant and engaging content could be served to them on the homepage. Following the success of the initial pilot project - which increased sales by more than 200 per cent on the targeted areas - the solution has been extended beyond the home page to other areas of the website.

"Two hundred of Lasminute.com's people are using Omniture Touch Clarity on a daily basis to see how every campaign and promotion is performing, what's selling on a real-time basis and what's converting," says Neil Morgan vice president marketing EMEA at Omniture.

Lastminute.com can now interrogate its customer base in a way that wasn't previously possibly. For example, it knows the different online behaviour for a customer searching for a city-break arriving via a pay-per-click campaign on Google, compared with a customer who has come from a partner site and is searching for a dinner and theatre package.

"As we learn more about our customers, we can improve our service, make the site more relevant for each visitor and engage them for longer and increase conversions," says Marko Balabanovic, director of personalisation at Lastminute.com. CLIENT QUIZ

THE CHALLENGE OF ONLINE BEHAVIOURAL TARGETING

LOUISE BROWN, HEAD OF OPERATIONS FOR NEW MEDIA, CHANNEL 4

- What's your top tip for using online behavioural targeting?

Use the technology to understand where users are coming from into your site. The multiplicity of entry points is incredible.

- What are the challenges involved?

Behavioural targeting gets better the more data you have and the more diverse your users are. If you offer different versions of the home page to users, it takes time to understand how that's affecting behaviour. Operationally, there may be more work upfront, but long-term benefits are worth it.

- Is take-up likely to grow?

Adoption of OBT has to grow because of the scale and diversity of users. Visitors have different needs. It's important to know the people we want to address and with what message.

CHARLES PING, HEAD OF CUSTOMER RELATIONSHIP MANAGEMENT, GUARDIAN NEWSPAPER

- What's your top tip for using online behavioural targeting?

It's all about segmentation and modelling. If you have a lot of data you need to decide what the motivating factors are. This is no different to direct marketing, except it's in real time.

- What are the challenges involved?

Integrating web data and all the other data an organisation holds about an individual.

- Is take-up likely to grow?

Take up will, undoubtedly, grow because everyone wants to improve the performance of the long tail of their web traffic.

KEVIN ADAMS, HEAD OF IN LIFE AND PERFORMANCE MONITORING AND REPORTING, bt.com

- What's your top tip for using online behavioural targeting?

You have to have an integrated behavioural strategy in place. Proper behavioural analysis requires companies to understand voice transactions as much as web transactions.

- What are the challenges involved?

If it was easy, we would all be doing it, but integrating the online and offline data worlds is not easy. Both use different technologies and kitting those together can be challenging.

- Is take-up likely to grow?

We are seeing online revenues grow exponentially year-on-year. This will only continue as broadband penetration gets deeper into the UK.