For all of its advantages, online retailing still misses one of most persuasive sales tools used in traditional retailing: a sales clerk who says hello and offers help.
Robert LoCascio wants to change that. LoCascio is the CEO of LivePerson, a company that developed and sells a chat tool that allows live operators to interact with Web shoppers in real time. LivePerson has provided chat tools for more than 3,400 online retailers, including heavyweights such as EarthLink, QVC and, just recently, Ebay.
Although LoCascio is a tireless evangelist for the benefits of chat, the success of LivePerson does suggest that instant messaging (IM) is finding its place in e-commerce. The company's servers currently handle about 1.3 million chat sessions per month, LoCascio says, noting this figure has grown from last year's rate of approximately 850,000 monthly chats.
And NewChannel, a chat provider LivePerson recently acquired, developed chat tools for well-trafficked sites like Verizon and AT&T.
Microsoft's bCentral.com recently began including its own chat feature to better promote itself to browsing customers. According to one report, the bCentral site now handles about 200 chats a day; the site offers a chat window to users that click on its deeper links, which usually indicates greater interest.
Yet even LoCascio admits that today's site owners view chat differently than in years past. He says that in the 1999 boom, "We signed up about 800 dot-coms, and by 2001 we lost about 800 of them." In contrast to these earlier adopters, who added bells and whistles without question, LoCascio claims the primary motivation of today's site owners for adding chat is to cut costs and expand revenues.
Two Forms of Chat
LivePerson sells both passive and proactive chat products. Its passive chat product is mainly a support tool; users must click on it to initiate chat. This support tool, which LoCascio estimates is used by 60 to70 percent of the company's clients, offers users a secure link to access product information and also provides post-sales support.
In contrast, LivePerson's proactive chat product enables real time site monitoring. It allows site operators to watch as shoppers enter, indicating each user's IP address, browser type, and status as new or existing customer. The site can track shoppers as they move page by page, monitoring the products they view and shopping cart activity. Site operators know if users came from a specific marketing campaign.
After monitoring shoppers, operators approach them via a pop up window and offer assistance. If a shopper chooses to respond, operators can push pages into a user's browser. "If someone says 'I'm looking for these red pants,' the operator can show them the red pants, then take them through buying them," LoCascio says. Operators also suggest additional purchases.
LoCascio says about five percent of shoppers respond to the proactive chat pop-up window; other retailers report a 3.5 percent response rate. He claims that the sales conversion rate is significantly higher among chatters: 30 percent or greater. Some retailers report a higher average sale among chatters.
Data Mining
LivePerson saves chat transcripts, crunches the data and creates a report for clients. "People think it's a chat tool, and while 50 percent is the ability to interact with customers, the other 50 percent is the data mining tools," LoCascio says.
The report provides a tally of that month's traffic patterns, compares chatters with non-chatters, and reveals which operators drive the most sales. LoCascio says many of LivePerson's clients make changes based on this data, like tweaking site navigation and simplifying registration.
ASP Model
LivePerson uses an application service provider (ASP) model. The company's clients insert 10 lines of HTML on their Web site, which presents site users with a click-to-chat button. When Web surfers click on this button they connect with LivePerson's servers; on the other end, site operators also log on to LivePerson's servers.
LivePerson charges clients $10,000 a month on average, in addition to a one-time $5,000 set-up fee, says LoCascio. This package provides them with the capacity to use 20 live operators simultaneously, which LivePerson will train, either by flying out a LivePerson rep or through an online training course.
Chat vs. Phone
LoCascio claims that chat is considerably cheaper than phone for sales and support. "For one of our large clients, a phone call costs an average of $6.00, but their average chat is $2.40."
Chat is cheaper because operators can chat with multiple customers at once, he says. "They toggle back and forth between two or three customers and have pre-scripted responses so if somebody ask a typical question they can respond automatically instead of typing."
This multi-tasking capability is why LoCascio hasn't pushed broadband applications like audio or video, though he expects the company to one day adopt them. "Those mediums take away the cost savings because you can't talk with three people simultaneously," he says.
Chatting With a Doubter
Not everyone shares LoCascio's enthusiasm for chat's role in e-commerce. Gartner senior research analyst Esteban Kolsky feels chat has a long way to go before it's a major force in online retailing.
Like LoCascio, he notes that chat had a peak two years ago, then fell off sharply, and is now slowly coming back, "but with a better understanding of what it can do."
But Kolsky sees numerous factors slowing chat's next wave. "Four years ago, there were 20 to 30 vendors selling this technology - now LivePerson is the only one still alive," he says. He claims this is partially due to chat's cost.
Customer service is already expensive, he points out, adding, "Most of my clients, once they look at chat's cost, don't consider it to be a stand alone solution but just one more thing they have to do."
Kolsky also feels that some chat vendors exaggerated their product's claims. Based on feedback from his large clients, many chat vendors' "extreme success stories" are not corroborated.
On the plus side, Kolsky's feels chat is best suited for selling products that require more customer care. He notes a recent Gartner case study for the e-tailer Land's End that found that shoppers who use the site's live chat are 67 percent more likely to buy than non-chatters.
"I do have chat pegged as one of the technologies to look for," he says, "but we're talking three to five years before we see a major rate of adoption."
For more information on LivePerson, check out the following Ecommerce Guide articles:
More Than Human
Real-time Chat: What Are You Waiting for?
Online Customer Service: Do or Die
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Firefox 2.0
