Serguei Alleko Blog

Let’s look one step further in our way to track users (continuing from http://alleko.com/2010/01/07/tracking-users-or-traffic/ )

How else you can track customers of your site:

• web analytics (they normally use cookies and URL parameters)
• e-commerce engine (user must in most cases create login for buying something, but even without logins the e-shop software could use cookies to track customers)
• user account, you can ask user identify hiself somehow, for example giving email address before downloading a trial. Normally user is identified by email

But all those methods could work in parallel! Let’s consider a following scenario of a person, who wishes to find and buy some software:

1. He’s using Google to search for a brand name and find a nice article on a MEGA IT-site about the software. He clicks on it, reads the review and clicks on “Buy now” affiliate link. (At this moment affiliate network system is registering this guy as user, coming from an affiliate partner MEGA-IT)
2. The guy is having second thoughts, opens a Google window and searching for best deal on the software. He clicks then on the first link, which is direct link to the customer e-shop. (Smart e-shop software should remember him as a client of MEGA-IT, of course, but Google Analytics script doesn’t know that and can think that this guy came from Google)
3. The guy suddenly sees a button “Free 30-days trial” on the e-shop and decides to profit from it. He fills his email, downloads the software and after a couple of days buys it, using direct link in the software itself. (The e-shop system registers him as converted trial user)

So, who was responsible for this user – Affiliate MEGA-IT, Google or trial? It’s very hard to find out, because the whole system of managing sales is not streamlined. There is no feedback from user to the vendor, only clicks via different web-sites. The possible solution could be the model of Steam. After the first click we should somehow made user install the agent software, which will track user activities, from trial to purchase. Then we’ll know for sure, where this guy came from.

Counting clicks

Web analytic tools can combine clicks to “visits”  very easily

Counting unique “visitors”

• daily unique visitor (all visits from the same person in one day are counted as the same visitor)
• weekly unique visitor (all visits in one week are counted as the same visitor)
• monthly unique visitor ( the same, but in the whole month)

A couple of days ago Microsoft came with a new free Anti-Virus product – Microsoft Security Essentials

I will not comment on Microsoft ability to create security products, my opinion could be based of course. I’d like to write a bit about the whole idea of those Free Anti-Virus.

Currently it’s not just a GNU-like projects, made by open source enthusiasts to make world better. Big serious companies are making those product and distributing millions of copies. Here are the leaders:

• AVG
• Avast!
• Avira
• PCTools Anti-Virus

Their marketshare is huge (although it’s very hard to measure. Most market share measuring technologies measure products, something which is bought and sold). They’re very high in Organic google resutls for the best keywords, like “antivirus”. They’re also spending hundreds of thousands on paid google campaigns and download seeding via affiliate networks. Why all of those? Just to deliver you a nice present?

Of course not. Their business model is  - first get a huge portion of market, get very strong recognition from home users around the globe. And then sell them something.

You can visit their sites and see their business models. It’s mostly Online Sales, so everything is open, no hidden distribution agreement or union contracts. You’re told that “Just Anti-Virus is not enough” to protect your computer and then they ask you to buy “full Internet Security version” where normally you can find firewall, anti-spam and a lot of different components.

What are the characteristics, you can use to measure your e-commerce activity (except just turnover). Most of the sales and communications are direct, so you can not measure it by the number of partners/resellers/distributors.

Here are examples for the software e-shop:

• Revenue source split
  • Direct sales
  • After trial
  • Affiliate network
  • SEM
  • Email marketing
  • Shareware
  • Banners
  • Other
• Type of clients
  • new
  • returning client (+ percentage of the happy clients, who buy again)
• Products (which products do you sell)
• Affiliate/Online partners parameters
  • Gross turnover
  • Affiliate commission
  • Network commission
  • Marketing agencies commission
• Google SEM parameters
  • Gross sales
  • keywords cost
  • agency cost
  • Total visitors/orders
  • cost per visitor/order
  • ROI (Return on investment)
• Website parameters
  • Total visitors/conversion
  • e-shop visitors/conversion
  • Trial section visitors/conversion
• e-shop and electronic payment parameters
  • Total orders
  • paid orders
  • never paid orders
  • Refunds
  • Charge-backs

I don’t go too deep in the website analytics, this can have another couple of dozen parameters. From mentioned parameters you can get a good idea how your e-commerce is performing. And don’t try to compare those values with other e-shop or “industry averages”. e-shops are too unique, each and every parameter could mean either success or failure of your business in general. Don’t think that high conversion or low google keyword costs immediately mean revenue growth.

Always compare your parameters with your own, but a year/month later

Just got a 1 hour webex training from Omniture about one of their solutions – Search Center. Basically it’s a framework, that uses different SEM-engines, like Google Adwords, Bing Paid Search, etc.

It allows to synchronize data from all those different systems and perform a couple of nice operations:

• Portfolio Manager (you just give him your money and he’ll made a lot of suggestions on your investments)
• Bid Rules (oh, I’m going to like this one. It’s a small IF-THEN language, allowing to program small changes with your SEM-campaigns.
• True click (I didn’t get this one, I think it’s just a sophisticated report tool)

I’m looking forward to compare it’s job with the job of our SEM-agency.

What is the difference between an activation code and a serial number. The biggest one is:

One of them costs money and could be a product for your e-shop and another doesn’t cost anything.

Activation codes are secret numbers, which are used to activate some software. Normally it happens online. The generation of activation codes could be pretty secure. For example as far as I know, pirates could not make a tool which generates activation codes for Kaspersky Anti-Virus software. All “generators” which you can download from pirate sites have 20-30 fixed stolen  licenses in it and give them to you in random.

Even if you manage to get the right code, the activation procedure means you have to connect to a server of the software vendor and try to get permission from them to use the software. At this point vendor could try to perform a “face control”. If the code was stolen in China and already used 500 times, I bet they just simply block it.

Normally crackers prefer to disable the control of the activation status in the software itself, not trying to beat the activation protocol.

After software is activated, it normally gets a serial number. It’s just a number identifying your copy, it could even be sequential. It can not be used in another copy of the software and can not be sold.

What could be easy then apply a 20% discount to your product in the e-shop! Nothing!

Ok, lets check it out from prospective of accounting. We have 1 product, that cost € 79.50. Let’s look at the order with 20% discount and Dutch VAT

Ok, the amount you need to book in your accounting is €53,45 you always work without VAT with your accountant. Which is a good deal because normal price €66,81

So, if you ask your accountant, how much discount you’ve got (if you’re a reseller, it means how much margin did you get on reselling this product – the answer would be € 66,81 – €53,45  = € 13,36

But I’ve just seen the discount being €15,90 Who’ve stolen €2,54!!!

I hope I’ve got everybody lost by now. So it’s not very easy to apply the discount. If you want to do it correctly, you should try to follow the rules:

• do ALL operations such as discounts only with amounts BEFORE applying VAT.
• Application of VAT must be always the last step in your operations.

So, that’s how the information order above should look like

Now I ope it’s a bit clearer.

This is the second part of the article about online channels. In the first part I’ve tried to explain what does “building online channel from online clients” mean.

So, lets assume we have a standard distribution model. A few distributors, several dozens (or hundreds) resellers-retailers and we want to track which customer of which reseller has renewed his license a year later.

Sounds like no easy task and it isn’t.  Let’s go step by step.

Step 1. Affiliate network.  Every retailer should be also your online affiliate. Affiliates can easily receive their reseller margin from online sales – as affiliate kick-back. Also, only affiliate program (or something similar) allow to exchange data, required for this model (I’ll explain it later).

Step 2. Tracking parameters. Which parameters could be used to track customer via time and via Internet? Those are:

- e-mail address of the client. If we somehow manage to get an e-mail address of the client and link it to reseller, we can link any sales year later

- serial number in the software. In theory we can assign batches of serial numbers to a reseller and later check these batches in the e-shop, when client is going to present them as their old serial number.

-link in the software. This feature is specific for Kaspersky, but some other vendors have it as well. After some period of time the product itself will ask you to renew the license and conveniently give you a direct URL to the e-shop. In this URL we can place affiliate reference. Every client who manages to click it and buy the product, will be registered to this affiliate

in this case we don’t even need to link customers with resellers, we just need to link Master CD-Roms with resellers.

Step 3. Implementation

Master CD-Rom option. If we make a master CD-Rom and deliver it to a particular reseller, then the problem is more less solved. It’s the easiest method and doesn’t require any manual steps. The problem is that it’s very expensive to set-up. It costs a lot to produce a special CD-Rom. And general CD-Roms are printed for the whole distribution. There is no way a distributor can track which CD-Roms are going to which reseller, if the boxes with these CD-Roms are the same. This option is applicable for the big resellers, who can order and pay for 5000-10000 Cd-Roms orders.

Serial number tracking option. Again we have problem with mass production. Serial numbers are random (well, looks like random) and secret (they’re located inside box and can not be seen until client opens the product box at home). We can create (in theory) some another open consecutive serial numbers for secret several numbers, place them on the retail box and tray to track them via distribution. I’ve never tried this before, looks like too much work.

E-mail tracking option. This is one of the most interesting options, because it can be used with small retailers. There are 2 options to do it:

-collecting e-mails of users. Reseller is collecting emails from it’s users and supplying it to a special back-office (linked to his affiliate program). Later the e-shop registers any orders from clients with this emails as orders from this reseller.

-online registration via voucher system. Instead of serial numbers we give customers some cards with vouchers. Those vouchers could be exchanged for the real serial numbers via especial website (linked, again, to the affiliate system).

In this article I’ll mostly speak about Kaspersky Anti-Virus products, but it could be applied to other products as well.

One of the feature of modern Anti-Viruses – they’re keep asking for money every year. Traditionally all vendors provide a possibility to upgrade online, with some discount. For example, you buy a box with an antivirus solution for €40, it’s valid for 1 year. Next year you buy the “upgrade” license for €30 euro. The year after next – the same upgrade for €30 and so on.

When you let people to buy the discounted version, you of course want to be sure this customer had the €40-version before. You can do it by checking the serial number or activation code.

Everything seams logical and simply. But lets think about business part. Your retail resellers, selling boxes, may not be very happy about the fact that he sells the license once, but you (vendor) are getting money every year. And vendors are trying to solve this problem.

The basic solution is a special service, provided by some Anti-Virus vendors. If retailer sold a box to a customer, this customer considered as linked to this reseller. He/she is a part of this reseller sales channel. If this customer buys a license in the vendor shop, reseller can get some kick-back for the sales via it’s channel.

Somehow we must ensure that online customer belongs to this reseller, so its building an online sales channel.

Update: Part 2 is availiable.

Yesterday we had a visit from our European director of eCommerce. This is this the aproximate list of topics under discussion:

• Sales statistics and analyse
• agencies cooperation
• Reporting
• User interaction
• Other online shops
• Electronic distributors relationships
• Co-operations
• Illegal products
• Marketing

After coming to the end of this list, I was wondering, what kind of job this is? Which department should it belong to – Consumer Sales, Marketing or may be IT (looking at the number of technical issues). Currently it’s considered as a part of Sales team and we have sales benefits and responsibilities, such as target revenues. But is it the best place.

I guess the position of “eCommerce manager” is something like “webmaster” 10 years ago. A person who can manage all aspects of a website – system administration, application configuration, content publishing, copyrighting, design.

This position doesn’t exist anymore, different people fulfill the parts of this “webmaster”.

May be 10 years later there will be no “online sales” or e-commerce department, the responsibilities will be splitted between Marketing, Sales, IT and Security people.