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Incentives to shop online
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October 4, 2000: 6:24 p.m. ET
'Click and choose' approach raises rate of online purchases, Peranet CEO says
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NEW YORK (CNNfn) - As the Internet shopping marketplace continues to take a beating, more merchants are focusing on the grim statistic that two-thirds of online shopping carts are abandoned in the virtual aisles before the customers get through checkout.
One Web startup hopes to improve the shopping results by offering a new twist on an old, real-world marketing gimmick -- the freebie.
 Peranet, a 40-employee firm based in Dallas, turns the old-fashioned giveaway on its head, however, transforming it from "company focused to customer focused," in the words of company CEO Joel Bines.
The company is getting support from some heavy hitters. Earlier this week, it announced agreements with Compaq (CPQ: Research, Estimates) and Xerox (XRX: Research, Estimates) to use its "conversion marketing platform."
The concept is simple enough: To figure out what kind of incentive would appeal to a given customer, ask and let the shopper choose. Then make the offer contingent on the client completing some activity, whether it is concluding a transaction, completing an interactive survey form or viewing an online video.
As Bines explained Wednesday to host Rhonda Schaffler on CNNfn's "Market Call," the technique provides "the right reward for the right person at the right time for the right behavior."
He contrasted the "click and choose" approach to "cross your fingers and hope" marketing, such as giving away T-shirts or ball caps, which many customers don't care about anyway. "Who needs another T-shirt?" he asked. (143K WAV or 143K AIFF)
Factors that cause shoppers to walk out
The strategy is a response to the finding that 65 percent of consumers quit their shopping excursions without completing the transaction. The finding, by the Boston Consulting Group for the e-commerce trade association shop.org, was based on the 1999 Christmas shopping season and is of growing concern to e-tailers as the 2000 holiday season approaches.
Some of the factors were easy enough to imagine: consumers simply changing their minds after putting an item in the online shopping cart or Internet newcomers -- a large portion of last year's holiday shoppers -- getting cold feet before concluding the transaction.
But the report also found that online retailers were responsible for many of the walk-offs, due to a "poorly designed ordering process, inadequate selection, or untimely information. Consumers who are ready to buy will often back away from a purchase if they find checkout confusing or laborious. They will do the same if they are surprised late in the process by unexpectedly high costs -- taxes and shipping charges, for example -- or by product-availability problems."
Peranet seeks to encourage customers to complete their transactions by offering them an incentive -- which may not be a T-shirt or ball cap at all, but could be a discount on the purchase, frequent-flyer miles, even a contribution to the customer's favorite charity, Bines said.
It generally costs $10,000 to $50,000 and takes four to six weeks to set up a "click and choose" site for a customer, plus the ongoing expense of the giveaway merchandise and the cost of delivering it, Peranet said. Bines said one customer raised its completion rate to 94 percent of transactions.
Also, by targeting the freebies, companies avoid the expense of giveaways that end up on the back of a shelf, never being used, Bines said: "There's so much waste associated with free stuff in this world." 
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