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Report: E-Biz Success Not Easy To Measure

By Nora Macaluso
Sep 20, 2001 11:02 AM PT

Many companies are misleading themselves when it comes to measuring the return on investment (ROI) they are getting from their online business ventures, by relying too much on internal calculations to gauge their success, according to a study released Thursday by Jupiter Media Metrix.

Report: E-Biz Success Not Easy To Measure

Jupiter said a survey of information technology executives found that 59 percent of "do-it-yourself" studies to measure ROI generated positive results, leading analysts to view in-house analysis as "a self-fulfilling prophecy" yielding the answers a company wants to see.

"Many 'do-it-yourself' studies use inconsistent definitions of ROI metrics in an effort to show positive results, therefore making it nearly impossible to correctly choose which projects should be funded and which should be killed," the Jupiter report said.

"If you have the Internet project manager measure whether the Internet project is doing well," the answer that it is going well is not going to be a shock, Jupiter research director David Taylor commented in an interview with the E-Commerce Times.

Relationship Meter

According to Jupiter, businesses should separate dollar calculations from more nebulous "relationship metrics" that are designed to "capture the impact of the Web on customer relationships."

"Business managers will save money and embarrassment if they precisely and consistently define financial metrics such as ROI, rather than attempting to 'guesstimate' a dollar value when there is no justification for doing so," Taylor said.

In fact, Taylor believes, it is difficult, if not impossible, to measure whether Internet relationships result in direct or indirect returns to a company.

Gauging Real Results

Taylor said Jupiter is working on a way to measure whether Web sites are working the way companies think they are, and how a company's different customers -- consumers, suppliers, vendors and so on -- are reacting. Companies can then see whether the money they spend on their Web sites and other Internet projects is translating into customer loyalty, referrals to new clients and bigger purchases, he said.

About 90 percent of the executives surveyed said the Internet had helped their relationships with customers, Taylor said. However, he told the E-Commerce Times, that statement is not an answer in itself.

"Does that mean customers are spending more money?" he said. "Does it mean more frequent contact, and is it just contact, or is it converting into dollars?"

Inside Job

The report found that few companies use consulting firms to measure the return on their e-business investments. Just 17 percent of the companies surveyed said they had used outside firms to conduct or oversee their ROI studies.

Just 5 percent of in-house studies done by the companies surveyed showed negative results, Jupiter found.

The report said that 39 percent of the companies who did these studies found "somewhat positive" results, and another 20 percent got "significant positive" results. Half of all the companies surveyed have not completed assessments of the success of their online ventures.

In fact, many companies are not even measuring the success of their online business programs, the study found.

Jupiter said that 92 percent of multichannel retailers do not measure returns on their online sales channels, and 31 percent of the companies surveyed are not evaluating their online procurement activities.

The survey results were taken from the responses of 471 information technology executives at companies with annual revenue of US$50 million or more.

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