18% of e-shoppers account for 46% of e-spending

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By: Wise Marketer Staff |

Posted on December 6, 2005

While the heaviest users of online shopping sites represent only 18% of consumers, those same consumers conform to a modified Pareto principle, accounting for almost half of all online spending, according to a study by internet media and market research firm Nielsen//NetRatings.

The Nielsen//NetRatings MegaPanel online retail study segmented online shoppers into four categories based on the amount of their online spending (low or high) and their frequency of purchases (low or high).

Most valuable purchasers
The study found that nearly one-fifth of the online buying population (18%) accounts for 46% of total online spending and that these "Most Valuable Purchasers" (MVPs) spend more money online and make more purchases via the internet than the rest of the online buying population.

In contrast, those spending a small amount online and making the fewest purchases made up the majority (55%) of online buyers. This rather less valuable group, however, still accounted for 21% of online purchases.

Maximising sales
According to Heather Dougherty, senior retail analyst for Nielsen//NetRatings, "Each retailer needs to analyse its own customer base to identify its respective MVPs and develop targeted marketing programmes that will maximise revenue from them. Not only are the MVPs valuable based on sales and number of purchases, they are also extremely loyal to the retailers they purchase from."

Online buyer group % of online
% of online
Spent US$185+ in 4+ purchases 18% 46%
Spent US$185+ in < 4 purchases 11% 24%
Spent < US$185 in 4+ purchases 16% 9%
Spent < US$185 in < 4 purchases 55% 21%

Table 1: Spending segments (June to August 2005)
Source: Nielsen//NetRatings MegaPanel Custom, November 2005

Comparison shopping
MVPs were also found to be heavy users of comparison shopping tools compared to other online buyer segments. Moreover, they skew toward a higher household income, are more likely to be connected via a broadband connection, and are heavier internet users in both overall time spent online and time spent on retail web sites.

Online buyer group Shopping.com Yahoo! Shopzilla MSN
Spent US$185+ in 4+ purchases 56% 48% 42% 21%
Spent US$185+ in < 4 purchases 51% 45% 34% 18%
Spent < US$185 in 4+ purchases 39% 33% 26% 15%
Spent < US$185 in < 4 purchases 44% 35% 29% 17%

Table 2: Comparison shopping tool users (June to August 2005)
Source: Nielsen//NetRatings MegaPanel Custom, November 2005

Impact on retailers
The report concluded that customer acquisition strategies should therefore include a combination of "broad reach" marketing tactics (such as searching and comparison shopping tools) as well as targeted web sites that are frequented by the MVP segment.

Online retailers should also tailor their loyalty programmes to reward the MVP segment for purchasing from their web sites, to help drive repeat sales and maintain strong relationships.

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