It pays to teach your customers well

Computerworld - Making your customers smarter may have the added benefit of generating revenue. The experience of online bookseller Barnesandnoble.com Inc. highlights the increasing use of "edu-commerce" to increase customer retention rates, reduce customer acquisition costs and boost revenue at e-commerce sites.

According to Boston-based consulting firm Eduventures.com Inc., edu-commerce represents the convergence of e-commerce and online learning. The learning takes places within a commercial setting -- say an online course about Pearl Harbor at a Web site that sells related books and videos.

But at the same time, marketers and business strategists can also learn some valuable information about their customers.

For example, Barnesandnoble.com tracks book sales based on each course it offers and which courses are the most popular. "We can track who bought from where, and the online university courses bring in more dollars than we spend to create them, even though they are free [to consumers]," says Len Gilbert, vice president of distance learning at the New York-based online bookseller.

Lowering customer acquisition costs is another advantage.

Internet customer acquisition costs average $25 each, "with customer conversion rates averaging only 4.7%," says Rachel Connell, a senior analyst at Eduventures.com. But implementing edu-commerce technology can significantly improve both figures. A recent Eduventures.com study found that after offering an edu-commerce course, companies' average customer acquisition costs dropped to $5 and customer retention rates went from 4.7% to 50% , to yield a customer acquisition rate of 48%.

Edu-commerce companies such as Austin, Texas-based Powered Inc. let customers like Barnesandnoble.com tailor courses to specific audiences using industry standard components. They also offer reporting and measuring capabilities. "Having data about what customers are doing is critical," says Gilbert.

Barnesandnoble.com launched its online university site in July 2000 with 35 courses. In one week 20,000 students had registered. Since then, more than 200,000 students have taken courses and about 40% have enrolled in more than one course.

During course enrollment periods, titles recommended for courses have reached the company's bestseller list. Examples include Getting to Yes: Negotiating Agreement Without Giving In, Organizing From the Inside Out and Adobe Photoshop 6.0 Classroom in a Book. In addition, about half the online students who buy course materials also buy noncourse books on the site.

Venture capital investors appear eager to jump aboard the concept, pouring $710 million into a variety of edu-commerce companies during the third quarter of last year.

Part of the attraction of edu-commerce is that it can be outsourced. "In the beginning, our IT folks spent time making sure [online courseware] would