FREEDyourMind

How Will the Economy Affect E-Business?

From RIS News:

 “It is a sign of tough economic times. Retail store closings are up in 2008 by 25 percent year-over-year as the national economy continues to deteriorate. The International Council of Shopping Centers estimates there will be 5,770 store closings in 2008 compared to 4,603 in 2007. Surging gas prices, higher food costs and powerful inflationary forces are squeezing consumers and retailers alike.”

 And from the San Jose Mercury News:

Electronic commerce has grown about 22 percent in the past two years, said Hal Varian, [Google’s chief economist], who spoke at a forum on the state of the Internet economy at Google's new  Washington office. Ed Garrubbo, chairman of the Electronic Retailing Association, said online sales jumped 17 percent in the first quarter of this year. 

"The lesson here is that the economic slowdown is not an Internet slowdown," Varian said. "The Internet is looking pretty strong compared to other sectors."

I wonder if the slow down for brick-and-mortar retail is actually a boon for the e-commerce industry.

Research published in Claes Fornell’s recent book, The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference, he proves that a customer’s ability to spend is not necessarily a predictor of his willingness to spend. The best predictor, as crazy as it may sound, is whether or not that customer is satisfied. A satisfied customer will spend even if they don’t have the money.

Study after study shows that the online channel is the bright spot in any industry in terms of customer satisfaction. In the February release of the ACSI, we saw online retail (81.6 on the ACSI’s 100-point scale) trounce offline retail, which scored 74.2. Our study with Forbes about online financial services showed that customer satisfaction with online banking (82) outpaced satisfaction with banking overall (78).

So, in general, websites satisfy people more than other channels. Add that to increasing gas prices, and I think we have a few good reasons for people to move more and more of their business online. They can conduct business anytime, anywhere, and they don’t have to worry about inconsistency in service. And if the companies they interact with online are doing a good job satisfying customers, it might not even matter how much money they have!

My bet is that we will continue to see growth in the online channels of industries that are starting to feel the pinch of tough economic times, gas prices, and inflation.

Honda.com Has Best Auto Website

Automotive websites have a tough mission: they need to inspire brand loyalty and encourage sales and dealer visits without actually selling cars online, since most people will obviously buy a car in person.  Their mission is not unlike other brand-based websites that don’t conduct e-commerce, but the auto industry doesn’t seem to pay nearly as much attention to the web channel as the consumer-packaged good industry, for example, does.

Therefore, we’re launching the inaugural ForeSee Results Automotive Website Satisfaction Index, and we released our first set of findings today. Read about them in the Detroit Free Press or feel free to download a copy of the study from our website.

Here’s what we found: On the ACSI’s 100-point scale, Honda.com did best and NissanUSA.com did worst. The industry aggregate was 78. Individual automotive website scores are as follows:

    * Honda.com: 80
    * Chrysler.com: 79
    * FordVehicles.com: 79
    * Chevrolet.com: 77
    * Toyota.com: 77
    * NissanUSA.com: 76

The study also found that Honda.com does the best job leveraging the website to get visitors to buy a vehicle or visit a dealer. Chevrolet.com, FordVehicles.com, and NissanUSA.com were tied for being the least likely to influence customers to purchase a vehicle. Visitors to FordVehicles.com were the least likely to visit a dealer.

Considering the fact that top e-retailers like Amazon have scores in the high eighties, these guys still have a lot of work to do. However, it is impressive that Honda is doing such a great job leveraging their website to encourage dealer visits and sales.

The commentary has some specific usability examples that may be of interest.

The State of Our Union is Strong

Watching discussion of all the thorny political issues raised in this campaign has me thinking about the state of our union. Since ForeSee Results was founded in late 2001, we have: 

• Over 28 million completed customer surveys measuring satisfaction with online marketing and e-commerce initiatives, including:
  • Over 9 million completed customer surveys in 2007.
  • Over 1 million completed customer surveys in December 2007.
  • Over 500,000 surveys presented in a single day last holiday season.
• More than 30 benchmarks, including:
  • Industry benchmarks like retail, financial services, healthcare, federal government, and product companies and
  • Functional benchmarks that measure specific aspects of an online experience, such as browse, checkout, fulfillment, etc.
• Over 550 active measures across dozens of industries
• Major new investment in functionality, technology, and delivery.

It’s great to see that the ACSI has become such an industry standard online, and it’s an exciting time to be in this business!

Satisfaction with E-Gov is Down

Every quarter, we help the University of Michigan with the American Customer Satisfaction Index (ACSI) E-Government Satisfaction Index. We measure more than 100 federal government websites to see a) overall, are citizens satisfied with online government initiatives and b) how satisfied are they with individual sites?

The answer this quarter isn’t great: satisfaction is down for the third quarter in a row, and now it’s at its lowest score in more than three years. You can get the report, with ACSI scores and analysis for 100+ federal websites here.

One of the reasons I think the scores are dipping is the lame duck effect. President Bush, love him or hate him, has spent administration time and energy on e-gov, through making it one of the five goals of the President’s Management Agenda and through other means. But there’s no certainty about what a new administration may mean for e-gov initiatives, and I think that may make them hesitant to make the changes they need to make to keep satisfaction up. Steve Barr, federal columnist for the Washington Post, told a colleague that he usually doesn’t see the lame duck effect until summer, but he could see that might be part of it. He also mentioned that a lot of agencies got their budgets late, and that could be part of the problem as well.

A scan of the presidential candidates’ websites shows that only Barack Obama has anything significant about e-gov as part of their campaign platform, and his point is more about using e-gov for transparency than for citizens' convenience and ease or for cost-saving measures. After a very quick look, I don’t see anything on either Clinton’s or McCain’s website specifically about e-gov. (Though, you can compare your NCAA picks with John McCain, a crucial feature neither of the other candidates offers!). So who knows what the future holds for e-gov. It seems clear that it will have to be a priority of any administration both because it can save the federal government so much money and because it should be the mission of any administration to be citizen-centric, which is what the web is all about. But 2/3 of the candidates don't seem to be thinking much about it yet.

Hopefully I’ll be posting more often in the coming weeks. We’re coming down off a crazy period that has had me running dawn ‘til dusk.

ACSI E-Commerce Results

It’s that time of year again: time for the University of Michigan's American Customer Satisfaction Index (ACSI) report on e-commerce. The e-commerce report includes the e-retail, online travel, and online brokerage industries.

You can download the full report here, but a few things I found most interesting:

• Amazon has the second highest score in the entire ACSI (which includes 200+ companies), behind only Heinz. That is a stunning achievement for a retailer with such a broad mission.
• Online travel aggregators like Expedia, Travelocity, and Orbitz continue to slip and are having significant trouble differentiating themselves from each other.
• Online brokerage does better than expected, given the slowing economy (which usually results in lower satisfaction with any kind of investing). Customer satisfaction with Fidelity.com rises 5%, while Charles Schwab.com and TDAmeritrade.com also report increased satisfaction.
• Of all the sectors measured by the ACSI this quarter, e-commerce was the only one to increase. All other sectors saw customer satisfaction scores fall, and the overall ACSI score for the whole economy fell this quarter. I attribute this to the fact that competition is so fierce in the online world that companies HAVE to excel in order to survive. The best competitive differentiator is customer satisfaction. Still, it’s remarkable that the e-commerce sector now outperforms all other service sectors measured by the ACSI, online and offline.

You can read more in the Detroit Free Press and Network World.

 

Which Retailers Satisfied Their Customers This Holiday Season?

Well Christmas has come and gone and two questions come to mind.

If you have young kids - how do you get all those toys put together?

And for everyone else, what retailers lead the way in satisfying their customers?

Let's address the second question today (you are on your own for the first one).

This year we measured satisfaction with the top 40 online retailers in the U.S. (get the full report here)

 
Overall, satisfaction was a 74 (on a 100 point scale) down 1 point from the 2006 holiday season.  The downward movement is a bit of a concern, but considering the very tough economic climate this holiday season and the disappointing retail sales, not too bad.  Netflix led all retailers with an impressive score of 86 (even with their score last year), followed by Amazon at 82 (down 2 points from last year).  QVC and L.L. Bean rounded out the top performers with scores of 80.

So who cares if customers are satisfied?  Well, not only consumers, but retailers should care too!  Satisfied customers become long term and loyal customers.  Dissatisfied customers become your competitor's customers. 

Comparing the top performers (scores of 80 and higher) to the bottom performers (scores of 70 and lower) we see that the result of higher satisfaction leads to significantly higher  purchase intent (33%), loyalty (23%), and word of mouth recommendations (26%).  That is the payback for satisfying your customers. 

And this year we also measured the top 30 U.K. online retailers.  This is our first time measuring the U.K. group.  Some of retailers performance was brilliant!  You can get the full report here.

 

How Kellogg Uses Customer Sat To Measure Website Value

Brandweek Magazine did an article this week about how we helped Kellogg quantify the contribution of several of their key brand websites on long-term customer loyalty, brand perception, and overall customer relationships.  This can be a huge challenge for brand managers—how do you tell if the website is strengthening customer relationships and influencing their future behaviors if you can’t measure that in terms of online sales?

Well, you do so by applying the methodology of the American Customer Satisfaction Index (ACSI), which is the only metric that has been scientifically and academically proven to be predictive of loyalty, ROI, and future financial performance.  When you can’t measure sales, you can measure satisfaction, which predicts the future behaviors that lead to sales.

By using the actionable data that the ACSI methodology provides, Kellogg was able to make several changes that resulted in tangible rewards and quantifiable proof that their websites were actively helping build customer relationships and influence loyalty.

And hey, I can't resist saying it, now they're grrrrreeeeat!

 

ACSI Link to Stock Prices

You may have read the January 2006 article in the Journal of Marketing proving that not only are the University of Michigan’s American Customer Satisfaction Index (ACSI) scores a leading indicator of consumer spending and overall company financial growth, they also predict stock prices. (full disclosure, ForeSee Results is a corporate sponsor of the ACSI e-commerce and e-business reports).

Claes Fornell, who heads up the ACSI, shared the latest returns with me. As of the end of September, an ACSI-based stock portfolio has beaten the market seven years in a row (will be 8 years in a row in just a few short months when we close out 2007, assuming things stay on track). That in itself is pretty incredible.

Also, the ACSI-based fund has a 5-year return of 218% - more than 100% above market with an annualized return of 26% (as of Sept 07).

BusinessWeek, the Wall Street Journal, and the Harvard Business Review have all written about this connection between ACSI scores and stock prices. There hasn’t been any evidence yet that ACSI scores move the market. But ACSI scores come out 4x a year and measure different companies and industries each quarter—I think they measure more than 200 companies now. It seems only a matter of time before the extensive publicity the scores always get starts leading people to buy or sell based on how well the measured companies did—or didn’t do. It will be interesting to watch.

 

Yahoo Edges Out Google in Customer Sat

Today’s American Customer Satisfaction Index (ACSI) results are all over the news for one big reason: Yahoo beat Google in customer satisfaction for the first time since both companies were added to the Index.

Actually, Yahoo’s (79) one-point lead over Google (78) on the ACSI’s 100-point scale isn’t the biggest story here–the bigger deal is that they’re moving in opposite directions. In 2006, Google had an ACSI score of 81 and Yahoo! a score of 76. This year, Google fell three points to 78 and Yahoo gained three points to 79. I attribute this mainly to the fact that to the average user, Google hasn’t changed all that much in the last few years. Sure, they’ve added incredible new functionality and tools like maps, iGoogle, gmail, calendars, etc., but I don’t think the average user who goes to google.com to do a search knows about those new capabilities. And Google doesn’t make them look very obvious. Yahoo, on the other hand, is making changes that are more useful and accessible to the every day user. Yahoo’s increase should be good news for CEO Jerry Yang, since ACSI scores are a proven predictor of financial performance, stock prices, loyalty, and recommend.

The other big news is Ask.com’s huge increase: up 5.6% from 71 to 75. They relaunched without paying the typical price (usually satisfaction scores drop in what we call the “relaunch effect”), which shows they did so with the right mix of evolution and revolution. Their market share is still small, but their satisfaction score has increased 21% and 13 points since they were first measured as AskJeeves.com in 2002, which is a phenomenal gain in such a short time.

AOL fell 9.5% from a 74 to a 67 in this year’s ACSI report. MSN increased marginally from 74 to 75.

The report also measured the top news and information sites, like ABCNews.com (74), MSNBC.com (74), CNN.com (73), NYTimes.com (73) and USAToday.com (72).
Get the full report here.

The ACSI Results Are In

For the second year in a row, customer satisfaction with the e-commerce sector has risen, with a year-over-year increase of .5% and an impressive score of 80.0 on the American Customer Satisfaction Index’s (ACSI) 100-point scale. The latest score of 80.0 brings e-commerce within striking distance of its highest aggregate score ever: 80.8 in 2003.The fourth quarter 2006 ACSI E-Commerce Report measures the following industries within the e-commerce sector, chosen because they make the greatest contribution within e-commerce to the U.S. GDP:

• E-retail
• Online auction
• Online brokerage (formerly e-brokerage)
• Online travel companies

(The report on the e-business sector, including portals, search engines, and news and information sites, is released every August). Such a high aggregate score for the e-commerce sector is impressive considering the intensely competitive landscape. E-commerce continues to outpace most other sectors of the economy in terms of satisfying its customers. For example, the overall ACSI e-commerce score (80.0) exceeds the 2006 cross-industry ACSI score (74.9) by 7%. In fact, the ACSI e-commerce
sector score outstrips all the other service sectors measured by the ACSI, often dramatically, including e-business (76.5); offline retail (74.4); accommodation and food services (75.8); healthcare (74.1); information services like cable, satellite, and telephone service (68.6); utilities (72.4) and finance and insurance (76.0). Clearly many of the e-commerce companies measured by the ACSI have figured out how to satisfy customers, even though it is a relatively new sector compared to some others measured by the ACSI. E-retail, the most mature of the industries measured as part of the e-commerce sector, continues to have the highest customer satisfaction score, up 2.5% to an aggregate score of 83. Barnes & Noble (88) and Amazon (87), lead the category.

Online brokerage, which has surged forward this year, had the highest aggregate increase in year-over-year customer satisfaction: 2.6% (from 76 to 78). This increase was driven primarily by large increases in customer satisfaction by two online financial service sites: Charles Schwab and E*TRADE. Charles Schwab continued its upward trend and reported a remarkable 8.1% increase in customer satisfaction (from 74 to 80), while E*TRADE saw its score go up 4.2%, from 71 to 74.

In online auctions, eBay maintains a clear lead (80) while the overall online auction industry remains flat from last year (78). Expedia (76) continues to lead the online travel industry, despite dropping one point in 2006. Faced with increasing competition from supplier sites and lack of differentiation among the aggregators, the online travel sites’ aggregate customer satisfaction score fell 1.3% in 2006.

Congratulations to a couple of the best performers, Barnes&Noble.com and Amazon.

Get the latest results and commentary on the results at the following:

http://www.theacsi.org/index.php?option=com_content&task=view&id=17&Itemid=165

http://www.theacsi.org/index.php?option=com_content&task=view&id=168&Itemid=162

http://www.foreseeresults.com/Form_ACSIFeb2007.html