FREEDyourMind

Customer Satisfaction and Purchase Intent

Tomorrow we're releasing our annual Top 100 E-Retail Satisfaction Index. In advance of the release, I just want to share a little bit about why this is such an important annual report for the industry and why satisfaction matters so much for retailers.

I think almost everyone buys into the concept of tracking and improving customer satisfaction. Most companies have some way to survey customers and will at least give lip service, if not actual service, to the concept that they want to satisfy their customers. But not everyone understands that customer satisfaction is not just a fluffy, feel-good concept. It is measurable and quantifiable.

I could talk about this forever, but I want to keep it simple. The ACSI methodology (developed at the University of Michigan, still in use as a leading national economic indicator that is released monthly) predicts future financial success. Seventeen years of academic research at the University of Michigan and other universities around the world proves that a more satisfied customer is more likely to return, recommend, buy again, and buy more. Companies with higher satisfaction even have higher stock prices. These are facts that are not in dispute.

So, if e-retailers want to manage their business with a metric that will predict the future success of their business, a scientific measure of customer satisfaction is the obvious choice. And that is why it really matters who does well and who doesn't do well on customer satisfaction indices, and why so many financial analysts ask us to lead conference calls reviewing the results of our index each year.

With that, stay tuned for results!

Top 40 E-Retailers & Some Great Holiday Matchups

We released our latest Top 40 E-Retail Satisfaction Index for the holiday season. Download a free copy on our website.

Early reports coming in are that e-retail had a pretty good holiday, financially speaking. Online sales rose 15% and several other reports say that offline sales had a good year too. This is great news for the retailers who are satisfying their customers and who managed to build loyalty for the coming year by treating new and returning customers well during the holiday season, when retailers see the biggest influx of new customers and often make or break their annual numbers in just a month.

In this Wall Street Journal article Todd Slater with Lazard Capital Markets says "some retailers' better traffic and sales this holiday season may have been won at a price . . . {some retailers} are traffic winners but margin losers."

The methodology we use to measure customer satisfaction is able to actually quantify what kinds of things (price, navigation, merchandise selection, website functionality, etc) have the biggest impact on customers' satisfaction with a website. It's not the same for every retailer. For example, when we look at the three computer manufacturers included in the top 40 (Apple, HP, and Dell), Apple scores the lowest on price, meaning people's perceptions of Apple's prices are lower than their perceptions of HP and Dell's prices. Yet Apple still has the highest customer satisfaction of the group because the methodology indicates that price is not their highest priority. In the office supply wars (Staples vs. Office Depot vs. Office Max), price is a much bigger factor influencing customer satisfaction than it is for computers.

In other words...not only is Todd Slater right that some retailers are traffic winners but margin losers, some of them didn't even need to slash prices like they did. Some did need to do it that didn't do it. We find that the prescription for success varies so much from retailer to retailer, depending on their current strengths and weaknesses, their customer base, their customer expectations, and a lot of other things. Not all these things are under a retailer's control, which makes it that much more important to influence the things that are.

Okay, that was a little side diversion on price. What you're really interested in is probably the customer satisfaction ratings for the top retailers.

 
You can get all 40 in the report, but here are some highlights.

The Leaders:The clear winners this year are perennial top scorers Amazon and Netflix, both with a score of 86. Twelve other retail websites registered scores at or above 80, which is generally considered the threshold for excellence. 

• Amazon (down one point to 86 and the only retailer in the top 10 to decline at all)
• Netflix (86, tied with Amazon for the top spot)
• QVC (up three points to 84)
• Avon (up two points to 83)
• L.L. Bean (up three points to 83)
• Newegg (82)
• Apple (82)
• eBay (80)
• Musician’s Friend (80)
• VistaPrint (80)
• Walmart (80)
• Williams-Sonoma (80)

 The Most Improved: Only two sites experienced notable increases this year:

• L.L. Bean (up three points to 83)
• HSN (up three points to 79)
• Twelve companies win the award for most improved since they first entered the index: Costco (up 10 points since they were first measured, to 79), Avon (up eight points to 83), Toys R Us (up eight points to 77), Walmart (up seven points to 80), JC Penney (up seven points to 78), Staples (up seven points to 78), Target (up seven points to 77), SonyStyle (up seven points to 76), OfficeMax (up seven points to 75), Apple (up six points to 82), Home Depot (up six points to 75), and Sears (up six points to 74). These are all significant gains for these companies, given that even a one-point increase in satisfaction can have a significant impact on future purchases, loyalty, and recommendations

Highly-satisfied visitors to retail websites say they are 60% more committed to the brand overall, 61% more likely to purchase from the retailer online, 35% more likely to purchase from the retailer offline, and 64% more likely to recommend the retailer than are dissatisfied visitors. Nearly 20 years of research coming from both academia and the private sector shows us that increasing customer satisfaction (in the right way!) is one of the most powerful things a retailer can do in any channel to increase sales, loyalty, and positive word-of-mouth recommendations. Seriously: what else can a retailer do between now and next November to make customers 61% more likely to purchase, or even 10 or 20% more likely?

The last thing I'll mention before wrapping up is that the report has some interesting match-ups between direct competitors, showing why one company is besting another in terms of customer satisfaction.

• Amazon vs. Walmart.com:E-retail giant Amazon (86) and retail behemoth Wal-Mart (80) both have superior online satisfaction scores, but Amazon still holds a significant 6-point advantage.  Amazon beats Walmart.com in three measured drivers, or elements, of website satisfaction: content, functionality, and merchandise, and they are tied on consumers’ perceptions of their prices. When it comes to priorities for improvement, neither retailer registers price as a top priority for improvement, which indicates the two may not need to be doing the price slashing we’ve seen in the last week before Christmas.
• Staples vs. Office Depot vs. OfficeMax: The three major office suppliers compete closely in terms of satisfaction, with Staples leading at 78, Office Depot at 76, and OfficeMax at 75. The difference-maker in the office supply category is price, and Staples scores better than its rivals for the price element of the retail website experience.
• Netflix vs. Blockbuster:While video rental is not typically associated with holiday retail, Blockbuster and Netflix are still two of the highest revenue e-retail websites on the Internet.  Netflix is online only. Blockbuster has the potential advantage of being an integrated multi-channel retailer, but Netflix (86) beats Blockbuster (76) in two very important categories: price and website functionality. In this case, improving functionality is more important than price if Blockbuster is going to make any strides toward closing the satisfaction gap with Netflix.
• Apple.com vs. Dell.com vs. HP.com: In the battle of PC manufacturer websites, Apple (82) continues to dominate Dell (76) and HP (78).  Apple defies conventional wisdom because it achieves the highest customer satisfaction despite scoring below its rivals on perceptions of prices. However, Apple scores much higher than the others in website functionality, which is the most important driver of customer satisfaction for all three websites.

The press release is on our website, as is the full report. We'll be doing follow up reports in the coming weeks about mobile commerce, social media, and the multichannel impact of a good or bad website experience. Anything else in particular you'd like to see us cover?

Online Retail Satisfaction Indicates Strong Green Monday

by Rhonda Berg, Researcher

The wave of this year’s holiday shopping season may not yet have crested.  Green Monday, the last Monday that is at least 10 days before Christmas, is often one of the largest online sales days of the holiday season, and it was yesterday, December 13th. 

Satisfaction benchmarks for key online retailer categories (which predict financial success) indicate that yesterday was a strong Green Monday.  The Online Retail benchmark (73.7 on the study's 100-point scale) was notably higher than it was for CyberMonday (73.1).  In addition, the score was higher than last year’s Green Monday (72.5). 

 

Not all categories benefited equally on Green Monday, however.  Apparel and Accessories online retailers appear to be doing especially well, while Computers and Electronics sites may be past their peak holiday sales.  It may be perceived as riskier to make a large-ticket electronic  purchase online this close to Christmas, whereas clothing purchases may continue to occur close to the holiday as perhaps supplemental gifts.

 

What do you think? Any predictions for sales this week?

Weekly Holiday Shopping Benchmark: Satisfaction with Prices is Up

 
We released our second weekly holiday benchmark of shopper satisfaction with online retailers today. In a nutshell: customer satisfaction is down since Cyber Monday (to be expected as Cyber Monday shopping incentives go away), but it is higher than it was a year ago during the post-Thanksgiving week.  That's good news.

 

Also, shoppers are more satisfied with prices this year than at this point last year, but satisfaction with price remains far below pre-recession levels, which may be more of an indication or reflection of how consumers perceive their purchasing power. But the higher customer satisfaction relative to last year shows that retailers are creating the right mix of merchandise and pricing that may drive more purchasing through the online channel.

 

Finally, we're seeing that apparel and accessories retailers are still providing the best online experience among the major subcategories that we're tracking during the holidays.

 

Feel free to snag these charts and use them as you see fit. They're also available on our website in the press release announcing today's results.

Just in Time for Spring, E-Retail Blossoms

Poetic title, right?

We've been doing our Top 100 E-Retail Satisfaction Report for six years now. And the latest installment was released today.  

Overall satisfaction with the top 100 e-retailers rebounded from last year's dip to an all-time high of 78, up nearly 5 points from 2009. That's a lot, especially since not a single one of the top 100 e-retailers scored 69 or lower, which we generally consider the threshold for being a bottom performer. Looks like we may need to come up with a new threshold.

 Since customer satisfaction is predictive of future financial success and even stock prices, this is great news for e-retail. In fact, this study showed that a one point increase in online customer satisfaction predicts a revenue increase of $89 million, on average.

The report is available on our website and has individual scores for all Top 100 e-retailers across a half dozen categories.

I'm still at eMetrics in San Jose today, so stop by and say hello if you haven't already. 

Does anything surprise you about this report? Has your own experience with e-commerce improved over the last year?

Social Media Strategy for Retailers

Get a Facebook page!

Okay, so that's not so much a strategy, really more of a tactic. But research we released today clearly shows the value of a Facebook page to retailers. Among our key findings:

• Facebook is, by far, the best place to reach shoppers—both because it’s where they already are, and it’s where they want to hear from retailers.
• 56% of shoppers to top e-retail websites who interact with social media websites have elected to "friend" or "follow" or "subscribe" to a retailer on a social networking site like Facebook, Twitter, and YouTube
• Customers mainly interact with retailers on social media sites to learn about products and promotions (rather than for help or technical support)—a marketer’s dream come true.
• Half of the top 100 retailers have a lackluster or nonexistent social media presence. If you can't find a retailer's Facebook page by going to Facebook and searching for their name, or if they are a top 100 retailer and have fewer than 10,000 fans... they aren't maximizing the value of this marketing opportunity.

Your customers want to interact with you! Make sure you're giving them what they want and that they can find you. And make sure you understand the needs of YOUR customers rather than industry trends (you know, like the one we're reporting in this research), because we see huge differences in preference and satisfaction from one retailer to the next.

Satisfaction with Top UK E-Retailers Surges

We've just completed and released our analysis of satisfaction with the Top 40 e-retailers in the UK, and it's great news: satisfaction increases across the board. Since satisfaction calculated using the scientific methodology used in this study predicts sales, loyalty, and even stock prices, this is great news for many top UK e-retailers. Get the full report and full list of 40 measured companies on our website or read about it in V3.

• Aggregate satisfaction with top UK e-retailers is 71 on the study’s 100-point scale, up 4 points and an incredible 6% from last year’s aggregate score of 67). This increase is made all the more notable by the fact that it occurred during a global recession. 
• Amazon continues to lead the Index with a score of 83, the only e-retailer in the UK to score above 80. Play.com (79) and QVC.com (78) rounded out the top three performers in the UK.
• Websites for Debenhams, M&M Direct, John Lewis, and WH Smith have seen the greatest increases in satisfaction since last year; all four registering year-on-year increases of 13% or more.
• 15 of the 40 measured UK e-retailers registered scores of 69 or lower, generally considered to be bottom performers who are risking erosion of market share and sales if improvements are not made. Ticketmaster UK and B&Q had the lowest scores in the Index (both at 65). Dixons, Currys, Freemans, and Littlewoods did only slight better but still fall to the back of the pack. (all at 66)

The report goes into my theories for why the increases are happening, but its clear that both the industry and UK shoppers have made leaps and bounds this year, and I expect it will be a very merry Christmas for many on this list.

Two caveats 1) we've seen in both the UK and the US that the best are getting better while most of the rest are getting worse. This theory/prediction is confirmed by our data, Comscore data and other post-mortem analysis of the holiday season.

We're releasing our US Index tomorrow with scores for the top 40 US retailers...keep an eye out.

What Drives the Best Quality Website Traffic?

Our new VP of Retail Strategy, Kevin Ertell (well, I guess he's not so new anymore) has a white paper out today about what kinds of customer acquisition sources drive the best traffic to retail websites. He did this analysis based on our Top 100 research, where we survey about 23,000 visitors to the top 100 retail websites (by sales volume).

The short answer? There is no short answer! You have to look at what drives the most traffic and what drives the best traffic. In the chart below (and in the white paper, available on our website as part of our Top 100 research), you can see which customer acquisition sources drove the MOST traffic (familiarity with the brand, promotional emails, advertising, word of mouth) and which drove the BEST traffic, meaning that it drove visitors who are more likely to buy (online or offline), recommend, and return to the site.

What most influenced your decision to visit the site?	% of respondents	Satisfaction	Likelihood to Return	Likelihood to Purchase Offline	Likelihood to Purchase Online	Likelihood to Recommend
Brand
Familiarity with site/company/brand	32%	77	84	66	76	79
Email Marketing
Promotional e-mail(s) from the company	13%	75	83	61	74	77
Advertising
Advertising: internet	12%	72	74	60	70	72
Advertising: TV, radio, newspaper, magazine	9%	72	75	65	69	73
Advertising: social networks	1%	66	67	63	67	67
Word of Mouth
Word of mouth: recommendations from someone I know	8%	74	79	58	73	77
Word of mouth: recommendations from a social networking site	3%	74	77	61	72	76
Word of mouth: product review website(s)	2%	71	74	65	70	72
Word of mouth: blogs or online forums	1%	67	72	52	67	69
Search
Search: search engine results	9%	69	71	55	66	70
Search: Link from a shopping comparison site	2%	67	70	55	66	68
Other
Couldn't find what I was looking for in one of its stores or catalogs	4%	68	73	67	66	69
Had a gift card I wanted to redeem	2%	70	75	60	71	71
Mobile phone text messages or alerts	0.3%	63	64	62	68	65

Kevin explores the value of social media customer acquisition sources and comes to the conclusion that while there is a lot of potential, they are still not the end-all-be-all you might think they are based on how much we talk about them.

The chart above represents aggregate data from the top 100 e-retailers. Tell me in the comments how you evaluate the quality of different acquisition sources? Have you integrated clickstream and satisfaction data so that you can compare and contrast traffic from specific sources? Tell us what surprised you most.

It's True: Satisfaction with Online Financial Services is Up

Incredibly, customer satisfaction with online banking is up. Customer satisfaction with online investment services is up. Customer satisfaction with online credit cards is up.

What's going on?

Every year, we partner with Forbes.com to do a survey of people who visit online financial services websites. This year, despite the economy and the near-daily bad news, customers are more satisfied than ever with the three online industries we surveyed.

On our study's 100-point scale, satisfaction with online banking is up to 83, making it one of the very few service industries to pass the threshold of 80, generally considered an excellent score. Online credit cards is also up, to a score of 80 and even online investing (which was hammered in the February ACSI report) is up to 78 as the markets have started to settle.

I wish I could tell you there was some magic bullet or miracle app that has saved the day, but the truth is, it's basic blocking and tackling. Each of the three industries improved in basic online elements that directly impacted satisfaction. This should be good news for banks, credit card companies and investment firms. You don't need to reinvent the wheel during an economic crisis.

Even better news: your website can have a huge impact on overall operations and could be a huge corporate advantage when times are tough. Highly satisfied online customers are significantly more likely than less satisfied customers to purchase more services, open more accounts, use the website as a primary channel, and recommend both the company and the website. Therefore, improving the online experience leads to increased revenue (because customers purchase additional services and recommend their friends and colleagues to do the same), as well as cost savings (because these customers use the website as their first source for information and transactions rather than more costly alternative channels).

Read the whole report for more details on the findings.

A lot of interesting things came out of the study though. First of all, only 1/5 of online bankers remembers seeing communication about their bank's financial stability on the website. That either means it wasn't there or that they didn't see it. Either way, it is absolutely essential that banks, given what we know about the ability of the web to build loyalty, use their websites to reassure and inform customers and prospective customers.

Second of all, only 13% of online bankers with mobile phones use them to access their bank's website, and only 3% of online bankers overall use mobile apps. Those that do tend to be more satisfied.

So what do you think--are you surprised that online satisfaction increased for an industry in so much turmoil?

Shopper Satisfaction Holding Steady During the Holidays

We released our second weekly holiday benchmark this morning.

Here's the bad news: satisfaction is still down year over year. But there is a real silver lining, and that is that satisfaction is maintaining from Cyber Monday--it has not fallen off in the week after one of the biggest online shopping days of the year. In fact, purchase intent is higher this week than it was at any point during November. If you're looking for good news in a bleak landscape, this is it!

I think all of us watched the good results from Cyber Monday and wondered if that was it. Did people do all their shopping the weekend after Thanksgiving to take advantage of deals? Would we see shopping fall off the rest of December?

I think we have all adjusted expectations--we are not going to see 15%-20% year-over-year increases like we have in years past. But everything I'm seeing tells me it also won't be as bad as some predicted at the beginning of the season.

But perhaps the bigger story than what will happen to e-retail overall is what will happen to individual retailers. Our benchmark covers more than 80 retailers, and we've collected more than 330,000 e-retail surveys over the last 5 weeks (more than 70,000 just in the week after Cyber Monday). When we're looking at that many shoppers of that many online retailers, there is going to be a huge range of satisfaction--some retailers as high as 90 (on our 100-point scale) and some are, well, a LOT lower than that.

I've said it before and I'll say it again: an economic crisis can be a huge opportunity for e-retailers to solidify loyalty and to really differentiate themselves in terms of customer satisfaction. Really, for anyone in any industry to do so. Satisfied customers are the last to leave, no matter how tight their personal finances get.