December 26, 2000, 9:55 AM

The Loyalty Factor

Forget everything you know about loyalty. It’s no longer just rewards programs and incentives. Today, Web retailers are finding that coupons and gimmicks don’t always pay off. Recent research shows that while incentives and loyalty programs get shoppers in the door, they don’t get them to come back. Instead, e-retailers are finding that the customer experience is loyalty’s key ingredient.

It’s no secret that for online retailers to be profitable, they must keep customers coming back for more. Accomplishing that can often be a lesson in futility. But some e-retailers appear to be making some headway. And surprisingly, category segment doesn’t really come into play. Whether CDs or original artwork, consumers will keep coming back-even recommend the site to their friends-when they consistently receive a positive overall shopping experience.

“Loyalty isn’t one specific thing,” says Claire Karnofski, senior manager of interactive media marketing for Eddiebauer.com. “It’s important to figure out ways to recognize your best customers, but first and foremost, is servicing the ones you have and providing the best overall experience possible for all your customers.”

Christine Bourron, CEO of Paintingsdirect.com, can attest to that. In just over two years in business, 40% of the New York-based company’s sales are from repeat customers. Because the company sells original artwork, which can cost up to $15,000 per piece, persuading consumers not only to make a purchase the first time, but again and again is one of her biggest challenges.

“We focus on over-delivering on the experience when a customer buys,” Bourron says. “Our challenge is to bring people to our site, then convince them to buy. Once they buy, it’s our one chance to gain that customer for life or lose him. So for whatever reason a customer decides to buy a painting, we are going to make sure that we deliver 200% on the customer’s expectation.”

Painting a complete picture

Paintingsdirect strives for a shopping experience that aims to excel from the moment a customer enters the site to the delivery of the art. “We are aware that many people don’t know a lot about original art, so we try to provide a lot of information,” Bourron adds. “We provide the complete biography of an artist, which helps to explain why his/her artwork is priced the way it is. And for each painting we also provide a personal quote from the artist that expresses what he/she tried to represent in the painting.”

A customer can then use the site’s view-to-scale engine and framing feature, which help the customer visualize just how big or small the artwork actually is and how it will look in a particular frame. Shoppers also have the option of purchasing a frame that the site recommends or one of their own choice. If customers have a particular spot on the wall they are trying to fill, they can search the site’s collection of paintings and photographs by desired size. While Paintingsdirect offers no online chat or live customer service feedback, customer questions are answered via e-mail within a day. Once a customer completes a transaction, Paintingsdirect assures delivery on or before its scheduled date and provides the buyer with information and a tracking system regarding shipment. The customer can return the painting for any reason within ten days of its arrival.

“For any business to be sustainable, you must have customer loyalty,” Bourron says. “If you have to recruit customers again and again, it won’t be sustainable. If we do an excellent job of providing the service we provide, then we have an amazing opportunity to build loyalty.”

As a gauge of the loyalty the site has generated, the company receives a lot of spontaneous e-mail from mostly first-time customers who say they will shop the site again and recommend it to friends. In addition, Paintingsdirect monitors purchasing behavior, customer counts, and purchase values, which average between $500 and $600.

“Some customers have bought six, seven, eight paintings,” Bourron says. “In my wildest business plan I never thought we would get such high repeat purchases. Some customers even receive their painting and place an order for another on the same day. That is the best direct results of the loyalty we are building with our customers.”

Not just a number

Paintingsdirect’s approach to building loyalty is not uncommon. Most agree that the formula is similar to following a recipe-a little of this, a pinch of that-with the end result primarily being the same. While the ingredients may slightly differ-some retailers may put more focus on price, brand, personalization, or merchandise selection and availability-it’s the fine balance of ingredients that create the loyal customer.

While many e-retailers went into business believing that numbers and technology are what count, many are finding that the numbers won’t be there without one major ingredient: service. A recent study by Internet strategy consulting firms Bain & Co. and Mainspring notes that e-retailers must “treat customers like assets, not transactions, to build loyalty,” it admonishes retailers: “Understand which customers are repeat vs. one-time shoppers, then identify the factors that are important to customers and measure satisfaction.”

Drugstore.com, for instance, directs a lot of energy into market research. The company conducts focus groups and surveys that help identify features customers want on the site and what keeps them coming back. From that information Drugstore.com has successfully launched several sticky features on its site, such as “your list,” which keeps track of every product a customer has ordered.

When a customer needs to repurchase an item, he/she simply goes to the list, clicks on the item and the product is automatically added to the shopping cart without a lengthy search of the site. “That helps make shopping more convenient,” customer retention manager Jackie Erickson notes, “which is why it is so important to get customer feedback-it allows us to design a strategy that makes them happy.” As a result, 50% of Drugstore.com’s orders in the first quarter of this year came from repeat buyers.

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