December 26, 2000, 9:55 AM

The Loyalty Factor

(Page 2 of 3)

The Bain and Mainspring findings also indicate that loyal online customers spend more, refer more people and are more willing to expand their purchasing into new categories. The more often a customer visits a site, the more likely the customer will spend an increasing amount of money and generate more profits for the online retailer.

For instance, luxury retailer Ashford.com reports that in the fourth quarter of last year, 11% of purchases were from repeat customers, accounting for 20% of Ashford’s revenue. “When repeat customers come back, their purchases are almost double the size of their first time purchase,” says Mary Lou Kelley, vice president of marketing. “That shows we are building trust and that our customers like the experience and feel comfortable coming back and spending even more money.”

The same is true for Drugstore.com. “When customers do repeat, their average market basket increases over time,” says Judith McGarry, vice president of strategic partnerships for Drugstore.com. “From first time to third time we see the basket almost doubling.”

And similar experiences occur across the board. The Bain and Mainspring study shows that among apparel sites, the average repeat customer spends 67% more overall in the third year of a shopping relation-ship with an online retailer than in the first six months. And on average, each apparel shopper refers three people to an online retailer’s site after a first purchase. After 10 purchases, that same shopper has referred seven people to the site. For consumer electronics, the average customer has referred 13 people after 10 purchases.

“Delighting customers is the clear determinant of e-business success or failure. Online shoppers want their lives to be made simpler-with the offline world as their bench-mark,” says Chris Zook, head of Bain and Co.’s e-commerce practice. “For the most part, their needs are fairly simple: good secure service, fair pricing and timely fulfillment. The few companies that succeed in these areas have significant advantages over their competitors and a business model that, in the long run, is best positioned for long-term success.”

Stick to the basics

But in addition to the more nebulous issues about what customers want and how they want to be treated, retailers must stick to the basics if they expect to create customer loyalty. New York-based Jupiter Communications reports that nearly 75% of online shoppers say customer service is a critical factor in shopping satisfaction.

For Ashford that means tracking all customer service components that lead to conversion and loyalty such as the average wait time on phone calls, the time it takes to respond to a customer’s e-mail, what percent of orders that were ordered by 5 p.m. get out the door every day, and for every one that didn’t go out, finding out why it didn’t.

“The Ashford experience is about making customers feel they can really depend on us and that we will pull through for them day in and day out,” Kelley says. “Our customers depend on us to do whatever it takes to make them happy. We know that brand, selection, and value are all im-portant but if you have all of that without the great customer experience and customer service, then you won’t develop customer loyalty.”

Jupiter also reports that online consumers place a high level of importance on easy returns: 85% of shoppers say that it is an important factor in their site selection. Ashford, for example, offers customers a 60-day return policy on all new watches and a 30-day return policy on all other products, such as jewelry. Eddie Bauer allows customers to return items bought online to any physical store.

A real experience

Enhanced product information also is critical, says Jupiter. Content must supplement the gap created by an inability to physically touch or see a product. Increased levels of information will lead to smarter purchasing decisions that result in satisfied purchasing experiences that deepen the relationship between customers and companies.

Drugstore.com is a big believer in the importance of credible, independent information. Although it doesn’t have Web chat, customers have access to an online pharmacist, beauty advisors and product guides that help them find answers to specific questions. Responses come via e-mail within 24 hours while inquiries to customer service are answered within eight hours.

And Drugstore.com allows customers to offer reviews and opinions about products sold on the site. “We are interested and eager to get into the minds of our consumers,” McGarry says, “This is an excellent communication tool and a great way to generate loyalty on the site. Our customers know they can buy these types of products almost anywhere, but knowing they can get the truth about a product makes them feel better about shopping our site.”

Facing the challenge that online shoppers can’t interact with merchan-dise and store personnel like they can in physical stores, Eddie Bauer and other online retailers are providing technology that allows customers to manipulate items in 3D as well as more accurately depicting textures and colors.

To relieve any fear about purchasing fine jewelry online, Ashford makes the process risk-free by using several techniques. It provides a tremendous amount of product information, clear and detailed photo-graphy and experts that customers can call or chat with online.

Utility over rewards

Jupiter also maintains that utility-not loyalty programs-is critical to increased online purchasing. Many Web retailers still believe loyalty can be generated solely through attractive loyalty programs. But this is in sharp contrast to recent Jupiter research that shows that while 75% of online customers take part in rewards programs, they don’t drive repeat purchases. Only 22% of online shoppers say loyalty programs are an incentive to purchase.

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