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Using an econometric model to measure web shopper satisfaction
A new company that grew out of the University of Michigan’s American Consumer Satisfaction Index aims to identify barriers to shopping and buying at web sites and predict the economic benefit to investing in fixing them.
For 50 years, economists have used the University of Michigan’s Consumer Confidence Index to forecast the ups and downs of the American economy. A companion index developed at the U of M in 1994, the American Consumer Satisfaction Index or ACSI, has added a new dimension to economic forecasting by measuring the amount and direction of general satisfaction that Americans derive from the goods and services they purchase. Now, the developer of the ACSI, Claes Fornell, the director of the National Quality Research Center at the University of Michigan Business School, is heading a new group that is employing the methodology of the ACSI to measure the satisfaction of shoppers at retail web sites and to predict the improvement in satisfaction that would be achieved if certain site modifications were made.
Fornell is now also chairman of ForeSee Results, a company he helped form to market the new web site evaluation technology. He described ForeSee’s new service this week to attendees at the eTail 2002 conference in San Jose. In an interview with IRNewsLink just before that presentation, Fornell argued that the need for his company’s new technology can be found in the weakness of existing methods to measure customer satisfaction with retail web sites. “The measurements that are in place right now are primitive,” he said, referring to logs of unique visits, page views and conversion rates. Even consumer surveys leave something to be desired, since consumers may not recall exactly their level of satisfaction with a web site when asked sometime after they have used it. “These tools need to be augmented with something more powerful,” said Fornell.
That something, according to Fornell, is the econometric modeling used in the ACSI, which is the foundation of ForeSee’s technology. ForeSee’s method for measuring customer satisfaction with a web site involves asking site users about five critical questions which pop up on the site as the visitor is navigating it. Using the ACSI-based modeling, ForeSee can interpret those answers to project a customer satisfaction rating. Limiting the number of questions and posing them while users are navigating the site, noted Fornell, helps to ensure greater participation in the survey and more accurate responses.
The system uses 10 different modeling schemes, each designed to measure satisfaction with different aspects of web site performance, including look and feel, navigation, search, content and the purchasing process. The pop-up surveys occur randomly, and users of the site can make their own determination whether they wish to participate in the process. If the behavior of non-responders at the site is similar to that of survey responders, the survey is assumed to be statistically valid. If there are differences between the two groups, incentives may be employed to expand the size of the responder group.
For web retailers, the primary attraction of the ForeSee survey technique is not the customer satisfaction rating it provides but rather the diagnostics that are developed based on that rating. “We isolate what it is that needs to be improved at the site for customer satisfaction to go up,” explained Fornell. And if those changes are made and the desired improvement in customer satisfaction is achieved, ForeSee claims it can measure the economic or functional result. “Using our modeling method,” Fornell declared, “we can tell someone, for example, that if they improve the satisfaction rating by 5 points, it will lead to a quantifiable improvement in sales or in the reduction of returns.”
Fornell’s confidence in the method is based on more than seven years of running the ACSI survey for the University of Michigan. Between 1994 and 1997, the ACSI dropped steadily downward as companies had difficulty meeting consumer demand, an indication, said Fornell, that the economy might have grown even faster during this period had Americans been more satisfied with their purchases. For the following three years, the customer satisfaction index steadily rose and the economy percolated. But beginning in the fall of 2000, the ACSI headed downward again, said Fornell, as manufacturers, anticipating weaker demand, cut production in advance of it, creating a self-fulfilling prophecy-and the recessing that began in March. “We know from the last eight years of doing this survey that customer satisfaction is by far the best predictor of consumer spending,” declared Fornell.
The site evaluation method, which can be used not only be retail e-commerce sites but by all informational sites as well, has quickly drawn the interest of a number of major web sites. While ForeSee has been marketing the product only since January, it has already signed up about a dozen clients at the rate of $30,000 each for a single site survey. Supplemental surveys cost $7,500 each. Formed last October in Farmington Hills, MI, ForeSee is jointly owned by Compuware and CFI, a consulting company Fornell runs to provide ACSI modeling techniques to a wide range of companies. Its web site address is www.foreseeresults.com.