PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
When it comes to satisfying online shoppers, excellence is becoming the norm for top e-retailers.
As the online retail business slowly rebounds from the challenges of the last few years, the web channel has become a more important influence on the relationship between retailers and customers than ever before. With this evolution comes the need for a more sophisticated, forward-looking set of customer metrics that will enable retailers to gauge not just the success of a single visit, but how well the web site supports the entire customer experience across all channels. As technology, customer savvy and customer expectations evolve, how should retailers measure the success of a web site?
Should we use web metrics such as average page views, number of sessions, number of unique visitors and number of returning visitors? Should we use financial metrics including average order size, return on inventory, return on investment or customer acquisition cost? Should we use qualitative measures: engagement, customer loyalty or brand recognition?
These are all important indicators of past performance, but they don't tell us much about where our business is going tomorrow or how effectively our web sites will impact cross-channel sales next week, next month, or next year.
In an ongoing study, researchers at the University of Michigan have conclusively shown a strong connection between customer satisfaction and a company's financial future, whether the markets are up or down. Companies that perform well on the American Customer Satisfaction Index enjoy better revenues, profits, loyalty, word-of-mouth recommendations and return visits. They even achieve higher stock prices. The University of Michigan's findings have been corroborated by other researchers, and the findings are consistent: High customer satisfaction, when measured scientifically, predicts future success.
Because of this proven link between customer satisfaction and future growth, ForeSee Results measures customer satisfaction with the top online retailers each year for the top 100 retailers in Internet Retailer's Top 500 Guide using the methodology of the ACSI.
We also track two other important scores that are derived from the same research: purchase intent and multichannel value. The scores provide a benchmark for retailers who are already tracking these numbers, whether or not they are in the top 100, and the scores allow for critical comparisons between top competitors.
- Satisfaction: In order to determine how well a web site is performing at meeting the needs of site visitors, it is imperative to measure, manage and work to improve online satisfaction. Academic studies have repeatedly shown that online satisfaction, when measured correctly, predicts sales (across all channels), loyalty, word of mouth and even stock prices.
- Purchase Intent: Our research indicates that only 40% of visitors to one of the top 100 web sites included in this study intended to make an online purchase. 50% came to research a product and 10% came for another reason. Therefore, we can't measure the success of a web site visit only by whether people purchase online. The purchase intent score measures the likelihood that an individual will purchase from any channel as a result of their visit. Purchase intent is an outcome of satisfaction.
- Multichannel Value: Exclusive to Internet Retailer, we have calculated the Multichannel Value Index. This score is based on the relationship between online satisfaction and multichannel purchase intent, and it helps us understand and project how well a web site is living up to its potential by either supporting or undermining multichannel sales.
Taken together, these three numbers give any CEO a good success metric for his web site in a way that goes beyond sales to also quantify how a web site is influencing future business across all channels.
Satisfaction is the most important metric we measure and is the driver of all the customer and visitor behaviors that retailers care about the most, including purchases, recommendations and loyalty.
In 2011, satisfaction held steady at 78, matching the highest level it has ever been. That score shows that top e-retailers, on average, are continuing to do a fairly good job satisfying customers.
Amazon (86) takes the top spot this year from Netflix (down two points to 85) for the first time in the spring study of the top 100 retailers, though not by much.
The other web sites rounding out the top five are QVC and Avon (both at 84) and Newegg (83).
When customer satisfaction studies are conducted using the ACSI methodology, a score of 80 has long been considered the threshold for excellence. In 2007, only four web sites had scored 80 or higher on a 100-point scale. In 2010 and 2011, nearly one-third of measured sites scored 80 or higher.
These findings suggest that we need to raise the bar for what is considered an "excellent" score. Please remember that this study reflects satisfaction only with the top 100 e-retailers. Since satisfaction predicts revenue, it makes sense that many Top 100 retailers would have superior satisfaction levels. Providing a satisfying online experience helped them get into the Top 100 in the first place.
Research we've conducted over the last two years indicates that as the recession ends and successful retailers rebound, smaller retailers are suffering, and the satisfaction gap between the best and the worst is widening. So while it's good news that the Top 100 e-retailers are doing so well, it means everyone else will have to work very hard to compete.
On the lower end of the spectrum, for the second year in a row, not a single e-retailer scored below 70. Just two years ago, 15% of the top 100 retailers scored 69 or lower.