The acquisition will add more than 300 products to L’Oreal’s lineup.
ForeSee Results measures how much browsers like the Top 40 retail web sites as ranked in the Internet Retailer Top 500 Guide.
Internet retailing by its very nature is a numbers game. Using advanced web analytics and e-commerce technology merchants can measure every important aspect of their web site. For many retailers, daily, monthly and annual sales are the biggest indicator of how well they’re performing and stacking up against their key competitors.
As a key measurement, sales volume is tantamount to judging the ongoing success or failure of an online retail site. But sales alone don’t tell the complete story of an e-retailer’s ongoing performance. Equally important are measuring and analyzing customer satisfaction, a barometer that helps retailers gauge and react to changing consumer behavior.
The forward look
Customer satisfaction measurement shows how effectively the online experience is meeting the needs of site browsers today. It also can predict future intent and financial success. Measurement using the methodology of the American Customer Satisfaction Index can show how current satisfaction leads to future loyalty, ongoing retention and positive word-of-mouth referrals.
In short, customer satisfaction provides a forward-looking dimension to the “look back” provided by online sales data. ForeSee Results teamed with FGI Research to look at customer satisfaction levels among the top 40 online retailers as ranked by annual sales in this year’s Internet Retailer Top 500 Guide to Retail Web Sites. This effort marks the second consecutive spring release of the Top 40 Online Retail Satisfaction Index and the third study since last year. Customer satisfaction with the top 40 retailers also is measured during the holiday season for a direct comparison to the rest of the year.
Overall, aggregate customer satisfaction with the top 40 retailers in spring 2006 rose from holiday 2005, but not to the level measured one year ago. The aggregate spring 2006 score for all measured e-retailers is 76 on the ACSI’s 100-point scale. The Top 40 Online Retail Satisfaction Index measures the satisfaction of browsers, which is defined as people who visited a web site but did not necessarily complete a purchase during that visit. With industrywide conversion rates at 3% to 5%, browsers that don’t buy during a given site visit represent enormous potential for growth. Browsers’ satisfaction tends to be slightly lower than customers’ satisfaction.
Winners and losers
The aggregate satisfaction score of 76 for spring 2006 is up 2.7% from the holiday 2005 aggregate score of 74, but still is 1.3% lower than the aggregate score of 77 measured one year ago.
Of the top 40 online retail sites measured by ForeSee and FGI, four sites scored 82 or higher on the ACSI 100-point scale; 82 is considered a superior rating. Netflix.com was the leader in browser satisfaction with a score of 85, followed by Amazon.com at 83 and QVC.com and Newegg.com each at 82. A total of 29 of the 37 companies that were measured in both spring 2006 and holiday 2005 posted higher customer satisfaction scores this time. Only BananaRepublic.com (67), PotteryBarn.com (74) and Buy.com (71) experienced declines.
When the top 40 sites are compared on an annual basis, 24 sites had a lower rating and six sites remained the same. Only seven online retailers, led by Chadwicks.com (78) with a 6.8% jump in satisfaction, managed to increase their scores. Several factors are causing the up-and-down movement of satisfaction scores throughout the year. As expected, satisfaction dropped during the holiday season due to the unique characteristics of the holiday shopping season and an influx of first-time visitors, who are less familiar with or invested in any particular site. As a result, this group is harder to please.
Further, the scores didn’t completely rebound in the spring 2006 index for a fundamental reason: Consumers constantly are raising their expectations and demanding even higher levels of site performance and customer service from the industry’s largest retail sites. As e-commerce continues to evolve, shoppers shape their expectations based on the collective experiences of all the sites they visit. From the customer satisfaction perspective, on the web large multi-channel retailers often struggle to keep up with more nimble web-only merchants and successful direct marketers. For instance, an analysis of browser satisfaction levels reveals that:
l Three of the top performing companies are web-only merchants, which is not at all surprising considering they can devote all resources to the web and don’t have the challenges of multi-channel consistency.
l Amazon.com is the only company that ranks in the top five for both sales (No. 1) and customer satisfaction (No. 2).
l Both Netflix.com (85) and Newegg.com (82) achieved the same satisfaction scores this year and last.
l CompUSA.com experienced a 6% increase from spring 2005.
l ToysRUs.com experienced the biggest decrease since spring 2005 by dropping 7.9% from a score of 77 to 71.
As was the case with last year’s browser satisfaction index, there is a pronounced difference between the satisfaction scores. On average, the top 10% attained a satisfaction score of 83, 22% above the bottom 10% aggregate score of 68. But there also were distinct differences with the elements that drive online satisfaction: merchandise, price, brand and site experience. Between the top and bottom 10%, for example, overall satisfaction with price was 30% higher for the top 10% than for the bottom 10%, while satisfaction with merchandise was 16% higher for the top 10% than for the lower 10%. Further analysis also reveals that the satisfaction score for brands was 10% higher for the top 10% than for the bottom 10%.
The intangible contribution
The contribution of the web goes well beyond the online sales it generates. As a predictive metric, customer satisfaction analytics can project multi-channel sales, future loyalty, retention and word-of-mouth marketing as future outcomes of browsers’ satisfaction.
When measured correctly, customer satisfaction provides a comprehensive system for understanding what drives satisfaction with the online shopping experience and how satisfaction exerts influence on two critical performance measures: multi-channel sales and word-of-mouth recommendation.