Elements of Building Internet Customer Loyalty

The following are some of the elements that constitute e-commerce loyalty strategies.

A Matter of Trust

To gain the loyalty of customers, you must first gain their trust. That’s always been the case, but on the Internet, where business is conducted at a distance and risks and uncertainties are magnified, it truer than ever. Online customers can’t look at a sales clerk on the eye, cannot size up the physical space of a store or office, and can’t see and touch products. They have to rely on images and promises, and if they don’t trust the company presenting those images and promises they will shop elsewhere. In fact when Web shoppers were asked to name the e-attributes of tailers that were most important in earning there business,

the number one answer was a Web site “that I know and trust”. All other attributes including lowest cost and broadest section, lagged far behind. Price does not rule the Web, trust does.

Focusing on the Right Customer

When many executives and entrepreneurs look at the Net, they see an opportunity to break free from one of the core constraints of the traditional business world, the need for focus. Because a Web site is accessible to any online customer anytime, anywhere, there is a huge temptation to try to attract as many potential customers as possible. That temptation is reinforced by the vast upfront investments in site development and process design that companies often have to make in launching an e-business. Executives presume that these fixed costs should be amortized over, as many customers are possible. So they become caught up in frenzy on indiscriminate customer acquisition, gauging the success by sneer number of page view, unique visitor s and sales they rack up. The fat that careful customer selection has always been a foundation of business success gets completely ignored.

A lack of focus makes building much more difficult. Customers want Web sites that are simply designated, fast to load, and easy to see,. But tempts to serve, the more complex its size inevitably becomes. In trying to be all things to people – to accommodate all levels of technical expertise, all service requirements, all price sensitivities, and degrees of brand preference – it must constantly add new features and functions. As it does, its site becomes slower to load and more complicated to use. Customers flock in but, confused by what they find, they rarely return.

Learning about Loyalty

While the Internet may seem like an anonymous space, in reality it is far easier to track customers, their purchase histories, and their preferences online than in traditional business setting. Customers in brick-and-mortar stores leave no record of their shopping purchase patterns is transparent. Every move they make can be documented electronically, click-by-click. If a customer exits a Web site when the price screen appears, it’s a fair bet that he is price sensitive. If he jumps from page to page without even initiating a transaction, he’s probably frustrated at being unable o find what he wants.

By providing such rich data, the Internet offer companies unprecedented opportunities for getting to know their customer in depth and for customizing offerings to meet their preferences. Very few companies, however, are actually doing much to even track customer retention rigorously, let alone try to systematically learn from customer defective patterns. Instead, they are fixated on building their Web capacity and

increasing their visitor counts, click-through, and online sales. As a result, they overlook opportunities for up selling and cross selling and end up capturing a much smaller share of customer’s overall purchases than they might have. Research shows that, in fact, that the average Web site achieves less than 30% of its full sales potential with each customer.

The Big Picture

Many companies have been tempted to split their Web businesses from the rest of their operations in hopes of cashing in on investor’s enthusiasm of dot-coms or of making it easier to attract the kind of talent required to manage Web activities. In the short run, such a strategy may create benefits, over the long run, however, it is likely to erode customer loyalty. After all, when a customer does business with a company, the customer does not distinguish between a transaction on the Web and one in a physical store or branch – they are both elements of the customers total experience with the company. Leaders like Vanguard, Dell and Graubger understand that loyalty is determined by full range of their interactions with customers, and they consciously integrate their operations to produce a seamless, quality experience.

In this view, the web becomes, to borrow a phrase from Vanguard’s Jack Brennan, “a tool, bit a strategy”. Its unique capabilities are used to improve communications with customers, to enhance organizational learning about customers’ needs and increase responsiveness, to reduce customers’ transaction costs, and to enhance convenience – all of which are vital for developing strong and durable relationships. But these relationships are not exercised in isolation. They are plugged into the full range of corporate capabilities.

Nothing but the Truth

In the end, loyalty is not won with technology. It is won through the delivery of a consistently superior customer experience. The Internet is a powerful tool for strengthening relationships, but the basic laws and rewards of building loyalty have not changed. By encouraging repeat purchases among a core of profitable customers, companies can initiate a spiral of economic advantages. This loyalty effect enables them to compensate their employees more generously, provide investors with superior cash flows, and reinvest more aggressively to further enhance the value delivered to the customers.

What is changing is the pace at which these economic rules are playing out, and the speed with which companies must improve their products and services if they hope to keep customers loyal. Customer’s tolerance for inconsistency and mediocrity is rapidly disappearing. In the past, convenient store locations, aggressive sales forces, and a general lack of information shielded companies from the penalties of providing anything less than the best product and service quality; customers where loyal by necessity not by choice. Thanks to the Internet, those shields have been dismantled. Customers can compare suppliers in real time, all the time. Building superior customer loyalty is no longer just one of the many ways to boost profits. Today it is essentially for survival.

SELF ASSESSMENT EXERCISE

• List and discuss the elements of building internet customer loyalty.