Price not the best path to customer satisfaction

A recent survey of the top online retailers found that lower prices don't guarantee a satisfied customer.

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Contrary to what some might expect, price is not the biggest concern for online retailers hoping to satisfy their customers.

ForeSee Results, an Ann Arbor, Mich.-based customer satisfaction management company, recently released the results of its annual study of the top 100 online e-retailers. Based on the University of Michigan's American Customer Satisfaction Index, the study, which ranked the vendors based on online revenue, found that Netflix, QVC.com and Amazon do the best job of serving their customers.

But it's not necessarily low prices that make the most difference. There are four key elements of online retail satisfaction: the site experience; the price; merchandise, including availability and product selection; and brand or brand image.

 

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"When we look across the top 100, we see that price, the majority of the time, is the lowest-scoring element," said Larry Freed, president and CEO of ForeSee. "Consumers aren't all that happy with price. The instinct then is, 'I gotta lower my prices. That's where consumers score me the lowest.' "

According to the survey results, however, focusing on lowering prices may not be the best idea.

"Only 5% of the time will improving price have the biggest impact on satisfaction and behavior," Freed said. "A significant majority of the time, site experience or brand image will have the biggest impact on satisfaction and the financial results."

A key to improving that experience is maintaining consistency across channels, and when companies add in different pricing strategies, that only adds another layer of complexity and inconsistency.

"That's a reason for companies to rethink shopping policies," Freed said.

For example, most online retailers charge shipping fees above and beyond the retail price of an item. But the physical stores don't charge real estate costs or the costs of shipping.

One need only look to Best Buy (a laggard in this year's ranking, coming in at the bottom with a score of 71) to see the dangers of inconsistent pricing. The consumer electronics retailer is facing a lawsuit in Connecticut, which is charging that stores in the state attempted to trick customers by displaying one price on online sites and a higher price on look-alike sites at in-store kiosks.

For most site visitors, the Internet is not a purchasing tool but rather a research and marketing tool. Online retail conversion rates average around 3% to 5%, according to Freed. Many people have no intention of making an online purchase, but they will go to the store for the final transaction, or else they plan to make a purchase online at a later point.

The importance of customer satisfaction is even greater for organizations looking to future performance, Freed said.

"We see an incredibly strong causal relationship between satisfaction today and financial performance tomorrow," he said. "Satisfaction today is probably the best lead indicator for a business. We tend to focus on financial metrics -- abandoned carts, sales, top-line growth, bottom-line growth. All of that's obviously important, but that tells people what has happened, not what will happen."

There is an enormous amount of research showing that satisfied customers become loyal customers, which translates to further purchases and better word of mouth.

The results are in

This year's top scorers, Netflix, the online DVD rental service, and QVC.com, a multi-channel retailer, lead the way with a score of 85 on the 100-point scale. They are followed closely by Amazon.com, a pure online retailer, and the Barnes & Noble Website BN.com, a complement to a traditional bricks-and-mortar chain, with a score of 83. Each demonstrates a different business model.

"It's not the business model that puts somebody on top, it's more about business execution, about what customers need and want," Freed said.

The lowest scorers in the top 100 were PCConnection.com and PCMall.com, with scores of 67, HomeDepot.com with a 69, and Lowes.com with a 70.

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