E-commerce wins on satisfaction, ACSI finds

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By: Wise Marketer Staff |

Posted on February 24, 2004

While most internet businesses still have a long way to go in terms of achieving high rates of customer satisfaction, some have mastered the art of producing among the most satisfying shopping and consumption experiences of any category or channel, according to the latest American Customer Satisfaction Index (ACSI) report on e-commerce.

The aggregate score for the four categories of e-commerce measured this quarter registered a healthy gain, up 4.1% to 80.8 over the previous year's already-strong score of 77.6. Ratings are on the ACSI's 100-point scale, and the e-commerce score is substantially higher than the new national average of all industries measured in the index, which now stands at 75.0.

E-retail leads the field
"E-commerce, compared to offline alternatives, shows a remarkably strong ability to deliver superior consumer experiences," said ForeSee Results' CEO Larry Freed, who is an acknowledged expert on online customer satisfaction. "Most of e-commerce performs well but e-retail is clearly the standard-setter, while the other categories don't quite measure up."

These ACSI scores provide good insight into why e-retail revenues have been rising at such a healthy rate. The ACSI scores have a track record of predicting future behaviours (i.e. good shopping experiences create repeat business and measurable word of mouth advocacy). Consequently, Feed expects the upward spending trend to continue.

The rest of e-commerce
The news for travel, brokerages, and auctions - the three other areas of e-commerce covered in the latest report - is also good but not quite as impressive as e-retail. While e-retail earned an aggregate score of 84.0, the auction category was the next highest-rated with a slightly lagging score of 78.0. Travel's score remains steady from the previous year with 77.0, and brokerages are still in last place at 76.0, despite a three-point (4.1%) improvement over the previous year.

Star performers
The star performers in e-commerce are found, with one exception, in the e-retail category. Amazon.com registered and exceptionally strong score of 88.0, putting it among the very best performing of any of the nearly 200 companies included by name in the ACSI. Meanwhile, Barnesandnoble.com also showed great strength in delivering the total experience online shoppers want, with a score of 86.0. In addition, eBay is the one non-retail e-commerce company that is among the elite of the ACSI. Its score of 84.0 is among the strongest of any company measured in the index.

"E-commerce has significant advantages over other channels but some players clearly know how to press those advantages better than others," said Freed, citing the Internet's built-in capability for heightened customer feedback and quick, focused change and improvement. "There's much more to producing strong, profitable customer relationships than having a good web site. And what really impacts customer satisfaction and spending varies from one type of service to another. Amazon is amazingly good, but simply benchmarking against Amazon is not going to suffice for most e-commerce companies."

Amazon's success
Amazon.com maintained its impressive score of 88.0, despite continuing evolution in its business model, dramatic expansion of its product categories and financial discipline that made the company profitable in 2004.

"Amazon's score shows it is remarkably close to delivering customers' ideal," said Freed. "Maintaining strength while evolving the business model is even more impressive. The most important point is that it has a very strong customer asset, does well by its customers, and has every opportunity to build profitability, loyalty, and satisfaction on that impressive base."

Other players
The 'all others' score of 83.0 in the e-retail category is an indication of the relatively broad strength of a range of players. This group represents a sample of smaller players visited by survey respondents.

"Travel is doing well enough relative to the ACSI in general but you expect more than just 'well enough' from the internet channel," warned Freed. "Travel clearly has room for improvement. All the sites do roughly the same thing in roughly the same way, and there is no clear consumer preference among them."

With the exception of eBay, the named players in the auction space were found to be less impressive. Although uBid registered a three-point improvement to 73.0, it is still below the national ACSI average.

The brokerage category showed better-than-average performance mostly among the 'all others' smaller players. That category improved by 5.5%, up from 73.0 to 77.0. Schwab, the top ranked player, fell by one point from 76.0 to 75.0, while E*TRADE's score of 71 is four points below the national ACSI average for all companies.

"The online brokerage industry is not yet a master of the medium," said Freed. "Despite various attempts at differentiation and innovation, the industry has not yet found the formula that makes customers true fans of the online trading experience."

Staying in front
Freed warns that the e-retail industry must continue to understand customer priorities and stay ahead of evolving expectations. "Expectations of online retail are exceedingly high, according to the data," noted Freed. "So far, e-retailers have done a good job at understanding what matters most to customers and delivering the goods. There are some challenges on the horizon as expectations continue to rise. But it's a good bet that e-retailers will stay on top of the things that matter."

Though e-retail's strength indicates relative maturity, other categories' scores, which are much closer to being little better than the national average, show signs of still being in evolution.

"The online travel industry may lose a player or two - either that, or someone will distinguish themselves with products or services that make customers sit up and take notice," predicted Freed. "While eBay obviously 'owns' auctions, and customers show every sign of continuing to be big fans, there's also room in the auction field for niche players. Brokerages, so far, are less impressive, so that space is ripe for competitors and new ideas."

The ACSI's measurements were calculated based on surveys of users of the products and services being measured. The ACSI is produced quarterly and covers a range of goods and services used by Americans. It is produced at the University of Michigan and is done in partnership with the American Society for Quality and the CFI Group. ForeSee Results co-sponsors the e-commerce portion of the ACSI, as well as the annual e-business report included in the ACSI each August.

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