MIT Sloan Management Review
Magazine: Summer 2013Research Highlight
June 18,
Rolph E. Anderson, Srinivasan Swaminathan and Rajiv Mehta
Companies looking to build a satisfied and loyal customer
base need to realize that there are multiple drivers of customer satisfaction.
Savvy company executives know that some of their greatest
and potentially most enduring assets are their long-run customer relationships.
Trying to sustain a competitive advantage with new products is a frustrating
game, where short-term leads often erode quickly. But by satisfying customers,
companies can nurture long-term relationships and customer loyalty. What’s
more, a small increase in customer loyalty can make a big difference in company
profits. McDonald’s, for example, calculated back in the 1990s that just one
additional visit per week by “heavy users” would boost annual sales by more
than $10 billion dollars.
Blending Bricks and Clicks
In retailing, customer loyalty cannot be achieved for long
by keeping customer interactions online distinct and separate from those
offline. Many consumers have largely merged their shopping to the extent that
they go back and forth between online and offline retailers. They may start out
by looking at desired products in a store, go online to check out the products
further, then decide to buy them from an online seller such as Amazon. Or they
may start searching online, then go look at the items offline at a Walmart or
Target store, and perhaps buy them there because they’re immediately available.
Since consumers are fusing their offline and online shopping habits, retailers
must adapt their systems as necessary to create seamless “brick-and-click” stores.
Shoppers will reward companies that do this well. Many Amazon customers use
brick-and-mortar Best Buy, Target or Walmart stores to inspect products before
making their final purchases online from Amazon. Consumers treating offline
stores as “showrooms” prior to purchasing elsewhere on the Internet present a
serious threat to companies that have yet to blend their offline and online
stores.
Traditional retailers are fighting back, in part by asking
suppliers to provide designs and products that are “exclusive” to their stores.
Toys “R” Us, for instance, has many products that can’t be purchased from other
stores or websites. Target does likewise with fashion brands such as Missoni
and Jason Wu. Retailers need to recognize that technological devices such as
smartphones are upping the ante. Apple recognized this early on and developed
its own brick-and-mortar stores where potential customers could see, hold and
try products before buying them. To attract and retain customers, retailers
will need to meet or exceed customer expectations throughout the shopping and
buying experience.
What Customers Want
To gain a deeper understanding of the factors shaping
customer satisfaction and loyalty, two of the authors conducted in-depth
interviews with 20 online shoppers and 10 e-commerce executives to develop a
questionnaire. Then, working with a market research firm, we collected data
from 851 respondents and conducted multivariate data analysis. We identified
six significant drivers of customer satisfaction in e-business, which in turn
influence customer loyalty: adaptability, commitment to customers, connection
with other customers, product assortment, easy transactions and appealing
environment. (Details of our findings were published in the Journal of
Marketing Theory and Practice.) We will discuss the role of each factor, and
how these drivers of customer satisfaction may be relevant not only to
e-businesses but elsewhere.
Adaptability
A “one size fits all” approach is no longer adequate.
Businesses must find ways to tailor their products, services and shopping
experience to individual customers. Advances in data mining and purchase
behavior modeling allow companies to utilize cloud data to predict and target
individual customers’ purchase interests. Caesars Entertainment Corporation,
one of the world’s largest gambling casino operators, collects detailed
information on individuals’ gambling behavior as they move from machine to
machine (for example, how many different machines they play, how many wagers
they place and the total amount of money they deposit in the machines). By the
time the customer leaves the casino, Caesars has enough information to know how
much the customer is worth to the company, to build a detailed profile of the
person’s gambling preferences and to develop a plan for enticing him or her
back to the casino.
Apple is also well known for adapting product offerings and
services to the needs of its customers. With airy store interiors, attractive
lighting and attention to small details, it provides customers with a casual
yet exciting atmosphere. The company teaches sales associates not to sell but
rather to help customers solve their problems. As an Apple training manual puts
it: “Your job is to understand all of your customers’ needs — some of which
they may not even realize they have.” To keep the focus on finding solutions
for customers, sales associates do not have to meet sales quotas and do not
receive sales commissions. They are trained to approach customers with a
personalized welcome, to gently probe to understand their needs, to listen for
and attempt to address their concerns and to invite them to return in the
future.
Commitment to Customers
Commitment to the customer is displayed by responsiveness
and resolution of customer concerns, problems and complaints. Instead of
telling customers what the company will do in response to a complaint, a
business that’s truly committed to customers will ask them how they would like
the problem to be handled or resolved. Oftentimes, this approach leads to lower
costs, because many customers ask for less than the company might be willing to
do to solve a problem. Solving complaints to the full satisfaction of customers
is critical in the age of the Internet and social media. Previously, unhappy customers
might tell a dozen other people; today they might go online and voice
complaints that reach tens of thousands of people. Product or service failures
that are not resolved promptly and to the full satisfaction of the customer
affect future business, because they weaken customer-company bonds and lower
perceptions of service quality.
Connection with Other Customers
Customers like being able to share opinions with others.
Companies can support this desire by establishing comment links, buying circles,
chat rooms or special events. When effectively organized and maintained, these
mechanisms can engender positive word of mouth about the company.
According to Opinion Research Corp., in 2009, more than one
in four adults had rated products or services on some website, and 84% of U.S.
shoppers claimed that online customer evaluations had influenced their decision
to purchase a product or service. Customers who share experiences tend to trust
information from other customers more than company-provided information; they
reinforce each other’s purchase decisions while sharing insights on product
use.
Some companies achieve important benefits from organized
customer groups. Harley-Davidson customers, for example, often have such a
strong identification with the Harley-Davidson brand that they won’t even
consider non-Harley accessories. Networks also encourage social relationships
among customers built around a shared interest. Many consumers partially
substitute shopping for recreation and use these activities to develop social
activities and bonds with others. By creating and supporting customer networks,
sellers provide the opportunity for customers to interact, identify and develop
social relationships with other customers that can translate into greater
loyalty toward the business and its brands.
Product Assortment
Customers are interested in a selection of products and
services tailored to their lifestyles and personal preferences. A product
assortment that is too extensive can be confusing and cause customers to
postpone or cancel purchases; an assortment that’s too narrow can lack
excitement. Trader Joe’s, the Monrovia, California-based grocery store chain,
with more than 350 stores in the United States, tries to find an effective
balance. In contrast to typical grocery stores, which may carry 50,000 items, a
Trader Joe’s store typically has only about 4,000 items, which are selected to
match the demographic and psychographic profiles of its customers (who tend to
be more affluent and more health and environmentally conscious than other
grocery shoppers). Trader Joe’s culture promotes loyalty and customer service
by providing the product assortment and quality its customers want, as
expressed in the company’s product guarantee: “We tried it. We like it. If you
don’t, bring it back for a refund or exchange — no hassles.”
Easy Transactions
Consumers respond positively when the purchasing process is
simple, intuitive and user-friendly. A brick-and-mortar store that doesn’t
provide information and prices at product displays or one that tolerates long
checkout lines may frustrate customers, causing many to abandon their shopping
carts and leave the store. The management of Amazon.com saw the benefit of this
fundamental customer service concept in the early days of its business and
acted to develop its patented “1-Click” purchase system. Despite being the
recognized industry leader in transaction ease, Amazon continues to make
improvements in the transaction process. All merchants, whether online or
offline, who make the purchase transaction process faster and easier increase
the likelihood of customers making repeat purchases and moving toward loyalty.
Appealing Environment
Over and above specific products, customers appreciate and
respond to a stimulating shopping environment that offers attractive store
layouts and engaging displays or websites. The selling environment can be
enhanced through interesting and entertaining presentation of products to
capture shopper attention and encourage interaction. Unless vendors offer an
appealing shopping or browsing environment, attracting shoppers is often
difficult. Bass Pro Shops, a retailer of hunting, fishing and camping equipment
headquartered in Springfield, Missouri, seems to have taken this challenge to
heart. The company, with more than 70 current and proposed stores in the United
States and Canada, sells outdoor gear to more than 60 million customers a year,
many of whom spend hours at a time examining the fishing and hunting displays.
Other retailers provide an interactive, enjoyable shopping
environment for their customers by making use of social media. For example, at
WE Fashion, headquartered in Utrecht, the Netherlands, and with about 250
stores in Europe and China, customers can try on stylish clothing, shoes, bags
and accessories and then push a button on the “Tweet Mirror,” which allows them
to post pictures on Twitter so friends can see them in the new outfits and give
immediate feedback.
Online retailers are eager to attract shoppers to their
websites through social media. According to Janrain, a Portland, Oregon-based
provider of social media log-in technology, in early 2013 more than 50% of
online shoppers preferred to log into retail sites using Facebook rather than
accessing the company’s own website directly. Some e-tailers invite customers
to begin their online shopping this way using visual lures such as extra-large
Facebook buttons. Shoppers have also shown a greater willingness to share more
detailed personal information about themselves on Facebook than on other social
networks, allowing e-tailers to better customize the products they display for
specific Facebook customers.
Companies looking to generate a satisfied and loyal group of
customers need to keep in mind the different drivers that affect customers’
attitudes. For each factor, they should measure, benchmark and compare their
performance with different customer groups against past performance, the
company’s overall goals and the performance of major competitors. The classic
approach is to ask respondents to select an adjective that reflects their
opinion, typically using a five-point scale; a similar survey can be conducted
with the customers of competitors. By monitoring how well it is doing versus
past performance, competitors and other benchmarks, a company can develop
insights and early warnings that will enable managers to make timely
adjustments to their customer relationship strategies.
ABOUT THE AUTHORS
Rolph E. Anderson is Royal H. Gibson Sr. Professor of
Marketing at Drexel University’s LeBow College of Business in Philadelphia,
Pennsylvania. Srinivasan Swaminathan is a professor of marketing at Drexel
University. Rajiv Mehta is a professor of marketing in the School of Management
at New Jersey Institute of Technology in Newark, New Jersey.
No comments:
Post a Comment