Study: E-Commerce Sites Require Loyalty Programs

FRAMINGHAM (04/28/2000) - People may be true to their school or root, root, root for their home team, but they don't show much loyalty to e-commerce Web sites despite the fact that more than 75% of online shoppers participate in some type of loyalty program, according to a study released today by Jupiter Communications Inc.

New York-based Jupiter said the survey of 1,200 U.S. online consumers revealed that only 22% of them cited loyalty programs as an incentive to buy products or services from a Web site. Consumers placed a higher value on easy returns (40%), customer service (37%) and product selection (37%).

Even the travel industry, which innovated frequent flyer and preferred guest programs, has been unable to effectively extend their retention efforts to the Web, Jupiter said.

"Consumers return to sites where they receive tangible value for being loyal, whether the value is priority service, personalized offers or e-mail updates," said Melissa Shore, a senior analyst at Jupiter. "Commerce players must create an online experience for users in which their customers see transacting on the Internet as a benefit, not a deficit."

At an online travel conference in New York yesterday, Terrell Jones, CEO at Travelocity.com, said his company creates a personal profile for each of its 19.2 million registered users.

"We know an awful lot about the customers," Jones said. "We know their addresses, their shopping habits, their preferences." And when Travelocity sends direct e-mail to a customer, he added, it makes sure that missive contains information the customer actually wants.

"If you send them a bunch of junk mail, you'll lose them," Jones said. He also stressed that his company handles all of its customer service in-house instead of outsourcing those functions. "In many ways, we're a service company that also sells tickets," he said.

At the same conference, Greg Stanger, chief financial officer at Expedia Inc., Travelocity's chief competitor in the online travel business, said product diversity is a key in creating customer loyalty.

Stanger said Expedia is working to offer more links to small hotels and individually owned vacation homes in order to draw customers who might want to vacation in out-of-the-way places or who would rather not stay in large hotels.

"People want options, and we're looking to give them those options," he said.

Ken Pelowski, chief operating officer at GetThere.com, a leading business-to-business online supplier, pointed to the need to plan for a certain amount of disloyalty among customers.

For example, his company allows its corporate affiliates - such as Nike Inc., Lucent Technologies Inc. and The Boeing Co. - to switch between travel agencies and global reservations systems while using the links provided by GetThere.

"The idea is that (users) stay with us even while they shop around," Pelowski said.

Shore, the Jupiter analyst, recommended that e-commerce companies improve customer loyalty by:

- Beefing up customer service and improving response rates.

- Streamlining product research and purchasing navigation.

- Enhancing product information and broadening product availability.

- Cataloging more information about users.

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