Net Prophet

SAN MATEO (05/15/2000) - What's the old joke about the two guys facing down a hungry lion? One asks the other, "Can you outrun a lion?" The other replies, "I only have to outrun you."

That's pretty much the state of Internet commerce. Things such as online customer service are invariably rated poor by consumers, but you don't have to be great right now -- just better than your competitors.

We may no longer be in the infancy of I-commerce, but at most we're shaky toddlers, lurching forward on uncertain feet.

Consumers tend to rate their online buying experiences as bad, so a little improvement could make a big difference in your business. Consider Amazon.com Inc. Honestly, how much distinguishes Amazon from its competitors? So why is Amazon a market leader? Certainly, coming to the game early counts for something. But that alone isn't the answer.

No, Amazon is Amazon because it provides things such as customer service just a little bit better than its competitors. Not always great, just a little bit better. And it's the little differences that pay off big-time with customers.

Customer loyalty is the Holy Grail of Internet commerce. But how does one get loyal customers, those that will return time and again?

Whether it's business-to-consumer or business-to-business, everybody wants repeat business, and for good reason: The cost of acquiring online customers is steep. Depending on industry, the costs can range from $30 to $90 to get a customer to come and make purchases on your site.

According to research done by Primix Solutions, the average newly online consumer spends $187 on a site. When you consider that 20 percent is a good rule of thumb for gross margins online, spending $40 to acquire a customer who brings you $37 in business is hardly a compelling business model. Get them to come back just once and the situation is reversed.

Hence the rise of the loyalty program. The travel industry has always been a pioneer with incentive programs -- frequent-flyer miles are a given.

Online, numerous start-ups are trying to offer incentives to consumers to keep their loyalty. Flooz.com, Beanz.com, and Netcentives, among many others, all offer consumers merchandise credits for everything from surfing to participating in research to purchasing.

Although research house Jupiter says 75 percent of consumers participate in some sort of loyalty program, only 22 percent said that the incentive programs created an incentive to purchase online.

Clearly, loyalty is not just about point programs. Jupiter found that the ability to easily return merchandise, top-notch customer service, and broad product selection all rated higher than loyalty programs in the purchase process.

Consider that 85 percent of customers indicated the ability to return merchandise easily was important to them. Contrast that with the 50 percent who are dissatisfied with the process.

Although customers continue spending online, they also consistently rate service as poor. Consumers seem to be resigned to poor service on the Web. A minor improvement in service could make a big impact on loyalty.

Jupiter's survey indicates that 72 percent of consumers say customer service is critical to them; 41 percent say they're satisfied with their online customer service experiences.

Which leads to leaders in online loyalty. Activemedia breaks online retailing into 10 categories and cites leaders for each.

Those top companies include Dell Computer Corp., Barnes and Noble, Amazon.com, Sabre, Charles Schwab, eBay Inc., eToys, AutoTrader.com, Land's End, and Homeruns.

Take note that more than half of this list consists of companies that had existing business models prior to the boom of I-commerce.

Things such as returns and getting a live person on the phone to answer your questions are real-world activities -- something most dot-coms aren't too good at.

But take heart: Like the two men trying to outrun the angry lion, you don't have to be quicker than the lion, just quicker than the other guy.

Send e-mail to sean_dugan@infoworld.com.

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More about Amazon.comCharles SchwabDell ComputereBayeToysJupiterNetcentivesPrimix SolutionsSabre CorpSchwab

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