English Section 06/04/2015

Scour the Web for the best deal? What businesses should know

The literature suggests that satisfaction is related to loyalty. In general, loyalty necessitates satisfaction, but satisfaction does not always lead to loyalty.
  • Customer satisfaction

Customer Satisfaction influences loyalty positively (Bolton et al. 2000) and is an antecedent of loyalty (Oliver, 1993; Reynolds and Beatty, 1999). For many years customer satisfaction has been a major goal of business organizations, since it has been deemed to affect customer retention and companies’ market share (Hansemark and Albinsson, 2004). Traditionally, satisfied customers have been thought of as less price sensitive, less influenced by competitors, buying additional products and/or services staying loyal longer (Zineldin, 2000). Oliver defines customer satisfaction as the “the customer’s sense that consumption provides outcomes against a standard of pleasure versus displeasure” (Oliver, 1993). Satisfaction with e-tailers, like satisfaction with traditional retailers, is not derived solely from the customer’s satisfaction with the product purchased (Balabanis et al., 2006) The dominant characteristics of e-store satisfaction are convenience, site design and financial security (Szymanski and Hise, 2000); traditional store satisfaction when separated from product satisfaction includes satisfaction with the individual salesperson (Reynolds and Beaty,1999) and store image (Bloemer and de Ruyter,1998). Building satisfaction should remain a priority of e-tailers (Balabanis et al., 2006).

The acquisition of successful customers is successful when (Gurau and Ranchhod, 2002):

PS > PSC

PS = perceived satisfaction offered by the company e-service offer

PSC = perceived satisfaction of competitors’ e-service offers

Szymanski and Hise (2000) argued that online convenience merchandising, site design and financial security are the main determinants of e-satisfaction.

The literature suggests that satisfaction is related to loyalty. In general, loyalty necessitates satisfaction, but satisfaction does not always lead to loyalty. It appears that switching barriers (Jones, Mothersbaugh, Beatty, 2000; Jones, Mothersbaugh, Beatty, 2002) and consumer characteristics like convenience and motivation can moderate the satisfaction-loyalty relationship (Anderson and Srinivasan, 2003). In line with the above arguments, Balabanis and Souitaris argue that goal-oriented shoppers - who have relatively high switching barriers as they lack time to search for alternatives and are motivated by an efficient and predictable transaction - will become loyal to an e-retailer once they are satisfied. On the contrary, experiential shoppers, who have more time to search for alternatives and actually enjoy experiencing novelty, might not remain loyal to the e-retailer even when they are satisfied.

Two additional issues that need to be clarified when researching customer satisfaction in services is whether satisfaction is conceptualized as facet (attribute-specific) or as overall (aggregate); and whether it is viewed as transaction-specific (encounter satisfaction) or as cumulative (satisfaction over time) (Hoest and Knie-Andersen, 2004)

  • Customer loyalty

Loyalty is defined as "a deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts are having the potential to cause switching behaviour" (Oliver, 1999). In summary, e-loyalty represents a customer’s favourable attitude toward the e-retailer, which results in repeat buying behaviour.

High rates of customer retention and increasing profitability from long-time committed customers reduce the drain on margins caused by expensive new customer acquisition. The result is a virtuous circle, an economic model in which efficiencies improve over time, and future revenue flows are assured against competitive attack. Some researchers claim that, if retailers do not retain absolute focus on what they can offer to keep the customers coming back to them, they will lose them quickly (Reichheld et. al., 2000). Where, in the past, customer loyalty was just one weapon to use against competitors, today it has become essential to survival (Reichheld et. al., 2000).

Moreover, Verhoef (2003) argued that, loyalty programs with economic incentives lead to greater customer retention. Loyalty creates increased profit through enhanced revenues, reduced costs to acquire customers, lower customer-price sensitivity, and decreased costs to serve customers familiar with the a firm’s service delivery system (Reichheld and Sasser, 1990).

In a more comprehensive model, Gommans and his colleagues identified five broad categories of differentiators that affect e-loyalty: value proposition, brand building, trust & security, customer service and website & technology (Gommans et.al, 2001).

Similarly, Smith’s model indicated that web site usability, features and benefits, purchase process, service, support, dialogue and relationships are the most important differentiators that affect e-satisfaction and subsequently e- loyalty.

In contrast, to the previous conceptual studies, Srinivasan et al (2002) provided empirical evidence that eight key online retail differentiation strategies (dubbed the 8Cs) influence e-loyalty:

    1. Customisation - tailoring the web environment to the customer
    2. Contact interactivity - the ability to interact dynamically with the customer
    3. Cultivation - the extent to which the e-retailer provides relevant information and incentives
    4. Care - the attention paid to pre and post purchase activities
    5. Community - the social environment facilitated by the e-tailer
    6. Choice- the degree of choice offered
    7. Character - the creativity of the website

All of the above factors, except convenience, were found to affect e-loyalty. In addition, Sirohi found that the quality of the stocked items, as well as value for money perception was found to have an important impact on store loyalty (Sirohi et.al, 1998).

Despite the ease with which comparisons can be made online, evidence suggests that online shoppers are involved in less comparison shopping and tend to switch suppliers less often than do brick and mortar shoppers (Reichheld and Schefter, 2000). Indeed, while some shop bot users are price sensitive, others remain attached to branded retailers and retailers with whom they have previous experience (Smith, 2002b). So while the physical search costs have been eliminated by intelligent comparison agents, significant cognitive switching barriers still exist in the online shopping environment (Hogue and Lohse, 1999; Johnson et al., 2003; Johnson et.al, 2004).

Leading e-commerce executives are concluding that the shift of business onto the Internet renders the loyalty principle more powerful than ever (Reichheld et. al., 2000).

Three basic truths are driving this conclusion:

  • As the Internet reduced the entry costs for retailers and pure play e-retailers flooded the market, costs for online customer acquisition has skyrocketed.
  • While high customer numbers help to offset fixed costs, they are no guarantee of long-term profits if you don’t build loyalty with those buyers.
  • Most importantly, profitable customers actually prefer to be loyal. There are plenty of bargain hunters who will scour the Web for the best deal. They are the same people who cut coupons and scout for discounts at shopping centres. They are not the ones who generate profits for retailers. The profitable customers are those who value the convenience of Internet shopping and appreciate the enhanced  functionality websites can provide, but who tend to consolidate their purchases in a sector with one online retailer and consider trust, not price, as the most important criterion for vendor selection. They bookmark their favourite sites, return to them often and use them for information and entertainment as well as multiplicity of transactions. Retailers are starting to understand that this second group represents their bread and butter and that they must find ways of targeting and retaining them.
  • Furthermore, the evidence that the loyalty rule still applies is clear in the strategies of e-commerce leaders – Dell, eBay – whose focus is on the delivery of a superior customer experience that will motivate customers to return to interact again. Their business models are driven by one factor above all others: customer retention.

III Customer Retention and Customer Share Development

Customer share is defined as the ratio of a customer’s purchases of a particular category of products or services from supplier X to the customer’s total purchases of that category of products or services from all suppliers (Peppers and Rogers, 1999).

Moreover, Souitaris and Balabanis, based on Wolfinbanger and Gilly’s study, suggested that the online shoppers can be categorised into two key benefit segments, goal-oriented and experiential, as well as a third segment of mixed orientation (Souitaris and Balabanis, 2007). In addition, they argued that e-tailer differentiation strategies based on convenience and customer care can increase levels of satisfaction when targeting the goal-oriented shoppers segment. Differentiation based on value for money and product quality can increase loyalty when confined to the goal- oriented shopper segment. Satisfaction as an intermediate objective leads to higher levels of loyalty in the goal-oriented shoppers segment than in the experiential shopper segment. As a result, differentiation based on convenience and customer care can influence indirectly (i.e., mediated by satisfaction) the loyalty of the goal-oriented shopper segment.

In retailing, satisfaction and loyalty was found to be significantly higher compared to the other service settings, however, commitment was lower, although not statistically significant (Dimitriades, 2006).


Anton and Postmus have identified 25 factors that combine to be an index of e-CRM, which they have been further divided into (TABLE 1), (Anton and Postmus, 1999):

  • Contact and information, general e-CRM features,
  • E- commerce features and
  • Post-sales support features

To supplement these 25 factors Feinberg, Kadam, Hokama and Kim (2002) reviewed the professional literature and identified 16 additional e-CRM features that might be present on a retail Web site (TABLE 2).



Contact and information, general e-CRM features

E-commerce features

Post-sales support features

Site customization

Online purchasing

FAQs

Alternative Channels

Product information online

Problem solving

Local search engine

Customization possibilities

Complaining ability

Membership

Purchase conditions

Spare parts

Mailing list

Preview product

 

Site tour

Links

 

Site map

   

Introduction for first-time users

   

Chat

   

Electronic bulletin board

   

TABLE 1

The e-CRM attributes that proved to have significant relationship with customer satisfaction are: mailing list, quick order ability, gift certificate purchase, affinity program and your account information [Feinberg and Kadam, 2002].




Affinity program – affiliations with philanthropic agencies or organizations.

Product highlights – benefits of particular products/ services highlighted.

Request for catalog.

Quick order ability – three click order

Ease of check out – subjective rating of ability to check out on an “ease” scale of 1(easy) - 4(difficult).

Ability to track order status.

Gift certificate purchase.

Store locator.

On-sale area – highlighted place on opeg Web page highlighting sale item(s).

Member benefits – description of benefits of shopping or belonging to site.

Order – ability to place an order within three clicks.

Speed of download page – less than 15 seconds was considered fast.

Account information.

Customer service page.

Company history/ profile.

Posted privacy policy.

TABLE 2

However, researchers suggest that e-retailers’ strategies should be based more on differentiation and focused market scope rather than cost leadership and price (Brynjolfsson and Smith, 2000; Lederer, Mirchandani and Sims, 2001; Porter 1980). For example, differentiation on educating and guiding the customer on how to reduce the time and increase the efficiency of transactions (convenience) and how to get the most out of the service (customer care), led Tesco and Ocado in Britain to success in their e-grocery venture and US firms like Streamline, HomeGrocer and Webvan to failure (Ellis, 2003; Reinartz, 2003). Differentiation has a strategic importance for a company only when it exists in the mind of the consumers, regarding some perceived value added to the product (Mintzberg, 1988).

As aforementioned, market scope is a very crucial factor for online environments (Souitaris and Balabanis, 2007) and according to some researchers, “…focus is a necessary condition for a successful e-business competitive strategy” (Kim et.al, 2004).

Souitaris and Balabanis have proven that e-satisfaction does not necessary lead to e-loyalty and thus, further differentiation is needed (Souitaris and Balabanis, 2007).

E-retailing is becoming more popular in Greece and since traditional retailers have to adopt this new trend, what they should focus on is mostly those dimensions that are highly correlated with Loyalty and Satisfaction and form their differentiation strategies based on that.

The businesses, that already have developed a website with advanced e-CRM tools, will have the ability to focus better on the exact needs and habits of the goal oriented and the experiential shoppers. In addition, the well-established e-businesses will have the ability to benefit to the maximum from their popularity for the e-services that they offer.

IV Shopping orientation and influencing factors

According to recommendations by Wolfinbarger and Gilly shoppers can be categorized into two key benefit segments – goal oriented and experiential (Wolfinbanger and Gilly, 2001). Souitaris and Balabanis empirically confirmed the recommendations for online shoppers by dividing them successfully into goal oriented and experiential, as well as a third group of mixed orientation (Souitaris and Balabanis, 2006).

Moreover, they proved that different differentiation strategies are necessary for an increase in loyalty for each group of shoppers. They found that there are different variables that increase customer loyalty and retention for each shopper’s category. More specifically, they found that in order to increase the satisfaction of the goal-oriented shoppers, e-retailers should base their differentiation strategies on convenience and customer care that indirectly will increase loyalty. For increasing the loyalty of the same group they should focus their strategies on value for money and product quality. Thus, satisfaction can lead to increase of loyalty for this group as an intermediate objective.

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Συμφωνώ να μην διατεθεί ο Παρθενώνας. Δεν θα είχα αντίρρηση αν επρόκειτο για άλλον αρχαιολογικό χώρο
6.1%
Η ψηφοφορία για αυτό το δημοψήφισμα έχει λήξει

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