Genuine loyalty could increase order sizes by 60%

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Companies considering viral marketing and customers' satisfaction when identifying loyal customers can reduce costs by 27% and increase average order sizes by up to 60%.

According to a CRM consumer survey* by Jupiter Media Metrix reveals that most companies define customer loyalty too narrowly and are overlooking key measures of their customers' behavior.

Forty-five percent of online shoppers choose e-commerce websites based on word-of-mouth recommendations, yet only 7% of companies are implementing tools that allow them to identify 'viral influencers' through email pass-along rates.

"Most companies are not tracking their customers' behavior adequately enough to understand customer loyalty," said analyst David Daniels. "Businesses need to identify what influences their customers purchasing decisions and they should start by building a broader view of consumers' behavior. While no single CRM application currently offers a comprehensive view of a company's customers, some wise businesses have devised methods to do so and have experienced a drastic reduction in acquisition costs and significant increases in average order sizes."

Key findings

• Most companies do not look beyond monetary metrics when identifying loyal customers. According to a Jupiter executive survey**, 63% of businesses define loyal customer segments and the value they place on those relationships by customers' spending habits and order values, while just 13% of companies incorporate customer-satisfaction scores.

Analysts have found that customers tend to be loyal to merchants that win their trust over time via a series of positive events, and many satisfied and loyal customers whose spending is not in the high-dollar category can evade a company's radar screen altogether. The incomplete approach companies currently use to identify loyal customers alienates valuable, lower-spending clients who may provide a low-cost means of customer acquisition when they make recommendations to others.

• Companies are not using customer data effectively and are allocating their customer and marketing analysis dollars incorrectly. Most companies are underutilizing data that they have collected on their customers and are instead using third-party data.

According to a Jupiter executive survey, 60% of companies purchase third-party data to analyze and segment their customers. Furthermore, 58% would use third-party data if their budget allowed, while just 17% of executives said they recognized that they already have enough data collected about their customers.

• Analysts believe that email will dramatically enhance the ability of companies to measure viral behavior.

Since HTML-based email messages can contain links to files remote from a user's desktop, companies can track and measure the pass-along rate of these messages (60% of online individuals have the ability to read and accept HTML-based email) and will soon be able to develop loyalty and retention campaigns that target viral influencers directly.

"To improve their understanding of customer loyalty, companies must implement tools that allow them to identify 'viral influencers' and build a consolidated customer view," analyst David Daniels said. "Improved email tracking capabilities and clickstream analysis tools are creating greater opportunities for companies to better learn their customers' behaviors.

"While most CRM vendors only address one or two pieces of the customer data puzzle, companies must rely on multiple vendors. For this reason, businesses should avoid vendors that build their solutions on expensive proprietary data schemes and should instead invest in those built on an Internet architecture."

* Jupiter Consumer Survey: In February 2001, Jupiter designed and fielded a survey to online consumers selected randomly from NPD consumer panels. Respondents received an email invitation to participate in the survey, with an attached URL linked to the web-based survey form. The sample was weighted by a series of demographic and behavioral characteristics to ensure that it was representative of the online population. Demographic weighting variables included age, gender, household income, household education, household type, region, and market size.

** Jupiter Executive Survey: In March 2001, Jupiter conducted a formal survey of leading executives across multiple industries to explore strategies, attitudes, and expectations of market-driving companies toward online customer service response management systems. Jupiter surveyed a sample of companies based on both Jupiter judgment of the most important and representative firms in this space, and the Media Metrix 200 most popular sites for February 2001. Executives from these companies were contacted via email requesting their participation in the survey, with the questionnaire linked as a Web-based survey form. The survey explored a variety of topics related to customer service.

About Jupiter Media Metrix
Jupiter delivers Internet measurement, analysis, intelligence and events to provide businesses with resources for profiting from the Internet. The company is headquartered in New York City and operates worldwide, across the Americas, Asia Pacific, Europe (as Jupiter MMXI Europe), and the Middle East.

Jupiter Media Metrix

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