Direct Marketing, Mail Order, and E-commerce News from the National Mail Order Association

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Retail Websites Are Powerful Drivers of In-Store Sales, Brand Loyalty,
And Customer Satisfaction, Says Groundbreaking Study of Multi-Channel Shoppers
by ForeSee Results and FGI Research

Retail websites have a major impact on customer satisfaction and brand loyalty while
traditional channels are relatively weak on both counts. In addition, the value of the
website to the multi-channel retailer's bottom line is far greater than just the online
purchases being generated, according to a groundbreaking study that yields some of
the first hard data on how shoppers behave in a multi-channel environment.

A surprisingly large proportion of multi-channel shoppers -- 86 percent of those
surveyed in the study -- prefer to make purchases offline. Yet this statistic dramatically
understates the influence of the web channel. Nearly 40% of multi-channel shoppers
prefer to use the web for browsing and researching their purchases. Of this group of
people who would typically be viewed as unconverted browsers or "shopping-cart
abandoners," 71 percent complete their purchase in the store. In addition, shoppers
are consistently less satisfied with the store experience than with the websites of the
same multi-channel retailers, suggesting that positive perceptions generated online are
being undermined at the point of sale.

"Up to this point, multi-channel retailers had to take a leap of faith that good online
experiences fuel offline sales," said multi-channel retail expert and ForeSee Results
CEO Larry Freed. "Now the impact of the online shopping experience on in-store
sales can be quantified more clearly using customer satisfaction metrics that gauge the
role of each channel in providing a more satisfying overall customer experience."

The study surveyed more than 4,000 customers of sixteen top retailers that have
significant presence both online and offline. Produced by online satisfaction firm ForeSee
Results together with FGI Research, the survey was conducted with a random sample
of U.S. consumers from FGI Research SmartPanel(TM), one of the industry's leading
online panels.

The survey found that satisfaction of multi-channel shoppers who both browse and buy
online is significantly greater than for those who browse and buy in the store. The web-only
experience produces an average satisfaction level of 79 (on a 100-point scale), and appears
more likely to spur people to become repeat customers and recommenders. By contrast,
when people research products online and then buy offline, the average satisfaction score
is 74. And those who both browse and buy in a multi-channel retailer's store register a 73.

On every key measure driving satisfaction, retailers' websites are better at producing satisfied
customers than traditional stores are. People who both shop and buy online register a score
of 85 with regard to how they view a store's brand, vs. 79 for those who prefer the store
channel to shop and purchase. The web is also much better at making a positive first impression
and making people feel valued as customers: First-time buyers who purchase online rated their
satisfaction nearly 8% higher at 70, while the corresponding score for those who buy in the store
is 65.

"Multi-channel retailers have clearly been able to generate greater customer satisfaction and
achieve more brand appreciation on the web than they've been able to in the offline world,"
said Freed. "But the gap between online and offline satisfaction is alarming, especially since we
see such a large proportion of people moving from one channel to another when making a
purchase. It's a difficult balancing act, since goodwill generated online can easily dissipate
with the offline experience."

"That does not mean retailers should necessarily try to lure people to the web," Freed said.

"Trying to drive people to a channel they don't already prefer also undermines satisfaction,"
according to Freed. "Free shipping might get a customer online but that could be a negative
if they prefer going to a store. We also found that those kinds of promotions help generate
a one-time sale but generally do not lead to repeat business."

Customers were surveyed during the busy holiday shopping season, when consumer activity
is high--a time that also gives insight into how well companies are converting one-time
purchases into repeat business. "With the growing penetration of e-commerce during the
holiday season, the web has become an extremely convenient, timely channel for capturing
broad-based customer feedback to complement behavioral data that retailers are collecting,"
said Dino Fire, General Manager of FGI Research.

FGI Research's Smart Panel(TM) was surveyed using a specially-developed application of
the American Customer Satisfaction Index (ACSI) methodology to analyze the complex
multi-channel shopping experience. Produced by the University of Michigan, the ACSI
assesses the impact of customer satisfaction on financial performance in the U.S. economy
on a quarterly basis. Using the same ACSI methodology, ForeSee Results captured and
quantified the impact of critical components that drive satisfaction with of the multi-channel
shopping experience. The ACSI technology then calculated how these components impact
overall customer satisfaction and loyalty behaviors. Satisfaction with the components,
aggregate experience and future behaviors are measured using a 100-point scale.

The findings have serious implications for planning successful multi-channel retail strategies.

"There's a danger of forcing the sale in a channel other than that which an individual prefers,
but there's also a major challenge making sure that you don't lose the sale on the trip from
the computer to the store," said Freed. "The situation demands a better integrated experience,
and may call for changes in how retailers treat channel-jumpers in their stores."

Category-level analysis revealed that brand image and the store experience are high impact
drivers of satisfaction for all categories in the survey: department stores, apparel and
accessories, electronics and computers, gifts, and toys/books/games. In many cases, the
highest scoring elements had relatively small impact on overall satisfaction and behavior.
For instance, in the electronics and computers category, price received the highest element
score (81), but is the driver with the lowest impact on overall satisfaction and on future
purchases and loyalty. "This is an example of electronics retailers sacrificing the opportunity
to build long-term loyalty for the short-term sales this holiday season, which may come back
to haunt them in the coming year," said Freed.

These and additional findings are detailed in a report called "Customer Satisfaction, Loyalty
and Buying Behavior in the Evolving Multi-channel Retail World," which is available at no
cost at http://www.foreseeresults.com. Customers surveyed were pre-qualified as having
had recent experience with sixteen specific companies that are major players both online
and off, including Wal-Mart, Sears, Williams-Sonoma, Pottery Barn, Gap, Banana Republic,
Barnes & Noble, Borders, Best Buy, and Circuit City.

About ForeSee Results

ForeSee Results is the market leader in online customer satisfaction management and converting satisfaction data into user-driven web development strategies. Using the methodology of the University of Michigan's American Customer Satisfaction Index (ACSI), ForeSee Results scientifically quantifies the elements that drive online customer satisfaction and predicts future behaviors such as purchase, return site visits or referrals. Clients include Danskin, Hallmark, Finish Line, Lillian Vernon, Overstock.com and Tower Records. ForeSee Results, a privately held company, is located in Ann Arbor, Michigan and on the web at http://www.ForeSeeResults.com.

About FGI Research

FGI Research is a leading provider of market research and information solutions that improve the speed, accuracy and impact of business decisions. By combining proven research methods, trusted online sample, and advanced analytics and communications, FGI delivers to end users and marketing research firms immediate and actionable information to decision makers throughout their respective enterprises. FGI offers a premier suite of online research solutions under the SmartPanel(TM) family of specialty and proprietary custom research panels. For additional information visit http://www.fgiresearch.com.

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