CUSTOMER SATISFACTION GAP WIDENS AS E-COMMERCE INDUSTRY MATURES; CLEAR LEADERS EMERGE
After a slight decline last year, customer satisfaction with the e-commerce sector has started to rebound, with a year-over-year increase of one point, or 1.3%, to an aggregate score of 79.6. The fourth quarter 2005 American Customer Satisfaction Index (ACSI) E-Commerce Report measures the following industries within the e-commerce sector: e-retail, online auction, e-brokerage and online travel companies. (The report on the e-business sector, including portals, search engines and news and information sites, is released every August.)
Even with this increase, customer satisfaction with the e-commerce sector is still more than a point lower than it was two years ago, when the aggregate score was 80.8. Customers' standards for e-commerce sites continue to rise as the industry matures, and online companies have struggled to keep up with industry leaders and high customer expectations. At the same time, customer satisfaction with e-commerce sites remains substantially higher than the ACSI aggregate score for cross-industry customer satisfaction, which this quarter is a 73.5.
The stakes are higher than ever for e-commerce companies to get a handle on customer satisfaction. The lead article in the January 2006 issue of the Journal of Marketing detailed academic research proving a direct link between ACSI scores and stock prices. After articles appeared in BusinessWeek, Institutional Investor, CBS MarketWatch and other prestigious news outlets about the link, investors will start to demand that companies make customer satisfaction a top priority.
As the industries in the e-commerce sector mature, we are starting to see the emergence of clear leaders and laggards. A large gap in customer satisfaction scores is most notable in the e-retail industry, where 10 points separate category co-leaders Barnes & Noble and Amazon from 1-800-FLOWERS, and in online auctions, where there is a difference of nine points between leader eBay and the lowest-scoring auction site, Priceline. Even the e-travel industry, which had long experienced a lack of differentiation, has seen Expedia emerge as the leader in customer satisfaction in fourth quarter 2005. As consumer standards rise, the "best of the best" e-commerce organizations are increasingly standing out from the rest of the pack, challenging competitors in their categories to enhance their focus on customer satisfaction in order to compete successfully.
Several e-commerce companies reported significant gains in customer satisfaction from 2004. Charles Schwab experienced a significant increase of 4.2% to a score of 74; Expedia jumped 3.9% to a 79 and Amazon's score rose 3.6% to 87. Amazon's score of 87 ties it with Barnes & Noble at the top of the ACSI e-commerce industry, indicating that these two organizations are doing an outstanding job of meeting the needs and exceeding the expectations of their online customers.
The chart above shows the gradual increase across all industries measured as part of the e-commerce sector and the significant lead enjoyed by the e-retail industry in particular.
COMPARISON OF ACSI E-COMMERCE SCORES TO OTHER ACSI SCORES
E-retail continues to have the highest aggregate score of the four measured industries in the e-commerce sector. Online retail significantly outpaces offline retail in terms of satisfying customers; the ACSI e-retail score of 81 is 11.9% higher than the aggregate retail customer satisfaction score of 72.4 for offline retail. At this stage in the evolution of e-commerce, online retailers have overcome the challenge of selling tangible products in a virtual world. In some respects, such as in providing extensive product specifications, online retailers even outperform their offline counterparts.
Online brokerage, on the other hand, has not yet taken full advantage of the potential of the online channel. For this reason, online brokerage is the lowest performing of the four measured e-commerce industries. The aggregate score for online brokerage of 76 is slightly ahead of the offline banking aggregate score (75).
Online retail long ago stopped being a novelty, and the expectations of the online shopper are continuing to rise with regard to their online experience. Despite the maturation of the industry, e-retail is doing a substantially better job of satisfying customers than offline retail. As measured by the American Customer Satisfaction Index, customer satisfaction with e-retail is almost 12% higher than satisfaction with the overall retail industry.
