Loyalty

E-merchants, like merchants in traditional retailing, are interested not only in attracting new customers to their Web sites, but developing a base of loyal old customers who return to a site regularly. Web sites that inspire customer loyalty are said to be "sticky." The stickiest, most successful retail sites, such as Amazon.com, have shown that the characteristics that make a Web site sticky are frequently the same ones that keep customers coming back to bricks-and-mortar establishments: quality merchandise, low prices, and good customer service.

As the age of the World Wide Web was dawning, it was assumed that crucial differences in e-commerce would result in a different yardstick for the loyalty of customers. In fact, customer loyalty was expected to be so completely up for grabs on the Web as to be nonexistent. Unlike traditional shopping, consumers on the Web were always "just a mouse click away" from any merchant and every competitor. Established economic theory suggested that the ease of comparison shopping on the Web would encourage shoppers to seek out the lowest possible price on any purchase. In the end, Web shoppers would be loyal primarily to their own pocketbooks.

By the beginning of the 2000s, however, it seemed that something was seriously awry in these theoretical predictions. A 2001 study by Erik Brynjolfsson and Michael D. Smith found that online shoppers maintained a loyalty to brand names, even when prices were higher. Shoppers who used shopbots—online engines that compare the prices of similar goods at a variety of online sources—also tended to limit their shopping to familiar sites, even when they could plainly see that an item was available at a lower price elsewhere. The same study revealed that brand-name online retailers could charge more than their competition, and that shoppers were willing to pay more at sites they had already visited.

The latter finding was confirmed in a study of online shopping patterns conducted by Professor Eric J. Johnson and others. Johnson discovered that, despite being just a click away, Internet consumers do very little comparison shopping. The average shopper, he found, visits an average of only 1.1 book sites, 1.2 CD sites, and 1.8 travel sites in any month, and furthermore the number of sites visited did not increase as shoppers gained experience using the Web. Although Web shoppers tended to be more affluent and less conscious of price than traditional shoppers, Johnson provided evidence that loyalty to a single site was rooted in a phenomenon called cognitive lock-in. Learning to use a Web site is an investment of time and energy for shoppers. They must learn their way around each new site they visit, much like learning to find groceries in the aisles of a supermarket. Once shoppers are familiar with a particular online site (or supermarket), they are much less likely to switch to a new site whose individual, perhaps idiosyncratic, navigational features they would have to learn from scratch. Cognitive lock-in is so powerful that most Web shoppers are willing to pay more at sites they know rather than switch.

The implications for designers of e-commerce sites are clear. First, a Web site that is easy to use will be stickier—consumers will be likely to keep coming back. Second, when updating a site, Webmasters should revise content but keep navigational features. New pages on a site should use the same familiar navigational features. Finally, new sites benefit by actively copying the navigational features of the most successful e-commerce sites. It is still an open question precisely which features make a Web site easy to use. It is also unclear how many shoppers stick with the first Web site they shop at regardless how easy or difficult it is to use.

Like traditional retailers such as gas stations and supermarkets, e-retailers feature special promotions, so-called "loyalty programs," meant to boost customer loyalty. A variety of programs exist, similar to the old idea of frequent flier miles—surfers who use a Web site are awarded points which are collected and then exchanged for goods or services. Some Web sites, such as Dell Computers and American Airlines, have mounted their own loyalty programs. In contrast, so-called "loyalty vendors" develop programs in which many businesses, online and offline, can participate. In the programs developed by beenz, iPoints, Webrewards, and MyPoints, for example, consumers collect points at participating sites and can swap the points for merchandise at the same site or others—sometimes even at bricks-and-mortar stores. How shoppers qualify for points varies from program to program. Beenz, for example, awards points to surfers who visit or shop at participating sites; MyPoints gives points to surfers who take part in various marketing schemes, such as reading marketing e-mails, filling out surveys, visiting Web sites, making referrals to friends, taking advantage of trial offers, as well as shopping. The impact of these programs in influencing actual customer loyalty is in question. A study by Jupiter Communications, an Internet research firm, found that nearly 70 percent of online shoppers participate in such programs, but only 22 percent felt the programs influence their online shopping habits. The same study found that 72 percent of shoppers ranked the quality of online customer service as the deciding factor.

Another scheme for increasing online stickiness is the use of information about consumers to generate personalized marketing e-mails targeted at individual interests. Amazon.com, for example, tracks its customers' purchases and later notifies them of interesting new books. Some marketers believe that this sort of database mining—collecting as much information on individual consumers interests and pervious purchases—is the key to developing strong online loyalty. However, a survey reported in the Guardian, an English newspaper, found many consumers are suspicious of such "personal relationships" when initiated by e-merchants. Half the respondents believed the point of such a relationship was to earn the e-merchant more money. Less than five percent were interested in a relationship that involved revealing their preferences to online businesses.

Jupiter Communications developed a list of recommendations for Web-based merchants interested in strengthening the loyalty of their customer base, most of which apply equally to non-Web businesses:

1. Improve customer service;
2. Develop a site that is easy to navigate;
3. Provide more product information;
4. Improve product selection and availability, provide easy returns, and get the most out of information about users.