In E-Commerce, More Is More

Many business leaders, disappointed by online sales growth, see Web consumers as disloyal and unwilling to spend. But that’s because the managers are not exploiting what customers value most: engagement. Online automobile shoppers want information about cars, yes, but they also want to learn about such other topics as travel, sports, apparel, and finance, our research shows. Online shoppers for upscale clothing might typically want information on art or even business. Most firms limit their sites to providing narrow information about the products or services that are for sale. Indeed, the majority of managers we spoke to in our global study told us they believe that a broad array of information diverts attention from the core offerings. But we found it helps customers search for solutions, invites them to think of all the ways the core products might add value to their lives, wins their loyalty, and entices them to buy. In fact, we found that exploiting consumers’ desire for engagement is the single dominant driver of superior shareholder value for e-commerce companies. Our research involved an analysis of more than 1,700 e-commerce sites, along with interviews of 238 consumers and 112 managers in the United States, Europe, and Asia over four years. Some 57% of the managers were disappointed by their firms’ online sales growth, but only 17% had a plan to change their sites to improve sales—an indication that they didn’t even know how to start turning things around. Most believed that price was the only important way to attract online customers. We scored the sites on the five practices that customers said they cared about most, and we found that a higher overall ranking on those practices is associated with greater company value, as measured by Tobin’s Q, the ratio of market value to asset replacement value. In addition, the shares of the 25 companies with the highest-ranking sites outperformed the S&P 500 by two percentage points, on an annual basis, from 2003 through 2006. Four of the practices are increasingly common and expected by consumers—without them, sites can’t hope to keep buyers around long. They are: personalized shopping, clear categorization, order tracking, and in-depth product- or service-related information. It’s the fifth practice—customer engagement through the provision of information on related products and services—that represents the most significant opportunity. A high ranking on this practice is a stronger predictor of the company’s Tobin’s Q than the rankings of any of the other four. The top 25 companies for customer engagement outperformed the S&P 500 by more than 12 percentage points, on an annual basis, throughout the period. Only about 23% of the sites in our sample made use of customer engagement practices. What Engages Online Shoppers Most Of the five e-commerce practices that our research indicates customers care about most, only one—providing information on products and services related to the site’s core offerings—strongly engages online shoppers and gets them to revisit a site. Ralph Lauren’s e-commerce site is a good example of how to engage users. Through the online “luxury lifestyle” RL Magazine, consumers are invited to regularly revisit the site to learn about fashion, art, sports, healthy diets, and business—facilitating brand attachments and associations that go beyond the core product. Corporate performance reflects the success of the e-commerce site: The firm’s Tobin’s Q increased from 1.6 in 2003 to 2.6 in 2006, and its stock price more than tripled from 2003 to 2007. One very effective way for a company to start learning what its customers are interested in is to offer Web visitors a wide list of topics and ask them to vote on which they like. The firm can use those responses to help it decide which attributes—wealth, attractiveness, exclusivity, for instance—it wants customers to associate with its brand. The next step is to provide supplementary information that will help customers make those associations. Porsche, for example, uses the Web to offer adventure tours and travel information, reinforcing the brand’s image of passion and high performance.

In E-Commerce, More Is More

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