Raising customer retention rates means focusing on long-term relationships. And as customer acquisition costs continue to rise, companies have no choice but to find new ways to make each new customer more profitable.
Even when an online store is successful in driving traffic to their site, getting customers to complete transactions is a frustrating task. It is impossible for customers to be profitable if they only browse. Too often for most vendors in the online retail environment, customers take advantage of the ease of comparison shopping. The result is millions of transactions aborted at the last second.
Imagine being the manager of a crowded store on a Saturday when dozens or hundreds of customers fill their shopping carts only to abandon them at the checkout stand during the course of their transaction. Online, this is not just a retailer's nightmare, but rather a daily reality. More than half of online shopping carts are abandoned, leaving more than $6 billion in incomplete sales on the proverbial table.
All of these challenges are the direct result of customer empowerment. Most early e-commerce success stories are based on business models that address each of these key issues. In the end, however, one key element of the user experience may prove more powerful than any other -- the use of technology to track preferences and provide each customer with unique and personalized service.
The cornerstone of a unique, personalized and valuable shopping experience is software that enables retailers to understand and anticipate customer needs.
It's the difference between a random greeter at a physical store nodding and saying "hello" as you walk through the door and an online retailer that welcomes you by remembering your name, clothing size, favorite type of music, hobbies, interests, and other preferences.
The benefits are mutual. Retailers are able to enhance customer service while customers enjoy better service and more competition in the marketplace.
Two years ago, the concept of one-to-one marketing was new even to the digital world. The ability of a site to personalize, customize or target its products, content, services, advertising and marketing was both promising and extremely challenging.
New technologies, however are making a positive customer experience possible for even the earliest-stage companies. The integration of software into Web sites, the facilitation of customer accounts with powerful database software, the utilization of Web content management databases and other tools allow consumers to create a personal interface that cannot be rivaled in the physical world.
Another technology option for online retailers are "," which further streamline the process of storing user preferences by embedding small bits of information to a small text file directly on a user's computer through his or her Web browser. This enables the Web server to instantly identify preferences, maintain the items in a user's shopping cart between visits, "remember" a visitor and many other useful functions.
Cookies, however, are greatly maligned and misunderstood, as they have come under increasing scrutiny as part of the debate over . Although cookies are generally harmless, the mere fact that Web servers can place the information on a user's browser has been a catalyst for great concern.
Internet browsers can be set to warn users when cookies are introduced and easily configured to refuse cookies altogether. Regardless of the existence of these simple options that any user can easily implement, the controversy over their use remains.
Fortunately for consumers, market dynamics and the law are already working to ensure that the only business practices that will survive in the long-term balance convenience and privacy concerns
With the increased capabilities to provide personalized customer service, the question of online privacy has become one of the most important issues facing companies engaged in electronic commerce.
The combination of enhanced technologies and the promise of one-to-one marketing creates immense new opportunities, but simultaneously has raised concerns over online privacy to a fever pitch among end users and policymakers.
Because consumers are sensitive to privacy issues and have become better educated about their choices, leading companies have been motivated to adopt a "" business model.
"Sense and respond" refers to businesses that seek to learn, understand and interact with consumers on a personal, individual basis by using technology and other methodologies. The term, coined by author Steven Haeckel, can be contrasted with "make and sell" enterprises.
Once again, the newly empowered customer is shaping online business models by demanding that sites respond to the privacy preferences of the e-commerce consumer.
Consumers are concerned, but for many, the question is based on notice and trust. Consumers are willing to share information with sites in exchange for services. A recently released (FTC) report notes that many consumers do share information when the benefits are sufficient to justify the sharing of information.
The industry is now engaged in several coordinated, proactive efforts to educate the public about the issue of trust, what they should expect from a privacy policy and what they should look for in one. The FTC also recently released figures that showed more than 90 percent of Web sites have posted privacy policies.
For consumers, the law is already on their side. Sites are held accountable by current law to abide by their privacy policy. Thus, it is truly a question of trust, and to help ensure that trust the industry has created third-party compliance organizations, such as and , to provide a viable method of ensuring that privacy policies are upheld.
Despite the criticism that these organizations are not achieving ubiquity online, the large number of pending Web site applications indicate that both the compliance organizations and the applicant companies take the compliance process very seriously. Once again, newly empowered consumers fully understand that it is the best interest of any company to protect customer privacy, driving change in the market. For those companies that have chosen to ignore consumer preferences and not pursue proactive, responsive privacy practices, the market, through the collective actions of empowered, educated consumers, has a solution.
But perhaps more importantly, current privacy law in this country also takes into consideration special types of information that deserve greater protection than shoe sizes and favorite hobbies. The sector-by-sector approach allows sensitive information -- medical, financial, credit, academic and children's data -- to be protected in ways most appropriate for each industry. States have flexibility in responding to their own constituents' preferences. These laws apply to both online and offline collection and provide consumers protection for their most sensitive and personal information.
Industry agrees that calls for privacy legislation are both premature and potentially damaging. Business models are evolving. The market is changing. Consumers are exercising their growing power, and companies are working to find new ways to educate consumers on ways to ensure that their power is effectively exercised to shape online privacy practices.
Given the rapid change, feel it is inappropriate for the government to dictate which models will succeed and which will not. In the next twelve months, industry will continue to educate consumers about their choices and sites that do not effectively respond to online consumer preferences will simply fade away
Ask your Mom if she wishes she had electronic commerce back when you were a kid.
Suddenly, the groceries, hard-to-find presents, school supplies, clothes and dog treats can be bought without leaving the living room. In the time it used to take just to find a parking space, a purchase can be made. Gone are the days of driving, parking, finding that the product sought is not being carried, getting back in the car and starting the process again.
Weekends are no longer spent running errands but spent enjoying the goods that just arrived in the mail, or even by courier in under an hour. But it's not all about convenience.
It's about power. Thousands of online vendors want her business, your business and everybody else's. They listen, are willing to make deals, and provide flexible terms that are defined by the customer.
Nothing is beyond the reach of the consumer. From a pint of ice cream to a luxury yacht, consumers can purchase virtually anything online from a wide variety of sources on terms that are acceptable to each individual.
The old maxim that the best consumer is an educated consumer has never been more true than on the Web. The educated customer - one who understands the power that he or she holds online - is the primary force shaping the digital economy today. Businesses that want to succeed will respect this reality.
Like everything else, the digital economy is changing common perceptions about public policy and issue advocacy. The explosion of the Internet has ensured that the relationship between industry and government will be fundamentally altered forever.
It's a reciprocal relationship. Policymakers charged with addressing current issues must tackle the challenges posed by the growth of the digital economy, while high-tech companies must work closely with policymakers to ensure that well-intended but potentially harmful legislation is not adopted to avoid crippling the digital economy.
Today, policymakers struggle to keep up with the electronic marketplace. The pace of technological change is rapid and relentless; public policy is deliberate and comparatively slow.
Similarly, industry struggles to keep abreast of policy proposals. Given the high-tech industry's historical arms-length relationship with government, many companies competing on Internet time find frustrating and difficult the consensus-building process necessary to succeed in the public policy arena. However, these very same companies understand that if they do not contribute to and participate in the process, they may find themselves legislated out of business.
The need for a new approach to public policy has never been greater.
Corporations, special interest groups and individuals have always tried to influence policymakers, but the rules of the game have forever changed because of the Internet. Where policymakers have often shaped both established and emerging markets through regulatory or legislative efforts, the global nature of the Internet has forced industry and government to work together more closely than ever before.
The result is a new paradigm for public policy. Technological capabilities and the competitive market realities of the digital marketplace are powerful parameters that policymakers increasingly understand they must appreciate and respect. At the same time, industry has learned that policymakers face their own unique boundaries of public opinion and the rule of law.
The new rules are having an effect from Silicon Valley to the Beltway and all points in between. Public policy is increasingly shaping the emerging digital marketplace and therefore having a direct impact on corporate bottom-lines. The rules of the environment are threatening to change almost as quickly as the technology itself. As a result, public policy representation has quickly become an essential component of the high-tech business model.
Quite simply, the high-tech community has quickly emerged as a major force in the policy process because it can't afford not to.
Empowerment
Once they have made sure that each employee fully understands that the heart and soul of the hotel is its people, empowerment becomes a way of life. The word involvement is used in conjunction with the word empowerment and I think that this epitomizes the key to successful empowerment of staff. There are three basic tenets:
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Move heaven and earth to satisfy a customer
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Spending authority of $ 2,000 for everyone
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Authority to call in a co-worker for help
They have found that five things happen when empowerment and involvement take hold:
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Customers have a memorable experience
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Employees grow
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There is a devotion to the organisation's purpose
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Relationships become natural
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The system improves itself
The very action of involvement encourages even the most junior staff to contribute ideas for improvement. In every department there are white boards, usually labeled 'Good Ideas', to make it easy to see what action is being taken on the suggestions employees write up.
Research carried out by TARP shows the importance of problems being resolved by the first person you come into contact with. Ritz-Carlton's $ 2,000 authority for everyone is probably the world's best example of setting out o meet this objective. Henry Stimson, US Secretary of War during world war two said "The only way to make a man trustworthy is to trust him". That is how Ritz-Carlton views this authority and you will not find anyone being criticized for using it.
The Cookie.
In the spring of 1997 I visited a grocery store called Fresh Fields in Devon, Pennsylvania. It’s about 30 minutes from my home, but I had heard that the company focused on healthy foods, and that interested me.
During my visit there, I sauntered by the bakery counter when my eyes were drawn toward the cookies. As a recovering cookie-holic, I really was not interested in buying any. However, as I yielded to temptation, I focused on the healthy ones—you know, the ones with fiber and such. So I asked if they had any crumbs or samples I could taste.
The young man serving me was kind and unusually patient as he mused over my obvious buy-don’t buy dilemma. Instead of crumbs, he simply gave me an oatmeal cookie to taste. He then suggested the luscious (and expensive) chocolate chip cookies beside them—he said they were really good. Proudly, I refused.
But somehow he seemed to notice a twinge of doubt in my refusal, so he asked again. Again, I refused. Do you know how much I wanted to try that chocolate chip cookie? I’ll bet you can guess. And so did he, because when I returned home and opened the package of oatmeal cookies I bought, I found two chocolate chip cookies that he had secretly slipped into the package! Today I am a regular shopper at Fresh Fields. OK, not just because of this cookie incident, but it helped.
What I sensed immediately was that this company must foster a culture of empowerment that allowed this bakery employee (or team member as they are called at Fresh Fields) to make an independent decision to satisfy, no, delight this customer.
The Orange.
Closer to my home is another very good grocery store where I shop when I don’t have time to visit Fresh Fields. This store’s products are more traditional, but their service is generally good.
For the last few months, however, I have been having difficulty buying oranges. More times than not, when I get to the checkout counter, the price for oranges will be wrong—usually higher. Correcting this is inconvenient and sometimes embarrassing when there is a line of customers behind me.
I have mentioned this to the produce people, but the problem still exists. A couple of nights ago I confronted one of the produce people again about the pricing problem, and pointed out another obvious error. To their credit, they handled me well, and worked with me to correct the problem. It finally took a manager to make a phone call and straighten out the pricing.
While the manager was phoning the other store, I talked with the young man in produce. He said that these juice oranges weren’t selling because the price was just too high (because of the pricing error). I asked him if he could change it and he said no. He also knew that they would be throwing out the oranges soon if they didn’t sell. His frustration in not being able to correct such an obvious problem in his own department was evident.
The Lesson.
I tell these two contrasting stories because they relate directly to customer satisfaction and profitability as a function of employee empowerment. Two good grocery chains with two very different approaches to management.
At Fresh Fields, every employee is aware of his or her impact on profit and is empowered to take independent action to maximize it.
The decision to give two expensive cookies to a customer is not an insignificant decision. It is a business decision that may influence the relationship between a store and its customer.
Unfortunately, it is a decision that most employees in traditionally managed organizations have no authority to make.
My hope is that these two examples will clearly show how customers and profits can be won or lost when employees are enabled to take ownership of day-to-day problems. Once again, it just makes sense.
