Loyalty Programs Alone Fail to Create Loyal Customers

Jupiter: Loyalty Programs Alone Fail to Create Loyal Customers


75 Percent of Online Consumers Participate in Loyalty Programs, Less

Than One-Fourth Say Programs Are Important to Motivate Purchase

A new research report from Jupiter Communications, Inc., (Nasdaq:JPTR) the worldwide authority on Internet commerce, reveals that more than 75 percent of online consumers participate in some type of loyalty program, but few said that it is a critical motivator to increase online purchases. Commerce players must not rely on incentive programs to serve as the sole mechanism to drive loyalty; instead, they must fill functionality gaps or face losing customers to either more costly channels or to competitors that offer more value.

While specialized programs provide incentives to drive loyalty, commerce players must first address critical issues that affect a broad audience. According to a Jupiter/NFO Consumer Survey of 1,200 US online consumers, only 22 percent of respondents indicated that loyalty programs serve as an incentive to purchase online. Online consumers place a higher value on easy returns (40 percent), customer service (37 percent), and product selection (37 percent).

Even commerce sectors such as travel, an early innovator in developing aggressive customer loyalty initiatives, have yet to extend their retention and loyalty efforts to the Web effectively. Loyalty initiatives must go beyond points; instead, they must offer online consumers compelling service and functionality to coax loyal customers online and develop online relationships with new customers.

“Loyalty is not only about loyalty programs, but also about rather unique and differentiated products or levels of service,” said Melissa Shore, a senior analyst for Jupiter Communications. “Consumers return to sites where they receive tangible value for being loyal, whether the value is priority service, personalized offers, or e-mail updates. Commerce players must create an online experience for users in which their customers see transacting on the Internet as a benefit, not a deficit.”

Shore recommends that commerce players pursue the following actions:

— Improve customer service response rates. Commerce players must

continue to make investments in customer service and improve

response rates to customers’ inquiries. A Jupiter/NFO Consumer

Survey found that 72 percent of online buyers said that

customer service is a critical factor in their online shopping

satisfaction; however, only 41 percent indicated that they

were actually satisfied with their customer service


— Streamline product research and purchasing navigation.

Commerce players, especially those selling complex products,

must address a highly diverse set of questions posed by a

broad customer base. Confusing navigation with limited service

options will dissuade customers from current and future


— Enhance product information. Consumers are seeking

comprehensive product information in a customer friendly

environment; providing this information remains a critical

issue for commerce players. Content must fill the gap created

by the inability of consumers to physically touch or see a

product prior to purchase. Richer information leads to smarter

purchasing decisions; satisfied purchasing experiences deepen

the relationship between companies and their customers.

— Improve product selection and availability. Commerce players

that sell physical products must invest in internal systems

such as inventory management, while improving external-facing

functionality such as product availability and shipping status

simultaneously. Stock-outs present an opportunity for

competitors to steal even the most loyal customers.

— Ease the return process. An overwhelming 85 percent of online

buyers said that the ability to return merchandise easily is

important to them, but more than half remain dissatisfied with

the process, the survey found. Commerce players must expand

servicing channels by either leveraging traditional retail

outlets or partnering with companies that own physical


— Analyze program viability. Of online consumers that

participate in loyalty programs, 65 percent belong to just

three or fewer programs. Commerce players must analyze the

likelihood of consumers actively participating in their

loyalty program, given consumers’ low threshold for

participating in a number of programs.

— Leverage information about users. Commerce players must

develop an understanding of actual and potential levels of

loyalty among their customers. By analyzing demographic and

behavioral data, commerce players can identify high potential

users and target incentives to induce profitable behavior.

Jupiter will discuss these loyalty findings and other new Internet research during the Jupiter @Travel Forum, which takes place today in Miami at the Hyatt Regency Hotel, and features keynote speakers, West Shell, CEO of Netcentives; Richard J. Davis, CEO of Rand McNally & Company; and Brenda McLaughlin, senior vice president, Internet Publishing for Frommers.

This year’s @Travel Forum offers a unique opportunity for executives affiliated with travel suppliers, Internet technology companies, online travel agents, reservation and back-end systems, tourist offices, and other travel marketing organizations to learn from Jupiter’s analysts and industry leaders.

Besides the three keynote speakers, more than 40 industry experts are joining Jupiter’s senior analysts to discuss the issues of marketing, advertising, partnerships, distribution strategy, site infrastructure, and emerging technology surrounding this mature online market. Panel speakers include luminaries such as: Richard Barton, CEO, Expedia; John Samuel, vice president, American Airlines; Mike Mulligan, CEO, Mapquest; Rick James, senior vice president, Customer Service and Sales, Princess Cruises; Ronald McElfresh, VP, Online Services, Cheap Tickets; Brian Thomson, president and CEO, Trip.com; John Davis, president and CEO, Pegasus Systems, Inc.; Brian Froelich, senior vice president of Consumer Travel, American Express; Ken Swanton, CEO, Lowestfare.com; and David Miranda, CEO, Lastminutetravel.com.

In addition to the two days of sessions, the Jupiter @Travel Forum includes an exhibit hall featuring more than 50 companies addressing issues relevant to the technology, distribution, and services of the Internet travel industry. Sponsors of the Jupiter @Travel Forum 2000 include PeopleSupport, Travel Agent, Time Digital, Upside Today, Business 2.0, and NetCommerce.

To receive information on future forums from Jupiter Communications, contact Jupiter at 800-488-2140 ext. 6424 (international callers can dial 917-534-6424) or visit Jupiter online at http://www.jup.com/jupiter/events/forum/. For sponsorship and exhibitor opportunities, contact Faine Speyer at 917-534-6118, or via e-mail at faine@jup.com.

Jupiter Communications Inc. (Nasdaq:JPTR) is a leading provider of research on Internet commerce. Jupiter’s research, which is solely focused on the Internet economy, provides clients with comprehensive views of industry trends, forecasts, and best practices. The company’s research services are provided primarily through its continuous subscription services. Jupiter also produces a wide range of conferences that offer senior executives the opportunity to hear firsthand the insights of its analysts and the leading decision-makers in the Internet and technology industries. Jupiter Communications is based in New York City, with operations in London, San Francisco, Stockholm, Sydney, and Tokyo. For more information on Jupiter Communications, visit http://www.jup.com.

This press release contains statements of a forward-looking nature relating to future events or future financial results of Jupiter Communications, Inc. Investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, investors should specifically consider various factors which could cause actual events or results to differ materially from those indicated from such forward-looking statements, including the matters set forth in Jupiter Communications’ reports and documents filed from time to time with the Securities and Exchange Commission.

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