Saturday, January 24, 2009

Benefits of eLoyalty

In my recent blogs I have discussed the factors affecting eLoyalty as well as discussing the reasons customers might become loyal to a web site. I also blogged about understanding eLoyalty. While it was important to list some of the reasons that customers might become loyal to a web site, I have yet to discuss the benefits to the company of having a web site. Once again, I am referring to the masters thesis of Asim and Hashmi noted in my blog of Jan 9th.

Before I discuss the benefits of eLoyalty a good definition was suggested by Srinivasan, Anderson and Ponnavolu in an article in the Journal of Retailing, Vol.78Issue 1, Spring 2002 which states that eLoyalty is "the customer's favorable attitude toward an electronic business, resulting in repeat purchasing behaviour." This is more limited than the general definition proposed by Oliver in the Journal of Marketing, 63, Special Issue in 1999 where he defined customer loyalty as "a deeply held commitment to re buy or re patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behaviour."

The following list of benefits is not exhaustive but represents some of the benefits of a web site.
1. Increased revenue - The most obvious impact of a web site is that it offers another sales channel to the market. Recent data has suggested that the amount of business being done on the web continues to increase; hence, the web is becoming a market unto itself. Thus, it becomes imperative to market on the web.
2. Referrals - Once customers realize the web site works for them, the site, like any bricks and mortal business will provide a source for referrals. Web sites can carry the same word-of-mouth.
3. Price Premium - AS customers become more loyal, there is a greater likelihood that they will not shop the net, After each successful interaction, the customer is less likely to shop. This can be referred to as the "tie that binds." This translates into the the notion that each successful interaction with a customer creates an emotional connection and each time this is repeated, the connection gets stronger. Loyal customers are less likely to use the introductory coupons that are often used to bring in the new customer.
4. Operating costs - The cost of operating the web site is very close to a fixed cost. Once the web site is open, the cost of maintenance is very small against the benefit of the site.
5. Customer benefit - There is a customer benefit from the site that occurs as the customers become familiar with the site and find the ease of use reduces the time to place orders and the time to search.

The bottom line is that there are many benefits to an internet site and the loyalty that can arise when a site is well defined. The benefits accrue to the customer through an increased trust that the company behind the site provides superior customer service. A great site has no more loyalty than the customer service support behind the site.

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