Online customer satisfaction hits record high: How good is good enough?

Does the quest for optimum e-commerce customer satisfaction have a date with the law of diminishing returns? It's a question raised this morning by notably rosy survey data.

Only one company - online or brick-and-mortar - does a better job of keeping customers smiling than does Amazon.com, according to the University of Michigan's latest American Customer Satisfaction Index (free reg. required to download report).

No disrespect to 57 Sauce, but top dog Heinz doesn't have the same variety of IT, inventory management and direct delivery challenges as an Amazon ... and the ketchup king has been honing its act since 1869, or 126 years longer than Amazon's been around.

Amazon may be the best, but it is by no means an aberration, according to ACSI. Also racking up high scores were newcomers to the survey, Newegg (87) and Netflix (84), as well as a host of e-commerce veterans such as eBay (81). Travel and brokerage outfits didn't' fare quite so well by comparison.

Survey authors say the ascension to the top of the e-commerce titans comes while their offline counterparts are struggling to keep their heads above water, both in terms of customer satisfaction and financial performance. From today's press release:

E-commerce in aggregate rises to a score of 81.6 on the ACSI's 100-point scale, a significant 2% jump from 2006. The e-commerce sector now outperforms all other service industries measured by ACSI.

"The improvement in e-commerce is impressive, given the downward trend in the national ACSI," said Claes Fornell, head of the ACSI at the University of Michigan and author of The Satisfied Customer. The Index includes more than 200 companies in more than 40 industries and slipped 0.4% to 74.9 in its second consecutive decline. "E-commerce is the only sector to improve this quarter, and in fact reaches an all-time high in customer satisfaction while other some industries start to struggle."

The online retailers surpass their offline counterparts in customer satisfaction by 12%, according to this measure.

"Against a backdrop of weakening consumer spending and talk about recession, e-commerce will continue to be a bright spot for multichannel companies," said Larry Freed, an online customer satisfaction expert and president and CEO of ForeSee Results.

"Companies have to excel in their online channel: survival in this economy depends on customer satisfaction, because switching costs are low and an alternative is just a mouse click away."

However, presuming it's true that you can't please everyone, might there be a point at which the pursuit becomes unjustifiable from a business perspective? I put that question to Freed via e-mail:

Do you foresee any theoretical limit for improvement in ACSI scores for the e-commerce sector?

There is no true limit short of 100, but there is a practical limit. Not a specific number per se, but I don't believe we have seen a score above 90 in the history of the ACSI. In addition, we have had many stages of innovation in e-commerce, and with each stage of innovation the standard of performance continues to increase. With the strong scores we see in the e-commerce sector, I believe surpassing 90 will be a big challenge.

Will top performers such as Amazon - second only to Heinz among all companies surveyed - see their efforts to improve customer satisfaction run into the law of diminishing returns?

There is a point of diminishing return, where an investment to improve customer satisfaction may not yield a significant enough improvement in financial benefits. However, if others are making improvements and implementing new innovative capabilities, those that don't move forward will slip behind and see downward pressure on satisfaction scores.

What surprises you most about this year's results?

Good question. We follow this space very close and work with many e-commerce companies on a daily basis, so I don't know that there was anything that really surprised me. However, there were a few results that were notable.

Newegg's debut was very impressive and while I have been very familiar with their success I think that their score was probably a surprise to many. In fact, many consumers may not even know Newegg. They have a very specific audience they serve and do a remarkable job in doing so.

Fidelity also saw a great increase. Again, I expected them to increase their scores, but their increase was significant. They have a great focus on the customer experience and the results show that.

(Update: Emphasis here on how the insurance industry fares in this survey.)

(Update 2: Bloomberg focuses on Wal-Mart's poor performance.)

(Update 3: Chicago Sun-Times: Thumbs up for Macy's; down for Wal-Mart.)

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