Report: Word-of-Mouth Key to Customer Acquisition

By Robert Conlin
CRMDaily.com
July 16, 2001

Jupiter said 45 percent of online shoppers choose Web sites based on word-of-mouth, yet only 7 percent of companies are implementing tools that allow them to identify viral influencers.

Satisfied online shoppers who tell friends, family and coworkers about their positive experience make up a large and vital block of consumers for Internet retailers -- but their impact often is overlooked when those retailers look for ways to acquire customers, according to Internet research and measurement firm Jupiter Media Metrix (Nasdaq: JMXI).

Jupiter said retailers routinely use a narrow set of parameters when defining customer loyalty and overlook key measures of their customers' behavior, allowing a highly effective and relatively inexpensive customer acquisition arm to slip through their nets.

The firm recommended that Web retailers utilize e-mail more effectively to reach this core group and trace "viral influencers" -- those users who pass along e-mail special offers and other messages to friends, family, coworkers and others in their e-mail address book.

Find the Root

Jupiter said that although no "one single CRM application offers a single comprehensive view of a company's customers, some businesses have unearthed methods to do so and have seen a decrease in customer acquisition costs and an increase in average order sizes."

"Most companies are not tracking their customers' behavior adequately enough to understand loyalty," said Jupiter analyst David Daniels. "Businesses need to identify what influences their customers' purchasing decisions, and they should start by building a broader view of customer behavior."

Numbers Game

Jupiter said 45 percent of online shoppers choose Web sites based on word-of-mouth recommendations, yet only 7 percent of companies are implementing tools that allow them to identify viral influencers.

The New York-based firm said it conducted a recent executive survey that revealed 63 percent of businesses define customer loyalty by spending habits and order values, while just 13 percent incorporate customer satisfaction scores and other intangibles that encourage consumers to return and to tell others about their experience.

In addition, Jupiter said, most companies are underutilizing data they collect about their customers and instead are relying on third-party data, driving up costs and creating a disconnect between businesses and their customers.

Mail Bonding

The firm suggested that companies invest in e-mail tracking and clickstream analysis tools, as well as tools built on Internet architecture rather than those built on "expensive proprietary data schemes."

Jupiter, noting that 60 percent of online users can read and accept HTML-based e-mail, said retailers should be able to develop e-mail loyalty and retention campaigns that directly target viral influencers.