Why Online Businesses Are More Customer-centric

July 8th, 2013 (9,356 views) by Pinny Cohen

Online shopping vs. offline shopping

Many experts say that good communication and being customer-centric are the most important parts of any business.  Speaking with your customers results in myriad positive outcomes including understanding their needs, crowdsourcing ideas for improving your product or service, and building trust.  Online businesses have some structural advantages in that realm, which we’ll explore today:

Competition

Online: Competition is all around online, with so many providers for each service it can make your head spin.  Because there are few obstacles (aside from a mouse click) to changing a provider for your product or service, the feedback cycle is shortened and bad businesses die faster online.

Offline: While there is still competition offline, it is bound by space and time.  There are the physical limits of where you are, and where the product or service you want is offered. There is a cost of switching, whether it be the longer time it takes you to get to the competitor, the unfamiliarity with various store policies, different store hours, and even lack of guarantee of the competitor having the item in stock.

All of this leads to slower changing of habits, and that explains why that horrible pizza place near you is still open – despite your disgust with it.

Feedback

Online: Online businesses were made for feedback. You would be hard pressed to find a sizable store online without a community and immediate feedback via contact forms, live help, surveys, polls, and more. These tools serve many purposes, such as management learning about problems faster, faster access to help for a customer (e.g. – help desk, live help, knowledge base, manual), and better ability to predict demand for a product or service in the store.

There is also a streamlined and written record of every problem, question, and help request, allowing everyone in the company to fix problems.

The whole web culture spurs more of a “we serve the people” feeling among online companies because they know their customers can go to a competitor in just a click, whereas in person an upset customer has to physically get to a competitor.

Offline: The offline version of the contact form is the “suggestion box”. I put the quotation marks because I generally think it’s an often useless attempt at obtaining feedback.  The only people who fill out cards and stuff them in the box are those using it in a therapeutic fashion after a traumatic event (e.g. – the restaurant was out of pickles that day).  Even they aren’t truly expecting any change as a result of their suggestion.

Besides the “box”, there is no centralized complaint line.  You complain to an employee, and you’re lucky if he even remembers the complaint by the end of the day, or even cares to tell his supervisor, and that his supervisor even cares enough to keep moving it up the ladder.  The alternative is calling the headquarters, and good luck with getting a response from that black hole.

Due to the belief your problem won’t be relayed properly, you don’t even bother making the effort to tell anyone, unless you are REALLY upset…and then the expletives tend to deter the employee from repeating your problem to the boss.

Pricing

Online: Products and services are almost always cheaper online, and the free shipping trend is growing.  Online stores are careful to be more customer friendly since their business model relies on repeat intentional business more than an offline store (I’ll explain why in a moment).

The web stores have it much easier to contact customers in the future for more deals and offers, which means more total value extracted from the customer. Therefore they can afford to make less profit on each sale.

Price transparency also exists online, for the most part. With just a few clicks, you know if you are getting a good deal or not, and price comparison sites like PriceGrabber.com make it even easier.

One downside for these online retailers is the hindered use of the “rebate deal” or doorbuster. While the stores get tons of press and online buzz about those deals, the ease of leaving the store, and the low cost of visiting the store make it all too easy and tempting to just get in, buy the loss leader, and get right out – leaving little profit, if any, for the retailer.

Offline: Brick and mortar stores have more overhead expenses, so by necessity they almost always sell items at higher prices.  There is also no price transparency, since you just have their signage to rely on, and a general idea of what a fair price for the item might be.  I should note that this advantage is beginning to unravel as more Americans get mobile devices that can get on the web and check prices in the offline store.

Offline stores offer “rebate deals” or “doorbusters” more frequently for two reasons.  The first is that they spend a huge amount on print, radio, and TV advertising, and these deals sound fantastic. The second reason is because once you drove all the way to the store, you are going to shop for more than just that loss leader item. The offline stores don’t do this for publicity as an end goal, but rather in the likely hopes that more items will be sold to you. They are usually right.

One final note regarding pricing is that most states are starting to get very desperate for tax dollars and they are striking tax deals with large online companies (such as Amazon.com) in order to speed up forcing online retailers to collect taxes from out of state customers.  This will long term reduce online pricing advantages.

Advertising

Online: It is easier to track accountability and “force” the visitor to see deals (because the computer monitor is just a foot or two wide and the website owner can select what dominates the visual field on the website), and you can deal with it immediately.

Offline: Advertising is often in a different medium, and forces customer to recall and then apply the information in a different setting. For example, you might see a billboard while driving down the highway.  You would then need to remember what was on the billboard and why it was a good deal once you step into the store at a later time and place.  This is more challenging for your memory, and therefore less likely to be effective.

Checkout

Online: The checkout areas of online stores have really improved considerably in the last few years. Many stores offer one page or one click checkout, sometimes even letting you know in real-time if you have incorrectly filled in some information.  This actually makes the process shorter than an in-store checkout. While you wait for the order to finish processing, you are also able to browse the web, or check your email.

Offline: While online stores are constantly creating faster ways to checkout, the offline stores have lagged behind, and even gotten worse! Lines are getting longer and longer (not due to more shoppers, but due to less cashiers, and more new cashiers). Here you end up waiting much longer and trying to find something to occupy your time somehow while in line – checking if the guy in front of you is notably funny looking or maybe there’s a tabloid somewhere in the checkout lane with some good gossip. When was the last time you saw a tabloid on your way to checkout online?

Traffic/Parking

Online: OK, you got me, there’s no parking online. but occasionally when it’s busy season on some sites it can be slow or hard to visit a page…but mostly not an issue.

Offline: Hit or miss…during some seasons parking can be the most frustrating part of a shopping experience.  Who hasn’t had the frustrating experience trying to find a spot at the parking lot during the holidays? When parking becomes an issue, it raises the “cost to visit” (see below).

Cost to visit

Online: Virtually all American households have some form of internet access.  And that is just about the only thing one needs (short of a computer) to shop online. There is no risk to visit.

Offline: Here, the picture becomes more complex.  Offline shopping takes up much more time, gas, and car costs.  However, an interesting thing occurs in offline shopping.  The shoppers are much more likely to purchase, because they have “invested” in getting to the store and the cost of getting nothing is high.

These advantages, taken in sum, add up to a very strong momentum for online business, and any offline business should consider having an online presence to be able to “tap into” this marketplace where the rules are different, and success can reach beyond the local area the brick and mortar operates in.

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