Discounts, Marketing Practices Working Against E-Tailers

A survey by Valentine Radford found that online retailers are topping traditional stores in service, but their marketing efforts and practice of providing discounts are keeping them from getting the most from their customers.

Online retailers looking to succeed should target what the survey calls “Internet Power Shoppers” — the one-third of online shoppers that buy twice as much as the other two-thirds.

Valentine Radford’s “iCustomer Observer” survey, conducted quarterly in conjunction the University of Missouri, Kansas City surveys 25,000 online consumers to determine current attitudes and behaviors in such areas as product quality and selection, pricing, customer service, advertising and current Internet shopping issues and trends. The most recent results indicate that Internet marketers don’t understand the hybrid shopper they have created and, as a result, they have missed the Internet Power Shopper.

According to Dr. Gene Brown, the Valentine Radford Professor of Marketing at the University of Missouri, Kansas City, the Internet Power Shopper intends to spend $1,660 online over the next 12 months compared to $1,200 for the last 12 months, an increase of 38 percent. The survey found Internet Power Shoppers to be affluent, young (average age of 37), spend a lot of time online and have high-speed Internet access both at work and at home.

“Internet Power Shoppers have extremely favorable attitudes towards Internet shopping in general, and specifically towards product pricing, quality and selection, advertising and service,” Brown said. “Marketers need to apply traditional marketing techniques like market segmentation to the Internet to target consumers and maximize their profits. Then they can reach both the Internet Power Shopper as well as those who buy occasionally.”

Not only are online retailers missing their most profitable customers, but the practice of offering discounts is also hurting their marketing efforts. Discounting has generated the expectation that the Internet is a bargain basement. According to Valentine Radford CEO Chuck Curtis, Amazon’s discount model is seriously flawed and makes its marketing efforts one-dimensional. The survey found that the vast majority of shoppers expect discounts online, and Cutis said proven marketing tools such as gift with purchase and coupons should be used to reward customer loyalty online, just as they are in the real world.

The survey also found that online shoppers like receiving e-newsletters and emails from their favorite retailers, but most online consumers find banner ads annoying. Because the typical online consumer uses one email address at work, a second for shopping and a third for family and friends, and marketers should include in their emails an option for the recipient to redirect future emails to a different email address and take advantage of software available on the market to target better.

One the bright side, shoppers already rate service on the Internet well above traditional shopping. Respondents to the survey gave the Internet a service score of 6.9 and traditional shopping a 5.9.

Internet Power Shoppers vs. Other Shoppers
Online Spending: Last 12 Months $1,200 $480
Online Spending: Next 12 Months $1,660 $680
Overall Satisfaction with Internet
Shopping (one scale of 1 – 10)
8.8 6.8
Percentage of respondents who
desire free shipping for products
which cost less than $25
30% 68%
Percentage who find banner ads to be annoying 55% 75%
Percentage who have more than one email address 90% 70%
Percentage who enjoy email marketing 75% 42%
Percentage who enjoy e-newsletters 90% 70%
Percentage who prefer email delivery
of coupons and other offers
70% 45%
Average Age 38 55
Average Annual Income $67,000 $34,000
Source: Valentine Radford

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