INTERNET: Developing rules to build online loyalty - Some firms spend a fortune attracting customers to their sites, but are they doing enough to keep them? David Murphy writes

So much has been written about customer dissatisfaction with online shopping already in the short history of e-commerce that you sometimes wonder why anyone bothers to buy anything over the internet.

So much has been written about customer dissatisfaction with online

shopping already in the short history of e-commerce that you sometimes

wonder why anyone bothers to buy anything over the internet.

Web sites that take forever to load; e-mail enquiry and complaint lines

that seem to filter anything that needs a response into a black hole;

and fulfilment set-ups that fall way short of the mark. These all paint

a bleak picture of life in the new economy.

These tales of woe are all the more surprising when you consider how

much easier it is for shoppers to switch allegiance from one supplier to

another in the online environment.

Forget jumping in the car to try out another supermarket. On the web,

the world’s largest shopping mall is at your fingertips. This is why, in

theory, creating loyalty among your customer base is arguably even more

important in the online world than it is offline. So what’s going


In the offline world, loyalty is all too easily associated with reward

schemes. Keep coming back and spending money with us and we will give

you something to make it worthwhile, goes the mantra. A number of web

schemes have emerged that reward online shoppers for returning to the

same sites and spending money.

The first in this field, beenz, has been joined in recent months by

iPoints, MyPoints and Webrewards, and other schemes are in the


Webrewards, despite promoting its launch via a poster campaign, could

only offer a ’coming soon’ teaser when we visited its web site in

mid-June. These schemes take a traditional approach to loyalty, awarding

credits to shoppers for discounts against future purchases from

participating sites.

Bill Kirkwood is sales and marketing director of, an

online corporate travel service that runs its own loyalty programme.

He points out that any rewards-based loyalty scheme can only succeed if

the shopping experience is a good one.

’The service that you offer is always the most important thing,’ says

Kirkwood. ’Loyalty schemes won’t build loyalty for a bad product. Some

web sites are trying to throw money at people to use their site as a

means of compensating for bad service, but there is nothing that will

compensate for bad service.’

Indeed, Yahoo, Amazon and have made Helen Bridgett, chief

executive officer of the gardening site, a loyal

customer. They didn’t do this by offering points or prizes, but simply

by delivering what they promise.

’These three sites have real bands of core users and for the customers

of these services they’re now part of everyday life, because they’re

providing a service and they’re doing it well,’ says Bridgett. ’You can

always spot the brand with strong loyalty, they’re usually in the number

one spot - and they’re not only number one, they’re miles ahead.’

In fact, service would appear to be one of the key factors in generating

loyalty online, and for obvious reasons. Traditional mail-order

companies used to offer 28-day fulfilment, and many still do. The web,

however, has raised people’s expectations. On the web, you’d better get

it out tomorrow, or this week at least.

’The brands that build strong positions for themselves online will be

those that execute what they promise faultlessly,’ says Peter Matthews,

managing director of e-business consultancy, Nucleus. ’It’s a matter of

exceeding expectations. If you say you’ll deliver in seven days, you’ve

got to deliver in five and you can’t afford to send the wrong order

because the cost of returns will cripple you.’

Delivery deadline

Helena Rubenstein, managing director of brand consultancy The Lab, is

even more forthright. She advises: ’Get your delivery right in one

place, figure out how it works and roll it out. That used to be the way

people rolled out traditional retailing operations in the offline


It isn’t any different online, in that sense. Get it right, then roll it

out. Don’t piss off everyone simultaneously in 17 countries because

you’re in love with the technology.’

The whole point of creating loyalty among customers, of course, is that

however much the loyalty programme costs to operate, it is likely to be

less than the cost of acquiring new customers. This is why, as any

marketer knows, existing customers are more profitable than new


But if this maxim holds true in the offline world, it must surely hold

true in the online world, given the amount of money some internet

companies are pouring into ad campaigns.

According to figures from Nielsen Media International, dotcom spending

on offline advertising rose from pounds 41.5m in 1998 to pounds 109.3m

in the ten months to October 1999, with dotcoms’ TV ad expenditure

rising by 500% in 1999 compared with 1998.

’The first generation of e-commerce brands have thrown money at

advertising, thinking that will provide a solution and that the

early-mover advantage will mean they can do an Amazon or a Yahoo,’ says

Peter Matthews of Nucleus.

But recent dotcom failures have demonstrated that it’s not so


Many investors have seen money burnt up quickly through advertising. So

perhaps the next generation of successful e-commerce companies will be

the ones that pick out the niches, deliver the lowest cost of

acquisition and retain customers.

Matthews believes the new wave of e-tailers will comprise traditional

’old economy’ companies fighting back against the start-ups.

’I think sentiment has turned and we would fully agree with the

bricks-and-clicks approach appearing to gather momentum and certainly

claiming back a lot of the territory that they initially lost to the


I wouldn’t underestimate the impact of a good brand moving into an

online world and using multiple channels to market, with different

fulfilment systems going direct to the consumer,’ says Matthews.

It appears established companies have two key competitive advantages

over internet start-ups when going online. First, the residual brand

awareness that good offline brands enjoy from their other activities.

And second, the opportunities they have to promote their online

operations offline and vice versa.

However, while the future, in some commentators’ eyes, belongs to

clicks-and-mortar operations, it’s perhaps worth remembering that not

every internet start-up is getting it wrong. Most of us, like

Greenfingers’ Bridgett, can probably think of sites we buy from that

constantly meet, if not exceed, our expectations.


There are a growing number of schemes that reward internet users for

time spent surfing and shopping on the web. Here’s a quick guide to the

major players ...


Who’s behind it?

US company

How do you get points?

’beenz’ if you please. You earn them by visiting, interacting with or

shopping at participant sites. Sites award different numbers of beenz

for different activities.

How do you use them?

You put them toward purchases at participating sites. For example, 500

beenz gets you a pounds 10 Woolworths’ gift voucher, while PlayStation

games from Gameplay start at 2200 beenz. beenz has also struck a deal

with MasterCard International, which enables you to transfer beenz to

your MasterCard.

Where can you spend points?

At over 200 sites, including The Motley Fool, MTV, Woolworths and



Who’s behind it?

It’s jointly owned by Dynamo Marketing, Durlacher and private


How do you get points?

You gain iPoints by shopping at participating online stores.

How do you use them?

You redeem them against goods at participating stores. Seventy iPoints

buys you a pounds 5 gift voucher at most of the participating stores,

while 1400 points buys you a micro hi-fi system.

Where can you spend points?

At around 20 sites, including Marks & Spencer,, Dixons and



Who’s behind it?

It’s a joint venture between and Experian, part of Great

Universal Stores.

How do you get points?

Reading marketing e-mails, filling out surveys, visiting web sites,


referrals to friends, taking advantage of trial offers, shopping.

How do you use them?

Points are redeemable as gift vouchers to use at participating


Where can you spend points?

Boots, Curry’s, Dixons, Halfords, The Link, PC World, Marks &



Who’s behind it?

It’s part of the Webmiles AG group, founded in Munich in March 1999 and

backed by Wellington Partners and Goldman Sachs.

How do you get points?

By shopping or taking part in promotions and games at participating

sites, or filling in questionnaires and playing games on the WebRewards


How do you use them?

Spend them in the WebRewards shop on the WebRewards web site, 750

rewards gets you a cocktail shaker, 6250 a helicopter flying lesson.

Where can you spend points?

A handful of companies, best-known of which is The Carphone Warehouse,

with more due to come on stream in the coming weeks.


High-tech media relations company Lewis recently held a seminar to

discuss the issue of retaining customers online. Present were a number

of Lewis clients whose businesses are centred on the internet and


Colin Lloyd, the Direct Marketing Association’s chief executive, kicked

off the event with a presentation on the poor performance of some online

operations in servicing orders and enquiries. He then went on to outline

the work of TrustUK, a non profit-making joint venture between the DMA,

the Consumers’ Association and the Alliance for Electronic Business,

which has the endorsement of the government.

TrustUK hopes to attract trade associations and web site certification

bodies such as Clicksure and the Consumers’ Association, which operates

the Which Web Trader web site certification scheme, encouraging them to

seek accreditation for their web site certification processes. Once a

trade association has been accredited by TrustUK, its members’ companies

are entitled to display the TrustUK e-hallmark. Web sites certified by a

body accredited by TrustUK would automatically be entitled to display

the e-hallmark, in addition to the certification logo relating to their

own scheme. The plan is that this accreditation scheme will engender

quality and customer loyalty online.

After the presentations, the floor was thrown open to a discussion of

online loyalty issues. Graham Technology research and development

specialist Ian Valentine said he believes that customers are looking for

transparency in their dealings with organisations, regardless of the

channel they use to communicate with them.

’The target should be to deliver the same levels of service through the

call centre as the web site,’ said Valentine. ’We can’t predict what

channel the customer will use at any time, so we have to try to offer

the same service over all channels at the same time.’ Tiho Vakasinovic,

eLoyalty senior vice-president, provided perhaps the most telling

insight into the problems afflicting many internet companies.

’There are people who believe what everyone has told them about the new

economy, so they think they can just throw away the traditional business

rule book.’


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