Turning E-Commerce Post-purchase into a Competitive Advantage

If business has a fundamental law, it is the law of competition and competitive advantage. If you're doing business, by default, you're competing against other market participants. Same goes for all your market activities. None of our businesses exist in a vacuum, so whether you're involved with architecting your product portfolio, individual product design packaging, a digital marketing campaign or your e-commerce channel, in the end customers evaluate your performance against competitors and other market players. Thus, any market decision and activity you take, while rooted in your own organisational capabilities and limitations thereof, must take into account market competition and market dynamics.

Any market decision and activity you take, must take into account market competition and market dynamics.

However, the fundamental principle of competition is often disregarded in e-commerce management, or to be precise within some elements of it. On one hand, competition is deeply embedded into e-commerce digital marketing professionals everyday work, as they bid on keywords and price of clicks - generating traffic that drive consumers to product pages. Same can be said for e-commerce managers, shopper marketeers and merchandisers who, to win the share of the digital shelf, continuously optimise on the competing offers - prices, product assortments and bundles available on marketplaces in realtime. On the other hand, in stark contrast to the competition aware, pre-purchase phase of customer journey, stands the, competition oblivious, e-commerce post-purchase experience design and management.

Post-purchase : crucial for nurturing loyalty and repeat customers

Post-purchase phase of consumer journey is essential for development of customer loyalty and it is where buying preferences are created, as documented in multiple academic research papers and empirical analyses, such as those of S.Wang, M.Merel Antisal and I. Anitsal (2016); R. Ramanathan (2011), IBM 2016 Consumer Expectations Study and Otim and Grover (2006). Named authors find that "several post-purchase factors, such as convenience of tracking order, on-time delivery and ease of customer service, play vital roles in influencing customer loyalty" and that "the customer loyalty seems to be largely established at the stage of post-purchase. (S.Wang, 2016). This is confirmed by Ramanathan who notes that "our results show that handling product returns plays an important role in shaping customer loyalty for low-risk products and also for high-risk products" (Ramanathan, 2011). "Post-purchase services consisting of support of order tracking, on-time delivery, and customer support positively influence customer loyalty" (Otim and Grover, 2006). Customer loyalty is a prerequisite for repeat purchases, creation and growth of repeat customer segment, which is essential for overall e-commerce profitability.

Post-purchase phase of consumer journey is essential for development of customer loyalty, as a prerequisite for repeat purchases, creation and growth of repeat customer segment - essential to overall e-commerce profitability.

Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. Research done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score) that shows increasing customer retention rates by 5% increases profits by 25% to 95%. Repeat purchases become increasingly important as cost of acquisition (CPA) rose as a result of crowded market. "With the influx of D2C brands (and their inevitable competitors) playing fast and loose in the digital ad space, more dollars are needed to compete for the same impressions" (T.Peterson, 2019). However, despite the financial potential of strategic management of post-purchase of e-commerce journey, which would result in elevation of consumers satisfaction, loyalty development and consequently repeat purchases and repeat customer segment growth, the customer experience after the 'shop now' button remains largely ignored and mismanagement.

Despite the financial potential of strategic management of post-purchase of e-commerce journey, the customer experience after the 'shop now' button remains largely ignored and mismanagement.

Sustainable competitive advantage for digital age : the consumer experience

In business, a competitive advantage is the attribute that allows an organisation to outperform its competitors. If you have a competitive advantage you might be able to charge high prices and still enjoy superior sales. Competitive advantage is a superior ability or resource that allows one firm to out compete all others in some area. According to business management theory, there are 6 sources of sustainable competitive advantage, such as (1) people, (2) organizational culture & structure (3) processes & practices (4) products & intellectual property (5) capital & natural resources (6) technology. While competitive advantages are inherently internal to the company, their effects and visibility are external or consumer facing. Digital age and disruptive models challenged traditional views of competitive advantage, giving space to transient advantages (note the plural), which individually are short-lived but cumulatively still enable the overall organisation to prosper. Fragility of traditional, inward looking, capabilities as competitive advantage brought about the perspective of consumers and consumer experiences as sustainable competitive advantage for the digital age.

Consumers and consumer experiences as sustainable competitive advantage for the digital age.

Companies of all kinds claim to recognise that their customers are important. But what kind of experience are they providing for customers with their products, their services, their communications, and their interactions?  "Consumers have made it clear that brand experiences during the post-purchase phase have the greatest overall positive or negative impact on their brand relationship with retailers and their inclination to shop that retailer over competitors " (IBM Consumers Expectations Study, 2016). So when it comes to maintaining competitiveness of your e-commerce business as an integral part of your overal business, post-purchase is indispensable. So how can you turn your e-commerce post-purchase into a competitive advantage? Start by comparing it to your competition, industry level average and market level defined consumers expectations from an online (post)purchase experience.

Customer loyalty which is mostly established at the post-purchase phase of e-commerce consumer journey requires strategic design, management, and continuous optimization of e-commerce operations in relation to the market developments and market defined customer expectations.

Turning e-commerce post-purchase into a competitive advantage

Customer loyalty which is mostly established at the post-purchase phase of e-commerce consumer journey requires strategic design, management, and continuous optimization of e-commerce operations in relation to the market developments and market defined customer expectations. Loyalty is impossible to create without satisfied customers. Customer satisfaction is a measure of how products and services supplied by a company meet or surpass customer expectations. So generating customer loyalty by delivering post-purchase performance which will satisfy your customers is impossible to do without knowing what are their expectations in relationship to this phase of the e-commerce journey. To meet & exceed customers expectations, which will create consumer satisfaction and enable the creation of customer loyalty, repeat purchases and repeat customer segment growth, starts with knowing consumers expectations from a post-purchase experience. Consumer expectations vs. experience dynamics develop like in the illustration below. 

Delivering post-purchase performance which will satisfy your customers is impossible to do without knowing what are their expectations in relationship to this phase of the e-commerce journey.

While there are at least seven types of consumer expectations such as : (1) explicit expectations (2) implicit expectations (3) static performance expectations (4) dynamic performance expectations (5) technological expectations (6) interpersonal expectations and 7 (situational expectations), most important ones are first two - (1) explicit and (2) implicit expectations as they both directly and indirectly include all remaining types.

So to understand what your consumers expectations are from your e-commerce post-purchase performance and experience you'll have to audit your own performance and compare it to what you explicitly say you will provide, and compare whether you under-deliver or over-deliver in real life. If you say you'll deliver the order within 2 working days, and the order gets lost, obviously you under-delivered. If you say you will deliver within 2 and you deliver in the morning, obviously you will exceed your customer expectations and thus customer satisfaction is achieved (given that faster delivery is something he generally wants).

To understand what your consumers expectations are from your e-commerce post-purchase performance and experience you'll have to audit your own performance

However, as we said in the article opening, we don't exist in a vacuum, and same is true for your e-commerce post-purchase performance. While it is evaluated against your promises, it is also evaluated against market averages. Since your customer also shop for other product categories with other retailers, all of those e-commerce post-purchase experiences he encounters collectively shape their implicit expectations from you. Your performance is also evaluated relative to others. This is where the need for competition-aware design of post-purchase experience and architecture of e-commerce supply chain and logistics operations arises.

Since your customer also shop for other product categories with other retailers, all of those e-commerce post-purchase experiences he encounters collectively shape his implicit expectations from you.

In order to architecture an e-commerce post-purchase that will delight your customers, not only do you need to meet & exceed explicitly communicated elements of the (promised) experience, but also continuously meet (and exceed) the minimum accepted market averages of the performance. The latter is impossible without a systematic assessment of competitive performance of post-purchase experience within and across markets.

Competitive assessment and strategic improvement of e-commerce post-purchase experience

Benchmarking is a management tool for the systematic assessment of the competitive power of an enterprise. It is a process of comparing one's business processes and performance metrics to industry bests or best practices from other companies. Applied to the e-commerce post-purchase experience, this tool provides insights how your post-purchase performs relative to other market players : category and market competitors, leading e-retailers - namely all those who shape implicit customer expectations within a single market. Post-purchase performance is evaluated across phases of : tracking, delivery, packaging (out-of-box) experience and returns & refunds.

Insights derived from competitive benchmarking of post-purchase performance enable strategic improvement and (re)design of e-commerce operations identifying exact elements which deliver superior value to customers.

Benchmarking research and consulting services, enable (re)design of superior processes of e-commerce operations which will create sustainable competitive advantage through delivery of market differentiating and highly customer valued elements of post-purchase experience.

Our consultants will help you pinpoint gaps to market averages and minimum accepted performance levels while also providing you with opportunities for brand differentiation in this crucial phase of e-commerce customer journey. Taken together, benchmarking research and consulting services, enable (re)design of superior processes of e-commerce operations which will create sustainable competitive advantage through delivery of market differentiating and highly customer valued elements of post-purchase experience.

One of our clients and success cases, Nike EMEA, after competitive benchmarking of e-retailers across WE, CEE and Turkey, created a supercharged and market distinct post-purchase experience which it uses as a competitive advantage and advertises it in the acquisition phase. Instagram ad emphasises (Spanish) market highly valued elements of free and ecological delivery and recycled packaging.

To discover more how you can turn your post-purchase experiences into a competitive advantage, contact us today for a free no-commitment 1-on-1 live walk through of our solution and client case of Nike (EMEA) or explore more on our website.

References

Wang, Siwei & Anitsal, Melek Meral & Anitsal, Ismet. (2016). A Review of E-Commerce: The Influence of Post-Purchase Factors on Relationships between Customer Loyalty and Perceived Risk.

Ramanathan, Ramakrishnan. (2011). An empirical analysis on the influence of risk on relationships between handling of product returns and customer loyalty in E-commerce. International Journal of Production Economics. 130. 255-261. 10.1016/j.ijpe.2011.01.005. 

Taylor Peterson (2019). D2C brands are driving up customer acquisition costs – and it’s time to course-correct. MarketingLand; https://marketingland.com/d2c-brands-are-driving-up-customer-acquisition-costs-and-its-time-to-course-correct-264293

Fred Reichheld, "Prescription for cutting costs: Loyal relationships", Bain & Company, Inc. http://www2.bain.com/Images/BB_Prescription_cutting_costs.pdf

Luca Griseri, "Customer Experience as A Competitive Advantage", Ipsos Loyalty Singapore https://www.ipsos.com/en-sg/customer-experience-competitive-advantage

Bernd Schmitt, "Competitive Advantage Through The Customer Experience" The EX Group, LLC https://www.exgroup.com/thought_leadership/articles/competitive_advantage_cem.pdf

Scott Smith, "Customer Expectations: 7 Types All Exceptional Researchers Must Understand" Qualtrics blog. https://www.qualtrics.com/blog/customer-expectations/