Amazon Soars; Netflix Plummets in ForeSee Holiday Study


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Study Finds Customers are Less Price Sensitive in 2011, Gap and Overstock
Struggle with Holiday E-Commerce

Ann Arbor, Mich. (December 28, 2011) – Customer experience analytics firm
ForeSee today released the results of their annual Holiday E-Retail
Satisfaction Index, showing that after seven years spent jockeying for first
place in the Index, Amazon and Netflix are headed in divergent directions.

Amazon climbed two points to score 88 on the study’s 100-point scale,
registering the highest score from any retailer in 14 consecutive studies.
Meanwhile, Netflix’s well-publicized blunders caused its customer
satisfaction to plummet by seven points and 8% to 79. After years of being
separated by a point or two, Amazon and Netflix, which are increasingly in
direct competition as Amazon expands into streaming video and rentals, are
now separated by nine points in terms of satisfaction, a gulf that may be
too wide for Netflix to overcome anytime soon.

Today’s report provides the first scientific quantification of customers’
experience with Netflix since its missteps earlier this year. With its
satisfaction decline, Netflix has gone from satisfaction superstar to merely
average, matching the Index’s aggregate score of 79 (up one point from 78 in
the 2010 holiday shopping season). Netflix saw scores drop in every single
element of the website that ForeSee measures, including site content, site
functionality, merchandise, and prices.

“Netflix totally misread its customer base and is paying the price, damaging
its brand among both consumers and investors,” said Larry Freed, president
and CEO of ForeSee. “Raising prices by 60% and splitting the baby into
separate DVD and streaming services totally undermines Netflix’s cost and
convenience advantages. Customer satisfaction is predictive, which means
that Netflix’s financial woes may be just beginning.”

“Meanwhile, Amazon may have started as an online bookstore, but it now
competes in almost every significant retail category and it is setting the
bar very high for any company selling online,” continued Freed. “E-retailers
have consistently upped their game since we first started measuring holiday
satisfaction in 2005, but Amazon is still the 800-pound gorilla of retail,
and it just keeps getting better. It’s tough for a smaller retailer to
compete with this level of dedication to providing an excellent customer

Since 2005, the average customer satisfaction score for the Index has
increased from 74 to 79. A score of 80 has always been the standard for
excellence; given the causal relationship between satisfaction and financial
success, it is not surprising that most of the sites receiving the top 40
largest revenues according to Internet Retailer also have very high
satisfaction scores. Any retailer scoring below average risks eroding
loyalty, recommendations, sales, and market share to competitors who score
higher, so even the Top 40 need to improve to stay at the top of the heap.
If satisfaction drops significantly, a revenue drop is likely to follow.

The report includes individual satisfaction scores for the 40 top
e-retailers (see chart below) for the past seven years, allowing for
comparisons over time and between companies:
. Next to Netflix, both (down 6% to 73) and
(down 5% to 72) have the largest declines in satisfaction, leaving them with
scores at the bottom of the Index.
. On the other end of the spectrum, the largest gains in satisfaction
go to (up 8% to 79) and JC Penney (up 6% to 83), which named
Ron Johnson, former head of Apple’s retail operations, as CEO this year.
. Price matters less: American consumers were less price sensitive
during the 2011 holiday shopping season than they were last year
. Nearly 20 years of research coming from both academia and the
private sector indicates that increasing customer satisfaction is one of the
most powerful things a retailer can do in any channel to increase sales,
loyalty, and positive word-of-mouth recommendations. The report quantifies
the impact of satisfaction on these desirable customer behaviors.

“Customer satisfaction is a leading indicator of consumer spending, and the
bump in the Index is good news for online retailers,” said Freed.
“Unemployment is down, consumer confidence is up, and holiday retail sales
are up from last year. Improved customer satisfaction suggests the good news
may continue into the new year.”

About the ForeSee Results E-Retail Satisfaction Index (U.S. Holiday Edition)

The seventh annual holiday online satisfaction report is based more than
8,500 responses from visitors to the top 40 e-retail websites according to
sales revenue as reported by Internet Retailer’s Top 500 Guide. Survey
responses were collected via FGI Research’s Smart Panel. ForeSee Results
used the methodology of the American Customer Satisfaction Index (ACSI) to
calculate the scores. The ACSI is the national standard for customer
satisfaction, and this measure has been shown to have a direct link with
stock prices and other measures of financial performance.

About ForeSee
As a pioneer in customer experience analytics, ForeSee continuously measures
satisfaction across customer touch points and delivers critical insights on
where to prioritize improvements for maximum impact. Because ForeSee’s
superior technology and proven methodology connect the customer experience
to the bottom line, executives and managers are able to drive future success
by confidently optimizing the efforts that will achieve business and brand
objectives. The result is better business for companies and a better
experience for consumers. Visit for customer experience
solutions and original research.

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