Website Efficiency, Customer Satisfaction and Customer Loyalty: A Customer Value Driven Perspective

This paper proposes a customer value driven perspective for analyzing the design of Internet retailing websites, the initial stage in the electronic service delivery channel. As a loyal customer base is crucial for website profitability over both the short and long term, customer satisfaction plays a critical role in determining both website efficiency and customer loyalty. The quandary facing Internet retailers is how to meet consumers' complex expectations for the retailing website without sacrificing speed and simplicity. The key to addressing this dilemma is to focus on customer value. This paper presents an empirical study of these issues using data from food retailing websites. The study uses Data Envelopment Analysis (DEA) and a post-DEA statistical analysis approach proposed in Xue and Harker (1999) to evaluate website efficiency and to analyze how website features affect website efficiency. 3 1. Introduction E-retailing, " a giant industry " that " virtually awakens " (Fortune2000), has gone through rapid development and dramatic transitions in a relatively short period of time. Shopping has changed forever. While brick-and-mortar stores still hold the major portion of market share, Internet retailers have earned significant gains in recent years. A survey conducted by PricewaterhouseCoopers in January 2000 showed that nearly half of the primary shoppers in households with Internet access had made purchases on-line, up from 27 percent in 1998. In 1997, only 62 percent of these individuals visited websites more than three times per month. By the year 2000, the percentage climbed to 80 percent (Fortune 2000). However, in stark contrast to the phenomenal performance of Internet companies in financial markets through the spring of 2000, many Internet retailers are now facing difficulties. Profit margins are still thin or absent, but investors now are demanding profitability. Many Internet companies' stock prices have fallen sharply. Venture capitalists are much more cautious and are reluctant to commit additional investments needed to keep numerous Internet companies alive. This gloomy picture of present day e-commerce is not universal. For those who have focused from the beginning on customers rather than products or technology, significant growth opportunities still exist. The capability of developing loyal customers and the profitability that ensues from this loyalty holds great promise. To achieve this goal, flawless operations are crucial. In a market where a given product can be purchased from any number of retailers within a certain price range, what really makes the difference to the customer is …