Word-of-Mouth Rules Customers Decisions, Jupiter Says

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Nearly half of the consumers shopping on the Web choose e-commerce sites based on word-of-mouth recommendations, but only 7 percent of companies can accurately identify these "viral influencers," according to Jupiter Media Metrix research released yesterday.


Jupiter also said that its cumulative research shows that a company considering viral marketing and customer satisfaction when identifying loyal customers can reduce customer acquisition costs by 27 percent and increase average order sizes by up to 60 percent. Most companies define customer loyalty too narrowly and are overlooking key measures of their customers' behavior, the study found.


"Most companies are not tracking their customers' behavior adequately enough to understand customer loyalty," said David Daniels, a Jupiter Media Metrix analyst. "Businesses need to identify what influences their customer purchasing decisions and they should start by building a broader view of customer behavior."


Other key findings of the research include:


· Most companies do not look beyond monetary metrics when identifying loyal customers. The majority of the companies define loyal customer segments and the value they place on those relationships by customers' spending habits and order values. A small percent of them incorporate customer-satisfaction scores.


· Most companies are underutilizing data that they have collected on their customers and are instead using third-party data.


· E-mail will dramatically enhance the ability of companies to measure viral behavior. Since HTML-based e-mail messages can contain links to files remote from a user's desktop, companies can track and measure the pass-along rate of these messages. That would allow the companies to develop loyalty and retention campaigns that directly target viral influencers.


Jupiter's findings were culled from executive polling, executive and consumer surveys, Media Metrix audience measurement data and AdRelevance online advertising metrics.


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