Online travel satisfaction continues to decline

February 20, 2008 | Online Travel

According to a new study, e-commerce satisfaction in the online travel industry falls for a second straight year. The three major online travel sites all suffered drops in satisfaction, as they continue to have difficulty differentiating their services.

Customer satisfaction with the e-commerce sector hits an all-time high, according to the American Customer Satisfaction Index (ACSI), released today by the University of Michigan with e-commerce partner ForeSee Results. E-commerce in aggregate rises to a score of 81.6 on the ACSI�s 100-point scale, a significant 2% jump from 2006. The e-commerce sector now outperforms all other service industries measured by ACSI.

�The improvement in e-commerce is impressive, given the downward trend in the national ACSI,� said Claes Fornell, head of the ACSI at the University of Michigan and author of The Satisfied Customer. The Index includes more than 200 companies in more than 40 industries and slipped 0.4% to 74.9 in its second consecutive decline. �E-commerce is the only sector to improve this quarter, and in fact reaches an all-time high in customer satisfaction while other some industries start to struggle.�

�Against a backdrop of weakening consumer spending and talk about recession, e-commerce will continue to be a bright spot for multichannel companies,� said Larry Freed, an online customer satisfaction expert and president and CEO of ForeSee Results. �Companies have to excel in their online channel: survival in this economy depends on customer satisfaction, because switching costs are low and an alternative is just a mouse click away.�

The ACSI E-Commerce Report, which is a part of the ACSI�s fourth quarter report, measures customer satisfaction with online retail, online brokerage and online travel companies.

Online Retail: Amazon Ranks Second of 200+ Companies Measured

Online retail is the highest scoring industry in the fourth quarter, scoring 83 for a second consecutive year and surpassing the offline retail sector (74.2) by 12%. All of the measured companies in the e-retail industry are among the top 10 highest-scoring companies in all of ACSI.

E-retail stalwart Amazon.com ties its all-time high, up 1 point to 88, leading both the e-retail industry and the e-commerce sectors. The silver and bronze for online retail go to two new companies to the Index: Newegg debuts at 87 and Netflix at 84.

Amazon has the second-highest score in the ACSI (trailing only Heinz) and surpasses other customer-pleasing companies such as Apple and Southwest Airlines. The company�s dedication to the customer experience is paying off in terms of customer satisfaction, as evidenced by its biggest fourth quarter revenues ever.

ACSI merged the auction category with online retail to reflect the increasing overlap and competition between the two. EBay moves up a point to 81, but it has been fairly stagnant over the last few years, failing to come up with the true business innovations that have catapulted Amazon up 5% since 2004.

Online Travel: Satisfaction Continues to Deteriorate

The online travel industry falls for a second straight year, dropping 1.3 percent to 75. The three major online travel sites all suffered drops in satisfaction. Expedia remains the highest-scoring company, but its score plummets 3.8 percent to 75. Travelocity and Orbitz both drop to 73, as the three companies continue to have difficulty differentiating their services.

Priceline employs a different model for its service and improves 1.4 percent to 73. But even the improvements in the �all others� category (+3.9% to 79) could not prevent the aggregate score from falling. The �all others� category includes airlines, hotels, and other travel search engines like Kayak.com. Travel suppliers like airlines and hotels are putting pressure on the three major travel sites. Airlines are now offering hotel and car rental options in addition to lowest-price guarantees and loyalty and rewards programs, and hotels encourage customers to book directly on their sites.

�For the last 10 years, the technology that online travel aggregators use has essentially remained unchanged, but competition continues to innovate,� said Freed. �Standing still is not an option. As the smaller players change the game, satisfaction with the big players will decline if they just tread water.�

Online Brokerage: Fidelity Overtakes CharlesSchwab

After a big surge last year, customer satisfaction with online financial services continues to climb. Online brokerage is up for a third consecutive year (+1.3% to 79). Fidelity is the biggest gainer, increasing 5 percent to 84, setting a new high for the industry. CharlesSchwab (+2.5% to 82) and TD Ameritrade (+3.9% to 80) also improved, while E*TRADE�s score is down 1.3 percent to 73.

�Unlike other areas of e-commerce, online brokerage requires a significant amount of trust,� said Freed. �Relationships are formed and switching companies isn�t as easy. That may account for E*TRADE�s dip as consumers have more confidence with established companies.�