I recently bought flight tickets online for a family trip. I compared the prices on different websites, including the websites of the airline themselves. I have two website that I usually prefer to buy online, and both were higher than a recently launched website. The price difference was just 0.01%. I proceeded to purchase the tickets from the ‘new’ website which I had not used before.
A little later I received a phone call from one of the websites I normally use, enquiring why I had not proceeded to complete the purchase. Honestly I was astonished (pleasantly surprised I may add) that they were able to track the transaction and took the trouble to call.
The call got me thinking. I realized that I had faith in the websites that I would usually buy from- yet a 0.01% difference created a swing in purchase behaviour and I went to an ‘unknown’ website. I am sure my behaviour is not unique. I suppose it is on just these small margins that newer e-commerce sites are building clientele.
But this is the issue- unless there is a perceived ‘value’, customers see no reason to ‘stay’. While starting an e-commerce business is relatively easy, engaging customer and keeping them is the key. Late entrants usually pull the ‘price’ lever to shift clients from the established players. I wonder why the older websites have not seen this sort of competition coming. A simple tactic for an early mover is to have a ‘loyalty club’ and keep a fraction of a percentage of income towards customer retention. This amount can be released to fight competition when they arrive on the scene.
I have seen this strategy being adopted among the Petrol companies (Gas outlets) in India. Petrol Pumps are owned by 3 Public Sector companies and the prices are the same across the outlets. So how do you attract clients to your company outlet- when Petrol is a non-involvement category? One of the companies started a loyalty program. It worked. Consumers were ‘driving the extra mile’ figuratively and literally to fill petrol at gas stations which added to their loyalty points. It took the other two companies almost 3 years to react with a similar tactic. With the imminent entry of Private players who do not have fixed Price compulsions, it will be interesting to watch how Public Sector outlets protect their revenues.
I look forward to hearing from those of you who have some insights on how online enterprises can protect themselves from customer poaching! Meanwhile my next blog will be from my vacation destination!