A few weeks ago, Amazon.com, Inc. (NASDAQ:AMZN) scored high on good reputation among customers according to two studies from Foresee and Harris Interactive. Many see Amazon.com, Inc. (NASDAQ:AMZN) as more than a ‘tech’ firm, because of the way the company has dealt with its customers and its commitment to social responsibility. In this article, I shall take a look at how Amazon’s good reputation among customers as reported by the two analysts will help investors to ensure long term returns.
Amazon, for the eighth consecutive year, has ranked among the top five in various criteria of consumer satisfaction-reaching 88 points-its highest score in this index. The annual survey “Holiday E-Retail Satisfaction Index” conducted by ForeSee questioned the level of satisfaction of 24,000 consumers with their online shopping during the holidays of Thanksgiving and Christmas. Amazon.com, Inc. (NASDAQ:AMZN) stands firm among the best scores since the list was launched in 2005. According to ForeSee, the company is “the perfect example” of an organization that provides quality services to its customers.
This score is important, especially for investors: highly satisfied customers say they are 67% more likely to consider the company next time they buy a similar product, demonstrating the importance of customer satisfaction to revenue loyalty and for the future of business.
Over the past seven years, online spending has risen in tandem with customer satisfaction. Let’s look at how this relates to Amazon. The 2012 Holiday Shopping Season went very well for Amazon.com, Inc. (NASDAQ:AMZN). Cyber Monday was huge for the company. More than 26.5 million items were purchased on Cyber Monday, which equates to a whopping 306 items sold every second. This growth is nearly double that of 2010, when 13.7 million items were sold.
One of the main reasons for this success was due to high customer satisfaction. ForeSee’s annual Holiday E-Retail Satisfaction Indexshowed that Amazon matched a record high score of 88 out of 100.
Amazon.com, Inc. (NASDAQ:AMZN) ranked the highest under two dimensions: Emotional Appeal and Products & Services. Apple Inc. (NASDAQ:AAPL) ranked the highest under two dimensions as well: Financial Performance and Vision & Leadership. Google Inc (NASDAQ:GOOG) ranked the highest under only one dimension, Workplace Environment. Whole Foods Market, Inc. (NASDAQ:WFM) ranked the highest under the dimension of Social Responsibility. For an investor, it is clear that Amazon ranks highest under the most important dimension, Products & Services. Ranking highest under Emotional Appeal, people will only return to buy products and services on Amazon. This survey is enough to let investors know that Amazon.com, Inc. (NASDAQ:AMZN) is the most future proof company in the world, as it sells not only its won products but also the products of others.
Competitors
Apple sells only its own products and ranks high on Financial Performance; something that we have noticed isn’t true in recent times. iPhone sales have not been impressive and Apple’s stock fell down from a high of $700+ to less than $400. Larry Freed, president and CEO of ForeSee said that Apple needs to improve the user experience of its website and also increase the its amount of features. The Apple Online Store lost three points compared to the previous year, featuring one of the largest falls in the year. Apple scored 80 points in the rankings, its lowest level in four years.
Google, which ranked highest on the dimension of Workplace Environment falls behind both Amazon.com, Inc. (NASDAQ:AMZN) and Apple in terms of customer satisfaction. It ranks high on a dimension that can’t be monetized – a great workplace. While Google is known for its hospitable workplace environment, this does not mean investors will get something out of it. On the other hand, Apple’s iPhone 5 again became the top selling smartphone in the U.S., dethroning Android-running Samsung Galaxy S3 and other smartphones that use Google’s operating system.
Barnes & Noble, Inc. (NYSE:BKS) suffered a sharp drop in revenue from the Nook, because of sluggish sales of e-readers and tablets. The Nook Segment revenue was down 26% in February last week. While the sales of digital content have risen 13.1% over the holidays, this is little compared to 113% last year and 38% of the previous quarter. This suggests that Barnes & Noble is having trouble holding the 25% – 30% of eBook market that it has in the United States.
One big surprise was Vitacost, which was ranked #3 in customer satisfaction during the holiday shopping season. According to the ForeSee, E-Retail Satisfaction Index, Vitacost is the leading online retailer of health and wellness products. This market is bound to grow because of the increased focus on healthy products and lifestyle.
Conclusion
With a market cap of $125 billion and an enterprise value of $114 billion, Amazon has good reason to celebrate. Its profit margin of -0.06% is low, but its revenue of $61 billion is huge, putting the company in a comfortable position. With high sales and customer loyalty, the investor will not regret investing in the Amazon. A good reputation and customer satisfaction are key factors in deciding which company will remain successful in the long term. Amazon ranks high on good reputation and customer satisfaction. It ranks the highest on two domains that are most important to revenues in the long term: Emotional Appeal and Products & Services. This will ensure that Amazon will be successful in the long-term.
The article Customer Satisfaction: A Hidden Growth Catalyst for Amazon originally appeared on Fool.com and is written by Maxwell Fisher.
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