With Amazon setting the pace, can its competitors close the gap?

I did not see my name on the Hertz’s Gold Car screen at Washington, DC’s Reagan International Airport on Saturday morning, the day before Mother’s Day. Securing a car quickly was one of the linchpins of my 950-miles-in-a-morning trip that I needed to make in order to catch my godson’s exhibit at Maryland College of the Arts (an hour drive away), have lunch with him, and still make it to my mom’s house (another 4.5 hours drive away) in time for dinner. Yes, the scheduling was tight with crazy connections, but the airlines came through and I could have arrived to dinner right on time had Hertz delivered on its promise of a “no frustration” car rental.

With Hertz unprepared for my arrival and offering a route recommendation that unnecessarily added an hour to my driving time, my trip assumptions (and timeline) were broken, creating my frustration. Rather than fume, I elected to think about how companies in all sectors today are being challenged to produce flawlessly.

When Fed Ex or UPS miss their delivery date, when Amazon fails to get the book to you in time, or when Trader Joe’s great-tasting, reasonably priced high value brands fail on taste or value, we take note because the experience is far outside the norm. One glitch by Hertz? I’m dissatisfied but remain loyal. Consistent misses?  I start to price shop Hertz with Avis or National.

Terrific execution used to differentiate companies, but far less so today. Like product quality, on-line execution excellence is becoming more standard. As a result, just to be considered, organizations must also come close to the performance levels set by competitors setting the standard.

This trend can be seen in the results from the recently released 2011 Internet Retailer Top-500 Guide. The report tabulates almost 21,000 responses from visitors to the top 100 internet retail sites to create year-over-year comparisons of e-retailers’ performance with that of other retailers and with their own past performance.

In 2010 and 2011, 28 websites achieved scores considered superior customer satisfaction, while only 6 websites earned this distinction in 2009. The scores matter financially. “When compared to dissatisfied customers, highly satisfied website visitors—those who score their experience 80 or higher—report being 72% more likely to purchase from that retailer’s website and 56% more likely to make the purchase through another channel,” according to ForeSee, a pioneer in customer experience analytics.

From Netflix, who lost considerable ground following customer snafus, to Walmart, who finally awoke to Amazon’s competitive threat, scores are improving for many retailers. Even Amazon jumped 3 points to lead the pack once again in performance (89 out of 100 points), followed by Apple’s on-line store, which jumped 5 points to tie QVC at 85 points for second place.

Amazon’s pressure on other brands shows up in more than a march to catch up to Amazon’s score. On-line shoppers are asked what changes would most improve the website they are visiting. Amazon shoppers select price (versus merchandising, website functionality, or website content accuracy, quality and freshness), whereas the answer from customers at other e-retail sites is most often “better merchandising.” The difference in ratings between Amazon and its competitors makes sense, as Amazon’s wide choice in each category sets a merchandising expectation that other e-retail sites often fail to meet.

But are there disadvantages in Amazon or other e-retailers offering “so much” choice? After spending 15 minutes scrolling down webpage after webpage of apparel on sale at shop.nordstrom.com, I asked myself, “How could an apparel website create a better experience that points me to the right brands and styles, reducing my shopping time? Might this type of functionality help an apparel e-retail site beat Amazon’s customer experience score? Or will Amazon build upon its simple recommendation formulas to lead the way in making shopping easier as its apparel footprint expands further?

I offer one caution as you try to improve your customers’ on-line experience. You must guard against creating an on-line experience and culture that is too rigid and thereby fails to change when needed. We regularly observe this lesson on the product side. National beat operationally excellent Hertz to the punch in offering customers freedom to pick out any car in the lot. And Wendy’s cut into operationally excellent McDonald’s share before McDonald’s awoke to the need for greater product innovation. Expect the same with on-line experiences.

The on-line and off-line challenge is to differentiate your brand while still meeting the execution excellence standards being established by leaders like Amazon.