developing an eservice strategy

“How do I justify investment ineCommerce to a group of senior managersthat get their secretaries to print theiremails?” was how one managerinterviewed for this study summarised hiseCommerce problem. This article is abouthow firms can develop a systematicstrategy for delivering service on the web– eService. It starts with the result of asurvey of responsiveness to customers inweb-based service delivery, part of a studywhich also includes case studies ofcompanies seeking to justify suchinvestments. It then focuses onunderstanding the challenge of eService,developing a strategy and making the casefor investment. It concludes withsuggestions for implementation, includingmetrics for assessing eService quality.

Customer service has traditionally been deliveredthrough people, either face to face or over thetelephone. The well-known ‘service profit chain’ linksthe behaviour of service employees through toperceived service quality, customer satisfaction,customer retention and profitability. The new mediaare challenging this. It is increasingly possible to deliver

Developing an eService StrategyChris Voss

customer service directly through the internet withlittle or no human intervention. As the internetprovides the opportunity to automate morecustomer interaction, the focus of business becomesservice. This article is about how to develop strategiesto deliver outstanding service using these newtechnologies and media.

Business Strategy Review, 2000, Volume 11 Issue 1, pp 21-33

© London Business School

Providing pureservice – freeor with servicecontract

eg Computerservice, statusinformation

Sellinginformation

egInformediaries

Sellingvalue -addedservice

egOnlinetravelagent

Sellinga bundleof serviceand goods

eg PCs

Sellinggoods

egSellingCDs

Customer Relationship Management

eService eCommerce

Figure 1The internet and service

eService is the delivery of service using new mediasuch as the web. However, as figure 1 illustrates, thereis a broad spectrum from pure sales on the web, withlittle or no service content, to pure service, deliveredfree, or as part of a service contract. In between thereare value-added services such as online travel agentsand products sold with a high service content, such asthe ability to customise your own computer whenordering it online. Each of these may be linked andsupported by Customer Relationship Management(CRM) systems.

Business Strategy Review

The SurveyTo gauge the quality of service on the web, we measured70 UK companies’ responsiveness to enquiries, in partreplicating measures of service levels researched byJupiter Communications in the US. The 70 companieswere equally divided between seven different sectors.Where the companies’ websites had email facilities orgave an email address, this was used to send an emailfrom each company’s website to the company. Fourdifferent email addresses were used to send two pairs ofquestions – 280 emails in total. For two of the sectors,shopping (eg records, books, videos) and travel, thesample was split into two sets, high-street and internet-only businesses. The response times and nature of theresponse were each measured. The results were revealing:

● Too many businesses are unresponsiveAlthough 47% responded within one day, 41%took over one week to respond or did not respondat all (figure 2). As the sample was taken only fromlarge organisations which had websites, theimplication is that far too few UK organisationsare taking service on the web seriously. UKperformance was about the same as the US, or evenslightly better (figure 3). UK companies whichresponded did so faster than their US counterparts,but the percentage of non-responders was higher.

● Brick versus Click – eBusinesses are much moreresponsive than high street businessesIn the eCommerce market-place there are bothorganisations dedicated to doing business on theweb and high-street businesses using the web asan additional channel. In two sectors we measuredthe performance of both the high-street (brick) andinternet-only (click) organisations. The differenceswere enormous (figures 4 and 5). Only a fifth ofthe high-street travel agents responded within sixhours, against half the internet travel agents. Halfof high street travel agents did not respond at all,compared with only a quarter of internet companies.Clearly, in these two sectors the high-street companiesare finding it very difficult to translate their servicelevels to the new channel. This creates a seriousdilemma for companies. Should they try to operatetwo channels from the same organisation and riskfailing to deliver? Or should they start (or buy intoor outsource to) a separate organisation not boundby their longstanding legacy systems, procedures andculture? However, this may risk losing the brandname advantage and other synergies and requireduplication of CRM and other systems.

● Sectoral differencesWe analysed the response times for all sectors andcompared them with US data where available(figures 6 and 7). The best sectors were computers(PC suppliers), followed by brands (eg brandedclothing, jeans, stores) and shopping. The worstwere utilities, followed by content providers.

● Response was often inconsistentEven when the response was fast, organisations

Figure 2UK: response times to email enquiries

2 days 8%

3-4 days 4%

1 week ormore 4%

Noresponse

37%

1 day47%

50

40

30

20

10

0

1 day 2 days 3-4 days

US data source:- Jupiter Communications 1stQ1999 n = 125

Figure 3UK and US: response times to email enquiries

1 weekor more

Noresponse

UK

US

Figure 4Response times: internet and high streetshopping

Response time

80

70

60

50

40

30

20

10

0

6 hrs 12 hrs 48 hrs24 hrs 72 hrs 1 week Not at all

% o

f res

pons

es

Internet Shopping

22 Chris Voss

High Street Shopping

Spring 2000

● Novices – limited used of the web and email (37%)

● Searchers – browsing and searching for information(20%)

● Goods and Service Buyers – had bought goods orservices on the web (23%)

The groups’ size was small and the selection of peoplenot representative of the population at large. However,we believe that a number of important insightsemerged:

● The main barrier to moving from searcher to buyeris lack of trust. This in turn is driven primarily byworries about putting personal and credit carddetails on the internet: even though there issubstantial protection for credit card users in theUK and the same people saw no problems in givingcredit card details on the telephone.

● The barriers to progressing from non-user to novicecan be either attitudinal or economic. This groupwas split into those who would like to use the web,did not have access at work and could not afford

80

70

60

50

40

30

20

10

06 hrs 12 hrs 48 hrs24 hrs 72 hrs 1 week Not at all

Figure 5Response times: internet and high street travel

% o

f res

pons

es

Travel: High Street

Travel: Internet

US data source:- Jupiter Communications 1stQ1999 n = 125. Comparable figures for US utilities and PC's were not available

80

70

60

50

40

30

20

10

0Brands Shopping ContentTravel Utilities PCs

Figure 6UK and US: fast response(% of organisations taking one day or less)

Finance

did not always give the same answer to the samequestion. For example, enquiries as to the locationof the nearest branch often drew two differentanswers.

● Few organisations have automaticacknowledgementOne of the problems with email is that you do notknow if you have got through: everyone has hadthe experience of sending an email and nevergetting a response. Automatic response is a simpleway of reducing customer uncertainty. However,far too few organisations had automatic response– 18% in both UK and US, with utilities again thelowest (figure 8).

Do People Trust the Web?We tested this through two focus groups consisting of30 people from south-west London. Of these, 80%had used the internet in some form or another andnearly a quarter were serious users. We grouped themas follows:

● Non-users – not using the web (20%)

Figure 7UK and US: poor response(% of organisations taking 5+ days or not responding)

60

50

40

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20

10

0

Brands Shopping ContentTravel Finance Utilities PCs

45

40

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0Brands Content FinanceTravel Utilities PCsShopping

Figure 8UK and US: auto-acknowledge(% of sites)

Developing an eService Strategy 23

UK

US

UK

US

UK

US


either the cost of a PC, or the Internet ServiceProvider (ISP) and telephone costs. The others werethose who did not trust the web or who had anegative attitude towards it.

● Nearly half the novices did not themselves have accessto the web. These used a PC belonging to family orfriends, or had asked them to search out specificinformation. Given the growth of the web, it isnot surprising that there were many novice users.

● Once a good site or portal was found, it wasbookmarked and used repeatedly. Searching wasseen as the biggest benefit of the web: the abilityto find useful information, a choice of goods,lowest prices, last minute bargains, etc. However,most searchers also found searching frustratingand slow, with the risk of ending up in unsavourysites: hence the importance of a good site orportal.

● Buyers seemed very satisfied both with their abilityto find what they wanted, the availability andprices, and the order fulfilment. Many hadpurchased goods from the US and had received thegoods within five days. This group bought a wide

range of goods and services, with travel and CDsthe most common; but including expensive itemssuch as PCs and cars. There were mixed views onshopping for clothing: many felt that they neededto visit a shop. Similarly, for groceries, some woulduse the web if possible, whereas others woulddefinitely not buy groceries online.

● In this group, there was little use of net-basedbanking.

● Ease of navigation dominated the responses toquestions on the prime aspect of service quality onthe internet. Members of the groups were generallysatisfied with most aspects of service includingfulfilment (delivery).

● When asked to identify the poorest service, ISPsheaded the list.

● There seemed little difference based on age, sex orethnic origin.

Outstanding Service on the WebWhen we asked our researchers to identify the bestresponse from any website, they nominated Blackstar,

24 Chris Voss

Figure 9Blackstar.co.uk – actual response to enquiry

From: [email protected]

Subject: Confirmation of email receipt at www.blackstar.co.uk

Date: Wed, 18 Aug 1999 12:07:19 BST

Thanks for emailing blackstar.co.uk

There are currently 181 emails in the queue in front of yours, and our average response time atthe minute is 13.2 hours, so hopefully we’ll get back to you within that time (if not faster!)

If your request is particularly urgent you can always ring us free on 0800 0529050 (outside theUK you’ll need to ring +44 1232 225555, but we’re afraid you’ll have to pay for that call yourself!)between 8am and 8pm weekdays (10am - 4pm weekends).

Don’t forget that you can track your order status on line at:http://www.blackstar.co.uk/circle/order_status

Many other common questions are also answered in our help section:click on the big question mark in the header bar or go direct to:http://www.blackstar.co.uk/help/

www.blackstar.co.uk - The UK’s biggest video store

Spring 2000

an Ulster-based web retailer specialising in videos andDVDs (www.blackstar.co.uk ). An example of theirresponse is shown in figure 9.

This example illustrates many elements of goodservice:

● fast response

● automatic response

● customer communication – length of the queue,length of time before you will receive a response.

● choice of phone follow up

● ability to check status

● a large number of service enquiries are statusrelated – where is my package, when will thewater engineer arrive, what is my bank balance,how many free minutes do I have left on myphone?

● The ability to automate status checking cansignificantly increase service levels and reduce costs.

● links to frequently-asked questions

Blackstar’s actual response times were better thanpromised, and the researcher ended up buying twovideos. If a small startup company can offer this levelof service, surely everyone else can!

Taking the human interaction out of service deliverymight be thought to limit the opportunity to delivergood service on the web. The opposite is true. Thecapabilities afforded by the new media create a wholenew set of ways to provide service.

The ingredients of creating service on the web fall into

three areas. The first is the foundation of good service– those things that are essential to qualify to be in themarket. These include site responsiveness andeffectiveness, and fulfilment. These are a necessaryfoundation for providing outstanding service. Buildingon this are the elements of service that potentiallydifferentiate – trust, information and status, andconfiguration and customisation. Finally there is thegroup that potentially excites – proactive service andvalue-added services.

What is expected: The Foundation of Service1. Site responsivenessAs our data have shown, far too often web sites areunresponsive. Response is often slow or sometimesnon-existent, and little use is made of automaticresponse. Examples such as Blackstar show how it ispossible to be highly responsive, and that thisresponsiveness is perceived as excellent service.

Like other research, our survey highlights ease ofnavigation as a prime determinant of the customers’satisfaction with a website and its effectiveness. Ifcustomers’ satisfaction is low, they will not return. Ifeffectiveness is low they will not use it properly. Easeof navigation includes:

● limiting the information on any one page

● segmenting potential users so that they can reachthe part of the site that they want

● developing intuitive ways of navigating

● developing a logical taxonomy of web pages

● allowing bookmarking at appropriate levels

● having a consistent approach across all parts ofthe organisation

● rapid download – a page that takes more than 30seconds to download will have a high risk of beingabandoned.

Our researchers saw IBM as an organisation that haddeveloped an excellent example of a well-constructedcorporate website (http://www.ibm.com).

2. Site effectivenessThe service effectiveness of a website can best bemeasured in terms of how well it meets the needs ofusers. Three measures of effectiveness or usability havebeen suggested (Jakob Nielson, useit.com):

Figure 10The building blocks of service on the web

Creating Service on the Web

WHATEXCITES?

• Proactive service• Value added service

WHATDIFFERENTIATES

• Trust• Configuration &

customization• Information & Status

WHAT ISEXPECTED

• Site responsiveness • Site effectiveness• Fulfilment

ValueAddedValue

Added

CustomerCentered

Foundation of Service

CustomerCentered

Foundation of Service



● Task performance – usually measured by the timeit takes the average user to perform the averagetask on a site.

● Subjective satisfaction with the site

● Quality of the outcome for the user

The Association of Support Professionals has an annual‘Best Web Support Site’ competition. The criteria usedinclude: performance, usability, navigation andappearance. Previous winners (listed on http://www.asponline.com/awards.html) include Cisco andDell. Other dimensions of web effectiveness are a site’sability to create trust and repeat visits, and the extentto which all information on the site is fully up-to-date.

3. Fulfilment and deliveryEven the best eCommerce operations will fail if thefulfilment process is poor. In general, the fulfilmentrequirements from the web will be similar to thosefrom phone-based ordering. However, web customerscan be anywhere and a global shipping and paymentcapability is a necessity. In addition, given that everythingelse operates faster, they may expect faster delivery.

What differentiates – customer centred service1. TrustCreating trust is one of the major challenges. It isdifficult to gain, but easy to lose. If one financialtransaction goes wrong a customer may never return.The debate on privacy is potentially important,especially as the web offers unlimited opportunity forcustomer tracking, even when they are not using theweb. Perceived abuse of privacy will severelyjeopardise trust.

2. Configuration and CustomisationIn the words of the Wharton School’s Jerry Wind:

“Cyber consumers expect to be able to customiseeverything – from the products and services tothe information that they seek, to the price thatthey are willing to pay” (The new rules of digitalmarketing).

Dell has been a leader here, both for business and retailcustomers. On Dell’s website potential customers canconfigure a PC system exactly as they want, and haveit costed immediately. The customer can thereforeevaluate alternatives to assess the possible trade-offsbetween performance and price. Once ordered, a PCis custom-made and delivered very rapidly. To be able

to provide this capability, Dell has carefully designedits products, it production system, and its logistics –both inbound and outbound. Similar capability is nowprovided by many other companies – for example,CISCO allows customers to configure their routersonline and has sophisticated systems to support thisand to ensure that the customer design is technicallyfeasible and meets customer needs. Gardener.com letscustomers design a garden on their computers, andthen co-ordinates and orchestrates the supply chainof over 50 suppliers. Organisations can also provideonline personalised technical support for customers.Examples include Unisys, IBM and Polaroid.

3. Information and statusThe Blackstar example includes status information.This is a widely used element of service. One of themain benefits of on-line banking is that the status ofaccounts and payments can be accessed at any time.No parcels or delivery company would now considernot having status information online.

One of the web’s more sophisticated uses is creatingservice level transparency, which in turn can improveservice levels. At the US auction site eBay, every timea buyer purchases an item through the auction, he orshe gets the chance to rate the service of the sellerboth on a three-point scale and through more detailedcomments. These ratings and comments, available toall registered bidders, form a very strong incentive forsellers to provide good service. Any incident of lateshipment, failure to ship, or dishonest representationis immediately available for all to see and prejudicesthe seller’s future ability to do business.

What excites – value added1. Proactive ServiceThe ability to store customer information, searchdatabases and email customers is rapidly expandingthe opportunity for organisations to be proactive inservicing their customers. For example, once you havemade a bid on eBay (which triggers emailconfirmation), eBay will automatically bid on yourbehalf up to your specified maximum. Every day,bidders receive emails that detail their outstandingaccepted bids. If someone else overbids you, an emailis sent immediately. There is even a ‘Personal Shopper’service to notify you automatically if items you specifycome up for auction. Another example is AmericanAirlines which will email you when the cheap flightto your chosen destination becomes available.

26 Chris Voss

Spring 2000

2. Value-added serviceThere are many examples of how the web adds valueto service:

● Web-based infrastructures to support service delivery.Training is a good example, where companies suchas University Access and Pensare provide web-based course rooms to support in-company trainingcourses and web-based learning material. AnglianWater is developing an online value-added servicefor developers, including providing maps online,online application for site visits etc.

● Dynamic Brokering. For example, the InternetTravel Network is launching a service(GetThere.com) where the customer specifies hisor her travel requirements. These are thenbroadcast electronically to all the service providersin an automatic invitation to tender. This can beautomatically offered, amended and considered,all without any further input from the customer(Financial Times Guide to digital business, Autumn1999). Similar roles exist in Business-to-BusinesseCommerce (Varda Lief, quoted in The Economist26.9.99)

● Aggregators. Companies like Chemdex helpbuyers in fragmented markets to select productsby providing up-to-the-minute price and productinformation, and a single contact point for service.

● On-Line Auctioneers. Adauction, for example,offers a reliable channel for sellers to dispose ofperishable or surplus goods/services, and for buyersto get bargains.

● Exchanges. These create liquidity in otherwisefragmented markets, lowering average stock levelsby matching bid/ask offers, and acting as neutralthird parties. National Transportation Exchangeconnects shippers to fleet managers to takeadvantage of unused capacity.

● eService as an experience. Increasingly companiesare looking to a customer’s visit to a website notjust in terms of the effective completion of atransaction, but as an experience which they willenjoy and will lead to them returning to the site.Access to games, entertainment, music, chat and arange of other things are some of the potentialelements of this.

Any organisation providing eService needs to ensurenot only the highest levels of quality but also new waysof delivering it:

● Exploiting information resources to provideadditional customer service such as status reporting

● Using the capability of the web to allow customersto configure and customise the products andservices that they want – put power back in thehands of the customer

● Being proactive in providing service

● Seeking to add value.

None of this is achievable without building thefoundation. Organisations must deliver high servicelevels in all parts of the process from logging onto theweb through fulfilment to after-sales. They must ensurethat their websites are both effective and responsive.

The eService Challenge: Five Questions“By 2001, 25% of customer enquiries will be via theweb and internet” – Gartner Group

The growth of the web and internet as new channels,the growth in their use by customers and the flood ofcompanies entering the market will present a series ofkey challenges to companies.

1. Do you have a strategy to respond to this?It is easy and cheap to put up a website. But to createan environment delivering effective service on the webto a significant proportion of your customer baserequires an eService strategy.

2. Do you understand your eService customers andtheir needs?Any strategy must be based on understandingcustomers and markets. This means havingarrangements for collecting data to help understandcustomers, track their preferences, and improvesegmentation. In our case studies of organisations, thesegments varied from unsophisticated and potentiallylow users – one set of core segments was grandparentsand busy mums – to highly-sophisticated users likecorporate IT executives.

Technology provides the opportunity to track andinteract with anyone contacting the organisation via theweb and to explore customer needs and expectations innew ways. For example, a call centre wishing toexamine the needs, expectations, or customersatisfaction of users who already have internet accesscan ask for an email address at the end of a call. The



company can then send an email which has a URL, whichwhen clicked can lead directly to a questionnaire.Leading companies such as Microsoft and Sun do thisroutinely, and organisations like Customer FacingSolutions can provide this service on an outsourcebasis. The opportunities could increase dramaticallywith digital TV. For organisations that already havewebsites, this can be automated: when customers clickon exit, they can automatically go to a message ‘wewould like to ask you a few questions’.

3. Can you make the web a major channel?Organisations that have made the web a major channelfor service include Egg in banking; Scoot ininformation provision; Go and easyJet in airlines; IBM,Unisys and Cisco in B2B service, and Dell. One keyquestion will be whether to develop a new and separatechannel, to offer linked channels, or to move completelyto an internet-based operation. Another will be toidentify the appropriate level of web automation.

4. Can you use the web to add value to service?The challenge is to develop a strategy for the rightcombination of value-added, personalised andproactive service.

5. Do you have a strategy to proactively provideservice, to maximise service levels and build trust?Keeping eService customers will require high levels ofservice, a positive experience and trust in yourorganisation. Can these be delivered?

Preparing for eService: Nine Key Steps“Customer Service will become the primaryadded-value function in every business. Humaninvolvement in service will shift from routine,low value tasks to high value, personalconsultancy on important issues, problems ordesires for the customer” Bill Gates, Business @the Speed of Thought

A strategy for eService should be part of the overallelectronic commerce strategy of the organisation.In parallel with these, the case for investment needsto be continually made (see box overleaf). Here areeight key steps:

1. Upgrade current service interaction.As a precursor it is important to upgrade theinteractions of any existing web-based interaction.This may include:

● Set fast response standards, measure and meet them.

● Introduce automated response.

● Introduce procedures for emailing confirmation ofactions.

● Introduce online status checking facility.

● Ease navigation

2. Understand your customer segmentsIt is crucial to understand customer segments andtheir potential attitudes to using the web. Whichare likely to use it more? Which less? Which arelikely to find the greatest value from using new mediato interact with you? Having identified segments,then questions of how to treat each segment follow.Should low-value customer interaction beautomated, and human interaction be reserved forhigh-value customers?

3. Understand your customer service processes andinteractionsAn essential precursor to developing web-based serviceis to understand existing customer service processes.A number of the companies in our case research hadconducted detailed analysis of both processes andcustomer interactions.

For example, one identified seven generic transactions,another classified hundreds of different transactionsinto generic groups. Such analysis provides theessential basis for addressing such questions as ‘whichof these is appropriate for low-touch automation?’Of these customer interaction processes, what can beput on the web? What is difficult to put on the web?This process requires an understanding of thetransaction costs in each channel a customer-orientedattitude. Which of these are most likely to be of valueto the customer if put on the web?

For customers too, transaction costs vary from channelto channel, especially in connection with time andtimeliness. Getting onto the web takes longer thanmaking a telephone call: a customer may rationallyprefer to do a short simple transaction by phone.Similarly, an emergency is most likely to require aphone call because of the speed of getting through,and the distance from the nearest computer.

In the US, banks have found that, for manytransactions, the web may not benefit customers.

28 Chris Voss

Spring 2000

Thorough service process analysis is needed to seewhere it makes sense to put a browser, where you needemail, tracking etc – and when you do not need it. Ifyou do not get this right, you may not drive the costout of the process.

4. Define the role of live interaction (and hence areasfor automation)The quote from Bill Gates’ book at the start of thissection underlies the importance of this question.High-value tasks that are best performed via humaninteraction include the following:

● Cross-selling

● Customer conversion

● Building trust and reassurance

● Getting diagnostic information

● Escalation when email is not enough

● Dealing with customers who have a strongpreference for human contact.

Having a clear view of how human interaction shouldbe used most profitably makes it easier to designeService systems. From this comes the specification ofthe technology and strategy for web delivery andintegration.

5. Make the key technology decisionsFor many, the toughest stage is technology. As onecompany said to our researchers: “one of our biggestimplementation issues is the integration of web-enabled technology with our legacy systems, bothtechnology and business processes.” Technology ismoving rapidly so tough decisions need taking .

● Do we pilot now and learn and invest later riskingloss of position, or move quickly and risk majorproblems, to gain marketspace today?

● Do we go for full integration, and if necessarythrow out today’s legacy systems?

6. Dealing with the tidal waveOffering web-based service can increase customerinteraction a lot. This means:

● Ensuring sufficient capacity is available for peaksand spikes

● Using low-touch technologies and system design

● Setting targets for low-touch interaction

● Ensuring facilities are scaleable.

For example, one of the companies we studied hadset an initial target of making 20% of interactionszero touch (both web and telephone). This isexpected to increase.

7. Customer training and creating incentives to usethe appropriate channelEven with an excellent website and high value-addedservice, customers may not choose to use yourpreferred channel. This is a familiar problem – peoplewon’t always use automatic teller machines, utilities'customers won’t always use direct debits. Ways toapproach this include training customers andproviding them with incentives to switch or disincentivesto continue using existing channels. Despite the growthof the web, the use of incentives can be a powerfultool to create a large customer base. Incentives includelower costs, higher interest rates, etc.

“Just over half of a sample of consumers said theywould buy more on-line if there were incentive orpoints schemes in operation at eCommerce sites.A similar proportion claimed that they wouldprovide personal information in exchange fordiscounts or reward schemes; only 15% said thatsuch schemes would not influence their onlinepurchasing patterns in any way.”(NFO Interactive survey of US customers)

It is of course important that channel costs are calculatedproperly. For example email interaction may be moreexpensive than phone interaction in some cases.

8. Brick versus Click – address channel choiceThere are two crucial questions. The first is whetherto offer the customer a choice of channels, for exampleface to face, post, phone and web. In any industrythere may be a variety of different approaches. Forexample, many high-street banks allow the choice ofmanaging their current accounts through the branch,post or on the web. Others have single channelaccounts – for example phone only. Others allowconstrained choice. Egg has phone and web, but allowsnew customers to enrol only via the web.

The difficulty in getting high levels of service whenadding new channels (see for example the brick versusclick results presented earlier) has led many in the pastto start new ventures separate from existing channels



and systems. This has been particularly true infinancial services such as telephone banking.

Informing this decision are both the costs of thedifferent channels, and importance of CustomerRelationship Management (CRM) databases. In mostcustomer service environments, the quality and scopeof the CRM database is central to the successfuldelivery of service. There is therefore pressure not tooperate new channels separately, but to integrateexisting channels around a single CRM database.Combining this with the ability to give the customerchannel choice can lead to success:

“One reason why Charles Schwab is able tocharge much bigger fees than some of its rivals is

Building an Investment Case

“It’s not easy –it’s not cheap – and it’s not optional”John Dickie – Insight Technology Group

“How do I justify investment in eCommerce to agroup of senior managers/directors that get theirsecretaries to print out their emails?” In a feedbacksession with the companies which participated inthis study, nearly all claimed to have made thisstatement! In one company, the team said: “Mostof the key decision makers have been with us for20-30 years and don’t have the requisite skills touse or understand the technology”. Many largecompanies have found building a case forinvestment in eService and eCommerce extremelydifficult. As another company put it: “The primaryfactor limiting our move to eService andeCommerce is convincing the board of directorsthat the benefits of the implementation in terms oflower costs are greater than the cost ofimplementation”.

This difficulty arises from a number of factors –uncertainty over the data and trends, using thewrong baseline, lack of vision and lack ofknowledge and skills of senior management. Onerecent survey concluded that while US directorstook the competitive threat seriously, those in theUK and France were in “a state of denial”. Someput off action because of the imagined scale of thechanges involved; others believe (mistakenly)that eCommerce will not affect their sector.

Conversely, an equal danger was that companiesinvest heavily in new technology without properlyunderstanding why.

The problem of uncertainty is very real: the newmedia environment is essentially very uncertainbecause the rate of change is so fast. But the peoplewho are winning are not those waiting for thecertainty to emerge; they are those who areexploiting the uncertainty and who back key trendswhen others are not doing so.

In building an investment case against a baselineof today’s business, the investment costs are oftenhigh, whereas the returns are often not visiblein the short term. This is particularly true wherenew start-ups are prepared to operate at muchlower margins, and sustain short-term losses tobuild up their customer base. For example, Eggbank is prepared to operate on interest-ratemargins of ½%, while its traditional competitorsare operating on margins of 2½ - 3%. There aretwo alternate baselines:

● Buying an option on the future. In an uncertainworld, investment in new media and channelscould be viewed as buying an option on entryto future markets and in mastering futuretechnologies. In the short term, this allows acompany to build expertise and infrastructurewithout major investment or structural change.However, to profit from this, the option mustbe exercised before it expires. Some of our case–

that it combines an on-line service with a low-cost branch network and a telephone service. Theyhave recognised the web has certain virtues andweaknesses. The web is lousy if you have a complexquestion. Likewise, it does not allow for people’sneed for relationships. Not everyone feels happyabout sending a cheque to a broker they have neverseen.” (Gary Hamel, speaking in October 1999).

9. Exploit the web to create relationships and anexperienceOne of the characteristics of the web is its ability tocreate relationships and communities:

● Tailor - made sites for customers

● Proactive service offerings

30 Chris Voss

Spring 2000

study companies had treated their investmentin this fashion, but were in danger of delayingfull investment for too long.

● The baseline as what will happen to yourbusiness without investment – the costs of notinvesting. If your market is being attacked bynew players, using new technologies and withdifferent cost structures and not bound by legacysystems or polices, then the baseline case forinvestment may be much lower thanextrapolation of today’s business. One case studycompany stated: “we are attempting to identifythe costs of not implementing these initiativessuch as losing customers, in addition to thetraditional financially-based cost/benefitanalysis.” Another case company had pitchedits eService strategy in terms of the competitivethreat to gain attention from the board. “Ourprimary driver for developing online capabilitiesis to remain competitive.”

The best way to find out how to exploitthe web is to do nothing!In every market that we looked at from utilities tobanking we found organisations wanting to breakinto the market or change the way the marketoperates by using new technologies. Theseorganisations are quick to see both the weaknessesof the current market place and new ways of doingbusiness and to challenge underlying assumptionsabout customer behaviour. Too often, the ability tochange is constrained by an organisation’s

unwillingness to make tough decisions about itslegacy systems and procedures.

“One of the biggest problems facing UKcompanies is ‘legacy integration’ – making surethat inherited systems can be made to work inharmony with new Internet-based solutions. Inmany cases, companies are focusing on reasonsfor resisting change rather than thinking ahead,”is how Richard Barrington of Sun Microsystemssummarises the problem.

Dot.com strategies:

● Ignore unattractive, expensive channels.

● Cherry - pick segments, differentiate segments

● Pick products/services where web adds value

● Offer Services worldwide

● Capture or create intermediary roles

● Use strength of portal.

● Create affiliate programmes, selling products viaother people’s websites

● Use incentives

Organisations must view their investment ineService not just in cost/benefit terms, but also incomparison with the case of doing nothing. Byputting yourself in the shoes of a potential entrant,you can gain major insights into what a servicevision might consist of.


● Communities of users

● Extend relationships beyond the firm

Success will:

● Turn browsers into buyers

● Turn service customers into repeat purchasers

Implementing the StrategyNo strategy will be effective without attention toimplementation. Lessons from our case researchincluded:

● Business process and transaction analysis isessential for effective eService design

● You must get implementation right first time, ifnot people will revert to the phone.

Important areas for implementation include:

1. Organisation and cultureOne of our case - study organisations found:

“Power will shift away from some people in theorganisation. Increasing use of technology isunsettling some; while employees lower down arecomfortable using the technology, more seniorpersonnel are not. This results from the freedomof information it allows and the subsequentperceived loss of authority. Thus a cultural and


organisational shift must occur that will result ina flatter organisation and responsibility drivendown lower into the organisation.”

Another case company reported that:

“lack of a cross-functional champion with thepower to bring together various departments’priorities to drive Service and eCommercemeans that the drivers of our eService initiativesremain unclear”

Just as eCommerce changes the organisation andpower in markets, it can do the same withinorganisations. Another aspect of organisation andculture is the need to realise that in the newenvironment, alliances and partnerships play a much-increased role.

2. Systems and InfrastructureImplementation will often require integration ofservice systems, particularly call centre, web and CRMsystems. This in turn may require a company to makedifficult company-wide decisions about legacy systemsand procedures. In addition, there is likely to be rolechange and convergence among all who interface withthese systems.

3. TrainingEffective implementation will require training of staffand customers. Dealing with electronic interaction willrequire different skills from those for dealing withvoice communications. Dealing simultaneously withwritten and verbal interaction will require a newskill set. Customers will require training both in howto use eService systems, and in appropriate choiceof channel.

4. Looking to the customersThis is well summarised by Mike Harris of Egg bank.

“We say Egg is about treating people asindividuals. If you joined Egg, someone wouldcall you and say ‘Welcome to Egg’.

“We were talking to people [in one of the pre-launch market research panels] about the digitalrevolution. One woman said: ‘You know, yourrevolution? It is similar to what Emma Goldman,the early 20th century American anarchist, said: If Ican’t dance, I can’t come to your revolution.’ In

other words, she was saying that she wanted to dealwith an organisation that had a bit of happinessin it, that wasn’t austere and dry, but that was anorganisation dancing with its customers.”

“We talked to real dancers. And we found theywork in three ways. First is interaction when theyare dancing – that’s what we do on the phone.Second is preparation – so we started to explorejust what kind of preparation we could do. Thirdis sensation – they try to create a response whenthey dance, so we looked at whether you couldhave a phone conversation that made people feelgood.... If the customer wants to joke, joke; if thecustomer wants to go quickly, go quickly.”

5. MetricsCompanies need to develop key metrics to setstandards and measure performance in the followingareas:

● Security/Trust. This can be measured throughsurveys and focus groups. Two organisations wecontacted saw this as a strength of theirorganisation: to be exploited in a webeCommerce environment where lack of trust mayhold back use.

● Response Time. In two organisations interviewedthat set standards, the response time standard wasset the same as for a mail enquiry – two days inone company, one week in the other. However, bothrealised that internet customers may expect fasterresponse.

● Response Quality. This is difficult to measure, butwe found evidence of inconsistent responses, andresponses were seen as blunt.

● Navigability. One of the most importantdeterminants of service.

● Download time. It is often stated that 30 secondsis the maximum that a user will tolerate for anypage. It may be less!

● Fulfilment. Is fulfilment fast and are the promisedgoods delivered?

● Up-to-date? For applications that exploitinformation, out-of-date information may quicklyturn off users.

● Availability. As Peter Simpson of First Direct putsit, “…customers should have what they want, when

32 Chris Voss

Spring 2000

Professor Chris Voss holds the Foundation Chairin Management Technology and Learning atLondon Business School. This research wassponsored by the Institute of Customer Service withfinancial support from Anglian Water plc, ThePost Office, Thames Water, and Ventura plc. Theauthor is grateful for assistance and comments toDr Ted Johns, Adam Ford, Georgina Kingsland,Judith Rantzen and Professor Jim Short.

they want it and where they want it. We don’t havea choice – the 24-hour society is inevitable”(Management Today, December 1998). Can theuser reach the site 24 hours a day, seven days aweek? Is the down-time minimal? Can the sitealways be accessed? There has already beencriticism of the ability of some online banks to copewith customer demand.

● Site effectiveness and functionality. Is the web pageintuitive and easy to use? Is the content written inthe users’ language? What is the effectiveness ofthe site from the users’ point of view?

Conclusion – New Media and the ServiceProfit ChainThe web, the internet and digital TV are key channelsof the future. The service profit chain is still as strongas ever, but the new media can be seen as:

● Supporting front-line service delivery.

● Changing the nature of front-line service delivery– human involvement in service will shift fromroutine, low-value tasks to high-value, personalconsultancy on important issues, problems ordesires for the customers.


● Becoming a service delivery channel in its ownright.

Based on our survey of service levels, mostorganisations are not yet prepared for deliveringservice on the web and are being outperformed byweb-based companies. The question for organisationsis not ‘should we invest in eService?’ It is:

‘What is our strategy for eCommerce and eServiceand how should it be implemented?’

BanksBarclays BankBank of ScotlandLloyds TSBNatWest BankCo-operative BankHSBC (Midland)Abbey NationalBank of IrelandRoyal Bank of ScotlandAlliance and Leicester

Travel – High StreetSTA TravelGlobal FlightsLee’s TravelCanadian AffairDelta Travel

Travel – Internetlastminute.comtravelocity.comtravel-bugdeckchairbonanza

Shopping – High StreetHMVTopshopSainsburyVictoria WineWaitrose

Shopping – InternetBeersdirectBlackstarChateauonlineNet MegastoreEasyshop

BrandsGAPConverseNikeLevi StraussGuessCoca-ColaRed BullAvonL’OrealVirgin

Content ProvidersYahoo!ScootAltaVistaMicrosoft Network (MSN)NetscapeGoToAmerica OnLine (AOL)FreeserveMainsailLycos

UtilitiesThames WaterAnglian WaterSevern TrentLondon ElectricityYorkshire ElectricityBritish GasScottish PowerNorthern Electricity and GasCable and WirelessBT

Appendix: The Companies in the SurveyComputer HardwareDellCompaqIBMToshibaUnisysFujitsuAcorn ComputersAcerCity ComputersElonex

developing an eservice strategy

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