e-Service quality is essential in creating customer satisfaction with e-commerce transactions, but what about in building loyalty in the online environment? It has been estimated that it costs an Internet site anywhere from $30 to $90 to attract an online shopper to visit its site and buy something. Customers must continue doing business with most online firms for at least 2 to 3 years for them simply to recover their initial acquisition costs.15 Somewhat surprisingly, at the beginning of a relationship, the outlays needed to acquire a customer are considerably higher in e-commerce than in traditional retail channels. Customer acquisition costs for pure-play online apparel retailers are 20 to 40% higher than for traditional brick and mortar apparel retailers with physical and online channels. Yet, in future years, profit growth accelerates at a faster rate; in apparel e-tailing, repeat customers spend more than twice as much in months 24 to 30 of their relationships than they do in the first 6 months.16
SurveySite conducted a study among American and Canadian Web sites (Web magazines; software/Internet firms; entertainment; retail; travel; and health related) and found that the most important variable for predicting repeat visits to the Web site was the site’s content. Respondents cited “frivolous content” as a primary reason for not planning a return to the Web site. The second most important factor in determining repeat visits was whether the respondent found the visit enjoyable. Respondents enjoyed their visits when they were able to find the specific content or information for which they were looking or if the site provided a novel experience, was entertaining, and had an
interesting interface. Finally, site layout was cited as the third most important factor in influencing the rate of repeat visits.17
Another study among Webmasters from Fortune 1000 companies identified information quality; system use; system design quality; and playfulness as four major determinants for future visits to company Web sites. Company Webmasters can improve service quality by focusing on the way in which customers use their Web site. It is the customers rather than business organizations who should control the online transaction process.18
Dell Computer, currently the leading personal computer company, has been extraordinary in creating a loyal customer base. Dell has determined that its major loyalty drivers are: order fulfillment; product performance; and postsales service and support.
Dell then determines the optimal measure of each one of these drivers. Success in order fulfillment, for example, is measured according to “ship to target”—a measure of the percentage of orders delivered accurately and on time.
HOW TO IMPROVE E-SERVICE QUALITY
Given the dismal record of many e-commerce providers, what should firms do to improve customer service? The fundamentals of customer service for e-marketing are the same as in traditional marketing. Most consumers today are looking for ways to streamline their shopping—to get it done quickly without compromising price or quality. The online shopping experience needs to be simple and efficient or shoppers will “click and move.”
Many companies mistakenly view technology as a cure-all to customer service problems.
However, no amount of sophisticated technology can make up for lack of a customer- centric culture.
Research has proposed that the five following components be considered in delivering e-service quality:19
■ The core service represents the “reason for being” and is designed to meet the primary demand need of a specifically described target market. Using the example of online book retailers, a core service would be displaying information on new products and offering recommendations.
■ Facilitating services make it possible to use the core service and, without them, the core service collapses. In the case of online book retailers, a facilitating service might be archiving and searching capabilities.
■ Supporting services do not facilitate using the core services but rather add value to them; support services might include the availability of useful links or “virtual book clubs.”
■ Complementary services accompany the core service and support their acquisition and use or disposition. For online booksellers, a complementary service might represent book reviews or their shipping capabilities.
■ The user interface, through which the customer accesses the services, is a means of communication between the e-service marketer and the potential customer. What information appears on screen, how it is organized, and how users access the information define the user interface. Limited menus, poorly designed navigation
systems, and difficulty comparing multiple products on different screens have adverse effects on electronic shopping.20
Even with the shift of business activity to the Web, the fundamentals of marketing exchange remain the same: to create enduring and profitable customer relationships. A key factor in establishing and maintaining profitable customer relationships is trust. One study of eBay buyers found that, to a considerable extent, price premiums were based on the buyer’s trust of the seller’s credibility (see customer value insight 6.1).21
CUSTOMER VALUE INSIGHT 6.1: EBAY BUILDS TRUST ONLINE
eBay, which is arguably the Web’s most successful pure play, has gone from a funky online garage full of Beanie Babies and collectible Elvis prints to a powerful global marketplace in slightly over 8 years. With its 50 million registered users, eBay is now five times larger than its nearest competitor, Yahoo!. eBay primarily earns its revenue (nearly $2 billion in 2003) by charging a commission on every trade on its electronic exchange; the rest of its revenue comes from listing fees and other charges. eBay is also spectacularly profitable because it has no real cost of goods and customer acquisition is largely driven by word of mouth. The company has created a powerful value proposition by creating a fun, fast, efficient trading environment where buyer-seller risks are kept to a minimum.
The real genius of eBay is that it has figured out how to tap into the social capital created on its site by the millions of people who trade there daily. A primary source of its social capital is its feedback system, which indicates whether users are legitimate sellers or if a user has had a bad experience with an online seller or buyer. Buyers can enter feedback (positive, negative, or neutral ratings) about sellers and vice versa. Sellers also achieve star ratings based on the number of positive votes (yellow for 10 to 99 votes;
gold for over 10,000), and the stars appear next to their sale items.
On eBay, sellers are forced to wear their reputations on their sleeves. Sellers go to great lengths to avoid negative comments because negative feedback causes sales to go down. In fact, sellers are often brutally honest about their wares in order to avoid negative feedback. eBay also features community-related tools that create a self- governing and self-policing body
of customers Sellers who have built solid reputations with buyers are rewarded by higher than average prices for their auctioned goods. A research study conducted on eBay found that buyers bid 7.6% more for goods listed by repeat sellers with high reputations.25 eBay’s feedback system creates tremendous transparency, allowing buyers to “price” a seller’s reputation. This degree of transparency and accountability has generated tremendous trust that allows eBay to continue to grow and support millions of buyer- seller transactions.
Yet, trust online seems to be scarce. According to Consumer WebWatch, only 29% of online users trust Web sites that sell products and services, a far lower percentage than for traditional, offline institutions.22 According to a survey by Jupiter Media Metrix, 45%
of U.S. companies said that lack of trust prevented them from conducting more business online.23 Some of the keys for building Web site trust:24
■ Maximize cues that build trust on your Web site.
■ Use virtual-advisor technology to gain customer confidence and belief.
■ Provide unbiased and complete information.
■ Include competitive products.
■ Provide open and transparent organizational communication.
■ Keep your promises.
Finally, e-service quality mirrors many of the service quality dimensions discussed in Chapter 5. Consumers may use their brick and mortar service quality experiences to form expectations when shopping online; however, their zone of tolerance may be considerably narrower. e-Shoppers tend to be less patient and competitors’ Web sites are only “one click away.”26 Figure 6.2 provides a broad framework for understanding the major dimensions of e-service quality.
“Incubative” dimensions would be considered before a Web site is launched and are largely related to site design issues, such as layout, content, ease of use, and general appearance. Recall from earlier discussion that site layout was highly correlated to repeat visits. On the other hand, certain factors (active dimensions) need to be considered throughout the period in which a company’s Web site remains active, such as reliability, efficiency, support communication, security, and incentives. These factors are responsible for increasing customer retention and for encouraging positive word-of- mouth referrals.
Figure 6.2 A Model of e-Service Quality (Adapted from Santos, J.
[2000]. Managing Service Quality, Emerald Publishing, 13(3).)
Finally, as with service quality in general, the challenge for e-service marketers is to determine the relative performance and valence on each of these various service quality attributes and devise strategies to improve in these areas. Customer value checklist 6.1 lists some of the major e-service quality dimensions and suggestions on how to improve in these areas.
CUSTOMER VALUE CHECKLIST 6.1: KEYS FOR IMPROVING E-SERVICE QUALITY
Access—give customers access to their accounts, to check their profiles or track recent orders; also give them numerous ways to contact you. Do not bury the telephone numbers somewhere deep in the Web site.
Personalization—when the prospect (or customer) grants permission to be contacted, e.g., “opt-in,” thank him for the visit; subsequent visits should present information based on the customer’s earlier preferences, i.e., using “rules engines.” Customers also want the opportunity for detailed shipping, billing, and credit card information as well. Many Web sites today offer a section called Your Account, which offers such information. The Lands’ End (now owned by Sears) Web site offers a feature called My Virtual Model—a mannequin that users can set to their own measurements to see how the clothing items might fit. Sites should consider using online
live chat; however, sites that offer this should make sure to give visitors who select this option an expected wait time for an agent.
Responsiveness—customers expect a prompt response to their inquiries. At the very least, visitors should immediately receive an automated e-mail response and a more detailed response to the customer’s inquiry should follow. More than half of all consumers expect retailers to respond to email inquires within 6 hours, but only 29% of online retailers actually meet those expectations, according to Jupiter Research.
Customers also want to find information and access it quickly, which would suggest offering faster page loading. Finally, keep customers informed when the status of their orders change because today’s e-consumer expects to be updated when changes to their orders occur.
Navigation—main links should be clearly visible on the tops of all pages, as well as on the sides or bottoms of pages. Once the prospect has navigated each individual page, second-level links should be visible under the main links. Access to “home” should always be present, regardless of tier level. Your site navigation scheme must be intuitive and easy to follow. By the time your visitors get to the second page, they must understand how your site is set up; key pages must be clearly labeled in the main menu; and the submenus must be very obvious. If a visitor gets lost in your site, he is much more likely to leave it than to try to figure out a confusing navigation scheme. Finally, according to research by Kearney, shoppers want to get in and out, quickly and efficiently.27 Thus, online retailers should limit requests for information; never ask for the same information twice; and state the return policy clearly.
Assurance—involves confidence that service providers will keep their promises and that the information presented is clear, truthful, and secure. A study conducted by Consumer WebWatch a nonprofit research project organized by Consumers Union and
funded by several nonprofit foundations, recommends that in order to improve credibility with consumers online merchants should:
1. Disclose the physical location at which they are produced, including an address, telephone number, or e-mail address. Ownership, purpose and mission should also be clearly disclosed.
2. Clearly distinguish news and information from advertising. Web sites should also clearly disclose sponsorships and relevant business relationships, including links to other sites.
3. Disclose financial relations, particularly when the relationships affect the cost to a consumer. Fees for service, transactions, shipping, and handling should be clearly stated.
4. Any posted incorrect information should be immediately corrected, and policies on consumers’ rights if a purchase is made based on incorrect information should be clearly stated.
5. Privacy policies should be easy to find and clearly and simply stated. Web sites should clearly disclose how a customer’s personal information will be used.28
e-Sellers should also be able to offer assurances about delivery. One of the major reasons many dot.com businesses collapsed was due to problems with order fulfillment.
Customers never gave these e-tailers a second chance when their orders arrived 3 weeks after Christmas.
Price clarity—extent to which the seller makes clear the final price to be paid. Prices should be clearly displayed alongside the items and a running total of purchases and shipping costs should be shown as the order progresses. Foreign consumers in particular have been hesitant to buy U.S. goods online when they did not know what the final cost would be after adding in customs and other fees. Comerxia, a Hallandale, FL-based company, uses their Web site, DoUWantIt.com, to arrive at a guaranteed price for products ordered online. Comerxia gets raw data on customs duties and taxes from UPS and their sources and applies its proprietary technology to come up with guaranteed prices. Before buying the product, the customer can see the price of the product, customs duties, and taxes. The products are then delivered from the retailer (such as Amazon.com) to a Mail Boxes Etc. or UPS center for pick-up by the customer.
SUMMARY
Service quality is an important aspect of electronic commerce. Online customer service expectations such as reliability and responsiveness often mirror offline service expectations. Given online clutter and the myriad sites vying for the consumer’s attention and loyalty, establishing online trust will become critical. e-Commerce marketers who regularly assess the performance and relative importance of these dimensions should be rewarded with loyal customers. This chapter has proposed that an opportunity exists to use online service quality to create high levels of satisfaction and repeat visits. Also, a framework of some of the key service quality dimensions controlled and managed by the
e-marketers has been provided. The next chapter will discuss how value is conceived and communicated through the value proposition.
CUSTOMER VALUE ACTION ITEMS
1. For each of the following businesses, identify core, facilitating, support, and complementary services: (a) portal (e.g., AOL, Yahoo); (b) university; (c) large public library; and (d) large brokerage (e.g., Merrill Lynch, Charles Schwab).
2. Visit the Web sites of three major airlines comparing each of them using the incubative dimensions in the E-Service Quality Model (see Figure 6.2).
3. Suppose as a consultant you are asked to advise a client in setting up a food catering and delivery business in a large metropolitan area. The client anticipates that 70 to 85% of the orders will be placed online. Thus, your client is interested in learning the following: (a) which service dimensions will be most critical in creating ongoing customer value; (b) how to design the business and, in particular the Web site, to maximize customer service; and (c) how to assess service quality once the business is operational. Write a one-page plan for the client that addresses these needs.
4. Simplicity marketing gives consumers choices but in new ways that reduce the stress associated with making purchases. Leaders in this area include Amazon.com, Honda, Southwest Airlines, and Target Corp. For example, SWA mastered low-cost
production of quality air transport and its Web site now accounts for more than half of its volume. Given what you know about CV and e-service quality, identify an Internet company (exclusive of Amazon) that practices simplicity marketing and briefly describe how it implements this strategy successfully.
5. A recent survey found that a third of Web users would pay for content. Yahoo! has capitalized on this finding and rolled out 17 paid consumer services last year. During the past year, Yahoo!’s paid services increased from 21 to 37% of revenues. How do you feel about paying for online services that were formerly free? Across the Web, companies are seeking revenue-producing strategies from information. What are the CV implications of this trend?
6. Exercise: a retail or virtual shopping experience?26
Situation: Customer A has an urgent need to buy an all-in-one printer that copies, scans, faxes, and prints. He drives to the electronics superstore where he has bought products previously. Nobody helps him, but he finds a model that may suit him. He asks a question about a feature and is told it is not available and “that’s just the way it is.” He still wants to buy, but it is out of stock and he is told to try the next week.
Discuss:
a) How did the store lose its three possible competitive advantages—press its buttons (product); press his buttons (immediate customer gratification); or press the flesh (customer service)?
b) What should have happened to create superior customer value?
c) How could an e-tailer overcome these potential competitive
disadvantages/advantages—press its buttons (product); press his buttons (immediate customer gratification); or press the flesh (customer service)?
d) What additional advantages and disadvantages occur in the e-commerce arena?
How do these factors affect the creation of customer value.
e) Comment on customer retention/relationship marketing threats and opportunities.
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