Abstract
This paper presents a cross-disciplinary framework
for understanding and designing electronic commerce systems. The
basic assumption underlying the framework is that rapid changes
in computing and communications technology, particularly the Internet
and World Wide Web, enable the compression of time and space.
Formerly distinct functions of commerce such as marketing communications,
sales, transactions and fulfillment can literally occur simultaneously
and in real-time. Cross-disciplinary principles from advertising
communications, interpersonal relationships, sales, customer service,
and fulfillment are applied to designing an electronic servicescape.
It is within the servicescape that direct buyer-seller contact
occurs. The Call Center from the catalog industry and a metaphor
of a service encounter provide a customer-oriented perspective
on electronic commerce.
Introduction
The 1996 University of Minnesota Conference on Electronic
Commerce [35] included numerous presentations and case examples
of organizations that are successfully approaching electronic
commerce by creatively applying emerging computer & communications
technologies to the primary business principles of those organizations.
The "evolutionary approach" described by these organizations
is in contrast to much of the hype surrounding the Internet and
World Wide Web which suggests some kind of revolution in the making
through radical new approaches to commerce.
Clearly, the dramatic changes in telecommunications
and computing technology as evidenced in the World Wide Web are
leading to a whole new domain of applications. Organizations that
have previously been conservative in their use of computers are
rushing to "have an Internet presence" - whatever that
means! Whenever such a dramatic new technology becomes available,
it is helpful to develop a framework as a starting point for how
to apply and manage the technology and its applications. The recent
electronic commerce conference, the underlying research project,
and an associated seminar series are part of our effort to develop
and communicate such a framework.
The theme of this paper is that electronic commerce
can be approached as an evolutionary process of applying new information
technologies to existing business principles, particularly in
the key functions of advertising, relationship marketing, and
fulfillment. The principles aren't changing, but their application
and the resulting practices will be different and possibly revolutionary
as new technology capabilities are applied creatively to those
functions.
This paper presents the authors' current research
which is based on a metaphor of a service encounter and the underlying
literature and concepts in the key business functions of advertising,
sales, relationship marketing, and fulfillment. The catalog industry
is examined as a starting point model for a specific category
of electronic commerce. The cross-disciplinary framework of the
service encounter becomes the basis for designing an electronic
commerce servicescape.
There are a variety of definitions of "Electronic
Commerce." It has been defined as a combination of technologies
at the 1996 Electronic Commerce World Institute [13], as a business
methodology by Kalakota and Whinston [18], and as business over
networks and computers by Haynes [15]. We will not attempt to
settle the debate regarding the specification of the definitive
definition of Electronic Commerce. Suffice it to say that the
catalog-based business-to-customer example used in this paper
satisfies the requirements of all three definitions noted above.
This paper builds on the efforts of Bloch, et. al. [9] by demonstrating
examples of creating business value in each of their value creation
strategies: improving, transforming and redefining.
Service Encounter Metaphor
We define a service encounter as the service that
is implicit in any transaction between buyer and seller. The servicescape
is the physical environment in which the service encounter takes
place. A service encounter can be viewed from three perspectives:
what the encounter is to accomplish, the expectations of all parties
about the encounter, and the underlying concepts involved in accomplishing
those objectives and meeting expectations. The purpose of suggesting
a service encounter as a metaphor for electronic commerce is to
provide a conceptual basis for designing the primary components
of an electronic commerce application: the "servicescape",
the supporting infrastructure, and the database and analytical
tools necessary for the relationship marketing function.
A service encounter typically occurs for one or more
customer purposes: gathering information in preparation for a
potential purchase, making a purchase, getting information after
a purchase, or obtaining customer service to resolve some problem
following a purchase. From the business perspective, an encounter
is for the immediate purpose of satisfying the customer and for
the longer term perspective of building and maintaining a relationship
with that customer. Of course, the desire for such a relationship
must also be part of the customer's expectations of the encounter
if a relationship is to result from the encounter.
The "product" involved in a service encounter
might be a physical product, a service, or information. The service
encounter metaphor is intended to relate to the entire transaction
surrounding that product, service, or information.
Customers have high expectations of a service encounter.
They want an encounter with the service provider to be friendly,
helpful, courteous, respectful, timely, include interactive discourse,
remember previous encounters, and to be goal oriented, among other
situation-based expectations. Another way to think of customer
expectations is to consider the "Four Way Test" that
Rotary International, the worldwide community service organization,
has for its members to apply in their personal and professional
lives: 1. Is it the truth?, 2. Is it fair to all concerned?, 3.
Will it build goodwill and better friendships?, 4. Will it be
beneficial to all concerned? If one considers a service encounter
from Rotary's perspective, answering the Four Way Test in the
affirmative would indicate a positive service encounter, and one
which builds and maintains a relationship.
In addition to their expectations about a service
encounter, customers also bring high expectations of computers
and the Internet, specifically: computer capabilities of storage
and retrieval, any-to-any connection, ubiquitous access and use,
fast interaction, and tailored to the individual. Because customers
have high expectations of both a service encounter and computers
and the Internet, it is likely that consumers will have very high
expectations of an electronic service encounter. The electronic
servicescape and the supporting infrastructure must therefore
be designed to meet possibly very high expectations.
Bitner [8] describes a service encounter and the
associated relationship-building around the concept of "promises".
Bitner poses three components of promises: making promises; enabling
promises; and keeping promises, indicating that these are three
separate but partially intersecting domains. One contribution
of this paper is to relate the concept of promises to business
functions and principles, and then to extend that to the design
of the electronic commerce servicescape and supporting infrastructure.
Berry [4] is the first person to use the term relationship marketing
in the services literature. Bitner indicates the heart of Berry's
contribution is "his identification of emerging perspectives
and trends in the fields of service relationship marketing: targeting
profitable customers, multiple levels of relationship marketing,
marketing to employees and other stakeholders, and trust as a
marketing tool."
In the marketing literature, Solomon et al. [32]
and Surprenant and Solomon [31] conceptualize service encounters
as "role performances" defined as "the dyadic interaction
between a customer and service provider'. These definitions focus
on the interpersonal connection between the customer and service
provider. Shostack [30] has a broader definition, "a period
of time during which a consumer directly interacts with a service".
Bitner, Brooms and Tetreault [7] indicate that Shostack's definition
"does not limit the encounter to the interpersonal interactions
between the customer and the firm, and suggests that service encounters
can occur without any human interaction."
Building on Shostack's and Solomon's definitions
we propose characterizing interaction between buyers and sellers
as service encounters. Electronic commerce, like a service encounter,
presents a servicescape described by Bitner [6] as an environment
in which interaction occurs. Retail service encounters, for example,
occur in real-life physical space with face-to-face communication.
Electronic commerce encounters occur through constructed interfaces
with computer-mediated communication. More specifically, electronic
commerce servicescapes are characterized by variations on the
six interactivity dimensions as described by Heeter [16] and Anderson
[2] and computer intelligence to provide levels of personalization.
While the actual execution of the buyer-seller encounter
differs, the core objectives and expectations do not. For example,
in both electronic commerce and more traditional service encounters,
customers need to be greeted, listened to and engaged. More specifically,
customers need to be able to express their needs and when necessary
receive help translating a general expression of need into a particular
product or service. In this sense, customers are looking for effective
buyer-helpers (Anderson & Wanninger [3]).
We can also examine the classic role of a sales person
with insights and observations that could be applied to a service
encounter/servicescape environment. While authors may use a different
number of stages and call the stages by different names, there
is universal agreement that selling is a process. Churchill, et.
al. [10] presents a classic six stage selling process: prospecting
for customers, opening the relationship, qualifying the prospect,
presenting the sales message, closing the sale, and servicing
the account.
The important point to note is that the actual sale
is only one part of the process. There are numerous steps that
precede the sale and the sale itself does not end the process,
but simply changes the emphasis of the repeated contact or interaction
with the customer. The change in emphasis could involve providing
post-sale service (step 6) or it could involve recycling through
the process by repeating the sales process all over again with
the goal of proposing a repeat purchase of the same product, selling
different products or services to the existing customer, or getting
referrals for new customers.
For our purposes, we can break the process into three
phases, pre-selling activity, the sale or transaction, and post-sale
activities. In many instances, post-sale service activity will
lead to future sales. In other words, the salesperson's job is
to identify potential customers, close sales, and provide follow-up
service that can lead to identification of additional selling
opportunities. A good salesperson can be described as having the
ability to correctly classify any person into the correct stage
of the selling process. Having done that, the best sales people
have the ability to deliver specific activities and actions that
are tailored to fit that particular person's needs.
Good sales managers (the individuals responsible
for the overall performance of the sales force) are able to determine
whether one type of salesperson can provide the needed response
to people at any stage of the selling process, hence the term,
general salesperson. In those instances when a general purpose
salesperson will not suffice, separate individuals are retained
to do pre-selling activities and fulfill after the service sales
requirements. Churchill refers to these individuals as merchandisers,
detailers and missionary salespeople.
Catalog Industry as a Model for Electronic Commerce
We now move to examine the catalog industry as a
specific example of commerce which has many of the characteristics
of electronic commerce. The catalog industry has demonstrated
that many specific products and services traditionally sold at
retail can also be sold, profitably, without direct physical contact
between the customer and the product or service. As such, an understanding
of how electronic commerce can be applied within the catalog industry
can serve as a starting point for the examination of electronic
commerce in other industries. The catalog industry is clearly
very different from retail in the service encounter and fulfillment
operation, and is different from other industries and situations
that fit our broader definition of electronic commerce. However,
we believe many of the principles involved in transactions and
interactions between customers and businesses apply across industries
and situations.
The catalog industry is a major segment of the $300
billion plus direct marketing industry. The direct marketing industry
has a rich history of leading edge use of technology and lists
of customers. The industry began in the 1880s with John Patterson
of NCR developing leads for his sales force. Richard Sears mailed
an offer of gold watches to railroad agents in the early 1900s.
Sears and Arron Montgomery Ward developed a mail order catalog
and then extended credit cards to farmers by 1910. Post World
War II saw the introduction of Book-of-the-Month Club, Diners
Club and American Express Cards, and Fingerhut's use of a computer
letter to sell auto seat covers. The introduction of postal ZIP
codes and 1-800# phone numbers in the 1960s were used by the industry
for computer segmentation of customers, telemarketing, the introduction
of a wide range of catalogs, and the rebirth of the catalog industry
to its current form of relationship marketing. The 1980s saw the
industry adopt VCRs, Cable TV, Fax, Home Shopping TV, PCs, and
on-line information services.
Stone [33] defines direct marketing as "an interactive
system of marketing, which uses one or more advertising media
to effect a measurable response and/or transaction at any location".
At the heart of the catalog industry are the concepts of relationship
selling and the use of prospect lists, use of a catalog as a media
of presenting "offers" to specific segments of customers
and prospects, and a complex and expensive fulfillment operation.
The customer receives a targeted catalog by mail, places orders
to a 1-800# Call Center, and receives the merchandise and invoice
from the fulfillment center. The customer service person in the
Call Center is supported by extensive computer databases on products,
customers, and "scripts" to aid in selling and service.
We view the definition of electronic commerce as close to Stone's
definition of direct marketing, because we see much of the potential
of electronic commerce in the ability to build one-on-one relationships
with customers, to offer specific products or services or information
to them, and to execute and/or support transactions at least in
part electronically in real time.
Figure 1 is a model of the catalog industry, depicting
the major functions and data involved in commerce between the
business and the customer. The model in Figure 1 includes three
primary functions: relationship marketing, advertising, and fulfillment.
The model also includes three databases: customer, operations
and external lists of prospects.
Relationship Marketing
In the catalog industry, both the customer and the
business are interested in a relationship. The process of a purchase
transaction, although part of a continuous cycle, can be thought
to begin with the marketing function, called here relationship
marketing. Relationship marketing is concerned with developing
offers in the form of catalogs for specific sets of customer segments.
The customer segments are determined by matching a proposed offer
with characteristics of existing customers who have purchased
similar products in the past and characteristics of prospects
on external "lists" that are thought to be similar to
the existing customers of the business.
Relationship marketing has two primary components
that must work closely together: a massive database, and a variety
of analytical tools for use with the database. Databases in significant
relationship marketing businesses often include 5,000 fields per
customer, resulting in terabytes of data. The specific data items
included in the database are determined from the underlying principles
of building relationships and sales, which require the business
to have the same kind of information about each customer as does
an expert sales person. "Lists" of customer prospects
have only general information about a customer, much of which
is inferences based on such information as census tract data.
The use of such lists requires particular expertise and software
that the direct marketing industry refers to as "merge/purge.
Analytical tools are used by marketing to analyze
the customer databases and "product trials" as an integral
part of developing the "offers" that result in successful
customer relationships. Use of statistical based techniques such
as multiple regression, factor analysis, conjoint analysis, and
analysis of variance are common within the relationship marketing
function.
The process of identifying new customers begins when
external lists are purchased from list owners and brokers, after
which they are merge/purged with the existing customer database
and then analyzed to match prospects from the list with existing
customers with similar characteristics. A trial offer is then
sent to a sample of the matched list. Results of the trial are
measured and analyzed to determine if the combination of offer
and customer segment are likely to result in a profit. The trial-measure-analysis
process is repeated until a likely profitable combination is found,
at which point a large rollout of the offer is conducted.
The process of building relationships with existing
customers is similar to that of finding new customers, with the
difference being the business has much more specific and appropriate
information about each existing customer - much as does an expert
sales person. Thus the offers to various categories of existing
customers are designed both to induce sales and also to build
the relationship with each customer.
Advertising & Communication
Advertising then develops a catalog and other print
media to present the offer and associated benefits to the customer
segment. The customer, upon deciding to make a purchase, calls
the 1-800# Call Center and conducts the transaction with the operator.
The Call Center operator has real time on-line access to the customer
and operations databases during that phone call, and so is able
to verify product availability, cross-sell, promise delivery date
and mode, verify account information and credit, handle return
merchandise, and provide service information. Scripts are provided
for the Call Center operators to use in interacting with the customer
to enhance their ability to sell, advertise, and build a relationship.
Fulfillment
Figure 2 is a model of the fulfillment function of
the catalog industry. Fulfillment as depicted in the model includes
the Call Center, the supporting physical and information technology
infrastructure, and the customer and operations databases. Fulfillment
receives the order via the operations database, assembles and
packs the order, ships the order, and invoices the customer. Fulfillment
also conducts the other activities necessary to support the sale
of goods to and meet the expectations of customers such as purchasing,
inventory management, credit, accounting, and information systems.
Fulfillment maintains the customer database as well as the operations
database. Fulfillment is a very complex, capital and labor intensive,
and demanding business function tied to warehouses, sophisticated
computer systems, and assembly operation. The requirements of
the supporting information infrastructure for fulfillment are
equally complex, expensive, and demanding.
The catalog industry has developed expertise in all of the critical aspects of "fulfilling an order", and very importantly in understanding the costs and margins by product. Some of the basics of fulfillment are captured in the following "formula" of activities, costs, and margins as presented by Moran [24].
Application of the fulfillment formula involves determining
all activities for each specific service or product, determining
costs by activity per unit (SKU). It is essential that the supporting
infrastructure is in place before taking orders, both to meet
customer expectations and for a profitable operation.
Success Factors
Success in the catalog industry depends on properly identifying potential long term customers and treating them differently to build and maintain a mutually satisfactory relationship. We propose that the principles of relationship marketing, advertising, and fulfillment as practiced in the catalog industry are an excellent starting point to understand the requirements of a service encounter and the design of a servicescape. Stone indicates the following keys to maximize success in direct marketing.
Call Center - The Service Encounter in the Catalog
Industry
The cycle of a sale in the catalog industry begins
with marketing defining and developing a product offer - making
a customer promise in Bitner's terminology. The advertising function
communicates those promises to customers initially via a catalog
and again communicates that promise through the "Call Center".
The Call Center is the catalog industry business function that
is primarily associated with enabling promises to customers via
taking orders. The fulfillment function then keeps the promise
to the customer.
Figure 3 extends Bitner's model of "promises"
to the service encounter as experienced in the catalog industry
Call Center. The model in Figure 3 shows the functions of Advertising
and Sales, Call Center, and Fulfillment as mostly separated but
partially overlapping, which clearly implies integration between
functions. Recall, technology enables the compression of time
and space, thus the tighter integration of functions. As indicated
earlier, relationship marketing develops a specific offer for
a specific customer segment. That offer becomes the "promise"
to the customer, which is communicated in the form of a catalog
and other print media by advertising.
Customer direct contact is with the Call Center,
which is thus the primary "enabler" of the promise.
The Call Center operator performs the direct functions of order
taking, provision of information and service, handling returns,
and interactive selling and advertising. The indirect functions
of the Call Center are to meet the customer expectations of the
service encounter and build a relationship with that customer.
The direct and indirect functions of the Call Center become the
basis for designing the servicescape of electronic commerce.
Call Center operators leverage the ability to customize
messages and the delivery of messages. When a customer calls the
Center, operators use their tools - databases and scripts - to
tailor queries toward the consumer and enhance sales. The knowledge
that the database can provide to the Call Center operator during
an interaction is provided by scripts that are pre-defined by
marketing. The scripts can not be modified in real-time, for instance,
by whether the customer is goal-oriented or experiential.
Fulfillment is responsible to "keep" the
promise, by delivering the order to the customer, complete, on
time, and as expected. A complete understanding of the activities
of the catalog fulfillment function provides the basis for designing
the supporting infrastructure of electronic commerce. Fulfillment
involves all of the operations and "back room infrastructure"
and is critical in conducting profitable commerce.
Designing the Servicescape and Supporting Infrastructure
The business functions of relationship marketing,
advertising, and fulfillment are critical to the catalog industry.
Following the metaphor of electronic commerce as a service encounter,
these same functions are critical to making, enabling, and keeping
the promises to result in satisfying each customer and building
a relationship. The problem of designing an electronic commerce
system breaks down into three primary components: 1) the servicescape,
2) the supporting infrastructure, and 3) the customer database
and analytical tools to support the relationship marketing.
The three business functions mentioned above have
traditionally been relatively discrete in the conduct of most
business (although not in the catalog industry) because time and
geography have typically separated the advertising from the marketing
and from the fulfillment. Electronic commerce changes that separation
of both time and geography, which makes it essential that the
three functions are integrated at least to the extent of the catalog
industry. Consider that a customer may, in one Internet session,
conduct curiosity shopping, purchase a product or service, and
obtain customer service relative to a previous purchase. The model
in Figure 1 illustrates the interrelationships of the customer
and the business functions, and also the continuous nature of
the customer and product life cycles. Similarly, the three components
of the electronic commerce system (servicescape, supporting infrastructure,
and relationship marketing) must be closely integrated.
The MIS function faces three very different and challenging
tasks in designing and developing an electronic commerce system.
We will consider each design challenge in order, relating the
principles and concepts of the underlying business function. (Recall
.... evolutionary approach). As we do so, we will recall two basic
principles of determining information requirements as explained
so well by Wetherbe [37]. The first principle is that individuals
require "hands-on" experience with new information and
new technology before they can completely and accurately determine
specifically what information they need, and how they want it
collected and presented. The second principle relates to the fact
that much of the information one either needs or generates comes
from another area or is heavily used by another area. Given that,
it is essential that a cross-functional team be involved in determining
information requirements. Translating those principles to electronic
commerce systems, the design teams must include practitioners
from each of the three key business functions and sub-functions,
and experts from each of the underlying conceptual fields. Further,
the teams will find it necessary to use some kind of evolutionary
design and development methodology.
Servicescape - Enabling The Promise
The servicescape involves almost all of the direct
interactions between the customer and the business. While MIS
practitioners have experience and a history of developing systems
to facilitate fulfillment and relationship marketing (database/analytics),
they have less experience and a very short history of building
systems that interact directly with customers. Effective servicescapes
need to integrate principles from interactive advertising, selling,
and relationship building. Another complicating factor is that
the format of information used in a servicescape will be heavily
"multimedia" in addition to the text and numbers that
are in the majority of MIS experience. Wanninger [34] relates
the functional capabilities of multimedia information to applications
and the required supporting technologies involved in both the
presentation and effective use of multimedia. In considering the
challenge of designing the servicescape, the reader is urged to
recall their own experience, the interaction, the environment,
and the dialog involved in placing a catalog order to a Call Center
via a 1-800#.
Some of the critical functional capabilities required for an electronic commerce servicescape include:
Advertising & Sales - Communicating The Promise
In broadcast and print media, the role of advertising
is to communicate a productís competitive advantage, be
it an intrinsic attribute or an image, to a pre-defined target
audience. Advertising strategy is based on the idea that exposure
to a message is separated in time and place from the opportunity
to respond. Advertisers work hard to increase ìreachî,
the percentage of unduplicated audience members who are exposed
to a message. Messages are intended to influence future purchase
decisions and to build overall brand awareness and image. However,
often these messages literally 'wash over' consumers as they are
not current prospects for the product [36].
By contrast, advertising in a digital and interactive
medium involves a different set of assumptions and strategies.
One primary difference is that consumers can interact with a message
and respond in one time and place. Closing the gap between exposure
and response fundamentally changes advertisingís role in
the sales process.
In the servicescape, the principles of advertising
are integrated with customer service, relationship marketing and
sales. It is not effective to think about advertising as removed
from immediate interaction with the product or company (see Figure
3). We propose that advertising is a process of bringing consumers
as close to a real-time purchase as possible. That is, advertising
is about facilitating quality interaction.
How does interactive advertising within the servicescape
work? Figure 4 summarizes a perspective based on concepts of interpersonal
communication. Keith Reinhard, CEO of DDB Needham, describes interactive
advertising as being similar to door-to-door personal selling
[27]. Both involve two-way communication. Both are intended to
persuade and complete a sale. Both need to focus on the immediate
individual consumer and not on winning creative awards. The analogy
of interpersonal communication directs advertisersí attention
to particular types of variables. Like broadcast and print advertising,
the product category variable directs strategy planning. In the
servicescape, an important product categorization is whether the
product can be sold in real or delayed time. Advertising for real-time
products has the objective of completing a sale and a measurable
return on investment. Advertising for delayed-time products has
the objective of qualifying leads and measurement of return on
investment is more indirect.
In interpersonal communication, there is an explanatory
concept known as the immediacy principle [23]. Here we apply the
immediacy principle to explain consumer behavior (whether they
engage in an interactive dialog) within the servicescape. That
is, consumers will approach and avoid servicescapes based on their
unique evaluations. Advertisers should ask themselves, what types
of consumers will approach and what types will avoid our efforts
at interaction? Some possible factors that influence consumersí
perceptions of whether servicescape are more approach- versus
avoidance-oriented include ease of access, complexity of choice,
responsiveness and social presence.
Of course, consumersí perceptions of whether
the servicescape facilitates approach or avoidance depends upon
the individual. Goal-oriented consumers, for instance, may initially
evaluate the servicescape positively. However, experiential consumers
who are more intrinsically motivated may evaluate the same servicescape
negatively. For this reason, the communication principle "know
your audience" needs to evolve in practice to "know
the individual consumer" [26]. This leads to the next step
in the advertising process - leveraging interactivity to execute
real-time segmentation.
The idea behind real-time segmentation is to match
the rendering of content (what to say in a dialog) with the unique
characteristics of a consumer. It also makes sense to adjust how
you say it. The message strategy should vary by the type of consumer.
This is a radical notion insofar as in more traditional media
the target audience, what to say, and how to say it is fixed before
the message is presented to consumers.
The ability to ask customers questions within the
servicescape sparks such questions as: What information is relevant
in terms of deciding what to say? Will customers disclose this
information? In the interpersonal literature there are theories
of reciprocity. However, the basic idea is that disclosure begets
disclosure. This is a die-hard reminder that the dialog needs
to be customer-centered. There needs to be motivation for the
customer to participate and disclose.
The advertising research literature provides some
clues for segmentation variables that can help direct content
rendering and predict response. Two are suggested here - prospect
status and product knowledge. Advertisers can ask customers to
self-identify themselves on these dimensions or they can infer
their status from activity within the servicescape. Knowing to
what degree a customer is a prospect tells the advertiser what
communication step to take next in facilitating a sale. Similarly,
knowing how much knowledge a customer has about a product directs
how and what to say in the dialog. As an example, suppose customer
X has little knowledge on laptop computers. The advertiser can
capitalize on this information by temporarily limiting the degree
of interactivity in the servicescape so the advertiser can tell
the story of laptops in a coherent, linear fashion. However, if
customer X has much more product knowledge, then the provision
of flexibility such as hyperlinks to seek more advanced diagnostic
information would be appropriate. That is, the servicescape should
maximize interactivity and open communication.
A last issue to consider here is measurement. Practitioners
of broadcast and print advertising spend significant time testing
the effectiveness of advertisements before they go public. Often
times, advertisements are tested as an isolated unit from the
overall sales process. That is, the copy and visuals within the
advertisement are tested for such dependent variables as attitude
toward the product, attitude toward the ad, recall and sometimes
physiological response. The weakness inherent in these surrogate
measures of effectiveness is the inability to accurately gauge
the actual behavioral response. Advertisers and their clients
can be left wondering - What did customers do (behavior) as a
result of being exposed to the advertisement? By contrast, the
effectiveness of advertising within the servicescape can be measured
using the actual behavioral response resulting from interaction.
For example, advertisers can record whether customers made a purchase,
disclosed personal information (qualifying a lead), or perhaps
their browsing habits. Furthermore, advertisers can correlate
three variables: responses to the segmentation questions, the
content and execution of the interaction, and customersí
behavioral responses to identify patterns. If advertisers discover
that a particular segmentation question is not useful in predicting
customer response, they can edit the servicescape. That is, advertisers
can think about the servicescape as a research site, where they
can continually collect and analyze data to refine ëwhat
to sayí and ëhow to say it'. Technology has made possible
the intelligibility and manageability to handle this process.
It follows that advertisers and MIS practitioners
need to converge their skills to leverage this capability in the
design of an effective servicescape. Advertisers contribute principles
of creativity and communication and MIS practitioners contribute
principles of system development and an understanding of the potential
functional capabilities of information technologies.
Each of the sales and relationship marketing concepts
that was described above has an application in an electronically
mediated environment. We will use a Web page as an example. If
the role of the Web page is to be an electronic alternative to
a contact with a person, then the Web page should be designed
using the same basic rules that are used to design a sales force.
For example, should the company use a separate Web page for prospecting,
selling, and providing service or can all three functions be served
by one general purpose Web page? Regardless of the type of Web
page used, i.e. general purpose or specific purpose, the page
must be designed to provide the type of responses that a good
salesperson would provide. It seems to us that this could best
be done by having active input from veteran sales people in the
Web page design process. A second issue that must be addressed
involves the specification of an electronic substitute for the
missionary salesperson. One possible alternative might include
classic direct mail marketing activities where new product announcements
and brochures would be mailed to existing customers. Another alternative
would be to include specific links on the Web page to take the
customer to view new product advertisements and sales presentations.
The key point to consider is that the electronic
technology should not be thought of as the end, but rather a means
to an end. The technology should be used then, to mirror the actions
of a best salesperson.
Supporting Infrastructure - Keeping The Promise
The supporting infrastructure is primarily involved
with the fulfillment function, but must also seamlessly support
the servicescape and relationship marketing function. The challenge
of designing very complex, expensive systems that require significant
development time and have extremely high operational reliability
is well within the experience of MIS. In designing the supporting
infrastructure for electronic commerce, it is important the system
be able to meet the two requirements: very fast response to the
need for significant changes in the business design of the infrastructure,
and frequent update in content. An additional current challenge
is the need to seamlessly integrate the operational infrastructure
with the servicescape, which is built on immature, rapidly changing
technology without standards or the tools to easily build and
change the applications. The supporting infrastructure will be
directly involved with the design and operation of the "operations
database", and will also be responsible to both access and
maintain the "customer database" described below.
Relationship Marketing Capability - Making The
Promise
The design of the relationship marketing component
of electronic commerce has three sub-components: a massive database,
a variety of analytical tools for use with the database, and integrated
links to the supporting infrastructure and servicescape. Databases
in significant relationship marketing businesses often include
5,000 fields per customer, resulting in terabytes of data. "Lists"
of customer prospects are less large, but the use of such lists
requires particular expertise and software that the direct marketing
industry refers to as "merge/purge". Analytical tools
are used by marketing to analyze the customer databases and "trials"
as an integral part of developing the "offers" that
result in successful customer relationships. An important aspect
of the customer database design is the very different, simultaneous
use requirements of the servicescape, fulfillment, and marketing.
Breaking The Promise
Given the metaphor of a service encounter as a basis
for designing an electronic commerce system, designers must pay
particular attention to the limitations of the rapidly changing
supporting information technologies. It is very important to be
careful not to permit existing limitations of technology to "break
promises" which could then negatively impact the service
encounter, the relationship, and brand image. Examples of such
current limitations are bottlenecks within the Internet, a wide
array of personal computer software and hardware which do not
integrate seamlessly, preponderance of 28.8 kbps modems, and lack
of software tools to not only incorporate but also effectively
use and present multimedia.
Summary
The theme of approaching electronic commerce in an
evolutionary fashion is important not only because it calls us
to go back to the basic principles of our business, but also because
we have learned in 50 years of computing that we must "learn"
the requirements of information technology applications via hands-on
experience.
The metaphor of a service encounter is helpful because
it focuses us on understanding customer expectations of an Internet
or other electronic commerce experience. This gives us a perspective
and conceptual basis to design the information systems: the servicescape,
supporting infrastructure, and relationship marketing capability
- to meet those expectations. The design, particularly of the
servicescape, will be directly related to the business basics
and underlying concepts of interpersonal relations and customer
service.
The catalog industry is a significant instance of
a set of companies that can clearly evolve their business into
electronic commerce, and can do so by selectively utilizing the
Internet and other emerging information technology for those situations
where the functionality offers a clear benefit over the current,
profitable way of doing business. The catalog industry model presents
a basis for understanding the servicescape in the form of the
Call Center and the supporting infrastructure in the form of the
fulfillment function. The catalog industry also serves as a significant
example of successful application of relationship marketing.
The design of an effective electronic commerce servicescape
is postulated to model a catalog Call Center, and to rely on the
underlying customer service and relationship-building concepts
including "promises" as well as the principles of sales
and interactive advertising. Servicescape design is suggested
as the most challenging of the three components of electronic
commerce for MIS.
Design of the supporting infrastructure and relationship
marketing components are complex, expensive, and demand very high
operational reliability. These are well within the experience
of MIS, and can be accomplished by carefully applying new information
technologies to the well-understood business principles of the
catalog industry. Because customers view electronic commerce in
the context of a service encounter, it is very important to be
careful not to permit existing limitations of technology to "break
promises".
Finally, the catalog industry was used as a starting
point for developing the framework. The rationale behind this
is the analogy of conducting commerce electronically via a 1-800#
with conducting the same commerce via the Internet. Examining
the business functions within the catalog industry and hypothesizing
how they will operate in the servicescape environment has been
our approach to understanding electronic commerce.
References