Why does your organization decide to have a web site? Is it because "everyone else is doing it and we don't want to get left behind?" Or is it because "we see this exciting new technology which might be more important than television and we have to learn how to use it?" Without more focus, either reason could harm your organization in the eyes of your most important constituency - your customers. Recall Advertising 101: "every contact between your business and each customer has a net positive or negative impact on the image of your Brand and organization with that customer."

How should you approach e-Commerce to minimize the risk of undoing some of your Brand image? What should your primary objectives be for a web site? Our research suggests that you focus on six key concepts:

2. Consider e-Commerce as an additional channel for communication with your customers and manage it accordingly. As with any channel, you must target it toward specific customers and objectives. You must integrate the channel within your larger business context and processes to avoid confusion by customers and other channel partners.

 

3. Think of the metaphor of "making, accepting, and keeping promises" as a way to evaluate interactions with your customers. Keeping the promises is the tough part. It is very easy to break promises without realizing it because the customer accepts both your explicit promise and the implicit aspects of the promise.

4. Design your e-Commerce application to integrate with all of the back office processes, systems, and data factors that affect relationships. This part of the business is where it is very easy to break promises. It is also easy to lose money in e-Commerce if you don't understand your cost structure at the individual order level and/or your business processes inherently can't deliver individual orders and handle returns profitably.

 

5. Measure the effectiveness of your e-Commerce application based on how it affects individual customer relationships. Hits and clicks can tell you some things, but can also be misleading. For example, a long time spent at a web site could be positive (interest and recall) or negative (I just want to get something done quickly and easily). Think of measures of desired outcomes rather than what is available to measure.

 

6. Design your "electronic servicescape" to interact intelligently, appropriately and individually. Good sales and customer service people can help make up for broken promises and turn those momentous encounters into relationship makers rather than breakers. You want your web site to do the same.

We began by considering e-Commerce technologies in terms of providing two unique functional capabilities:

1. The ability to compress time and geography into an "electronic servicescape."
2. Intelligent interaction using the database and software capabilities of computers.

We then looked for situations where communications technologies with similar functional capabilities have been applied with customers. This led us to the analogy of the catalog direct marketing industry, which has successfully been selling products to customers electronically (1-800# Call Center) for decades. The catalog industry exhibits three major competencies that can be applied to e-Commerce:

This led us to develop a model, shown in Figure 1, which relates the factors under our control to factors that affect relationships.

Our research has led to four developments and findings. First, we have developed and validated a survey instrument to measure the effectiveness of a web site in terms of building individual customer relationships. Second, using the instrument we have confirmed the validity of our research model on the basis of several pilot studies. Third, we have confirmed the presence of "web site personality" factors which include some traditional Brand and Human personality factors and which show the existence of factors that relate to interaction and flexibility. Fourth, is the widespread existence of "implicit and unmet" promises in web sites. Our research instrument includes ways to determine from customers what some of these implicit promises are.

Figure 2 is a comparison of two web sites from one pilot study. The Amazon.com web site does quite well at building relationships as can seen by inspection of the individual characteristics. The second web site is designed to provide important information to its customers, and obviously does not do a very good job of that. The point of Figure 2 is that our survey instrument can identify areas for diagnosis and continual improvement of an e-Commerce web site on the basis of information gathered from your target customers. It can also provide a benchmark against your competition.

Let's consider three successful examples of e-Commerce web sites that illustrate the development of customer relationships and extend the Brand image. Cisco products are complex and must fit with existing systems. It is very difficult for a customer or sales person to specify exactly all of the required options and components. For example, a missing cable or a cable with the wrong connectors can render a new system unworkable. Cisco's solution was to develop a web site with a software configurator that examined the customer database for existing systems and then determined the necessary components and options for each order. The results were impressive: a significant increase in order accuracy, greatly improved customer satisfaction due to reductions in frustration and time in getting the initial order to work, and cost savings exceeded $500 million per year. Cisco is now doing over $2 billion sales per year through their web site because this became a preferred method of ordering.

UPS developed a web site to allow customers to track their packages. UPS experienced a substantial reduction in phone calls to track packages, increased customer confidence in their package delivery capability, and a significant reduction in "packages that are temporarily misplaced." This web site is also a reinforcement of their Brand - "you can count on us to get your packages delivered at a reasonable price."

Amazon.com designed a number of customer relationship capabilities into its web site. First, it remembers who a customer is so that they need not re-register each time they access the site and place an order. Second, Amazon uses "recommendation engine" software that suggests books to each customer on the basis of their previous orders and information collected from their other customers who have ordered similar books.

My last example is to relate a conclusion from a research study (Wackman et al). This study shows that the single most important factor in client retention is the personal relationship between the advertising agency representative and the primary client representative. The personal relationship outweighs agency creative work and pricing. There are two important reasons to note this study. The first is to remember that as we design our "electronic servicescape" we are replacing communications between expert sales people and their customers. The second reason is to remember that commerce begins with people and depends upon relationships. The challenge is thus to build the capability for relationship formation into our e-Commerce applications. Our research shows this is possible and illustrates ways to gather information from customers to show how we are doing.

Bitner, Mary Jo, "Building Service Relationships: It’s All About Promises", Journal of the Academy of Marketing Science, Vol. 23, No 4, pp. 246 - 51, Fall 1995.

Crosby, Lawrence A., Kenneth R. Evans and Deborah Cowles, "Relationship Quality in Services Selling: An Interpersonal Influence Perspective", Journal of Marketing, Vol. 54, pp. 68 - 81, July 1990.

Wackman, Daniel B., Charles T. Salmon and Caryn Salmon, "Key Factors in Developing an Advertising AgencyClient Relationship", Journal of Advertising Research, Vol. 26, No. 6, pp. 2128, Dec. 1986 Jan., 1987.

Les Wanninger is a faculty member in the Carlson School of Management at the University of Minnesota, instructing undergraduate and MBA students in Information & Decision Sciences. He is the leader and director of the University of Minnesota Electronic Commerce Conference series and Principal Investigator of a National Science Foundation research program on "The Role of Customer Relationships in Electronic Commerce".