Title

The role of the Internet in providing Customer Service

Headline

Internet Customer Service, the self service society’s customer empowerment tool?

Abstract

The ability to directly contact a service or product supplier and interact with support services is a key element of internet business. Globalization has created greater competition in sales and service delivery and in its wake the customer service revolution has taken place. The internet has also provided large cost savings, in salaries and building costs making modern businesses more competitive in the area of valued added services like customer relationship management.

Keywords

Information, Internet, Customer, Service

Introduction

The concurrent developments between business systems and information technology (IT) have both created and destroyed competitive advantage. Information gathering from business processes has driven the development of internet technology. Data storage, collaboration and supply chain systems have created a market for self analysis and proactive customer services. “Smart companies will gain a competitive advantage by improving the delivery of customer service through information technology” (Burgetz, 1992, p. 01).

Getting people to purchase products or services is no longer the main priority in business, it is getting them to build a relationship with a company based on good consumer experiences through several purchases. “A fundamental shift is taking place in the way companies must approach the marketing of their products and services in the future. “The most successful marketers will be those who can address the dual challenges of marketing information and customer service” (Barnes, 1993, p. 45).

Competitive Advantage Business Model

According to Steven Alter “competitive advantage occurs when a firm’s value chain generates superior product and service features, quality, availability, lower cost, or other things customers care about” (Alter, 2002, p. 249). However this definition is derived from the western consumer led society of the late 20th century.

In the early 20th century western society did not have the same level of telecommunications or locally stored information but relied heavily upon specialist knowledge held by individuals, companies or organisations. Early 20th century business models were based upon information control, through the knowledge of people, services, products or processes. Companies were able to maintain a competitive advantage by being able to sell services and products without the buyer’s knowledge of their relative costs or of alternative suppliers. In the Laudon and Laudon (2004) example of Rosenbluth International the company was founded in 1892 and provided travel services through a network of “associates”. These motivated individuals supported the development of the company through specialist knowledge. This advantage was eroded as the commissions for travel agents were capped by airlines that were becoming directly accessible to travellers. Rosenbluth’s response was to invest in information technology supported by their associate network. From this strategy they where able to provide cost effective travel services to corporations like DuPont, saving them $150 million dollars from their travel and entertainment budget (Laudon K. & Laudon J. 2004, p. 273-5).

As the century progressed large volumes of information became disseminated, initially through corporations, scientific and educational establishments then latterly through public channels like radio and libraries. This level of accessibility to information destroyed the competitive advantage of many companies, forcing them to seek alternative advantages. “The Internet shrinks information asymmetry, making it easier for consumers to find a variety of prices in a market and to discover what a merchant pays for products” (Laudon K. & Laudon J. 2004, p. 114). Consumer orientated services are derived from a better reach, multiple connections and richness and depth of detail about services and products available.

Contemporary Business Strategy and Information Technology

According to Laudon and Laudon (2004) four factors have redefined business strategy, Globalization, Transformation of Industrial Economics, Transformation of Enterprise and the Emergence of the Digital Firm (Laudon K. & Laudon J. 2004, p. 05). Each of these factors has changed the operational and aspirational practices of companies, suppliers and consumers.

Globalization has created new markets for companies, but it has also created opportunities for their suppliers to service their competitors. Consumers are now able to purchase products and services outside their locality, region or nation. The traditional linear protected supply and demand environments have been replaced with multi path product and purchase options.

Transformation of Industrial Economics from industrial manufacturing to service based economies. “Knowledge and information work now accounts for a significant 60% of the American gross national product and nearly 55% of the labour force” (US Department of Commerce, Bureau of the Census, 2001 cited by Laudon K. & Laudon J. 2004, p. 06)

Transformation of Enterprise employs informal planning procedures reliant on flexible working practices, planning technology, individual decision making and customer focused products. This creates a vibrant environment able to produce customised product or services, responsive to market changes and developments.

The Digital Firm is derived from intensive use of information technology coupled with organisational redesign in order to gain competitive advantage. Digitally enabled service relationships with internal customers (employees or departments), suppliers and external customers are key to success.

Within firms evolving towards digital business processes there are four sub-systems which may exist or be in the process of development. Supply Chain Management relates to the optimised relationship between input of materials or information and output of completed products or services. Customer Relationship Management (CRM) creates a proactive model of consumer attitudes, experiences and preferences. Enterprise Systems integrate value management, corporate standardisation, strategic marketing and sales with ledger control. Knowledge Management is used to discern, delineate and record the firm’s expertise and knowledge (Laudon K. & Laudon J. 2004, p. 07). These systems provide department managers with objectives, targets and day to day accounts of activity. Senior managers are able to create long range aims and planning schedules by accessing costs, sales, marketing, activity and efficiency models derived from this data. These systems supplement and support company strategy but do not in themselves create a competitive advantage “Technology and strategy are strong complements. Companies that understand their technology better than they understand their customers and competition won't succeed in any economy, old or new” (Adner, R. & Rangan, S. 2001. p 48).

Customer Relationship Management

Globalization has created greater competition in sales and service delivery and in its wake the customer service revolution has taken place. “Microsoft requires every executive in the company to undertake training to learn how to communicate with customers and listen to their needs” (Baijia, 2004, p. 01). Many companies have automated their sales activities (SFA) relating to contact management, tracking sales, scheduling, target focusing which allows management through data retrieval and analysis. “Regardless of a company's type of business, the 4 levels of marketing success are: 1. a core product or service, 2. support services surrounding that product, 3. the question of how well the service is performed, and 4. the consideration of how well the customer is treated” (Barnes, 1993, p. 45). In order to effectively use information derived from CRM a cyclical model is used (Figure 1) to show the relationships between design & production, support routes, quality assurance and customer experience. Each of these provides feedback constantly evolving time and cost efficient products and services.

By linking SFA and CRM companies have created three distinct processes of customer service. Pre-transaction service involves information and knowledge transfer to clients for decision making. Transaction service which involves information gathering for internal dissemination, information outputs from time / process calculations and post-transaction services related to completion and servicing. These components each require tracking, assessment, analysis by a manager who understands the relationship between the data and its source. “A recent study, conducted on behalf of enterprise firm Minerva by Benchmark Research, found that the most important benefit of CRM was to satisfy customer needs / exceed customer expectation however over 50% of respondents did not think they were CRM users when in fact they used a CRM sales force management system” (Mainwaring, 2000, p. 36).

The integration of technology and latterly Internet technologies into CRM has been accomplished through network systems evolving. Closed internal homogeneous systems where integrated into supply chain homogeneous networks to establish standardisation in working practices. These networks required similar hardware and software to be effective but the cost of mainframes was prohibitive for many small companies until the 1980’s. In the 1980’s the cost of computers and interconnection hardware was reduced in accordance with Moore's Law. Moore's Law states that the computing power or the number of transistors within the same silicon processor doubles every 18 months, or in short, computing speed doubles every 18 months. Conversely as the hardware technology became available to a mass market, there remained problems with transfer of information between heterogeneous or dissimilar networks and the potential loss of data. Parkinson's Law of Data, states that data will grow to fill available storage. Networks could not cope with the expansion in the quantity, diverse type’s information data and required extensive storage.

Customer relationships defined their technological interaction with a company. Business to Business (B2B) relationships formed points of interaction through computer networks, telecommunications and paper trails. Business to Consumers (B2C) where still restricted to intermediaries based relationships through wholesalers, shops and consultants until the formation of the World Wide Web (WWW).

World Wide Web

From its instigation the WWW was designed as an informational structure for the pooling and locating of information customisable by each user (Berners-Lee, 1989, p. 01). The underlying concept of the WWW predated Berners-Lee by sixty years through the works of Vannevar Bush. Bush was concerned with finding ways to make machinery help people in dealing with information “selection by association, rather than by indexing” (Bush, 1945, p06) from his experience of the inadequacies of paper based indexing systems since the 1930’s. He proposed a device called the “Memex” which would augment human intellect by operating as a vast data storage device with links and search functions.

“Memex” was similar to hypertext, only it was mechanical and designed thirty years before Douglas Engelbart and Ted Nelson’s work on hypertext. Bush did not publish his ideas until 1945 with the essay “As We May Think” where he considered that “the human mind operates by association” (Bush, 1945, p06) and offered the “Memex” as a method to support that human function for recovering data.

This initial idea was a key influence on Douglas Engelbart in the underlying technology that Ted Nelson would describe as “hypertext” in 1982. Engelbart working at Stanford Research Institute in the 1960’s, acknowledges the influence of Bush in a letter he wrote to him (Engelbart, 1962, p. 01). Engelbart demonstrated the On-Line System (NLS) which manipulated structured documents in the San Francisco Fall Joint Computer Conference in 1968 and then made the same documents available in a collaborative environment located some miles away.

Accurate information handling is a key to good customer service, as it facilitates access to transaction details and ledger, allowing a quick and efficient response to customer needs. The augmentation, user control and accessibility of information were of primary importance in the development of the database system Hypercard (launched in 1987) created by Bill Atkinson who also designed MacPaint. Hypercard capitalised on hypertext using hyperlink technology users where able to create ‘hot spots’ allowing click through connections between user defined data stacks. These stacks could store text, images or music files dependant upon the user’s requirements. This allowed for user associations and supported search linking functions as specified in Bush’s “Memex”.

In the late 1980’s Tim Berners-Lee was attempting to resolve a problem associated with “loss of information about complex evolving systems” (Berners-Lee, 1989, p.01) due to staff turnover at Conseil European pour la Recherché Nucléaire (CERN). CERN operated in a hierarchical management structure but Berners-Lee suggested an informational structure forming across groups. The purpose was to share information, equipment, software and general communications using hypertext documents at different locations on a distributed network (heterogeneous, dissimilar elements or parts environments for computational, contextual, and cooperative design). He established the theory of “Mesh” (Figure 2) shows his original design and in 1990 while creating the code he coined the term World Wide Web (WWW). This WWW context provided a key customer service role by maintaining consistent and accurate information in an accessible environment.

Berners-Lee, Tim 1989
Figure 2

The WWW supports a number of network technologies including intranet, extranet and internet. These three networks in turn are visualised through front end browsers like the Microsoft® Internet Explorer. Using standardised languages like Hypertext markup language (HTML), Extensible Hypertext markup language (XHTML) have enabled the addition of a standard user front-end tools or browsers for using intranet, extranet and internet data retrieval points. While the languages involved are different customer service is provided with a generic visual medium of search options, hyperlink lists, database driven queries and standardise visual outputs using icons, text and images.

Networks receive information and provide collaborative spaces in two distinct ways, through synchronisation or asynchronous. Synchronisation means information does appear at the same time as its input to a network. Asynchronous networking means information does not appear or exist in the same time period as its input. “Marketers will have to place their emphasis on obtaining accurate and timely information about customers and markets and on providing precisely the type and level of service that customer wants” (Barnes, 1993, p. 45). It is imperative in providing customer service that information is received in a timely fashion, finding out the information is old after passing it on, irritates and inclines customers to find alternative service suppliers. Control of information flows within the firm and between the firm and its customers will define, the customer experience and save the customer service department being relegated to a reactionary role, through problem solving. Internet customer services are based around synchronised databases that maintain accuracy, by overwriting old data with current data.

An intranet is a network located within an organisation or company which may have many physical operator locations or nodes but uses one central database or information server. Robert Metcalf's law states that “the "value" or "power" of a network increases in proportion to the square of the number of nodes on the network” (Metcalf, 1973, p. 279). Intranets use both synchronous and asynchronous technologies to control the flow of information. An extranet is an extension of an intranet into a secure virtual private network (VPN) to support B2B functions or a customer B2C interface for purchase and service support. The internet is a network of networks which may include many intranet, extranet or WWW portals.

Internet Customer Services

The ability to directly contact a service or product supplier and interact with support services is a key element of internet business. There are now many companies like Figleaves.com that are etailers (Figure 3) having no bricks and mortar shops. Figleaves.com is an intermediary company that has gained a competitive advantage through the joining together on one website of a balanced range of high class lingerie. Brands include D&G, DKNY, La Perla, Calvin Klein, Rigby & Peller and standard ranges like Playtex. These companies being direct competitors had not previously been listed together due to commercial singularity contracts which stopped shops from stocking both their ranges and their competitors.

Screen capture Figleaves.com 2004
Figure 3

During the last ten years UPS has invested more than $1 billion a year into technology and systems to boost customer service (Laudon & Laudon, 2004, p. 10). This enormous expenditure has effectively controlled the key element of their business, moving packages. Where is my package? By using barcode labels and recently, radio frequency identification (rfid) tags UPS is able to track parcels as they travel through their internal systems. "RFID hasn't been adopted for widespread use, but we do have pilots currently underway, said Donna Barrett, UPS technology public relations manager” (Herndon, 2004, p. 01). At key locations the labels or tags are scanned which updates a central database. The central database is accessible to customer service representative responding to customer telephone and email enquires. Customers can also access this information in a self service manner through the companies extranet on PC or handheld devices. The internet has also provided large cost savings, in salaries and building costs making modern businesses more competitive in the area of valued added services like CRM. Allowing customers to access and maintain an understanding of where their request is in the scheme of things, reduces the number of staff required in customer service departments and the physical building cost of rent and utilities, provides another cost saving to keep companies competitive.

Conclusion

Customer services have evolved hand in hand with the development of the WWW in the form of the Internet over the last fifty years. The marrying together of these two modern processes has created the opportunity for the focusing of competitive advantage. The roll out of internet technology across large companies and organisations is not always appropriate or helpful as “inappropriate use of technology can be counter-productive” (Weston, 2003, p. 18). The process of system actuation can interfere with the normal operation of a company and their interaction with suppliers or customers. This can cause distrust in the effective working and the ability of a company or organisation to complete existing requests and reduces the opportunity for repeat orders. Even if their products or services are the best on the market poor trust will cause people to look for alternative suppliers.

Correct use of technology taken from an integrated company strategy creates a robust foundation and allows for supported growth. Each department’s data is integrated initially from key aspects of supply chain, manufacture, stocking, transportation, sales, customer’s service and strategic management tools. Commercial advantage is formed through “building good customer service, building customer loyalty and delivering the service in the most beneficial way by deploying modern technology to reduce operating costs” (Weston, 2003, p. 19) which in turn creates a competitive product or service.

Customer service provided through the internet has created new kinds of business which function mainly on the internet. This has often reduced costs but can also have the negative effect of customers still wanting to deal with a real person by phone or in person rather that an email address or post office box.

The problem with customer services has always been inaccuracies in the information given to internal and external customers. Making decisions based upon un-factual or false information causes mistrust between customers and service providers. The internet has made it possible to have the most up to date information instantly available, often without interpretation from a third party. In this self service customer environment people are empowered regarding their choices and are able to decide themselves between available options. By maintaining a mixture of empowerment and trust eCRM has realigned the relationship between consumer and service provider enabling the development of a dual commitment based on positive experiences.

References

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Published by permission from the Author 18th March 2005

Author

Mr Karl Smith