Technology in Services McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives Describe the five roles of technology in the service encounter. Give industry examples of the evolution of self-service from human contact, to machine assisted, to electronic service. Describe the eight uses of web sites. Describe and differentiate the eight generic E- business models. Explain what is meant by scalability an how its is relevant to E-commerce. Describe the managerial issues associated with the adoption of new technology. 5-2

Role of Technology in the Service Encounter Technology Customer Server Server Server Server Server Customer D. Technology-Mediated Service Encounter E. Technology-Generated Service Encounter A. Technology-Free Service Encounter B. Technology-Assisted Service Encounter C. Technology-Facilitated Service Encounter 5-3

Evolution of Self-service Service IndustryHuman ContactMachine AssistedInternet Facilitated BankingTellerATMOnline banking GroceryCheckout clerkSelf-checkout stationOnline order/ pickup AirlinesTicket agentCheck-in kioskPrint boarding pass RestaurantsWait personVending machineOnline order/ delivery Movie theaterTicket saleKiosk ticketingPay-for-view Book storeInformation clerkStock-availability terminalOnline shopping EducationTeacherComputer tutorialDistance learning GamblingPoker dealerComputer pokerOnline poker 5-4

Self-service Technologies (SST) Challenges Does customer adoption of self-service follow a predictable pattern? How do we measure self-service quality (e.g., ease of use, enjoyment, and/or control)? What is the optimal mix of SST and personal service for a service delivery system? How do we achieve continuous improvement when using SST? What are the limits of self-service given the loss of human interaction? 5-5

Classification of Service Automation Fixed-sequence (F) - parking lot gate Variable-sequence (V) - ATM Playback (P) - answering machine Numerical controlled (N) - animation Intelligent (I) - autopilot Expert system (E) - medical diagnosis Totally automated system (T) - EFT 5-6

Technology Convergence Enabling E-Business Internet Global telephone system Communications standard TCP/IP (Transfer Control Protocol/Internet Protocol) Addressing system of URLs Personal computers and cable TV Customer databases Sound and graphics User-friendly free browser 5-7

Purpose of Web-sites Retail channel (Amazon.com) Supplemental channel (Barnes & Noble) Technical support (Dell Computer) Embellish existing service (HBS Press) Process orders (Delta Airline) Convey information (Kelly Blue Book) Communicate with membership (POMS.org) Play games (Treeloot.com) 5-8

Electronic and Traditional Services 5-9

Grocery Shopping Comparison 5-10

E-Business Models Content Provider: Reuters Direct-to-Customer: Dell Full-Service Provider: GE Supply Co. Intermediary: eBay Shared Infrastructure: SABRE Value Net Integrator: 7-Eleven Japan Virtual Community: Monster.com Whole-of-Enterprise: Government 5-11

Economics of E-Business Sources of Revenue: - Transaction fees - Information and advice - Fees for services and commissions - Advertising and listing fees Ownership - Customer relationship - Customer data - Customer transaction 5-12

Economics of Scalability Dimensions High Scalability Low E-commerce continuum Selling information (E-service) Selling value- added service Selling services with goods Selling goods (E-commerce) Information vs. Goods Content Information dominates Information with some service Goods with support services Goods dominate Degree of Customer Content Self-serviceCall center backupCall center supportCall center order processing Standardization vs. Customization Mass distributionSome personalization Limited customization Fill individual orders Shipping and Handling Costs Digital assetMailingShippingShipping, order fulfillment, and warehousing After-sales serviceNoneAnswer questionsRemote maintenanceReturns possible Example ServiceUsed car pricesOnline travel agentComputer IT supportOnline retailer Example FirmKbb.comBiztravel.comEverdream.comAmazon.com 5-13

Adoption of New Technology in Services Challenges of Adopting New Technology The Process is the Product Back Office vs Front Office Changes Need for Standardization Readiness to Embrace New Technology The Case of Radio Frequency Identification 5-14

AMAZON.COM Winning the Online Book Wars 5-15

Amazon’s Success Factors First mover advantage (mind share) Low overhead costs (60 inventory turns/yr.) Cross-Marketing: Amazon Associates Program (other web sites link book sales) Customer service (recommendations) 5-16

Online Book Buying Experience Convenience Browsing experience Searching Editorial content Delivery Payment Recommendations 5-17

Supply Chain Management Amazon orders from wholesaler and repackages and ships. (cross-docking?) Dependent upon one wholesaler (Ingram) Considering self-distribution (buying directly from publishers) Ingram response by offering drop-shipping Traditional distribution system is designed to stock retail store shelves. 5-18

Barnes and Noble Response Internet seen as a new channel to leverage existing assets and strengths. Features (online community reflective of real store) Pricing (30/20% vs 40% Amazon top 500) Alliances (Firefly collaborative filtering) Information Technology (Web farm flexibility) 5-19

Amazon’s Challenges Operations (Barns & Noble - 2% margins) International Expansion Brand Extension into Online Music Sales Backward integration into Self-Publishing 5-20

Amazon.com Questions How would you contrast Amazon’s business design with that of Barnes & Noble before Barnes & Noble went online? Why has Amazon.com not turned a profit yet and what needs to be done to achieve profitability? Will Amazon continue to be successful against “click and mortar” competitors, such as Barnes & Nobel, which go online? Is Amazon.com a model for the future of retailing? 5-21

Evolution of B2C E-Commerce in Japan Cultural Adaptation 5-22

City Growth Around Train Stations 5-23

5-24

Direct Code Product Selection Using Cellular Phone 5-25

Evolution of B2C E-Commerce in Japan Questions 1. What features of the 7-Eleven Japan distribution system illustrate the “Value Net Integrator” e-business model? 2. Does the 7-Eleven Japan distribution system exhibit scalability economics? 3. How does the 7-Eleven example of B2C e- commerce in Japan illustrate the impact of culture on service system design? 4. Will the 7-Eleven “Konbini and Mobile” system be adopted in the United States? 5-26

Topics for Discussion 1. Can an Internet service encounter be a memorable experience? 2. How does the economics of scalability explain the failure of Living.com, an online furniture retailer? 3. What are the characteristics of early adopters of self-service? 4. How can we design for self-recovery when self-service failure occurs? 5. What could be the explanation for the high customer satisfaction scores in Table 5.6 for Internet services? 5-27

Interactive Exercise The class breaks into small groups, formulates criteria to judge Internet sites, and then using the criteria selects a superior Internet site to defend before the class. 5-28