e Business Customer Expectations

8/2/2019 e Business Customer Expectations

http://slidepdf.com/reader/full/e-business-customer-expectations 1/7

How can e-Business improve customer satisfaction? Case Studies in

the Financial Service Industry

Introduction

Customer satisfaction is an important element of competitive quality. Firms strive to identify

customer requirements and develop strategies that allow them to meet or beat the service level

provided by their competitors [8]. Four decades ago, Levitt [24] stated that: “customer satisfaction is

the ultimate goal of every business.” With increased competition from new products and delivery

channels, Levitt’s observation becomes increasingly relevant.

Research shows that when customers are satisfied, they become loyal. Loyalty has been defined as:

“long-term commitment to repurchase involving both repeated investment and favorable

relationship” [7]. Loyal customers often develop an emotional attachment to a brand they are happy

with. Emotional affinity makes customers more willing to pay a higher price for their preferred

brand, making it relatively price inelastic [33]. Companies can use customer satisfaction and loyalty

programs as bases to help support the strategic profitability goal [35]. Having loyal customers

reduces operating costs as less needs to be spent on advertising and marketing, product/services

become much less price elastic, and the positive word-of-mouth by the existing customers brings

new potential customers.

Recognition of the importance of customer loyalty is leading to many changes in the organizational

practice of enterprises. Firstly, changes are made with regards to the provision and sharing of

information. Firms are making information more available to customers. In Fortune 1000 firms, by

1990, over 50 percent of the employees were directly involved with customers [23]. Secondly,

companies are involving customers more in decision-making processes, even giving them the

opportunity to provide their input also with regards to production and design. Thirdly, firms are

adapting to the changing customer needs and conditions. The focus now is not only on Return On

Investment (ROI) but also on customer awareness [39]. Finally, especially in the service sector,

customers are being viewed as important potential co-producers. Managers are placing an

increasing emphasis on listening to the customers and identifying them as the drivers of overall

satisfaction. In this new economy, businesses can no longer effectively compete on just product,

price, promotion, and distribution, but must also compete on product quality, product choice,

payment options, reaction speed, delivery policy, information services, and their will and ability to

adapt to special cases and differing customer demands. Old economy tactics are no longer sufficient

to keep current customers satisfied or to attract new ones [1]. Customer satisfaction is key to

business success and is linked to an organization’s market capitalization and profitability [31]. Today,

for many firms incorporating customer satisfaction has become a primary goal.

But how can improved customer satisfaction be achieved in our modernizing economy? Electronic

commerce (eBusiness) is the newest means of trying to improve business and making it more

customer oriented. Reaching the customer faster, at the right moment with the right information

seems to be the ‘magic’ of the 21st century. Customers want to shop in their homes, and sellers

need to provide them with opportunities to do so. Reaching customers through the Internet seems

to have become the way to maximize their satisfaction.



Integrating the supply chain using information technologies can result in many advantages. The

faster and smoother information flows from supplier to manufacturer and finally to the customer,

the better the flow of goods and services, the happier the customer, and the lower the cost. Quick

delivery of ordered goods or services will result in another satisfied customer. Sending an order

through Electronic Data Interchange (EDI)- directly from the customer to the manufacturer- will save

a lot of time and costs and reduce errors. For example, the ability to check one’s bank or insurance

balance on-line can save a trip to the bank.

But what are the advantages derived from improved information flows such as those described

above? The trade literature seems to imply that cost saving is the main advantage. But, might

improved customer satisfaction provide an equal or greater advantage with long-term implications

for corporate success? Many companies are implementing new eBusiness initiatives simply because

they think it is something they should be doing [13]. Some are hoping to improve customer

satisfaction and thereby to retain customers and attract new ones. But, many do not know what

customers want, or even whether eBusiness can improve customer satisfaction. This research aims

to answer such questions. In particular it aims to investigate whether the use of eBusiness to

optimize the information flow in business processes in the value chain, results in higher customer

satisfaction. Additionally, it aims at finding how eBusiness can affect customer satisfaction, what

aspects of eBusiness improve it, and what aspects detract from it. Knowledge of the

advantages/benefits of eBusiness, allows managers to decide which products, processes, or services

to provide electronically. Moreover, it allows them to design eBusiness services carefully so as to

minimize possible negative effects and maximize the positive ones.

In order to be able to find out whether customer satisfaction had been improved/detracted, some

indication criteria is required. The criteria variables or components of customer satisfaction have

been researched and found in the literature. Those were later grouped into ten categories and are

identified as the ‘elements of customer satisfaction’. The following section explains each element

and its impact on customer satisfaction. Additionally, it describes the effect eBusiness can have on

each of the elements and hence, on customer satisfaction. The subsequent section introduces the

research questions and presents the methodology used to investigate the elements. Next, the

results of two case studies used to investigate the determinants of customer satisfaction with

eBusiness are presented. Finally, conclusions are set forward and recommendations to managers

and other researchers are offered.

Elements of customer satisfaction and the effect of E-Business onthem

A review of the literature research identifies ten elements of customer satisfaction and the effect

eBusiness can have on them. This section identifies and explains the impact on customer satisfaction

of each element identified.

Customer Relationship

Building a good relationship with the customer is one of the key elements of customer satisfaction.

Research shows that empathy plays an important role when dealing with customers [33]. Addressing

the customer by his name, knowing what he purchased lately and offering new products to his taste,



makes him feel important and that the business has thought about him and his needs. Firms have

adopted numerous service-quality and relationship-building initiatives designed to give customers a

reason to do business with them [16]. Customer Relationship Management (CRM) is a business

strategy that is mainly based on IT and designed to optimize profitability, revenue, and customer

satisfaction by closely monitoring and improving relationships with the customer. Today’s CRM

strategies are a business model unto themselves, ensuring that companies focus on customers

[10][12].

Service & Support (customer service)

Studies investigating customer satisfaction of purchasing on the web often conclude that poor

customer service is the main reason customers decide not to purchase online. One initiator says:

“one of the great fallacies in selling on the Internet is that customers serve themselves” [37]. But

they don’t want to have any less service than they received in the real world. EBusiness sets higher

expectation for support: people expect a 24-hour (e-mail) response. Moreover, customers expect

the company to know what they did online, even if they just logged off a few minutes earlier.

eBusiness initiatives can have a great impact on customer satisfaction by improving planning and

collaborating between suppliers and customers ensuring a more responsive supply chain. In

addition, eBusiness can improve response to change; today’s systems provide the ability to convert

customer order immediately into manufacturing requirements. eBusiness can cut out the

middleman and get the supplier to deliver directly to the customers.

Value for money

Today’s customers face a large variety of products and brand choices, prices, and suppliers.

Consumers buy from the firm that they believe offers the highest value for money. They compare

the actual value they receive in consuming the product to the value expected, and this affects their

satisfaction and repurchase behavior [21]. Porter proposed the value chain as the main tool for

identifying ways to create more customer value. Under the value chain concept, a company should

examine its costs and performance in each value creating activity to look for improvements. One

way to make those improvements and reduce production costs is to shorten this value chain [21].

The use of B2B eBusiness can play a crucial role in shortening this chain. Many tools exist to improve

the product development cycle, to manage inventory and order to payment processes, and to

improve customer service. All of the above can contribute to creating a greater value for money tothe customer.

Speed

eBusiness can potentially have a significant effect on the speed of delivery of a service. With

eBusiness, processes become independent of time of day and geographical location. Integrated

systems offer an opportunity to reduce process time and optimize organizational decisions.

eBusiness can reduce internal and external coordination time and lower market transaction times. It

can also cut out unnecessary administrative steps resulting in faster communications and

timesavings. Shared information leads to tighter integration and improved coordination betweendepartments and firms [28].



Nevertheless, at times online customer service is incapable of handling all orders, something that

can have major drawbacks. [6]. For example, consumer investors are becoming dissatisfied with

content-based investments sites, as they find them too slow; hence, customer loyalty has been

decreasing steadily since the summer of 2000 [25]. Furthermore, 20 percent of online customers

have had unsatisfactory experiences such as late deliveries, billing errors, delayed refunds and

others [2]. However, eFulfilment products have the potential to eliminate these problems and

reduce the time from order to delivery [2].

Privacy & security

The elements privacy and security, as well as reliability and availability, which are addressed later,

are inter-related elements of customer satisfaction and potential dissatisfiers. If one of them does

not function properly, it may result in a dissatisfied customer despite proper functioning of the other

two. Security is an especially important dissatisfier as once an appropriate level of security is

reached, further improvements do not increase satisfaction. But, if security is ever breached, there

can be serious dissatisfaction [15].

Recent studies have shown that security is the primary concern of consumers keeping them away

from transacting business on the Internet [4]. The value of information systems and dependence on

them, make them increasingly attractive targets for those who wish to disrupt, destroy, steal,

defraud, misuse, or spy. Such attacks may be mounted by pranksters, criminals, competitors,

terrorists, hackers, or (most commonly of all) irritated employees [34]. Sixty percent of the Fortune

1,000 admit that they have fallen victim to hackers [11].

Reliability

A quality product or service must have an acceptable amount of reliability; that is: “the

product/service must perform its intended function over its intended life under normal

environmental and operating conditions”[14]. Most consumers are reluctant to buy digital goods

and services online because they do not have enough information to be confident with their

purchases. According to a Gomez study, one of the reasons that many customers purchase travel

‘offline’ is the unreliability of the on-line service when making a reservation. However, if a service

proves to be reliable, then customers will use it and be satisfied [27].

AvailabilityAvailability of a product or service measures the extent to which a consumer can buy it when he

wants to. For financial services, lack of availability can be highly dissatisfying. During the “Black

Monday” stock market crash (October 19th, 1987), many of the most popular stock trading Web

sites and online financial information resources suffered ‘traffic-related meltdowns’ [30]. Many

customers with on-line accounts found themselves unable to trade and attributed much of their

financial loss to the unavailability of services.

EBusiness can have a positive impact on availability. With eBusiness, processes become independent

of time of day. Geographical differences also play a lesser role and eBusiness can assure 24x7

availability. The availability of on-line investment and brokerage services is especially important in



the financial industry. Stock brokers need to make decisions very quickly and implement their

decisions on the stock market immediately.

Access to Information

Access to information educates customers to help them make better decisions and assists

transactions through a network of retailers committed to delivering quality service and savings [5].

Practice shows that when implementing eBusiness in the financial area, customers will repay in

greater loyalty when they are given access to account information [19]. A tracking program can

enhance the customer’s experience by offering on-demand access to shipment information, as well

as updates about the estimated time of arrival and the last reported shipment location. Access to

information can also be a great advantage when dealing with suppliers as customers. Quick and easy

access to arrival time and shipping location is vitally important to those customers with just-in-time

practices and provides tighter inventory management [26].

Predictability

Predictability is one of many key performance indicators that are vital to achieving customer

satisfaction. When customers expect a delivery of a product on a certain date, and receive it later or

earlier than they expected, it creates dissatisfaction [29]. When price and performance are

consistent, expectations have an absorption effect on performance and satisfaction; when price and

performance are inconsistent, expectations have no effect on performance and satisfaction[36].

One major way in which eBusiness can improve predictability is by allowing customers access to

processes information to track the delivery of their product.. eBusiness can also impact ‘price

predictability’. At present, the vast majority of eBusiness service providers offer pricing parameters

based on the number of transactions exchanged or the value of those transactions. By structuring

fees on a flat basis, companies can provide customers a predictable price for their products and

services [9].

Quality of product/service

Quality of service or a product, is defined as designing, implementing, and continuously adapting

systematic activities to providing efficient, value-added outcomes that are important to a wide range

of customers [23]. In other words, the quality of a product (what can also be a service) that is

expected by the customer. A PIMS study that followed 2600 business units from 1972 to 1993 found

that the most important single factor affecting performance is the quality of products and services

relative to those of the competition [38]. Reportedly, dissatisfaction with the quality of service is

responsible for more than 70% of customers’ defections in the financial services [18].

eBusiness technologies can support design, production and customer support services to provide a

more accurate service or product. An integrated system can be used to control multiple business

processes better than separate decentralized systems, and can therefore provide a higher quality

product [32]. When a product or service is developed, a set of standards for quality planning and

control can also be developed. These standard tests can be then implemented using IT by setting

control variables. Those variables can be accurately tested using IT [32].



eBusiness applications sometimes overestimate customers’ computer ability [17]. Thus, when

designing a site, it is important to take into consideration the information the customers will need in

order to complete a transaction. The quality of service can increase as customers have the

opportunity to learn more about ‘how’ to use such services (e.g. gain usage skills about the internet)

and not only about the service they were initially interested in.

Summary

Table 1 below summarizes the advantages and disadvantages of eBusiness found in the

literature:

Customer

satisfaction

element

The elements eBusiness advantages eBusiness disadvantages

Customer

relationship

CRM software can predict

what to offer a customer andthus strengthen the

relationship

Some customers can complain

about impersonal relationshipas it is only computer based

Service &

support

On-line support can increase

efficiency and provide on-line

solutions

Customers may become

frustrated if email response is

slow and when there is lack of

personal attention

Value for

money

eBusiness can eliminate many

steps in processes and cut out

the middleman, this can

reduce costs and price, thus,higher value for money

eBusiness can have large

infrastructure costs and can

cause higher production costs

and therefore reduce value

Speed eBusiness can speed up all

information flows and

transactions

For physical goods, eBusiness

is usually slower than going to

a store. Due to network/server

failure, some customers can

complain of long response time.

Privacy &

security

UserID/Passwords, Firewalls,

encryption, server

segregation, application

controls, authentication

servers can all contribute to asecure eBusiness initiative

Information is a very sensitive

form of data, giving access to

this data can raise the security

issue. Customers may not trust

the security of the digitaltransmission or of the

information storage

Reliability A good satisfaction rate can

be achieved when a service is

provided and when systems

perform as they should.

If a service is not doing what

one expects and, for example,

transactions are not reliable, or

network/server failure,

customers will not use it.

Availability eBusiness can be very useful

when service is available at all

times

Due to network/server failure,

eBusiness can cause a great

deal of dissatisfaction when

service is not available.



Access to

information

eBusiness can be used to let

customers access their

accounts 24/7

Expectations can be too high.

People forget their passwords.

When systems go down, access

to information is minimized.Predictability Customers can see their own

accounts and transactions on-

line, can make sure they know

what to expect

Giving customers the possibly

to know what to expect can be

good, but eBusiness can raise

customers’ expectations and

thus have a negative effect

Quality of

product/service

eBusiness technologies can

support design, production

and customer support services

to provide faster and more

accurate service.

eBusiness applications

sometimes overestimate

customers’ computer ability. If

customers are having

difficulties, they would beunsatisfied.

Table 1 – summary of pros and cons of eBusiness

Documents

e Business Customer Expectations