Linking Customer Needs to Corporate Strategic Intention

An Extension of Service Design Planning Models in Online Financial Service

Xin (David) Ding *Rohit VermaYang Huang

* Assistant ProfessorDepartment of Information and Logistics Technology

University of Houston

Presented for the Art & Science of Service Conference

June 19, 2009

Outline

• Motivation

• Research Objectives

• Literature

• Research Findings

• Future Research Directions

Motivation

• “… organization has been burned by technology dumping: systems were designed and pushed out to the field with little thought for how they would be used…”

– Kruse et al., ICSS (2001)

• “… companies run out and buy [technology] when they hear about a great deal without thinking about the products' strategic fit in the business…”

– Robert Kish, Business Week (2009)

• A mismatch between customer needs and system design leads to a shrinking customer base

– Gupta et al., JMR (2004)

Theoretical Frameworks

• Service planning models (Chase and Acquilano, 1989; Goldstein et al. 2002)

• Dual-layer experience model (Ding et al. 2008)

PerformanceOutputService Delivery System

Input

•People•Technology•Process•Equipment

•Service outcome•Service experience

Experience Clues

Flow Experience Satisfaction

•System•Product offerings•Customer service•…

•Interactivity•Focused attention•Control•…

Research Objectives

1. Empirically test the applicability of an extended service planning model in an online financial service setting;

2. Examine the impact of market positioning on corresponding service outcomes and service performance.

Literature Review

• Technology readiness– People's propensity to use new technology– Its typology helps access final usage, usability needs and

evaluations (Parasuraman & Colby 2001, Tsikriktsis 2004, Massey et al. 2007)

• Service delivery system (clues)– Consists of four major components including system, production,

information, and accounts (Krishnan et al. 1999, Wixom and Todd 2005)

– The aggregate perception of the service system from interacting with the clues lead customers into a cognitive flow experience state, which stimulate further behavioral intention (Carbone and Haeckel 1994, Ding et al. 2008).

Literature Review (Cont’d)

• Flow experience – Cognitive states during human-computer interaction (Krishnan et al.

1999, Wixom and Todd 2005)– Including the factors of focused attention, interactivity, sense of control,

level of challenges, and skills (Ghani and Deshpande 1994, Huffman et al. 1996, Novak et al. 2000).

– For the study context, it is best captured with focused attention and interactivity (Brush and Artz 1999, Lovelock 2001).

• Market entry and operations strategy– First-mover advantage (Lieberman and Montgomery 1988, Kerin et al.

1992).).– First-mover disadvantage (White 1983, Robinson et al. 1992).– Marketing – operations dilemma (Bozarth and Berry 1997).

• over-promise to lure customers and a push on operations to move beyond an internal focus on reducing costs without a clear vision of consumer needs

Research Model

Technology Readiness

Service Sys.(Clues)

Customer-Firm relation

Service Experience

H1a

H1cH2a

H3

H2b

Market Entry

H1b

H4a

H4cH4b

Research Hypotheses

H1:: TR segments differ in the evaluation of service delivery system, service experience, and customer-firm relationship;

H2:: Major design elements within the service delivery system affect customer experience and customer-firm relationship;

H3:: Customer experience affects customer-firm relationship;

H4::Market entry decision affects the evaluation of service delivery system, customer experience, and customer-firm relationship.

Research Methodology

• Sample– 666 individual investors from 14 major online

brokers (RR > 10%)– Unit of analysis: individual investor & broker

• Survey – Likert-scale type, mostly validated scales

• Statistical analysis– LCA, ANOVA, PLS

LCA Analysis - TR Segments

1

2

3

4

5

Optimism Innovativeness Discomfort InsecurityTechnology Belief

Mea

n

ExplorerPioneerSkepticsLaggards

Market Entrants

Explorer Pioneer Skeptics Laggards Company a Total Customers

first entrant 37% 10% 28% 26% e*Trade (1992) 90

explorers 28% 14% 39% 19%Ameriprise (1994), Ameritrade (1994)

128

followers 22% 9% 45% 24%

Charles Schwab (1996), Scottrade (1996),

ShareBuilder (1996), TD. WaterHouse

(1996), Fidelity (1997)

406

late entrants 29% 0% 50% 21%

Interactive (1998),Vanguard (1998),

Merrill Lynch (1998),Wells Fargo (1998),Buy & hold (1999),

Optionsxpress (2000)

42

Average 25% 10% 42% 23% 1996 167

Analysis Results (Overview)

Technology Readiness

Service Sys.(Clues)

Customer-Firm relation

Service Experience

H1a

H1cH2a

H3

H2b

Market Entry

H1b

H4a

H4cH4b

ANOVA Analysis  Mean (standard deviation) F   Mean (standard deviation) F

  1. Explorers

2. Pioneers

3. Skeptics

4. Laggards

1. first entrant

2. explorers

3. followers

4. late entrants

 

Product offerings

3.67 3.99 3.55 3.34 3.61 3.64 3.57 3.35  

-0.9 -0.56 -0.66 -0.7 13.72*** -0.79 -0.78 -0.71 -0.93 1.59

Account4.24 4.25 4.04 3.78 4.03 3.98 4.09 3.95  

-0.64 -0.49 -0.61 -0.59 18.50 *** -0.59 -0.57 -0.61 -0.69 1.49

Information4.31 4.31 4.18 3.92 4.18 4.21 4.15 4.12  

-0.55 -0.49 -0.52 -0.53 17.24*** -0.55 -0.53 -0.54 -0.68 0.52

System4.3 4.2 4.16 3.85 4.05 4.14 4.14 4.11  

-0.51 -0.51 -0.51 -0.52 23.03*** -0.54 -0.56 -0.51 -0.61 0.73

Focused attention

3.81 4.11 3.65 3.55 3.59 3.72 3.72 3.88  

-0.81 -0.68 -0.71 -0.67 10. 92*** -0.84 -0.75 -0.72 -0.59 1.52

Interactivity4.04 3.88 3.96 3.62 3.76 3.93 3.9 4.02  

-0.52 -0.43 -0.63 -0.66 12.90** -0.67 -0.7 -0.65 -0.65 1.91

Behavioral intention

4.07 4.24 3.98 3.75 3.76 4.03 4.01 3.92  

-0.77 -0.56 -0.71 -0.68 9.11***   -0.75 -0.69 -0.72 -0.7 3.36 **

H1 H4

PLS Analysis

28.02 R

46.02 R15.02 R

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H2 H3

Research Findings

• Perceived service system performance, experience, and customer-firm relationship differ across TR segments;

• Market entry decision does not affect the performance of service delivery system and customer experience, yet it affects customer-firm relationship;

• Service delivery system affects customer experience and following customer-firm relationship;

• Customer experience mediates the relationship between service delivery system and customer-firm relationship.

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Research Contributions

• Four major contributions: – Examines the connection between customer tech

needs and experience/evaluation from service design perspective;

– Examines how the critical decision in service strategy (i.e., market positioning relative to competitors) affects the type of relationship the firm wishes to pursue with its customers;

– Examines how the design of a service delivery system affect the firm’s relationship with its customer;

– Empirically tests the dual-layer experience model.

Managerial Contribution

• Customer needs affect his/her experience and valuation of a service from service design perspective– target the right customer segment and prioritize customer

needs to obtain the maximum value

• Market positioning affect the type of relationship the firm wishes to pursue with its customers– be the second to market (explorers) tend to draw more

loyal customers

• The design of a service delivery system affect the firm’s relationship with its customer– System is most important, following by account,

information, and then product offerings

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Future direction

• Applying– Explore the service design planning model

and dual-layer experience model among other service settings

• Extending– Include additional factors measuring service

input and service delivery system– Cross-cultural comparison

• Validating – Controlled experiments

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