ELECTRONIC COMMERCE IN SERVICE INDUSTRIES UNIT 5

1. INTRODUCTION Services and Products differ in their complexitiesThe INTERNET has transformed SERVICES where the customer can carry out many aspects of the service themselves.

This is known as = Service technologies Example: Internet banking

OUTCOMESUnderstand how broker-based services are performed online

2. BROKER-BASED SERVICES Types of Broker-Based Services:

Online Intermediaries •Brokers • Infomediaries

2.1 ONLINE INTERMEDIARIES Who are they?

• Facilitate transactions between buyers and sellers • Receive a % (percentage) of the transaction’s

Value• Part of the largest group of B2C organisations• Distinguish between 2 types of online

intermediaries

A. BROKERS B. INFOMEDIARIES

A. BROKERSFacilitate transactions between buyers and sellers

B. INFOMEDIARIES They are information brokers that gather info about online consumers, their preferences and shopping habitsThey sell this info or use it to act as a CYBERMEDIARYThis helps consumers locate appropriate sites for purchases

2.4 ADVANTAGES OF B2C E-COMMERCE

Shopping can be faster and more convenient Offerings and prices can change instantaneously Call centres can be integrated with websites Broadband enhances the buying experience

2.5 CHALLENGES FOR B2C E-COMMERCE There are 2 main challenges:

• 1. Building traffic to sites

• 2. Sustaining Customer Loyalty

• Smaller firms find it hard to compete in this market because online shoppers are price sensitive and gets lured away to other sites. Thus creating traffic to sites and wanting customers to come back = Extremely Difficult

COMPANY MOTIVATIONS TO USE ONLINE SERVICESP. 254-275 TEXTBOOK

Companies supply online services on their website that complement their core business products. Example: Banks = Online banking services is part of their core product Courier companies = You cant make use of an online courier, as it does not suit the core product, but courier companies can transmit courier information online This shows that you need to make online services suit your core business product

CORE FACTORS THAT COMPANIES USE ONLINE SERVICES FOR INCLUDES:

• Selling core products• Decreasing costs in serving customers online rather than

offline • Expanding market opportunities • Convenience • Speed • Ease of use • Cost (Not always cheaper for services online, but you can

service more customers)

CORE FACTORS ….• Establishing an interactive channel of communication

with customer • Providing info about the organisation • Being generally aware about the organisation • Projecting a favourable organisational image • Providing the opportunity for feedback • Accessing previously inaccessible customer • Generating qualified leads for salespeople

WHAT CUSTOMERS VALUE IN ONLINE SERVICESBasic question to ask is:

What do online customers want?3 C’s = Control Costs Convenience

CONTROLConsumers have greater choice on the internet, they choose where they buy and through which channel they want to buy the product. For example: Ask yourself: Would you be prepared to wait in a bank queue for online banking services as which you would wait in your actual bank branch?

WOULD YOU BUY THE FIRST AIRLINE TICKET YOU CAME ACROSS OR WOULD YOU COMPARE PRICES ON VARIOUS SITES? CONSUMERS SEARCH FOR THE LOWEST COST OF THE PRODUCT

COST

CONVENIENCE Consumers are not restricted to make use of only ONE supplier…………. They search around the web and see for themselves.This is convenience: Search and buy:

• When they want to…………• Where they want to………..• How much they want to……… • How it must be delivered……………• Personalise their products to suit their needs

SELF-SERVICE TECHNOLOGIES The internet allows for online service delivery The online customer perform the services themselves – think online banking….. You do all the work yourself.No “people” involved in the service………….. It is all SELF SERVICE SST = Self Service Technology We do find SST offline = ATM machines - but the internet has much more of this SST We still find “Offline” services for those customers that want personal contact. You can walk into your bank and do all the things you want to with a personal banker.

WHO KNOWS??? IN THE FUTURE WILL OFFLINE

SERVICES STILL EXIST?

NATURE OF PRODUCT AND SERVICENot all services can be delivered online.You need to look at the nature of your product to determine if the core product can be “sold” online. Example: Hairdresser – cant cut your hair online Restaurant – cant enjoy a meal online These services however can use the internet for supplementary services such as providing information and advertising.

When looking at selling a service online, ask yourself the following questions……….

Is the service local or global? Example: Hairdressers have no use of a global market as their customers are not global………….. Only local.

Is the service high-touch or low touch? Low-touch services can be delivered entirely on the web Example: Banks and Travel Agents

Is the service high in search qualities? Is it easy to search for these products online. Example: real estate - high in search qualities. Internet supports it well.

IS THE SERVICE HIGH IN EXPERIENCE QUALITIES? DO PEOPLE FIRST NEED EXPERIENCE IN THEIR PRODUCT BEFORE THEY MIGHT CONSIDER BUYING OR SEARCHING FOR INFORMATION ONLINE.

IS THE SERVICE HIGH IN CREDENCE QUALITIES? CREDENCE QUALITIES = SERVICES THAT REQUIRE EXTENSIVE INTERACTION BEFORE THEY CAN BE EVALUATED. EXAMPLE: EDUCATION , ONLY AFTER YOU HAVE STUDIED YOU CAN EVALUATE ITS FULL WORTH!

CORE AND SUPPLEMENTARY SERVICES Ask yourself = What is the core service of the product that you are buying Core Services= The main benefit of the service .

Flying down to Cape Town – What is the core benefit? ( Main reason…)= Transportation

Thus you have to understand what is main reason a consumer visits a supplierSupplementary services = Services that are closely connected with the core service which adds value to the core service. Supplementary services supports services. Example: Comparing prices of seats on flights between different seat on the plane and different cities. Toll free Number to phone for assistance

COMPLEMENTARY SERVICES These services do not add value to the core product. They are self contained, but do add value to the WEBSITE. Need to make sure that the complementary services fit into core service offering . Example: South African Airways Website ; www.flysaa.com They have complementary service on the site that links you to complementary services such as: Car Rental, Baggage Insurance & Hotel bookings

USER INTERFACEThis refers to the FUNCTIONALITY, OUTLOOK, LOGIC and USABILITY of the website. A website should be fun, or at least pleasant to use! But, why do service offerings (websites) expand beyond their core and supplementary services? / 3 reasons…………….

1.Far easier and cost effective to add additional services on the web that offline 2.Companies often need to distinguish between their added services and those of the competition.3.They want to enhance the buying experience of the buyer. In other words….. Make it as comfortable and pleasant as possible

FIGURE 9.1 The e-service offering p. 262

SERVICE RECOVERY Service recovery = Actions that companies take when service failure occursService failure happens for many reasons: Service may be unavailable, Too slow, Late, Poorly done, Employees may be rudeCompanies are judged in how they react when things go wrong……..Customers can leave more satisfied if service recovery is done right and correct.

EXAMPLE: A DOUBLE BOOKING ON A SEAT ON AN AIRPLANE, THE PASSENGER BEING UPGRADED TO BUSINESS CLASS - THAT’S NICE! SERVICES ARE MORE INCONSISTENT THAN PRODUCTS AND THEREFORE HAVE MORE PROBLEMS. COMPANIES NEED TO HANDLE COMPLAINTS TO IMPROVE CUSTOMER RETENTION. THE INTERNET SUPPORTS COMPLAINING PRACTICE VERY GOOD. LOOK AT THE FOLLOWING /………………..

PLEASE CONNECT TO THE WIFI AND VISIT THE FOLLOWING WEBPAGES IN CLASS

www.mcspotlight.comwww.toysrussucks www.dontflysaa.com

KEY INDUSTRIES (SERVICE INDUSTRIES)

Financial Services have benefit a lot from the WWWInsurance and Brokerage industries: Grown significantly with the internet due to cost savings, access, convenience and consumer control. Insurance groups now DEAL DIRECT with the customer, no brokers fees anymore.“Day-Traders” trade online with the stock exchange - Internet supports it Supplementary services can be added very easily to website to support the core product Search the WWW for a multitude of finance information, FREE OF CHARGE

BANKS Banks are greatly affected by the Internet. The adoption rate of Internet banking is more than what ATM were1 million of 11 million banking populations transact online They mostly use Internet banking to monitor their accounts that to transact online.Biggest reason for this: Internet Security and Online Banking Security Banks offer different services to convince people to make use of online banking Example: FNB “ In Touch” service – sms notification Nedbank: Free anti-virus software for their users. Problem: Clients also don’t have enough credit to trade online but Blue Bean and eBucks helps clients to build up credit, which can be spent online

BANKS /CONT…Banking online provides the 3 C’s it is:

• Convenient• Cost Effective • Control

Customers can bank 24/7 365 and call centres to help with queries

Problems in South Africa is: Download times of Internet Cost of Internet Connections

Digital Divide between those who have money and internet and those who don’t

PROFESSIONAL SERVICES

This part focusses on the Health Industry The Internet facilitates the search for medical information online. Internet Users make use of the internet to search for medical information daily.

Consumers form Communities for chronic and genetic illnesses and provide support, counselling and medical advice These communities share their emotional trauma. They form networks through “WEB RINGS” = interconnected links of information.

The social barriers between professionals and clients are decreasing, as the internet supplies consumer education…. But there are problems: ………../

1. How do consumers ascertain the reliability and credibility of the information they find online? 2. How do consumers judge the information they find? 3. If consumers do retrieve the right information on a condition, they stand the change of misdiagnosing themselves

TRAVELThe travel industry has benefitted hugely from the internetThe internet has allowed means to reduce the perishability of travel products. BIG THREE online travel agencies: Oribitz.comTravelocity.com Expedia.com

The internet has allowed tour operators to access a wider audience, and to use dynamic pricing more effectivelyDemand-based pricing is also applied due to the Internet So convenient to plan your own holiday online as the user has access to numerable sites. Dealing with offline (bricks and mortar) agents can sometimes be frustrating, so the internet allows for self-service which is very appealing.

Interesting statistics: USA in 2002 – 64 million people made their travel plans online39 million of those booked onlineSouth Africa: Kulula.com - 65% of bookings are made online

EDUCATION Online education is very popular overseas In SA this impact is reduced due to legislative reasons. In USA 44% all higher education institutions offer online distance courses via Internet Students can interact through two-way interactive video

Corporate training has a lot of potential by e-learningTraining managers have viewed e-learning as reducing training costs, but it still have many advantages:

• Access to a wide variety of content • Relevant models to support

REAL ESTATEHouse hunting is extremely popular online in South AfricaWebsite: www.property24.co.za Very popular with 3,2 % of online users searching for houses online. Pam Golding sold R90 million worth of property through leads generated by the internet, many of which were foreign and for high-value property. GIS = Global information systems allow consumers to search for info about access to public facilities, parks, shops, schools, universities, libraries. Sites offer assistance with financing, legal and administrative requirements, legal advice. The internet truly makes home-buying process more focussed, and could even replace the current habit of wading through weekend property supplements.

ICE ACTIVITY

1.Shortly discuss the following concepts: a.Self Service technologies b.Difference between Core and

Supplementary services on the internet c. “web-ring”d. Impact of the internet on the Travel

industry

INTERNET AUCTIONS (MODULE GUIDE P. 36)

Auction Type Price Number of bids Bid awarded to English Goes up Many per bidder Highest bidder

Reverse price English

- One per bidder Lowest bidder

Dutch Goes down One per bidder First bidder who accepts

New Economy Dutch

- One per bidder Highest bidder (buying item at the price of lowest bid)

Reverse - One per bidder Highest bidder

THE ENGLISH AUCTION The usual type of auction that we are all used to see on TV and Movies

REVERSE PRICE ENGLISH AUCTIONSimilar to where organisations tender for contracts. Each organisation is invited to tender, attends a tender meeting, then submit a tender.Tender = similar to a quotation, but with much more detail. The lowest tender wins the contract

DUTCH AUCTION The price is lowered until someone accepts. A person waits for as long as possible before a bid is made so that the price can drop. Risk: Another bidder can accept before you do and outbid you!

NEW ECONOMY DUTCH AUCTIONEach bidder gets ONE chance to bid. Bids are kept secret until the winner is announcedThe winner is the bidder who’s bid is the highest, but s/he then buys it at the price of the lowest bid.

REVERSE AUCTIONSGives all the participants the chance to enter ONE secret bid.The highest bid wins

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