Foundations of EBusiness BMG714C1

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Foundations of E-Business (BMG714C1)

• Week 9 Introduction to E-Services

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Services Some Definitions

• A service is an activity or series of activities
  of more or less intangible nature that normally,
  but not necessarily, take place in interactions
  between the customer and the service employee
  and/or physical resources or goods and/or systems
  of the service provider, which are provided as
  solutions to customer problems. Gronroos (1990)

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Services Sectors

• The services sectors are very diverse and range
  from knowledge and information intensive areas,
  performed in both public and private sector
  organisations, to very basic services such as
  cleaning and maintenance. Also included are
  retail, wholesale, construction, transportation,
  communication, professional, insurance, tourist,
  educational and health care (Dicken, 1998).

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Electronic Distribution of Services

• Benefits
• quality control
• low cost
• customer convenience
• potential for wide distribution
• customer choice

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Electronic Distribution of Services

• Challenges
• lack of control of electronic environment
• inability to customise
• customer involvement
• security

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Electronic Distribution of Services

• Pure EC where the product, the agent and the
  process are all digital
• Trading of products pure EC only possible where
  the product can be digitised, such as in selling
  software or music
• Potential advantages the greatest with pure EC,
  since automating the entire process can result in
  a substantial cost reduction

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Electronic Distribution of Services

• Where the service industry is concerned pure EC
  can be used in most cases so that the savings are
  much larger than in selling most physical
  products
• Service companies started to sell online even
  before the Internet, e.g. banks, estate agents

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The Online Retailers

• Established retailers using the Internet
  strategically or tactically as a marketing tool
• Virtual merchants designing their operating
  format to accommodate the demands of online
  trading
• Manufacturers using the Internet to take their
  goods direct to the consumer

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Key Issues for High Street Retailers

• Even without online transactions, the information
  flows associated with consumer e-commerce may
  change the role of high street outlets
• High street shops may find new opportunities from
  e-commerce, e.g. enhanced services, such as
  delivering higher levels of customisation and new
  functions such as community facilities and play
  areas

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Key Issues for High Street Retailers

• Greater emphasis on delivery, storage, repair,
  service etc. Products may be browsed online then
  purchased and collected in the high street or
  vice versa
• Strong impacts on particular types of products,
  e.g. music and newspaper/magazine sales

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A Model of EC Consumer Behavior

• Consumer Types
• Individual consumers get much of the media
  attention
• Organizational buyers most of the shopping in
  cyberspace
• Purchasing Types
• Impulsive buyers purchase products quickly
• Patient buyers purchase products after making
  some comparisons
• Analytical buyers do substantial research before
  making the decision to purchase products or
  services
• Purchasing Experiences
• Utilitarian shopping to achieve a goal or
  complete a task
• Hedonic shopping because it is fun and I love
  it

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Key Characteristics of Financial Services

• Intangibility
• Inseparability
• Heterogeneity
• Fiduciary responsibility
• Long-term nature of products

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Consumer Choice and Financial Services

• Problem Recognition - a range of needs may be
• satisfied through the purchase of financial
• services, including
• The need to make payments (cheques, debit cards
  etc)
• The need to defer payment (loans, mortgages,
  credit cards etc.)
• The need for protection (house insurance, life
  insurance etc.)
• The need to accumulate wealth (unit trusts, ISAs
  etc.)
• The need for advice (tax/financial planning,
  business start-up etc.)

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Bank Selection Criteria

• Dependability and size of the institution
• Location
• Convenience
• Ease of transactions
• Professionalism of bank personnel
• Availability of loans

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Changing Dynamics in the Banking Industry

• Changing consumer needs driven by online business
• Optimisation of branch networks in order to
  reduce costs
• Changing demographic trends and potential new
  consumer markets
• Cross industry competition caused by deregulation
• New online financial products

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Online Banking

• Internet the gateway to low cost international
  banking
• IT will reduce the cost of producing financial
  services
• Facilitates the efficient flow of information
• Creates new distribution channels
• Makes physical distance between banks and
  customers unimportant
• Weakens the position of established institutions
• Makes banking more international

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Online Banking Methods

• Mobile devices
• Interactive TV
• Greater interest in Europe than USA
• Low cost electronic channel to the mass market
• In many European countries there will be greater
  interactive TV penetration than PCs or mobile
  handsets
• Greater age spread with TV viewers than PC users
• New marketing opportunities

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Financial Services Key Issues

• Decline in branch banking
• Many routine services done from home
• Banks pressuring customers to move online
• Integrated fashion of online financial services

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Broker-Based Services

• Brokers work as intermediaries between buyers and
  sellers
• Agents basically make the markets
• Agents provide many services
• Most of the value-added tasks of brokers can be
  automated
• Major electronic agent based services include
  travel, employment, real estate, stocks, and
  insurance

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Impact of Intermediaries and their Changing Roles

• Introduction of EC resulted in the automation of
  many of the tasks provided by the intermediaries
• Does this signal the end for travel agents,
  estate agents, job agency employees etc?

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Disintermediation and Reintermediation

• Up to 5 agents involved in the process
• Portal or search engine
• Affiliate
• Retailer
• Distributor
• Producer

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The Impact of EC on Traditional Retailing System

• Disintermediation and Re-intermediation
• Disintermediation the removal of organizations
  or business process layers responsible for
  certain intermediary steps in a given value
  chaineliminating the traditional intermediaries,
  such as wholesalers, to reduce the cost
• Re-intermediation the shifting or transfer of
  the intermediary functions, rather than the
  complete elimination

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Impact of Intermediaries and their Changing Roles

• Two roles of electronic marketing intermediaries
• to extend what we are familiar with into the
  virtual world, e.g. search services (yellow
  pages)
• to break down the value creating chain of the
  physical market into separate entities or to
  combine them into a different type of service

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Impact of Intermediaries and their Changing roles

• The agents role will be changed,
• emphasizing value-added services such as
• assistance in comparison shopping from multiple
  sources
• providing total solutions by combining services
  from several sellers
• providing certifications and trusted third-party
  control and evaluation systems

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Impact of Intermediaries and their Changing roles

• Certain issues will have a key impact
• the success of intelligent agents
• consumer attitudes and behaviour

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Travel and Tourism

• Travel - a popular Internet application
• EC creating much stronger competition, resulting
  in lower prices and commissions
• Changing role of the travel agent
• More emphasis on value-added services
• More automation due to intelligent agents

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Auction Model

• Reduces product search costs
• May create new market opportunities
• Derives a true market value for the
  product/service
• Purchases cannot be time critical

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Job Placement Services

• Rapid growth in the online job market
• Major driving forces include the ability to reach
  large number of job seekers at low cost
• Intelligent agents allow resumes to be checked
  and matches are made quickly
• Benefits for employers, job seekers, government
  agencies and successful employment agencies

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Real Estate

• The online real estate market is basically
  supporting rather than replacing existing agents
• Time savings for both buyer and seller
• Commissions on regular transactions will decline

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Online Trading

• Buying and selling shares is the most popular
  investment activity online, however investments
  can also be made in individual savings accounts,
  futures and options, and foreign currency.
  Investment will also increase in unit trusts and
  investment funds.

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Online Trading

• Online trading is one of the fastest growing
  online businesses
• Inexpensive, convenient and supported by a huge
  amount of financial and advisory information
• Reduced commissions
• Fast and efficient, and almost fully automated
• Policing issues of market abuse

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Other Online Services

• Online Publishing
• The electronic delivery of newspapers, magazines,
  news, and other information through the Internet
• Information products are goods that can be
  digitised or that originate in digital form
• Many products are augmented by information, e.g.
  equipment sold with instruction manuals
• The ability to create information goods and
  distribute them via the Internet is a huge threat
  to some industries, e.g. music

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Other Online Services

• Knowledge Dissemination
• Educational Developments
• Range of courses available, mostly targeted at
  adult learners
• Various initiatives and collaborations between
  private and public institutions, e.g. the UKs
  e-university
• Company training
• Continual education required in certain sectors,
  e.g. real estate, law and insurance