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E-Business, E-Customer, Relationship and Interactivity
Dissertation
The E-Business, the E-Customer,
their Relationship and Interactivity
Jan Vig
Dissertation av Jan Vig om E.Business, E-Customer, Relationship and Interactivity (286 sider) i forbindelse med Masterstudie i Information Technology and Communication Juni 2000.
The E-Retailer Business, the E-Customer,
their Relationship and Interactivity
Table of Contents
Chapter 6
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The Future, Critical Sucess Faktors, E-Business Strategy, Results and Conclusion
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6.3
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The critical sucess factors for E-Business
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The most important thing to understand about E-Business is that it is first and foremost about business, not technology. Technology, while important, is not the hard part. The hard part is managing the changes in institutional processes that must take place for the enterprise to take advantage of E-Business, or to avoid losing out to others who do.
Andersen Consulting (n.d.) states that «eCommerce is not just technology it is fundamental business change»
Figure 6.1 Business change
“The potential of eCommerce points to a fundamental economic change that is much more pervasive. And this requires strategic and organizational change that is also pervasive and fundamental.”
Andersen Consulting (n.d.) sees that the following three fundamental factors critical for success:
- The ability to «dream» pragmatically: to identify profitable and realistic future destinations
- The ability to manage difficult journeys, so that companies get to those destinations sooner and with more predictable results
- The ability to take a holistic approach to organizational change and growth
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For the E-Retailer it is further important to:
- Understand the economics of the electronic economy.
- Rethink the enterprise-wide business strategy.
- Create, train and enable a new organisation.
- Reengineer business processes.
- Implement flexible, scalable technologies.
- Execute complex global change programs at scale.
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IBM (n.d.) presents ten success factors for E-Business.
They are:
- E-Business is as much about business vision as technology. The most successful e-businesses are partnerships between business managers and IT managers. Companies that make e-business central do better than those that make it an afterthought.
- For most organizations, the key to a successful e-business transition is making their e-business priorities the same as their business priorities. It makes e-business an investment instead of a bet.
- When companies move to E-Business, it pays to move quickly. In many industries, business cycles already reflect e-business efficiencies and speed. Waiting for Internet technology to “mature” may be ceding advantages to bolder competitors.
- It pays to integrate E-Business with companies core operations from the start. This approach leverages business-proven systems they already have, saves them from doing dumb things like selling products that aren’t available at prices that have changed; and ensures that customer service and accounting are consistent across all sales channels.
- Scalability, availability and security are not optional. Extending business-critical applications to the Web doesn’t make them any less critical. In a system that is available 95% of the time 5% of sales transactions are lost.
- Customer knowledge is everything on the Web. The company that knows its customers best and uses what it knows to serve them better has a huge advantage in this one to one environment where competitors are only a click away.
- The key to transforming any major process is to identify all of the sub processes that are part of it. This sounds obvious until companies consider that most business processes span multiple operating environments and customers. It pays to look at what business is happening, rather than at the systems designed to serve the pieces of the business.
- It pays to overbuild for traffic the company doesn’t expect. Triple-digit growth is the norm in e-business, and unpredictable 1,000% demand spikes are common. Early over capacity is less expensive than starting over.
- A vital component of e-business is a way to manage the performance of all systems, networks and applications, as a single enterprise.
- Plan for change. An “ideal” solution that is platform-centric or uses proprietary technology may not be as bankable in an e-business world as a more flexible standards-based solution. It is a guarantee that tomorrow will be different from today.
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In a survey “What contributes to the success of a Web business?” the factor marketing strategy turned out to be the most important driver of both profitability and growth (39% and 69% respectively). To understand the customers’ needs is the key to success. As seen the key drivers of profitability are different from the key drivers of growth. The marketing strategy factor plays a more important role in determining growth (69%) than in determining profitability (39%). This result shows that although these two measurements are correlated, they are different. If a company want continuous growth, they need to understand the customers, develop a good marketing strategy, keep high quality and want to play big.
According to Gibson (2000) “the best practices for building an e-business are no secret: get to market first, build your brand, use highly reliable and scalable systems”.
Any successful e-business must offer a new value proposition, building on convenience, information, entertainment and savings. Convenience and savings are traits of any successful business. Information is another area where the Web’s near-limitless content capabilities can impress. Entertainment, though, is an often overlooked component that is hard to quantify. How often do top-level manager, when contemplating a business plan, ask how entertaining it is to the buyer? And notions of entertainment are quite subjective. About the only way you can tell if a site is entertaining or not is to try it out on people.
Larry Downes & Chunka Mui, Harvard Business School defined a killer app as “a new good or service that establishes an entirely new category and, by being first, dominates it, returning several hundred percent returns on initial investment.”
Smith, Speaker and Thompson (2000, 82-89) identify 12 rules that they considered essential for building successful killer Apps:
- Outsource to the customer
- Cannibalize your markets
- Treat each customer as a market segment of one
- Create communities of value
- Replace rude interfaces with learning interfaces
- Ensure continuity for the customer, not yourself
- Give away as much information as you can
- Structure every transaction as a Joint Venture
- Treat your assets as liabilities
- Destroy your value chain
- Manage innovation as a portfolio of options
- Hire the children
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Credibility is one of the most critical factors that will affect whether the E-Retailer will succeed or not. Being credible meaning being trustworthy and believable.
Some rules about credibility: (Sinclair, 2000)
- Consistency applies to every aspect of the business. Don’t change the guarantee terms every couple of weeks. Ensure that all products or services consistently meet the quality and value standards that the company is promoting.
- Credibility is something that is earned. Therefore, companies need to give of themselves to get trust back in return.
- Sharing the knowledge is a useful way to build credibility
- Making outlandish claims in advertisements or on the web site can harm the credibility. Telling the truth is always the best way.
- Ensure that the products or services provide more value than promised
- Testimonials can be a powerful way to generate trust in products or services.
- Don’t just state what the qualifications are on the web site or in promotional material. Instead, state how the qualifications can benefit the potential customers.
- Following sound business practices will help credibility also.
- Prompt delivery of what has been ordered also helps build the right impression of the business.
- Be focused on providing solutions to the customers, providing consistent quality
and value for money, and being accessible.
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The companies that have been most successful in E-Business generally fit the following profile:
| Business Success Factors |
- Senior management leads. Senior management embraces change and recognizes the strategic importance of e-business to the company’s future.· Strategic thinking. Management thinks strategically, creatively, and «outside the box» about the opportunities and challenges of e-business.
- Processes reengineered. Management is prepared to reengineer processes dramatically, not just incrementally improve existing processes.
- Properly funded. Management has a realistic view of the significant effort and funding that e-business requires and is prepared to make the investment.
- Other issues considered. Management avoids unpleasant surprises by considering the cultural and regulatory aspects of global commerce, including taxation.
- The marketing will be changed. Communications models and Interactivity by internet together with information availability will change the way to promote and distribute the products and the customer contacts fundamentally.
- Ability to change. The management’s ability to foresight and adapt to the change.
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Table 6.1 Business success factorsSource (Deloitte Touche Tohmatsu, 1998)
| Technology Success Factors |
- Aligned infrastructure. The company’s technology infrastructure is aligned with its current and twenty-first-century business requirements. The technology is appropriate to support the business processes· Integrated business systems. The company’s Internet front-end systems are integrated with its enterprise resource planning (ERP) and other back-office systems.
- Security. The company carefully considers the security it requires. The critical factors for the paying systems are for instance securness and costs.
- Agents. Agents have to work together, with each other and with human beings.
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Source (Deloitte Touche Tohmatsu, 1998)
Table 6.2 Technology success factors
| Customer Driven Success Factors |
- The user demand confidentiality. Only systems by companies, which could guarantee securness and privacy, will be used.· Loyalty will be transferred from the company to the products/services. The customer could compare shopping quite easy and fast. The companies therefore have to inform their customer well and be able to let the customer get easy access to the knowledge of their products and services.
- Service and trust are more important than ever. The customer gets increased power and control through Internet. This means for the companies that they have to take the service they offer more serious and they have to secure quality otherwise they will be out of business quite fast.
- Time is the new currency at Internet. Companies, which are able to save time for the customers, will be chosen.
- Quality. The ability and commitment to deliver quality products and services.
- Product assortment. Here the company has to have a balance in what kind of products and services they are offering. The Product assortment must be extensive and interesting.
- Date-/delivery time /delivery ability. The Industry has to keep its promise to deliver at time to the customers. The delivery has also to be complete.
- Customer satisfaction. Companies have to meet the critic and suggestions from the customer efficient and direct, either by offering other products and services or give money back or a «credit note» or in another way. Companies have to take the privacy of the clients customers serious.
- Security information and guarantee. Of course, security is a standard feature on every e-commerce site. Although companies have probably implemented a secure commerce system on the site, many customers are still wary of ordering online. In order to improve online sales, the E-Retailer has do a good job of educating customers about the security of the system. Can the customers easily find information describing the security technology used and how its protects them? Amazon.com offers its customers the «Amazon.com Safe Shopping Guarantee.»
- Protection of customer privacy. Online customers have made their wishes well known. Their personal information is personal. So customers want companies to protect their information. They have stated they won’t buy from sites that won’t protect their privacy, or they will provide false information. As customers prefer to control their own data, the E-retailer should control the own destiny with good practices and self-regulation, rather than government legislation.
- Cross-selling. Cross-selling will increase average order size. Increasing average order size can translate into increased profit per order. Cross-selling is merely offering customers additional recommendations when they are placing their orders. If it’s done in an informative way, customers will appreciate the personalised service.
- Order status and tracking. Convenience is a key reason for shopping online. Communicating order status (and/or letting customers access order status via the web site) is a feature that is quite convenient, and the customers will appreciate it. Amazon.com does a great job of sending an e-mail when the order is processed, and then again when the order ships. In addition to these gifts, the E-Retailer site may be happy to receive enhancements such as simplified ordering, easy access to customer service assistance, site usability testing by the customers and formal customer feedback methods. More import-antly an E-Retailer should know what works, and doesn’t work, by asking the customers.
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There are eight factors critical to every company’s success in increasing its customers’ lifetime value.(Seybold, 1998) (318C)
- Target the right customers.
- Own the customer’s total experience.
- Streamline business processes that impact the customer.
- Provide a 360° view of the customer relationship.
- Let customers help themselves.
- Help customers do their jobs.
- Deliver personalized service.
- Foster community.
According to Seybold (1998) these are the 5 steps to success in E-Business (318D)
- Make it easy for customers to do business with you.
- Focus on the end customer for your products and services.
- Redesign your customer-facing processes from the end customer’s point of view.
- Wire your company for profit: Design a comprehensive, evolving electronic commerce architecture.
- Foster customer loyalty, the key to profitability in electronic commerce.
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Table 6.3 Customer Driven Success Factors
| Required Features and critical success factors for the E-Retailer shopping site seen from the customers point of view. (Mougayar,1998) |
- Side by side products and services comparison· Multiple options for purchasing· Top sellers list, new arrivals and today’s specials
- Easy payments options, including micro transactions
- Online transaction history
- Personalized view of products/services
- Multi parameter notification service by e-mail and/or push channel
- Extensive linkages to other related information/services for cross-selling purposes
- Order tracking and shipment status by account number
- Pro-active advice while shopping
- Advanced search techniques such as parametric search, or agent-based search
- Online auction capability
- Virtual reality handling of products
- Live chat with a real person for customer service
- Ability to download a personal catalog for offline viewing
- Extremely efficient interfaces that rival the most user-friendly information kiosks
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Table 6.4 Required Features and critical success factors for the E-Retailer shopping siteseen from the customers point of view
| Other Success factors |
- We will get a global market. Geographical boundaries will be broken down, and enormous markets will be available for the one who thinks global
- Usability testing. This is a field where too many companies are doing a poor job and waste a lot of money. It has been dome a lot of research on usability testing and one of the conclusions is that 85% of the usability problems will be found by testing the Web site with 5 users and running a lot of small tests. (316)·
- Know – how. Companies also need knowledge about associations within their Industry and knowledge about rules and regulations within the country they are selling their products to. Companies have to have competence in electronic commerce.
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Table 6.5 Other Success factors
If the E-Retailer is capably to handle the following issues efficiently they will have success. (Unruh, 1996: 147) Note: multiple responses possible
Issues
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Mentioned as critical |
| Take orders/request |
61% |
| Track orders/requests |
56% |
| Respond to complaints |
55% |
| Communicate with customers |
53% |
| Monitor company performance |
51% |
| Provide data on-line for response |
48% |
| Link service departments |
48% |
| Route customer requests |
45% |
| Manage inventory |
35% |
| Monitor sales activity |
34% |
| Communicate with vendors |
22% |
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Table 6.6 Critical issues for success
PwC (1998) found 92 per cent of organizations are still in Stage I of the evolution, they are still preoccupied with acquiring customers and grouping their customers according to interests and needs.
The survey report concludes with the «twelve steps to success» – a step-by-step guide that can help the E-Retailer create an action plan for the business.
They are:
- Align your management team and mobilise it for action
- Assess your readiness for change
- Segment your customers
- Profile your customers
- Listen to the voice of your customers
- Analyze the gaps
- Mobilize your strategic account team
- Outline your strategic action program
- Validate and assess the fit of your action plan
- Train your teams
- Implement your strategies and activities
- Track your performance and adjust as necessary
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