Internet Marketing Customer Support and Online Quality

Marketing Processes That Can Be Digitized Understand Markets & Customers Involve Customers in Design Process Market & Sell Products & Services Deliver Value Through Distribution Provide Customer Care Manage Customer Information

Topics Solving problems online Lower costs Online quality Justifying online enhancements Co-production

Providing Customer Care Through Online Content Online Quality VVAs Customer Support Lower Costs Online Publishing Electronic Distribution Virtual Problem Solving Customer Support Justifying Online Content Enhanced Margin Expanded Sales –Acquire new customers –Develop existing customer base Customer satisfaction –Customer retention

Solving Problems Online Lower customer support costs Improved online value for customers Companies and consumers benefit –Lower costs improve profit margins –Savings can be passed through to consumers Figure 6.3 Provides Strong Justification for Investing in the Web

Solving Problems Online Benefits are strongest for companies that are first to innovate –Increased market share –Improved customer satisfaction –Improved customer acquisition and retention

Lower Costs Cost savings from using the Internet to support customers are more measurable and controllable that many other customer support investments These savings can be quite large Figure 6.3

Cost Savings Q: Where do these cost savings come from? Online publishing saves the cost of printing and shipping manuals Software updates can be downloaded, saving the cost of burning and shipping CDs Virtual problem solving Inexpensive communication

Virtual Problem Solving Online solutions –Many companies practice call avoidance, making people log on instead –Difficult / impossible to find a phone # on the site Stored answers –FAQ – auto-responders Customers help each other –Bulletin boards

Traditional Customer Service Methods Are Expensive Sales calls and call centers –Require expensive, assisted, real-time interactions –Are labor intensive

Inexpensive Web-Based Communication Many of these methods do not require real-time intervention Customers are able to solve their own problems

Traditional and Web-Based Customer Support

Web-Based Customer Support Systems Merging , artificial intelligence, and smart routing shows promise –First: the system tries to find a stored answer –Second: the system tries to find the best customer service rep to handle the request –Third: the response becomes a part of the database Over time, the database becomes richer and more inquiries can be handled automatically by the system

So What? Success on the Web is Becoming More & More About Customer Care Provide Customer Care Through Online Content

Headline Insert excerpts from a current article out of the business press (e.g. Wall Street Journal, Wired News, Business 2.0, or Fast Company) that talks about the importance of online customer support. I usually take excerpts out of the lead paragraph, and highlight keywords. There have been a number of articles talking about increased investments in online customer support. Name of Publication - Date

Customer Care Q: How do you create a Nordstrom-like experience on the Internet?

Online Quality Enhancements Virtual value activities (VVAs) can improve quality Companies have multiple constituencies It’s possible to use the VVAs principle to design Web content that supports multiple customers and needs

Virtual Value Activities and Customer Support Solutions Figure 6.6

Virtual Value Activities and Customer Support Solutions Figure 6.8

Table 6.3

Online Quality Enhancements Effective use of the Web can increase customer satisfaction Product design: online discussions provide early feedback that provide valuable insight and suggestions Sales: consumers have access to online product information and dealer locations After-sales support: self-help problem solving, technical support & user groups Company culture: Web content communicates and reinforces corporate culture

Drivers of Customer Satisfaction Figure 6.9

Product Design Satisfaction Drivers and Online Methods Table 6.4 TABLE 6.4 PRODUCT DESIGN SATIS Satisfaction ComponentsOnline Methods ProductDesign  Messages and quality signals  Sales and support effectiveness Valuable online enhancements, Product information Useful additional products, FAQs Feedback and incentivesFeedback from early users, Usenet groups, from users Sourcing and manufacturing  Customer contact  Quality  cost Collaborative design with suppliers, Intranet and extranet sharing of information

Sales Activity Satisfaction Drivers and Online Methods Table 6.5 TABLE 6.5 SALES A CTIVITY SATISFACTION DRIVERS AND ONLINE METHODS Sales ActivitySatisfaction Components Online Methods Messages  Overt  covert Web site positioning and requirements, Information and editorial content, Use of personalization when valuable Attitudes  Sales force training  Sales force rewards Brand reinforcement by site, Ease of use, Responsiveness Intermediaries  Incentives  Selection  Training  Monitoring Guides to dealers and dealer support information, Advance and in-depth support to dealers using extranets, Archives of sell sheet, Effective transaction systems and delivery, Online product and service information

After-Sales Activity Satisfaction Drivers and Online Methods TABLE 6.6 AFTER-SALES ACTIVITY SATISFACTION DRIVERS AND ONLINE METHODS Satisfaction ComponentsOnline Methods After- Sales Support services  Coverage  Quality and performance Self-help problem solving and FAQs, Tech support online, User groups Feedback and restitution  Coverage  Responsiveness Customer service , repair tracking, Warranty explanations and personalized coverage

Culture Satisfaction Drivers and Online Methods Table 6.7 TABLE 6.7 CULTURE SATISFACTION DRIVERS AND ONLINE METHODS Satisfaction ComponentsOnline Methods CultureFormal symbols and systems  Mission statements  Performance standards  Compensation Online image and branding, Performance measures online Informal symbols and systems  Beliefs  values Mission statements and public works involvement, Social activities

Justifying Online Enhancements Two possible methods for justifying a firm’s investment in an online presence –Breakeven investment analysis ($) –Customer-centered method, looking at customer acquisition, development and retention rates ( 人 ) Let’s take a closer look

Breakeven Investment Analysis Traditional customer support technologies –customer-support call centers –sales force help –dealers Steep curve due to increasing difficulty of providing higher quality levels Cost Focus vs. Quality Focus Figure 6.10 The Cost-Quality Tradeoff for Traditional Support

Breakeven Investment Analysis Exceptional service not yet attainable using online only Online content is low cost for basic levels of support Costs rise rapidly at higher levels Pure online support attractive for cost- oriented firms Cost Focus vs. Quality Focus Figure 6.11 Limited Quality Pure Online Support

Breakeven Investment Analysis Hybrid systems combine online content and technical help from staff –Online material handles routine inquiries –Customer-support staff focuses on difficult issues Staff also provide support to customers without access to online materials Quality-oriented firms use Cost Focus vs. Quality Focus Figure 6.12 Creating a Hybrid High- Quality Support System

Breakeven Investment Analysis Cost savings from migrating to an online support model free up funds to enhance customer support over the long run Managers often opt to achieve hard savings first Then use those savings to improve quality A Dynamic Implementation Path Figure 6.13

Customer Lifetime Value Analysis Web marketing as direct marketing The Internet’s digital nature make it possible to capture, store & manipulate huge amounts of data on individuals Three activities related to marketing at the individual level –Customer acquisition –Customer development –Customer retention Closed Loop Web Enhancements

The ADR Framework Acquisition: the cost of bringing in new customers Development: costs incurred expanding the share- of-customer that firms receive from existing customers Retention: costs to keep the business and loyalty of current customers

Co-Production A new view of the company and its customers as co-producers emerges when the Web is used in sophisticated ways to provide customer support The customer is no longer a passive recipient of a product and some support material Rather the customer is a partner Closer links between companies and their customers provide opportunities for personalization and new product development

TABLE 6.8 AN EFFICIENCY-IMPROVING WEB ENHANCEMENT Before Web EnhancementAfter Web Enhancement Your Taxes software product Price Incremental cost Sales level Fixed cost $100,000 Net income before support $2,675,000 Your Taxes software product Price Incremental cost Sales level Fixed cost $100,000 Net income before support $2,675,000 Standard support costs w/o enhancement Fixed cost $500,000 Avg. support contacts per buyer 0.3 Labor cost per support contact $15.00 Standard support costs $837,500 Web w/o enhancement Periodic fixed cost 20,000 Avg. accesses per buyer 0.3 Cost per support contact 0.05 Web support costs $21,125 Standard support costs with enhancement Fixed cost $500,000 Avg. support contacts per buyer 0.1 Labor cost per support contact $18.00 Standard support costs $635,000 Web with enhancement One-time Web cost $225,000 Periodic fixed cost 35,000 Avg. accesses per buyer 0.7 Cost per support contact 0.05 $37,625 Operating Profits $1,816,375Operating Profits $2,002,375 First year Profit $1,777,375 Change in operating profits $186,000 Sales periods until payback 1.21

If { △ Total Costs / Original Revenue } ≦ Web Enhancement Ratio then the enhancement is profitable (Equation 6.2) A web Enhancement Ratio Test

TABLE 6.9 USING THE WEB ENHANCEMENT RATIO ScenarioCompanyCMRRevenueExpected MC Expected SC Web Dev. Costs △ Web Usage Costs △ TC / Revenue WER Sophisticated Database Blockmonster Enterainment.40$3.9 billion0%.5%505,00060, %.20% Sophisticated Database Investments RUs.65$500 million0%2.0%84,85020, %1.30% Sophisticated Database ACME Sprockets.15$5 million5.0% 42,9708, %.61%