Transcript GSB 582 High-Tech Marketing

Internet Marketing
Customer Support
and
Online Quality
Involve
Customers
in Design
Process
Understand
Markets &
Customers
Market &
Sell
Products &
Services
Marketing Processes
That Can Be Digitized
Manage
Customer
Information
Provide
Customer
Care
Deliver
Value
Through
Distribution
Topics
•
•
•
•
•
Solving problems online
Lower costs
Online quality
Justifying online enhancements
Co-production
Providing
Customer
Care
Through
Online
Content
Lower Costs
•Online Publishing
•Electronic Distribution
•Virtual Problem Solving
•Customer Support
Online Quality
•VVAs
•Customer Support
Justifying Online Content
• Enhanced Margin
• Expanded Sales
– Acquire new customers
– Develop existing customer base
• Customer satisfaction
– Customer retention
Solving Problems Online
Provides Strong Justification for Investing
• Lower customer in the Web
support costs
• Improved online value
for customers
• Companies and
consumers benefit
– Lower costs
improve profit
margins
– Savings can be
passed through to
consumers
Cisco's Estimated Annual Savings From Internet Use
Custermer
support, $125
million
Distribution
of software,
$130 million
Figure 6.3
Recruitment,
$10 million
Printing
product
manuals,
$270 million
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
Cisco's Estimated Annual Savings From Internet Use
Custermer
support, $125
million
Distribution
of software,
$130 million
Recruitment,
$10 million
Printing
product
manuals,
$270 million
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
– E-mail auto-responders
• Customers help each other
– Bulletin boards
Traditional Customer Service
Methods Are Expensive
Customer Service
Method
Agent:Customer
Ratio
Type of
Interaction
Type of
Service
Sales Force
1:1
Real-time
Assisted
Call Center
1:1
Real-time
Assisted
• Sales calls and call centers
– Require expensive, assisted, real-time interactions
– Are labor intensive
Inexpensive Web-Based
Communication
Customer Service
Method
E-mail
Agent:Customer
Ratio
Type of
Interaction
Type of
Service
1:1
Messaging
Assisted
E-mail with AI
1:many
Messaging
Self
Web: FAQ
1:many
Messaging
Self
Web: self
1:many
Messaging
Self
Web: chat
1:many
Real-time
Assisted
1:1
Real-time
Assisted
Web: phone
• Many of these methods do not require real-time
intervention
• Customers are able to solve their own problems
Traditional and Web-Based
Customer Support
Customer Service
Method
Agent:Customer
Ratio
Type of
Interaction
Type of
Service
Sales Force
1:1
Real-time
Assisted
Call Center
1:1
Real-time
Assisted
E-mail
1:1
Messaging
Assisted
E-mail with AI
1:many
Messaging
Self
Web: FAQ
1:many
Messaging
Self
Web: self
1:many
Messaging
Self
Web: chat
1:many
Real-time
Assisted
1:1
Real-time
Assisted
Web: phone
Web-Based Customer Support
Systems
• Merging e-mail, 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
Name of Publication - Date
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.
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
VVAs
Investor Relations
Technical Support
Gathering
SEC filings
Press releases
Stock information
Analyst Reports
Product manuals
Product design documents
Help desk info
Field engineers
Warranty info
Organizing
Chronological listing
Keyword search
News
Product group
Product line listing
Search
Index
News
SEC reports
CEO speeches
FAQs
High hit rate requests
Frequent call center requests
Synthesizing
Reporter pages
Analyst pages
Getting started pages
Solution pages
Distributing
Homepage link
Investor channel
Key customers extranet
Key suppliers extranet
Navigation bar links
Solution CDs
Mass media ads
Selecting
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 PRODUCT DESIGN SATIS
Satisfaction Components
Product
Online6.4
Methods
Table
Design
Valuable online enhancements,
Messages and quality signals
Product information
Sales and support effectiveness Useful additional products,
FAQs
Feedback and incentives
Feedback from early users,
Usenet groups, E-mail 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 Activity
Satisfaction
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
AfterSales
Satisfaction Components
Online Methods
Support services
 Coverage
 Quality and
performance
Self-help problem solving and
FAQs, Tech support
online, User groups
Feedback and restitution
 Coverage
 Responsiveness
Customer service e-mail,
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 Components
Culture Formal symbols and systems
 Mission statements
 Performance standards
 Compensation
Informal symbols and systems
 Beliefs
 values
Online Methods
Online image and
branding,
Performance
measures online
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
Cost Focus vs. Quality Focus
Figure 6.10
• Traditional customer
support technologies
– customer-support
call centers
– sales force help
– dealers
• Steep curve due to
increasing difficulty
of providing higher
quality levels
The Cost-Quality Tradeoff
for Traditional Support
Breakeven Investment Analysis
Cost Focus vs. Quality Focus
Figure 6.11
• 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 costoriented firms
Limited Quality
Pure Online Support
Breakeven Investment Analysis
Cost Focus vs. Quality Focus
Figure 6.12
• 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
Creating a Hybrid High• Quality-oriented firms use Quality Support System
Breakeven Investment Analysis
A Dynamic Implementation Path
Figure 6.13
• 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
Customer Lifetime Value Analysis
Closed Loop Web Enhancements
• 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
The ADR Framework
Acquisition
Supported





Web Advertising
E-mail accounts
Free trials
Amazon partners
Edmund's QFN
Development
Supported
Retention
Supported
 Community and
 Customer support
personalization
 Enhancement
spending
spending
 Information
 Effectiveness
collection
spending
 Syndication expenses
• Acquisition: the cost of bringing in new customers
• Development: costs incurred expanding the shareof-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 Enhancement
After Web Enhancement
Your Taxes software product
Price
Incremental cost
Sales level
Fixed cost
Net income before support
Your Taxes software product
Price
Incremental cost
Sales level
Fixed cost
Net income before support
49.95
12.95
75.00
$100,000
$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
Avg. accesses per buyer
Cost per support contact
Web support costs
Operating Profits
20,000
0.3
0.05
$21,125
$1,816,375
49.95
12.95
75.00
$100,000
$2,675,000
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
First year Profit
Change in operating profits
Sales periods until payback
$2,002,375
$1,777,375
$186,000
1.21
A web Enhancement Ratio Test
If { △ Total Costs / Original Revenue }
≦ Web Enhancement Ratio
then the enhancement is profitable
(Equation 6.2)
TABLE 6.9 USING THE WEB ENHANCEMENT RATIO
Scenario
Company
CMR
Revenue
Expected
MC
Expected
SC
Web Dev.
Costs
△
△
WER
Sophisticated
Database
Blockmonster
Enterainment
.40
$3.9 billion
0%
.5%
505,000
60,000
0.176%
.20%
Sophisticated
Database
Investments
RUs
.65
$500 million
0%
2.0%
84,850
20,000
.0483%
1.30%
Sophisticated
Database
ACME
Sprockets
.15
$5 million
5.0%
5.0%
42,970
8,000
1.3000%
.61%
Web
Usage
Costs
TC /
Revenue