BUSINESSWEEK ONLINE : MARCH 22, 1999 ISSUE
BUSINESS WEEK E.BIZ

You'll Wanna Hold Their Hands
E-commerce doesn't spell the end of customer service. The velvet-glove treatment may be even more crucial in cyberspace than it has been on Main Street

The big myth about E-commerce is that it's about as close to self-service as you can get. At last--or so the theory goes--companies no longer have to sweat customer hand-holding, staff huge call centers, and suffer the dings and slings of customer gripes. But oh, how wrong that is.

Four years into E-commerce, and the shrewdest Web operators are finding that the velvet-glove treatment may be more crucial in cyberspace than it has ever been on Main Street.

Gone are the days of the geographically captive customer, when merchants had the advantage of being the only store within driving distance. On the Web, the next shop is seconds away. What's more, it's open 24 hours. If cybershoppers can't get products or answers instantly--which happens all too often--they are off in a heartbeat. ''Better service is no longer just a nice thing to do. It's mandatory,'' says Amir Aghdaei, Hewlett-Packard Co.'s call-center manager.

From Chase Manhattan Bank (CMB) to Thomas Cook Travel Group Ltd., companies are waking up to the need for so-called E-service. It takes many forms: schmoozing shoppers over the Web through E-mail and Web chats, or sophisticated software that tracks buyers' habits and supplies instant help. There's even software that will respond automatically to the avalanche of E-mail Web sites are getting. The beauty of it? Done right, E-service can dish up more than just digital warm-and-fuzzies. It can improve the bottom line.

RED CARPET. Whether a company rolls out the red carpet or tries to scrimp with linoleum could be one of the biggest factors in deciding tomorrow's E-business winners and losers. Amazon.com CEO Jeff Bezos says over the Internet, word of mouth has a far wider reach. In the offline world, he says, 30% of a company's resources are spent providing a good customer experience and 70% goes to marketing. But online, he says, 70% should be devoted to creating a great customer experience and 30% should be spent ''shouting'' about it.

That's the idea at furniture.com, a startup in Worcester, Mass., whose state-of-the-art digital aid provides a glimmer of the future. Visitors to its Web site type in style preferences, and within seconds a live company rep is at their service, ready to talk via Web chat or Netphone about the personalized showroom that has just been created and sent to their computer. From there, buyers can haggle over colors, fabrics, prices, and dimensions.

The service doesn't stop there. After the sale, customers are ''adopted'' by the reps, who E-mail or phone from time to time to vet complaints or offer a new fabric-coordinated accessory. The result: While shoppers who use the personalized showroom take 20% longer, the orders are, on average, 50% larger. CEO Andrew Brooks says furniture.com can afford to spend more on service because doing business over the Web is cheaper. ''The fundamental earth-shaking event that's being shaped by E-business is a radical shift in bargaining power from sellers to buyers,'' says Brooks. ''What does that mean? Service is everything.''

Sometimes that means combining all the different complaint boxes at a company--call centers, faxes, and E-mails--into one Web site. ''Many companies haven't yet equipped their service staff to handle both E-mail and phone traffic,'' says analyst Jeff Snyder of market researcher International Data Corp. Or they have separate staffs handling each, without much integration or communication between the two.

Companies such as Thomas Cook, the travel and financial-services firm, are avoiding that trap, using software to coordinate all queries. Sprint Corp. (FON) is taking another tack: With each request for help, its software automatically dips into a database to find similar questions, then automatically provides an answer. Sprint is using each exchange to build its problem-solving and marketing database. This helps Sprint handle a glut of new service traffic and E-mail without adding to service costs.

E-service savings can be huge. A Forrester Research Inc. study of financial institutions says Web service costs companies just 4 cents per customer on average for a simple Web page query, vs. $1.44 per live phone call. Shifting service to the Net, says Forrester, could let companies handle up to one-third more service queries at 43% of the cost.

The ultimate money-saver, though, is automating service so thoroughly that few reps are needed at all. The idea: let the Web do for customer service what automated tellers did for dispensing cash. One example: Using software from Motive Communications Inc. in Austin, Tex., companies including Netscape (NSCP) and Dell (DELL) can take a digital ''snapshot'' of a customer's troubled computer system, pinpoint the problem, and send repairs over the Web--all without human intervention.

And E-service sells. HP is using homegrown tracking software to create a database of corporate customers who call or E-mail for service. That way, HP can chart their concerns and, when they E-mail or call again, identify them by specialty before automatically routing them to agents with the right knowhow. The payoff so far: an estimated $180 million in incremental sales. With those kinds of results, E-service can pay for itself.

BY MARCIA STEPANEK

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