E-Service: 24 Ways to Keep Your Customers -- When the Competition Is Just a Click Away by Ron Zemke, Tom Connellan

From the Publisher

Sixty-three percent of online shopping carts are abandoned before checkout...50 percent of Web shoppers give a site only one chance...That's why 100 percent of companies doing e-business need this book!

The Web has made the concept of "competitive edge" into a virtual anachronism. Location means little, and vendors can routinely beat each other's prices and offerings at a moment's notice. So how can an e-business differentiate itself? How can it stop fickle surfers in their tracks and turn them into loyal buyers?

The answer is service, tailored uniquely to the Web. And no one knows more about that crucial subject than service guru Ron Zemke and Tom Connellan, who shared in bringing the world "Knock Your Socks Off Service." Together, they have created a detailed blueprint for companies who want to cash in long-term on the exploding Web market.

Packed with ideas and solutions that readers can implement immediately, E-Service explains how to:

• Manage the customer's psychological experience to strengthen brand image in the marketplace
• Capture the right buyers -- the ones who provide true profit -- and earn their iron-clad trust
• Recover from mistakes, using methods that not only retain at-risk customers but turn them into your best publicists
• Design home pages, order forms, and other visual elements that attract users rather than frustrate them; and more!

Online Magazine

If you deal with customers in an electronic environment, read this book. The authors use plenty of examples to show how customers perceptions are changing and how successful organizations need to adapt to meet these changing expectations….With so many companies providing such awful service, I wish everyone would read this book.

Financial Executive

"…E-Service is comprehensive, well-packaged and highly readable.

Publishers Weekly

Online businesses that stand out from their competitors are not just those with a great product and a savvy marketing pitch; they also know how to translate the old-fashioned notion of superior customer service to the Web, argue customer-service consultants Zemke--best known for his Knock Your Socks Off series--and Connellan. In fact, first-rate customer service is even more important for online businesses than for their offline competitors. For those e-businesses that are losing out on sales or failing to capture repeat business because customers have difficulty navigating their Web site, Zemke and Connellan offer sound advice in the form of "seven winning principles" of e-customer service, based on their analysis of Web sites, focus groups and consumer complaints. The authors emphasize that first and foremost online businesses must personalize the e-experience and encourage human contact (as does Land's End). Among their occasionally surprising findings: customers don't want bells, whistles and distracting graphics; they want to find the information they need quickly and easily, so it's best to design for clarity and ease of use. This insightful book is among the best of the recent crop of online customer service books. Zemke's solid reputation, combined with the continuing fallout among Internet companies, will draw readers eager for fresh insights. It might even help e-bookstores enjoy a booming holiday shopping season. Copyright 2000 Cahners Business Information.

Booknews

Offers on-line retailers suggestions for delivering better customer service, such as filling orders correctly and downloading sites quicker. The authors base many of the recommendations on their research into the expectations and experiences of buyers on the web. Annotation c. Book News, Inc., Portland, OR (booknews.com)

Internet Book Watch

How does an online business keep its customers when the competition's only a click away? From assuring customer satisfaction through personal emails to simplifying a Web interface for quick and easy navigation, this discusses all the elements which make a web site a success or a failure. An essential guide to ecommerce businesses.

SAM Magazine

Understanding the notion that good customer service drives repeat business to web sites, Ron Zemke and Tom Connellan present easy strategies to ensure your new customers become loyal customers….The book is well written and a fast read….E-Service also does a very good job of presenting the customer's side of the story and of enforcing the point that in cyber-space the customer is truly in control.

Product Details

• Table of Contents
• Forewords & Introductions
• Read an Excerpt
• Read a Sample Chapter

Table of Contents

Forewords & Introductions

The research, writing, and building of this book, is without fear of overstatement, a fantastic act of team work!

From the people at AMACOM who threw away the time-tested guidelines and asked, "When does it need to be in the marketplace?" instead of declaring, "This is how long it takes to bring a book to market," to the people at Maryland Composition who made the production process a high-speed interactive delight, to the researchers at Selah! Inc., the mystery shoppers at Shop 'n Chek who dared to plow new ground, and the analytical geniuses at ParaMetrica, Inc.-we are indebted. Spectacular!

"We" aren't just the two names on the cover. "We" is a five-person team who wrangled and fussed over every sentence, word, paragraph, and idea in this book as if they were precious human newborns, composed of Tom and Ron; Sarah Fister Gale and Dave Zielinski, two overachieving, tech-savvy journalist/writers of immense talent; and Jill Applegate who not only coordinated the research and writing, but strung the text together in a single package, surfed the Web tirelessly looking for exceptional sites, secondary sources, cases, and data. Not to mention being ground zero for all the communication it took to pull things together and keep them running smoothly.

All that said, we need to thank some other very specific players and acknowledge their contributions.There's Lindsay Willis of Selah! Inc., who made/makes our focus groups rich resources. April Vitale of Shop 'n Chek, who put together and managed a championship of professional mystery shoppers. Dr. Jeff McLeod of ParaMetrica, Inc., who made the loyalty/profitability metrics a reality. Ellen Kadin of AMACOM who championed our requests for speed and took our delays and machinations in stride without losing a single kidney. Helen Powers of Maryland Composition was flawless in interpreting what we were trying to do with every graph and image-regardless of how vaguely we expressed it.

And we absolutely must mention the generosity of John Goodman of e-Satisfy.com, Lauren Basham of SOCAP, Gene Camera of BizRate, and Jean Kong of Forrester Research in allowing us to see and report on their cutting-edge e-commerce research.

Others who put energy into this book-either directly or indirectly-include our partner Chip Bell, Allyson Campa, Edward Dubrawski, Jamie Rapperport, Penne Allen, Lynn Neillie, Karen Revill, Beth Brown, Mike Grasee, David Hochberg, Rich Takata, Bill Bass, Brett Astor, Mark DeChambeau, Scott Anderson, Sharon Bargas, Mike Guerra, Jerry McLaughlin, Donald Bielinski, Ron Paulson, Lisa Huckleberry, Soon-Chart Yu, John Prokopiak, Paula Noack, Doug Sundheim, Kathy Ferrante, Elise Dann, Dale Veno, Meg Colgate, Cindy Grimm, and Cheryl Gracie. We thank you all for your time and effort. We couldn't have done it without you.

And no list of acknowledgments would be complete without thanking Susan Zemke and Pam Dodd for their forbearance and wise advice on the progress of this project.

Read an Excerpt

Chapter 6: Design For Distinction

Click to Godiva.com and you know you have entered a special Web space. While the fragrance isn't there-yet-the look, the feel, the ambiance are just what you would expect of a site dedicated to the expensive, high-quality, melt-in-your mouth, special occasion chocolates and truffles that bear the Godiva name.

As importantly, the look and feel of Godiva.com reflects the look, feel, and ambiance of a brick and mortar Godiva boutique. Just as the physical Godiva stores exudes quality, taste, and a touch of indulgence, the Godiva.com Web site sends the same subliminal "Go ahead. You deserve it" message. It is exactly what we mean by designing for distinction and branding every touchpoint.

It may seem strange for us to be discussing design in a book dedicated to e-service. But in our view, distinctive design is only partly about building an eye-appealing Web site, more importantly, it's about building trust and loyalty and creating a unique service experience. There are thousands of mediocre retail Web sites that do little more than offer a list of items for sale. The successful ones imbed themselves in shoppers' memories through a smooth, effortless feeling of being well served. From the first click, shoppers are drawnin, made curious, and delighted by the display of offerings. When every link works and help is given if and when it's needed, the experience is secured in trust. Whether or not they buy on the first visit, the visit is branded in their memories, and they will return to experience it again.

Lands' End is another organization that knows the importance of making every e-space touchpoint exude the brand identity-the feel and look, the ambiance and personal care service-that characterize the company's catalog, phone, and outlet store operations. Specialized tools, live access to customer service reps (CSRs), and multiple ways to browse and shop work in concert to convey LandsEnd.com's dedication to customer service and desire to please the customer.

Sites, like LandsEnd.com and Godiva.com, which are designed for distinction-to stand out in the user's mind-take their offerings far beyond the quaint and largely outdated storefront metaphor. They take the time to evaluate what their audiences want and present their goods and services memorably, reliably, and consistently. Shopping at these sites feels real to the consumer-whether she's a housewife in Minnesota or a purchasing manager for a Fortune 500 firm in Philadelphia. A well-branded site has a loyal, profitable following that guarantees its online success and bottom-line performance.

KEY 4: PUT YOUR PERSONALITY INTO EVERY TOUCHPOINT

Of the "beyond-the-basics" elements that create a distinct Web site, branding is what elevates you from average and acceptable to memorable. It's the first step toward loyalty.

Having brand name recognition outside of the Web will bring shoppers to your site once. While they are there, you must win their loyalty and trust all over again through consistent memorable experiences online. Unfortunately, most well-known brick and mortar names build boring click and order sites that create no memory, or worse, sites that frustrate and annoy- even anger-visitors and damage existing brand loyalty. Better to stay out of cyberspace than to go there badly.

To make an e-commerce site memorable, you have to brand every touchpoint. A touchpoint is anywhere a customer comes in contact with your company. It's the ads, the titles, the links, the click-through approach, the search capabilities, and the order process. Think of customer touchpoints as "Moments-of-Truth," each is an opportunity for the customer to make a positive or negative judgment about your organization. Every step a customer takes through your site must be foolproof, easy, and say "you" to the consumer. At Godiva.com, it's not just a picture of chocolates that brands the site, it's the image of luxury, the consistent customer service, the helpful extras throughout the site that all project the image of a luxury brand.

Most sites have not achieved this level of brand identity consistency. Disagree? Go to any two sites that sell the same goods and look for the differences. In most cases they are minimal. For example, ToyRUs.com and eToys.com are well-designed sites, but they have little brand originality. Both sites are easy to navigate, load quickly, and have a fairly trustworthy reputation for delivering goods,1 but the sites themselves are eerily similar. Besides slightly different color schemes there is little to set them apart.

There are likely a hundred sites that sell the same, or similar, products that you do-all within a click of your site. So what makes your site special? What will make consumers remember you-only a branded e-shopping experience.

Translating a Brick and Mortar Brand to the Web

If you are brick and mortar, the Web is not the place to reinvent yourself. Your Web presence should be an extension of your company, not just of your retail stores. It's not just about making a virtual storefront, it's about making the site a positively enhanced representation of your organization. Brick and mortar companies must learn to translate their distinctive customer experience to the Web and then learn how to use their e-commerce offering as a means to reinforce that customer experience throughout the entire business system.

If you are a pure dot-com, your Web site is your brand identity. Along with your advertising, your site is your primary point of identity and what consumers will judge you by at first click. Their experience at your site and your follow-through are all you've got to secure their loyalty. If they do not inspire confidence and demonstrate your competence and personality, you lose. There is no room for error. Regardless of whether you are virtual, brick and mortar, or both, the experience consumers have at your site determines whether they will make a purchase. How you respond to that purchase, with the timeliness of your delivery and the quality of your products determines whether they will shop with you again. KEY 5: MAKE EMOTION PART OF THE MEMORY

Branding is about more than a catchy logo or a cool advertisement. Branding is the total customer experience encompassing every step, from discovery to purchase to fulfillment to postpurchase service. Tying emotion to a site is part of the branding process. A well-branded site is remembered, enjoyed, and talked about.

Companies like Illuminations.com reinforce their brand with emotion from the moment a shopper arrives. Every graphic and link is well thought-out and works to create a consistent mood. Visiting the site is an experience that will forever connect Illuminations.com with the idea of candles and bath oils in the minds of shoppers.

When a customer arrives at a site, curiosity and interest are present almost by definition. He or she is ready to be delighted by easy-to-find information that gives them what they need in as short a time period as possible. They are already predisposed to buying something, or at the very least finding out if you have anything that peaks their interest and merits bookmarking your site for a revisit. At the same time, they know they aren't stuck in your site. Irritate them and they click away. Entice them and they are yours.

A memorable experience begins before the visitor arrives, through advertising and word of mouth. According to our "Shopping the Internet Circa 1999" study,2 these are the two most likely reasons consumers go to a dot-com site: An advertisement or a third party encouraged them to visit. The chances of them finding your site, even if they've heard of it or seen something written about it, is dependent on another branding moment: An easy-to-remember URL.

Assuming they do remember you long enough to go online and find you, the experience and the evaluative opportunities are far from over-they've just begun. Now your site must capture them emotionally. Which emotions are captured depends on your goals and products. For example, REI.com immediately excites visitors about the prospect of climbing and biking with REI gear, whereas Illuminations.com calms visitors, lulling them into a state of relaxed awareness with pictures of candlelit patios and silky bubble baths. In both cases, the sites entice their visitors, making the visit more than just another Web site. It's a unique and memorable experience.

Once they are in, a company's brand is further developed in how it treats consumers throughout the online shopping experience.

Go to LandsEnd.com and you know immediately that this company cares about its customers in a unique way. The company's dedication to customer service shines through in its specialty features, such as Lands' End LiveT, which lets consumers chat online with CSRs who send them pages of products they might like or the Your Personal ModelT, which uses shoppers' dimensions and coloring to create virtual models that try on clothes and suggest outfits to fit that body type.

Everything you do at LandsEnd.com is a unique Lands' End experience.

But just as it is easy to enhance the experience, the smallest mistakes can destroy it. For example, during our research, one of the sites we visited and otherwise were impressed by acknowledged an e-mail inquiry within minutes of receiving it to say they would answer the question as soon as possible. That was a plus for brand identification. However they waited three weeks to actually answer the question, which erased any points they accumulated from their impressively designed site and prompt computer-generated acknowledgment.

Turning visitors into loyal customers is a two-step process: Easy access, reliable performance, and attention to detail are the ante you pay to play in the game. Delivering on wants, needs, expectations- and dreams brings them back again.

KEY 6: BUILD IN-AND ON-SECURITY, SPEED, AND EASY NAVIGATION

Once the key emotional tone of the site is in place, access must be above all things, easy, fast, and consistent. No matter how beautiful your site or how well it physically represents your company, if your site crashes or is too slow, if you deliver products late or damaged, or you don't respond to customer requests, you will fail. You will be reverse branded- become known as a purveyor that doesn't deliver. When the mechanics intrude, you destroy the mood.

These three elements emerge again and again in research data on the characteristics that make a Web site successful. The Net is a new environment that changes the context by which products and services are experienced, compared, and delivered. Security, speed, and ease of use are the elements of the environment that make the experience acceptable.

Without a secure Web site an e-commerce company will fail. Even the most novice shoppers look for the padlock icon and security guarantee before offering up sensitive personal information. Seventy percent of our focus group participants said the lack of that simple signal of security gives them pause about buying from a site.

However, if security is obviously there, they will browse and consider shopping, which is where speed becomes essential. Consumers expect instant gratification from the Web and that includes instant access to pictures and fast click-through options.

The single biggest gripe about Web sites heard in our retail customer focus groups is that they don't get to the point. Consumers have very little patience for waiting time. Pages must load quickly and then have the information the shopper wants.

Web shoppers we observed in action, claim they will wait thirty to sixty seconds for a page to load, but as we watched, they regularly became restless much, much sooner. In reality, eight seconds seems to be pushing it.

"Every time a page must load you risk losing customers," says International Data Corporation (IDC) analyst Barry Parr. "If a page loads too slowly, gets lost, or has the wrong information, customers lose patience," he adds, "so don't waste their time with layers of flashy header pages that don't have useful content."

Once they've made their choices and put items in their cart, shoppers expect to be able to check out quickly. Access to checkout needs to be available on every page. Shoppers tell us that if they know what they want from a site, they should be able to arrive at the home page, type a search, and click directly to that product, choose it, and check out.

A great example of understanding this need for speed is Clinique.com. The company knows its customers are loyal to certain product lines. They accommodate them with an Express Shopping feature that goes to a "know exactly what you want?" page that has quick links to every product they sell for easy access to the item of choice. It's a three-click process that most consumers are coming to expect from Web sites. Regardless of the number of pages shoppers choose to view, those pages must be well organized, easy to search, and consistently accessible. The best sites, like LillianVernon.com, offer multiple category options through which products can be accessed. Lillian Vernon recognizes that its Web site is not about the products themselves, rather it's about what the shoppers need. Consequently, the same items will appear under "gifts," "at home," and "in season." Likewise, ArchieMcPhee.com has multiple ways to arrive at the same product, picture, and description. These companies know that not all customers think alike, act alike, or look alike. Nor do they search a site the same way.

For business-to-business (B2B) sites, the needs of specific clients can be catered to more fully through the customization of vendor sites for individual customer requirements: Lands' End creates elaborate custom sites for B2B clients, such as Saturn, that include pictures of the Saturn corporate logo stitched on to every potential product. Branders.com does a similar thing. Customers can place their logo on various items, such as shirts, canvas bags, calculators, and other promotional items, and see how they'd look.

KEY 7: COMMUNICATE TRUST THROUGH DESIGN

All of the elements of distinctive design-branding, easy consistent navigation, fulfillment of promises, distinctive uncluttered presentation, up-to-date technology, and proof of security- lead to a perception, a judgment of trustworthiness.

Online brands are built first and foremost on trust and reliability. On the Net, brand trust is only as strong as its infrastructure is reliable and consistent. If consumers believe in your company and trust your site, they will shop there and tell their friends and colleagues. The look and feel of the site are the first and most constant touchpoint for customers' assessments of your organization's trustworthiness.

Customer loyalty, measured in repeat purchases and referrals, is the key driver of profitability for most online businesses. According to a recent study of online retailing,3 the average online apparel shopper was not profitable for the retailer until he or she had shopped at the site four times. If trust generates loyalty, and loyalty creates repeat business, trust is a key component of e-service success.

That perception of trustworthiness begins with look. As a shopper in one of our retail e-commerce focus groups put it, "If a Web site is designed well then it is more probable that other shopping details such as delivery and correct billing have received proper attention." In essence, if you look good, I'll give you a chance to be good.

Convincing the buyer that you are trustworthy is the first and largest hurdle every e-commerce site faces to secure the first and most crucial sale. If buyers feel confident enough to give you their commerce and you respond by fulfilling your promises, there is a solid chance they will be back. This is especially true of B2B buyers who won't take the time to complete a transaction on a site that doesn't have a high potential for repeat business. B2B buyers don't have time for one-click stands. The promise of trust must be built into every link, every form, every graphic. Every time someone clicks on your site they are looking for proof of your trustworthiness. If a link says "Men's Shoes" it had better go to men's shoes options-not to women's shoes, not to useless company fluff, or worse yet, not to an error message.

When you screw up early in the relationship, even in minor ways, customers become suspicious. How can a self-respecting business have lost links at its site, spelling errors in content, or a checkout process that inexplicably dumps the customer halfway through? Surely it means this e-commerce site is shoddily thrown together. Make customers suspicious or fearful- and kiss them good-bye.

Overcoming Fears: A Critical Step in Developing Trust

Getting retail buyers to make the first purchase at your Web site is a monumental challenge. The implicit trust that helps drive that first purchase is even more important online than offline. Online shopping requires consumers to provide considerable personal information- names, addresses, credit card numbers, and the like. People aren't comfortable sharing this confidential information with just anyone. In fact, 60 percent of consumers have significant concerns that someone will misuse the personal information they provide online, according to a Boston Consulting Group's study.4 What's more, they are buying goods that they have never handled or seen, except onscreen.

As a result, shoppers, especially less Web savvy consumers, are still very wary of the Web as a place to do business. Securing their loyalty is tricky.

According to a 1999 survey by Cheskin Research and Studio Archetype/Sapient,5 90 percent of consumers perceived purchasing on the Web to be risky business. Similar fears were noted in the Shopping the Internet Circa 1999 focus groups. Consumers are still afraid of being scammed by shady online dealers and imagined hackers who can steal their credit information from any Web site. Even though none of our many focus group participants felt they had ever been scammed, they believe in their hearts that if they shop online often enough, they are asking to be taken.

As a result, most visitors do significantly more browsing than buying. When they do buy, they aren't spending all that much money. In fact, none of our focus group participants were willing to spend more than a few hundred dollars on any Web purchase. The money they did spend they considered expendable-a gamble that has some thrill attached to it and no real guarantee of delivery. The attitude seemed to be that money lost on a Web site transaction was a result of their bad judgment and a loss to be expected, not a woebegone transaction to be challenged. For example, a participant who had ordered and paid for stereo equipment he never received, blamed himself. "That's stuff that I really probably shouldn't have bought anyway," he said. "I just risked it and went for it because it was a really good deal and I never got it. That's all right." So even though technically he was scammed, he took the blame for making a foolish transaction. And of course, he is willing to let anyone interested know about his experience with this site, anyone except the site owner and operator.

B2B buyers are much less fearful of financial fraud. B2B business online is typically an amalgam of a long-term relationship and an existing contract. Buyer and seller have already tied their trust of follow-through to promises made before any procurement has taken place...

Read a Sample Chapter

Chapter One

REMEMBER
THE KLONDIKE

At 3 o'clock this morning the steamship Portland, from St. Michael's for Seattle passed up the Sound with more than a ton of gold on board and 68 passengers.

The Seattle Post-Intelligencer
July 17, 1897

WITH these words the last great gold rush of North America began. By 1902 large mineral development companies had bought up the most productive individual claims and mines and the Great Klondike gold rush had come to an end. Between end points, fortunes were made and lost, tens of thousands of fortune seekers, miners, gamblers, merchants, prostitutes, developers, opportunists, and scalawags streamed to the rugged wilds of Alaska and the Yukon Territory of Canada, and the last act in the great westward power shift was in full swing.

    Seattle was transformed from a sleepy fishing and lumber port lolling in an economic depression to a robust metropolis where wealthy merchants, financiers, and import/export tycoons, proudly—and accurately—dubbed their little town "The Gateway to Alaska and the Orient." The Seattle Exposition of 1909 announced the arrival of the area as a player on the national and world scene—and a new industrial age powered by the energy and resources drawn to the glamour and promise of the place and the day.

    It was a heady time that created a permanent prosperity far greater and long-lived than could have been imagined by even those dreamers and adventurers who triumphantly returned from that cold, hard tundra as high-profile gold dust millionaires.

THE GREAT CYBER GOLD RUSH: GIVE ME AN "E"

Today, e-commerce entrepreneurs worldwide are engaged in a gold rush of their own, the product of which and fallout from promises to outstrip the Klondike gold rush of 1897 in outrageous hyperbole and actual productive product.

    From the beginning of this cyber stampede, press, pundits, and volunteer commentators of all types have been off to the side watching the wild and wooly action as the e-commerce frontier was explored, tamed, and exploited. These noisy bystanders have been of two minds about the great Internet gold rush. In one grandstand were the gushing, garrulous enthusiasts. These almost Pollyannaish promoters and cheerleaders burbled on about new economy versus old economy companies, paradigm shifts, and "new solution matrices." They saw boundless bounty with acres of gold nuggets in every corner of the virtual tundra.

    These Klondike cheerleaders watched dot-coms explode geometrically across industry and category. Start-ups and their landbased competitors kept piling into categories that were either commodities, such as flowers and software, or that operated on the thinnest of margins, such as pet supplies and toys. Each insisted that their site was the most comprehensive flower/software/pet/toy/etc. site on the Internet, and each had an amazingly similar list of reasons why that was the case. There were a myriad of articles and press releases proclaiming yet another "change-the-world-site-that-was-going-to-be-like-no-other" frequently followed by a weird ad crying out for attention.

    Predictions of revenue growth in the business-to-consumer (B2C) market soared, and predictions of growth in the business-to-business (B2B) market arched even higher—and faster. They delighted in pointing out that the number of people who logged onto the Internet daily was growing at unprecedented rates, at times logarithmically, with the Web reaching as many Americans in its first six years as the telephone did in its first four decades.

    There were seemingly solid business reasons for the enthusiasm.

* Cisco Systems, always a good exemplar, was able to save hundreds of millions of dollars by generating an increasing percentage of its sales through the Web itself.

* Amazon.com redefined book selling—and set the model for managing high volumes of Web-based transactions.

* Ebay.com and a dozen other B2C and B2B Web auction sites proved that a most ancient form of commerce could become a hi-tech hit.

* AOL handily demonstrated that there's gold in cyber matchmaking.

    Certainly, most venture capitalists fell into the enthusiast camp. Amazon.com and Netscape, two early players in the e-commerce space, beginning with a mere $8 million and $5 million, respectively, in venture capital, made millions for the initial investors. Indeed, these early players' successes made those investors, not to mention company founders, seem like farseeing geniuses. Others watched and learned. The rush was on! CarsDirect.com garnered an amazing $280 million in a single round of venture financing. By the time Webvan was IPO ready, it had already pulled in a whopping $429 million in venture capital funding. Life in cyberspace was good! Every new idea seemed a fundable winner and a customer magnet. Sure, most e-ventures weren't generating much profit, but traffic was terrific and investors ebullient. It was a brave new world, with brand new rules.

CYBER DUST IN THE WIND?

All the while, the dour, scowling nabobs of negativity were seated low in the opposite bleachers shaking their heads and repeatedly observing that "there's no there, there." They were appalled by the apostasies of endless sunshine and growth. They relentlessly reminded all within earshot of the frenzied speculation of the Roaring Twenties and delighted in giving lecturettes equating the cyber boom to the Dutch "tulip mania" debacle of 1637.

    They pointed repeatedly to the lack of profit that was being generated by many of the highly touted and respected e-commerce companies.

    Then, in mid-April 2000, the world changed. The Pollyanna camp got hit with a massive dose of reality. Technology stocks in general and Internet stocks in particular plunged. IPOs were put on hold. Valuations of privately held firms were adjusted downward. "Two guys with a business plan" could no longer command an instant $1 million to $5 million in venture capital money. Talk migrated from deals that would create billions to deals that might create millions.

    The curmudgeons responded almost gleefully to the NASDAQ drubbing of April 2000, raising their voices from a dour, "the sky is falling" to a higher decibeled, "we told you so." Further chanting, "the worst is yet to come," they seemed almost relieved that their dark predictions were finally being realized.

    Press comparisons to the tulip mania, the Great Depression, and the October 1986 market tumble grew in number and volume. Reminders of the gold rush of auto company start-ups in 1912 and its small percentage of survivors were used with increasing frequency to suggest the worst was yet to come. Every dip in technology stocks and Internet stocks throughout April, May, and June brought questions regarding the long-term viability for this sector of the technology economy.

    Flip-flop financial columnists, who had initially cheered high and loud with the best of the e-commerce devotees, started pointing out that many of these dot-com prodigies had never been through a major hit to stocks and had not proved they could weather the test of time and volatility. Stern declarations warned that the likes of General Electric and Wal-Mart were not going to let a bunch of upstarts come in and steal market share from them without a fight. "Lookout!" the omenizers warned, "You're about to learn what real competition looks like." Established firms in the auto and aerospace industries led the way by creating their own industry-wide supplier marketplaces, clearly demonstrating that they weren't about to be undone by a gaggle of clamoring twenty-somethings, waving their undergraduate technology degrees and squawking about the joy of the "new economy" and the morbidity of the "old economy."

CAMP REALITY

The truth of the matter is that neither the Pollyannas nor the curmudgeons are 100 percent right nor 100 percent wrong. The truth of the Klondike is that there will be some consistent e-commerce moneymakers, some really big winners, and a lot who struggle, but never really make it big—and many, many losers.

    Andy Crawford, a professor in the University of Michigan's Engineering School who teaches classes in entrepreneurship, uses the Klondike gold rush metaphor to impress upon his students the risk side of new ventures. Andy points out that 200,000 people set off for Klondike. Some 120,000 made it as far as Dawson, Canada. Eighty thousand of those ended up actually looking for gold. The other 40,000 stayed, but decided that it was easier to make money in some other way. Of the 80,000 who actually went looking for gold, perhaps 10,000 found enough saleable ore that they became comparatively rich—for four to five years, and of all the thousands of initial adventurers, about 200 made enough money that their modern-day heirs are still comfortable.

    So who is going to "make their heirs rich" in the cyber gold rush? Again, the Klondike perspective is instructive.

    The most consistent money-makers of the gold rush of 1897 were the merchants who fed, outfitted, and supplied the miners. Mark Twain observed, "When everyone is looking for gold, it's a good time to be in the pick and shovel business." This is turning out to be true of the cyber gold rush as well. The most consistent money-makers are and will be those who supply the miners—the e-commerce adventurers and dot-com millionaire "wannabes," e.g., the Ciscos, Oracles, Foundry Networks, and InterNaps.

    Internet commerce is obviously here to stay, and it's going to provide benefits far beyond those presently in place or yet envisioned. The Net's ruthless savings has greatly reduced friction, created enormous time savings, made customers smarter, and ushered in a whole new era of business opportunity. Just the same, our studies and those of many others suggest there is much to be done before e-promise becomes consistent, customer-pleasing e-performance.

    E-commerce and technology stocks will continue to ebb and flow. Those swings are sometimes associated with value and actual productive performance, sometimes not.

    But more dot-coms will fail for lack of a solid business model. The prevailing earnings before expenses (EBE) is not a solid business model. The Buy.coms of the world busy acquiring the wrong type of customer will not survive in their present iteration. Many more will fail because they haven't created value for their customers. Most of these dot-coms will have overfocused on the technology and underfocused on the customer needs. The long-term winners—those firms that are still profitably standing two years from now—will be those that have done the best job supporting customers and delivering that value in a way that seems effortless to the customer.

NEXT STEP: DIFFERENTIATION

The bloom, to borrow an old phrase, is off the Internet rose. During the dot-com gold rush daze, any HipName.com Web site that could cast a shadow drew lots of visits from lots of visitors. In addition, with any reasonable product, or service, or information offering at all, it made sales—sometimes one-time-only sales, but sales. Often, that was enough—or seemed to be. After all, the market value of the company behind HipName.com, particularly if it were a retail Web site, was increasing every day. Sooner or later, the company would become so desirable that it would be gobbled up by someone who really wanted—needed—access to the customer base HipName.com claimed as its cyberturf.

    The downturn and belt tightening of second quarter 2000 has changed the rules. The future of pure dot-coms as well as the e-commerce ventures of mixed brick and click endeavors depends on economically attracting and profitably retaining customers—becoming profitable, and staying the course for the long-term.

    Where and how do you differentiate yourself? Whether you're a B2B or B2C, you've got to find a point of differentiation to separate from the rest of the herd, and you've got to fight for it and maintain it. In the e-world, the competition is a click away and breathing down your neck ready to snap up your customers the moment you drop your guard. In the brick and mortar world, the "mud world" as some would call it, a primary differentiator has always been location, location, location. On the Web everyone has the same location; no place and every place at once.

Product Differentiation?

Product differentiation may work for a few product categories—temporarily. But unless you're selling rare antiques or custom hand-crafted, design-patented furniture, if you've got it to sell, then anyone else can have it to sell, too. And they will. Even if you manage to be the only online site selling your unbelievably unique merchandise, the incessant entrepreneurial spirit of the Web will surely pull that uniqueness out from under you. Sites like Fogdog.com have "search squads" whose sole purpose in life is to track down hard-to-find items online and purchase them for their own customers for zero profit, thereby creating loyalty and discouraging consumers by dint of ease from finding new sources of products on their own.

    How do you differentiate yourself on a book? You can't. It's a commodity—a book is a book is a book. How about a unique specialized kind of information? Again, maybe you can have a temporary leg up on the competition, but only for a very short period of time. Then someone else will offer virtually the same information.

    It's possible to differentiate yourself for very short periods of time on product offering, but in today's networked and information-rich world it won't be very long before someone has a competing offer that approximates yours. The truth of the matter is that differentiating yourself on the uniqueness of product is tough.

How about Price?

While price is always a consideration for consumers, unless you intend to undersell yourself right out of business, the competition will probably meet or beat what you've got to offer. Our and other people's research makes it clear that customers will dump you if your site is clumsy, your customer service difficult to access, and your delivery methods shoddy and slow—regardless of what you charge.

    You could make the lowest price in your segment your point of differentiation. But how viable is that as a long-term business model? If all you're doing is acquiring customers based on price, you're probably acquiring a customer base that won't serve you well in the long run. Price-only consumers are end users, not long-term customers; they are infamously fickle—and demanding and difficult. How about considering product your break-even point and net advertising your real money-maker? Maybe. But losing money or breaking even on each transaction with the hope of making it up by advertising is an inherently unstable business plan and doesn't seem to bode well for future profitability. There are already a substantial number of dot-coms operating on negative gross margins. A situation that can't last for long. Yes, you can gain share by competing on price alone, but the probability of being able to profitably maintain that share is minuscule.

    If location, product, and price are null sum differentiators, and they won't work even in the short, much less the long run, where does that leave the fledgling e-commerce venture of a traditional company or its dot-com competitor? We suggest there is but one surefire e-commerce differentiator for dot-com and brick and click endeavors as well: Service, or perhaps more correctly, e-service.

SERVICE WILL SEPARATE LEADERS FROM LOSERS

Forrester Research, a leading e-commerce research organization, has boldly predicted the demise of most dot-com retailers by 2001, averring that the key to survival for dot-coms rests on something most of them can't fathom—the quality of their service "Online retailers must strike back at brand confusion and product duplication by distinguishing themselves through customer service," advised Forrester's report. In another study, Forrester announced that 90 percent of all online shoppers consider good customer service to be the critical factor when choosing a Web merchant to give their commerce. In our own research, customers we interviewed and surveyed told us 2:1 that poor service discourages them from making a second trip to a dot-com—regardless of product and price.

SERVICE IS THE ONLY DIFFERENTIATOR—AND A CLEAR OPPORTUNITY

If you can't differentiate on the product offering and can't profitably differentiate on price, the only point of differentiation is service. Service involves factors like ease of doing business, trust, responsiveness, Web site navigability, problem resolution, and all those other elements of good e-business that don't fit quite so neatly into a purely binary world, but that nonetheless, as we will demonstrate, have high value to customers.

    No matter where you look, the message comes through loud and clear: Service is key to winning on the Web. Yet, few firms are doing a good job of providing that service. E-Gain reports that 50% of those who had purchased online have stopped doing business with a company due to poor customer service. In December 1999 through January 2000 we sent a team of virtual shoppers out on the Net to visit sites and evaluate e-service. After 755 visits to 385 sites, the results were clear: Service on the Web is woefully wanting. Allowing the most generous standard—sites named as "good" or "great" by at least one of our shoppers—we still found that only 7% of the sites met this standard. By contrast, 13.3 percent (50 of the 385) were judged "so bad I would warn others way from this site," and 28.8% were rated to be so clumsy, difficult, and uninteresting that "I would probably not shop or revisit this site."

HOW BAD IS E-SERVICE?

Few people abandon their shopping carts at the neighborhood Target or Kroger store. But set them loose in the online world, and they do so with frightening regularity. Depending on the study you look at, between 25 percent and 75 percent of all shopping carts are abandoned online. As one of our focus group participants put it, "It's easy to `drive' to a virtual marketplace, but it's also easy to `drive away' and leave your shopping cart sitting there. You don't even have the embarrassment of people looking at you."

    E-mail? Another disaster. Again, while the exact percentage depends on the study du jour, somewhere in the neighborhood of 40 percent of all e-mail queries to companies never get answered. The answers that do come frequently take days longer than the more immediate 1- to 2-hour response time expected by today's customers.

    Download times don't fare any better. One respondent in our focus groups captured the download issue fairly succinctly when she said, "Waiting for this (site's) splash page to download is a lot like watching paint dry." Again, the actual numbers vary from report to report, but the estimates of dollars lost when customers give up and leave a site due to the tedium of slow downloads reach into the hundreds of millions.

    The truth of the matter is that in a world where user experience dictates brand, customer service is your brand. Doug Sundheim, senior client development manager of Internet consultancy in the New York City office of Luminant Worldwide, notes that "A brand does not, and can not, exist separately from the customer's experience. Companies now operate in a world where products are commodities, pricing wars are a zero sum game, and physical location is irrelevant. Put simply, then, your customer's experience of your service becomes your brand."

    The question you need to ask yourself is, "Is the service experienced by our customers creating the brand image we want in the marketplace?" If it is, great. If your brand is as strong as you'd like, great. But if not, then you have your real work ahead of you.

WITHER ONLINE CUSTOMER SERVICE?

The bottom line is that companies have spent millions of dollars attracting customers to their Web sites and seem oblivious to the fact that acquiring customers is not the same thing as keeping customers. Not serving customers well produces hard lessons about customer loyalty and the ripple effects of poor customer care. The lesson is equally clear: Treat customers badly just once online, and not only will they never come back, but through chat rooms and broadcast e-mail they will tell potentially thousands of other consumers about your careless attitude.

    The fallout from poor service online is magnified and instantaneous. E-Satisfy.com, an Arlington, Virginia-based research firm formerly known as TARP, reports that dissatisfied online customers tell twice as many people about their experience than do satisfied customers. They are also four times more likely to discuss their experience in an online chat room than satisfied customers. Think about how many people that potentially reaches.

    It may seem easy enough to throw up a site and watch the sales roll in, but there are an unbelievable number of ways to fail a customer at your site—all of which have been detailed in countless surveys, research reports, and high-profile press stories: Slow pages, crashed sites, lousy navigation logic, incomprehensible instructions, search engines that require a degree in Boolean algebra, unsecured and confusing order forms, Machiavellian return policies, e-mail that's never answered, and "frequently asked questions" (FAQs) that raise more questions than they answer.

    These and similar malfunctions, complaints, and service disappointments undercut the best marketing plan and best advertising and send would-be customers clicking away. And yet there are few sites in existence right now that don't manage to screw up the fundamental e-service elements on a regular basis.

    Customer loyalty on the Web is even more fleeting than landbased shopping. Those companies who view customer service as an afterthought—saving key infrastructure and other back-end investments until the "brand is built"—will continue to pay a steep price. As the cost of customer acquisition rises and Internet competition increases, no one can afford to lose e-shoppers after only one visit.

    Meeting and managing the service expectations of online shoppers is proving to be no small challenge for e-sellers. It is a devilment often of their own making. Far too many companies' own aggressive and omnipresent advertising messages often suggest that online shopping is a breeze and that Web shoppers will benefit from fast downloads, always be a click away from what they seek, experience hassle-free product ordering, receive delivery close to instantly, and receive first-rate help from live customer service reps at a click. Most of these explicit and implicit promises go unmet. The bad news is that the first time a customer's experience doesn't stand up to the reality—that an explicit or implicit promise is breached—is almost always the last time a Web shopper visits a site.

    E-shopper expectations are not just set by advertising and hype. They are also tied to the perception of the Web as an instantaneous medium. Die-hard brick and mortar shoppers accustomed to "shopping till they drop" now can shop around the clock and expect around-the-clock service and instant support on the Web—something they would never have thought to demand of a brick and mortar company.

    Some of the solutions to today's stunningly poor e-service are amazingly simple. An Andersen Consulting survey of 500 people found that 95 percent said a guarantee of on-time delivery would increase the likelihood that they would buy from a Web site again A BizRate.com survey of 9,800 consumers found that 89 percent of online buyers say return policies influences their decision to shop with an e-tailer. The "headline" from the Andersen and BizRate examples: Slow down the expenditure on technology and beef-up the straightforward service-oriented solutions your customers are looking for.

FALLOUT FROM POOR E-SERVICE

Those who manage B2C and B2B shopping sites have discovered there's nothing easier for frustrated e-shoppers to do than type in a competitor's URL. Or worse, they simply go back to the brick and mortar world, where they can be assured of getting their hands on a needed product right away rather than risk technology snafus, endless order form requests, late or erroneous product delivery, inconvenient return policies, and absent customer service help.

    In an interview with Fast Company magazine, Jeffrey Rayport, a Harvard Business School professor, stressed that while poor customer service in the brick and mortar world can be damaging, in the online world it can be a death knell. "People will keep going to the same supermarket (where they experienced poor service) simply because it's on the way home. On the Web, a bad customer experience can be fatal."

    Without well-conceived and adequately funded strategies for handling customer problems online, e-tailers can find their call centers overrun and customer service expenses rising in lockstep when they unveil new products on Web sites or when customers start experiencing problems with existing ones.

A FEW SHINING LIGHTS

Amidst the stories of shoddy online service there are a few shining lights. These are e-businesses that understand how customer retention drives profit and who've built online models that pay as much attention to back-end concerns as they do to the investments needed to draw customers to a site in the first place. These companies understand that e-commerce is about much more than just transferring a product catalog online.

    It is about e-service, first and foremost. At Lands' End, the Wisconsin-based clothing retailer, customers who have trouble finding what they want on the company's Web site simply click on a button, type in a phone number, and a salesperson calls them back in no time. The company understands that there is more to e-commerce than pretty pictures and order forms on a Web site. LandsEnd.com "gets it." A few others "get it" as well: Dell.com, Amazon.com, SmarterKids.com, Garden.com, REI.com, Gap.com, and Fogdog.com routinely get rave reviews from market researchers and their own customers for clear and easy-to-navigate sites, customer support, personalized service, return policies, service guarantees, or reliable product delivery.

    The infrastructure of the Internet is largely in place. Customer loyalty, not technology, is going to be the factor that separates the winners from the losers. If you're in the competitive ballpark on offering and price, you get to play in the game. But to be a champion you need to differentiate yourself on outstanding service. Service will separate the winners from the losers—in fact it's already beginning to happen. The winners understand that, and so should you.