Challenges in Distributing Services through Electronic Channels



Customers Are Active, Not Passive, and Must Be Enticed

Traditional advertising media such as magazines and television consider the customer a passive receiver of their messages. If the customer is reading an article or watching a television program, he will most likely see the advertisement. While we know that not all customers stay in the room for a television advertisement, most of us see hundreds of ads a day and accept this as an inevitable by-product of consuming entertainment and informational media. The user of the Web, however, is different: It's not that Web users aren't interested in learning about new products and services or getting a great buy on an old standby, but they want to learn on their own terms. They want the choice to click or not, to view or not, and anything more than the gentlest form of persuasion from an advertiser is likely to be construed as an intrusion.

Lack of Control of the Electronic Environment

It did not take long for the Internet to face the challenges of unregulated media. As soon as the network became popular, pornographic and other controversial material started to appear. When a service's advertising or information appears in proximity to such material, the result can be a negative spillover effect. It is similar to the challenge advertisers face in using print media such as TV Guide-the advertiser has to be careful to separate its advertising for banking from the ever-present ads on balding-concealment devices and quick weight-loss programs. With the TV Guide, however, the advertiser could request or pay for the right positioning, something not possible on the Internet at this time.

Price Competition

One of the traditional differences between goods and services has been the difficulty of directly comparing features and prices of services with each other. Whereas goods can typically be compared in retail settings, few retail settings exist that offer services from multiple sources. The Internet has changed all that. Services such as CompareNet and make it simple for customers to compare prices for a wide variety of services. Compare Net is a broker that will compare products and services feature for feature and price for price in an online version of information similar to Consumer Reports. is even more revolutionary. It allows customers to name their price for a service such as an airline ticket, wait until finds anairline willing to accept it, then purchase the ticket. Never has the customer has such ability to bid on prices for services. In a later chapter, we describe another type. of price competition spawned by the Internet: the Internet auction as presented by such companies as eBay, which sells more than one million products and services in more than 1,000 categories.

Inability to Customize with Highly Standardized Electronic Services

Some of you have experienced learning basic college courses through large, video-transmitted courses. If you consider what you missed in learning that way compared with learning directly from a professor, you will understand this challenge. In mass sections, you cannot interact directly with the professor, ask questions, raise points for clarification, or experience the connection that you receive in person. In electronic classes-as in videoconferences that are springing up in many businesses-the quality of the service can also be impeded by the way the audience reacts (or doesn't react) in those situations. People talk among themselves, leave, laugh, and criticize, among other behaviors.

Lack of Consistency because of Customer Involvement

While electronic channels are very effective in minimizing the inconsistency from employees or providers of service, customer variability still presents a problem. Many times the customer produces the service himself using the technology, leading to errors or frustration unless the technology is highly user-friendly. Maneuvering online can sometimes be overwhelming, and not all Websites are currently easy to use. Furthermore, a large percentage of customers do not have computers and, even if they do, may be reluctant to try or continue using the medium



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