EBay and Amazon - Customer Service Delivery - Case Study Example

EBay and Amazon: Service Delivery March 19, 2007 Contents EBay and Amazon Service Delivery March 19, 2007 Contents 2 Overview of Services 3 Servuction 5 Blueprinting Servuction 6 Servicescape 9 Intangibility of Service 9 Heterogeneity of Services 10 Inseparability of Service 11 The Perishability of Services 11 Flowcharting Servicescape 12 Servqual 14 Gap Analysis 17 Opportunity Recommendations 19 References 21 Overview of Services EBay (www.ebay.com) and Amazon (www.amazon.com) are Internet based possession processing services. The companies offer a format for transactional sales in new and second hand products from retailers and private sellers. EBay offers an auction-based sales service, where the retailer or private seller can present their item to purchasers. Amazon offers direct-buy pricing rather than auctions, but the retailer and private seller are still responsible for presenting their product. The managerial value of each company lies in their ability to provide consistent and continuous services to the retailer and purchaser, where both companies act as the intermediary between global sellers and purchasers. The nature of the relationship between each service-oriented facility and the end consumer is based on separate transactions that can occur continuously, that is, a client can buy or sell an item through EBay and Amazon at any time, but each physical sales transaction is a singular event. The benefits of EBay and Amazon to sellers are global recognition and ease of use. Each service allows any retailer or private party to advertise their product via the Internet, and so each product has the potential of reaching millions of viewers internationally. The service encounter is fairly well-received, although due to the direct nature, a person may experience difficulties with a particular seller or buyer. The service facilities of both EBay and Amazon are Internet based E-commerce. Service interaction is mainly the computer interface, although this can also be done by cellular phone, PDA, and any other medium of connecting to the Internet. The role of customers in EBay and Amazon is highly imperative to the service. Each customer can be defined as a buyer or seller of a product, and in turn these people can review and leave feedback for interactions of other buyers and sellers of products. Direct contact with EBay and Amazon is rare in the person to person domain; however, both companies have continuous updates, newsletters, service additions, and so forth that are centered on improving the customer experience. The concern is that these communications are largely one-way, contact with EBay and Amazon disseminates from EBay or Amazon, and not from the customer. Demand for EBay services is high. Recently, Bob Swan CFO of EBay announced at the at Merrill Lynch Internet, Software & Services Conference that: the biggest piece of it [EBay] is the large and growing core business, or the eBay platform. With a global presence in 33 markets, transacting $1,800 of goods per day, with over -- I'm sorry -- per second -- with over 6.6 million new listings added per day, and 45,000 developers leveraging our APIs, we've grown from over 222 million users on this site as we exit 2006. And we've processed $52 billion of global merchandise value on the site during the course of 2006, as a whole (Fair Disclosure Wire pp 7 2007). Amazon has similar consumer demand structure, with 9.7 billion dollars in annual revenue, but where EBay applies a global presents, multi-functional consumerism and value strategy, Amazon appeals to the customer services and their capabilities, according to Adam Selipsky, vice president, product management and developer relations, Amazon.com Inc: "As with most good ideas, we come at things from two different directions: What do people need, and what can we do well" says Selipsky. "We look internally and ask, 'what do we have built, or what can we build with our world-class engineering talent that would justify creating a business"' (Cone p 51 2007). Servuction The servuction model illustrates the factors that influence the service experience of the customer. This can be examined as the complex bundle of benefits that exists in the visible (customer interaction) and invisible (internal processing) stages that occur during the service process. The components of servuction are the segmentation of service interaction, the determination of consumer behaviour, facilitation of possible interaction, and critical incidents from third parties. EBay and Amazon services are segmented based on the client as either a buyer of products, seller, or retailer. EBay's service extensions include Skype (Internet based telephone), consumer awareness and protection from fraud programs, and payment methods (PayPal) (Wolfe p 2 2007). EBay's services are expanding towards international money-transfer business, yet there is an invisible challenge in offering the scope of service where customer profiles do not overlap with remittance recipients (Wolfe p 2 2007). Amazon's service extensions (beyond product trade) include software technology for business, especially developing storage and computing services with hosting and utility computing for software developers and startups (Cone p 47 2007). Amazon also offers direct retailer services with Toys R Us and ITunes. The visible services are divers, yet there is a challenge in the invisible services as communication in unforeseen events, such as payment distribution, confusion of new products (UnBox), and "offering a returns policy below best practice levels" (Goldie p 13 2006). Blueprinting Servuction Blueprinting originated with Lynn Shostack (1984). This strategy examines the service delivery based on process planning and modification. This shows the points of divergence, in both EBay and Amazon it can be seen that the points of divergence are in the 'unseen' and 'remitting' services. The blueprint chart "Servuction Blueprint" is explained by four circles (as the dimension of servuction) with four attached fans. This shows that there is a gap between the client-based knowledge of visible and invisible services, but these services have a tremendous impact on the perception of the consumer. Furthermore, there is a gap between known's and unknowns as third party advertisers, for example, a consumer does not know how 'trustworthy' a third party advertisement on EBay or Amazon is, because both companies sell advertising space to nearly any buyer. Points of divergence from positive customer interaction can also be found in the Web-based activities, such as Internet browsing and functionality between the visible site and the invisible software processes. Reducing divergence, especially in returns of products and fraudulent products, as well as third party payment processing, can lead to the marketing benefit of added security, increased positive perception, and added reliability. There is also the concern of complexity. EBay and Amazon, while having different client formats, have highly diverse orientations that are becoming increasingly complex and hard for clients to understand. For example, EBay and PayPal have a strong relationship, but it is nearly impossible to distinguish where the third party (PayPal) fraud service ends and the EBay fraud service begins, especially because there is a divergence between the explanation and communication of third party processes. The same can be said for Amazon and Toys R Us product lines, the concern of service complexity in that case becomes the point at which the consumer must decide if an inadequate or unwanted product should be communicated to Amazon or Toys R Us, even though Amazon was the medium of purchase. Servicescape A service is "A deed, a performance, an effort" (Rathmell 1966) is not a thing, however something tangible, yet services rely on things for their performance. There are four unique characteristics which influence a service, discussed further in the following paragraphs. According to Bitner (1992) service process environment (servicescape), service encounter and other factors become crucially important. The reason for this was clearly raised by Johnson and Payne (1985) on describing the customer decision making process. The clear example is risky choice heuristics; the situation when a customer uses "a rule of thumb" in choosing particular service provider. This is the reason why service providers use servicescape, a powerful communication tool to switch a potential customer. Intangibility of Service Many services are intangible; these cannot be held, seen, touched or felt by anyone. The lack of tangible attributes means that it is difficult for a service provider to communicate its advantages and add-value benefits in an exploit or clear-cut way. Because of its intangibility a consumer cannot apply physical perception in order to access and evaluate it. Hence, other communication channels are used to collect valid information in the decision-making process. A consumer cannot go to EBay or Amazon and talk directly with a manager. Communication regarding the process of trade between retailer (or private seller) and buyer and then to the E-commerce company is not a hard, tangible item. Therefore, the client's perception of communication as an intangible service is highly likely to have an impact on the decision to purchase a service. Furthermore, commitment of the E-commerce companies to the services offered is something the customer can not touch, but will notice in the service interaction. Heterogeneity of Services It is often very difficult to reproduce a service consistently and accurately. Numerous factors were put forward by Zeithaml and Bitner (1996) that can affect the extent of heterogeneity of service provisions. To begin with the delivery of service often involves some form of contact between the consumer and the service provider. EBay's behavior lends towards the service packaging through their line extensions (Skype, PayPal), where Amazon lends to consistent application of tangible product extensions (Ubox, ITunes). These are two very different behaviors, but if neither E-commerce business offered to substantiate consistency and uniformity of their services, the customer would not have a positive perception. Secondly, service operations depend on consumers to articulate their needs or provide information (Zeithaml and Bitner 1996). The accuracy of the information and the ability of the service provider to interpret this information correctly have a significant influence on the consumer's perception of service quality. EBay and Amazon both rely on consumer and seller profiles to be legible by clients that product specifications are accurate, and clientele relies on EBay and Amazon to deliver accurate information. The expectations and priority of the consumer may vary each time he/she uses the service (Zeithaml and Bitner 1996). The variability of service from one era to another and from consumer to consumer makes quality assurance and control complex (Zeithaml and Bitner 1996). Service providers have to rely immensely on the competence and ability of their staff to understand the requirements of the consumer and for them to react to these in an appropriate manner (Zeithaml and Bitner 1996). These components were noted to be overly complex, particularly in the service line and third party extensions described in the above servunction section. Inseparability of Service Lovelock et al. (2003) indicates the high visibility of the conversation process means that the quality drawbacks are obvious. In addition, the involvement of the consumer in a delivery process makes him/her an integral part of the process (Lovelock et al. 2003). The essential element of this side is that it is not subject to direct managerial control. EBay and Amazon management systems offer the client a wide range of facilitating tools, designed to shape the cognition of a customer during the service process. For example, a simple search of a product on either site will deliver a wide range of options in 'buy it now' purchases, auction purchases, product reviews and so forth. These services from EBay and Amazon are inseparable in the context of the consumer perception, yet there are so many options and reviews that very often this gives the customer service and product confusion, especially in regards to product trust. The Perishability of Services Services are perishable and cannot be stored in one time period for consumption at a later date (Zeithaml and Bitner 1996). This means that unlike manufactures goods, it is impossible to have a final quality procedure (Zeithaml and Bitner 1996). EBay's services are considered perishable because retailer and private seller profiles are not static in the same manner as a brick and mortar store, and the same can be applied to Amazon. The ability for EBay and Amazon to provide consistency in the perishable services has an impact on the customer decision making process. Flowcharting Servicescape The Servicescape Flowchart is used to document the sequence of the service environment based on the contentions above those services are: intangible; heterogeneous; inseparable; perishable. This allows the differentiations between Ebay and Amazon in their service delivery environment to be sequenced and compared based on the ideal consumer perception and identifies bottlenecks and critical failure points. Based on the flowchart example, it can be shown that the customer perception of serviscape is based on the intangible, but the heterogeneity of critical time slots can impact the customer's service decision. Furthermore, the chart shows that activities, which in the EBay and Amazon service domains are perishable, is based on the profile of the seller and product description, as well as the functionality of relationship based communication. The relationship based communication is considered the inseparability of services, where the communication between buyer-seller-service is highly important to the customer, however, this will bottleneck at the addition of third party line extensions. The potential for failure is strongest in the relationship-communication inseparability, where one aspect of indirect communication fails; the potential for all communication to fail is stronger. Servqual Parasuraman et al. (1988) claims that perceptions of quality of service are a result of evaluating service delivery in relation to pre-consumption expectations. Quality is therefore defined as the gap between consumer's expectations and perceptions, and a customer will perceive quality positively only when a service provider meets or exceeds his expectations. Based on this paradigm Parasuraman et al. (1985) developed service measuring tool known as SERVQUAL. This measures service quality within certain service constructs, which act as service quality determinants. The two 22 items questionnaires with 5 points Likert scale answers were developed in order to measure expected and perceived quality within 10 service constructs. Later on, the number of constructs was reduced to five. These are as follows: 1. Reliability: the ability to provide the pledged service on time, accurately and dependably. 2. Responsiveness: the ability to deal effectively with complaints and promptness of the service. 3. Assurance: Knowledge and courtesy of workers and their ability to inspire trust and confidentiality. 4. Empathy: Individualized attention the company provides its customers with. 5. Tangibles: These include: the state of facilitating goods; physical condition of the buildings and the environment; appearance of personnel; and condition of equipment. In assessing SERVQUAL Parasuraman et al. (1988) defined it as a concise multiple-item scale with good reliability and validity that can be used to better understand the service expectations and perceptions of consumers. He suggested that the scale might be very useful in facilitating continuous improvement. Parasuraman et al. (1994) argues that there is strong theoretical and empirical evidence to support that assessment of performance occurs with reference to some norms or standards. They recognize an area for additional research as they need to identify the most appropriate way to incorporate expectations into service quality measurement. However, Cronin and Taylor (1994) reiterate their view against disconfirmation-based SERVQUAL scale of measuring service quality, and continue to be proponents of their perceptions-only approach to service quality measurement. Gap Analysis Gap 1: Discrepancies Between Consumer Expectation And Management Perception Of A Service Quality. EBay: Constant changes of visual and functional site implemented by management disrupting members (Hof p 16 2004) Amazon: Dispute between the Authors Guild and Amazon.com over the digital First Sale Doctrine. Complaints of the Authors Guild on the business practice of Amazon as not delivering appropriate copyright investigation (Sweeting 2002) Gap 2: Discrepancies Between Management Perception Of A Service Quality And Actual Set Of Established Service Quality Specifications. EBay: The very center of the front page is full of pictures that are described as "Top Ten." To the left, the listing of categories for auctions is seen, but the consumer has to wait for the pictures to upload, which have a bright green and red background. This may be logical from a marketing management standpoint, but there are multiple objects and product lines on the start page that the information is lost amid a barrage of moving images. Amazon: Amazon.com has constant pop-ups regarding 'recommended items' that generally have nothing to do with the item being searched or investigated. This creates confusion regarding what the consumer is purchasing. These pop up 'tags' are disconcerting, take too long to load, and, while management finds them a good marketing scheme, are generally frustrating to the user. Gap 3: Discrepancies Between Service Quality Specifications And Actual Quality Of Service Delivery. EBay: Customer concerns on transparency of shipping costs (Fair Disclosure Wire 2007) Amazon: Criticize Amazon for offering a returns policy below best practice levelsfailing to include return information relating to purchases with products (Goldie p 13 2006) Gap 4: Discrepancies Between Actual Service Delivery And The Firm's External Communications To Consumers. EBay: "Definition of shill billing which is when a seller places a bid on his or her own item to encourage others to bid higher; Attempt of eBay to limit fraud on the Web site" (Freeman p 134 2000) Amazon: Too many retailers with little communication regarding who is responsible for warranties, returns, defects (Aquino 2004) Gap 5: Discrepancies Between Customers' Expectations Of Service And Their Perceptions Of The Service. EBay: Conflicts between buyer-seller-service relationships (Fair Disclosure Wire 2007) Amazon: Customers expect that their purchase is through the retailer or directly through Amazon, however, in many instances it is a third party retailer with no warranty or return policy (Aquino 2004) Opportunity Recommendations There is a need for Amazon to increase clarity of communication between sellers, buyers, and services. Amazon keeps the buyer at an arm's length, but should go to the customer and initiate stronger serviscape by removing (or giving the option to remove) additional 'pop up' and confusing marketing visuals. Amazon needs to change the confusion of consumer perceptions regarding the responsible parties as sellers of products by either adding an additional 'coverage' service at added cost to the buyer or clarifying the responsibility of sellers and buyers per purchase. This will increase the reliability and communication of customers with the hopes of improving on the gaps in servicescape and servqual mentioned previously. Amazon's third opportunity lies in lessening the complexity of buyer-seller-service communication by establishing easy to find and navigate contact information, and Amazon has an opportunity in this to build on the relationship model that is the foundation of their facility. EBay has a need to improve customer protection through direct communication. Customers are scammed by erroneous shipping labels and shilling. EBay should implement a policy where all merchandise must have an exact shipping cost so that buyers can see the shipping cost based on their country. EBay also has an opportunity to improve the consumer relationship by lessening the complexity of navigation. For example, the front page loading is constantly changing and graphically intense. 'Toning down' these metrics can improve the customer service quality based on the idea that customers expect-and relate to-heterogeneity and continuity of services. EBay has further opportunity to strengthen communication between the buyer-seller-service relationships by reducing the complexity of communication in the relationship matrix. References Aquino, Grace (2004) Amazon's Confusing Return Policies. PC World; Sep2004, Vol. 22 Issue 9, P47-47, 1/3p Retrieved March 19, 2007 From EBSCOHOST Database. Bitner, M. J., (1992) Servicescapes: The Impact Of Physical Surroundings On Customers And Employees. Journal Of Marketing, Vol. 56, No. 2 P 57-71, Retrieved March 19, 2007 From Thomson Scientific Journal Database Cone, Edward (2007). Amazon At Your Service. CIO Insight; Jan2007 Issue 77, P47-52, 6p Retrieved March 19, 2007 From EBSCOHOST Database. Fair Disclosure Wire (2007) EBay At Merrill Lynch Internet, Software & Services Conference - Finalsource: Fair Disclosure Wire (Quarterly Earnings Reports); 02/13/2007. Retrieved March 19, 2007 From EBSCOHOST Database. Freedman, David H.(2000) Sleaze Bay. Forbes; 11/27/2000 ASAP, Vol. 166 Issue 14, P134-140, 6p, 5c Retrieved March 19, 2007 From EBSCOHOST Database. Goldie, Luan (2006) Delivery Is Top Issue Facing Web Retailers. New Media Age; 11/30/2006, P13-13, 1/9p Retrieved March 19, 2007 From EBSCOHOST Database. Hof, Robert (2004) A Big Easy Gabfest With Meg. Business Week; 7/19/2004 Issue 3892, P16-16, 1/2p, 1c Retrieved March 19, 2007 From EBSCOHOST Database. Johnson, Eric J. And John W. Payne (1985), Effort And Accuracy In Choice. Management Science, Vol. 31 Issue April, 395- 414. Retrieved March 19, 2007 From Thomson Scientific Journal Database. Lovelock, C, H, And Wirtz, J (2003) Services Marketing: People, Technology, Strategy 5th Ed, New Jersey: Prentice Hall. Parasuraman,A.;Berry,Leonard L.;Zeithaml,Valarie A (1985) A Conceptual Model Of Service Quality And Its Implications For Future Research. Journal Of Marketing, 1985, Vol. 49, Issue 4, 41-50. Retrieved March 19, 2007 From Thomson Scientific Journal Database. Parasuraman,A.;Berry,Leonard L.;Zeithaml,Valarie A (1988) SERVQUAL: A Multiple-Item Scale For Measuring Consumer Perceptions Of Service Quality. Journal Of Retailing, 1988, Vol 64, Issue 1, 12-40. Retrieved March 19, 2007 From Thomson Scientific Journal Database. Parasuraman,A.;Berry,Leonard L.;Zeithaml,Valarie A (1994) Refinement And Reassessment Of The SERVQUAL Scale. Journal Of Retailing, 1991, Vol. 67, Issue 4, 420-450. Retrieved March 19, 2007 From Thomson Scientific Journal Database. Rathmell J.M. (1996) What Is Meant By Services, Journal Of Marketing, Vol. 30, Issue 1 Pp 32 -36 Retrieved March 19, 2007 From Thomson Scientific Journal Database Shostack G. L. (1984) Designing Services That Deliver, Harvard Business Review, Vol. 62, P 133-139. Retrieved March 19, 2007 From Harvard Business Review Archive Database Sweeting, Paul (2002) Going By The Book. Video Business; 4/22/2002, Vol. 22 Issue 16, P12, 1p Retrieved March 19, 2007 From EBSCOHOST Database Whitman, Margaret C. (2004) "The Constant Challenge" At EBay. Business Week Online; 6/30/2004, Pn.PAG, 00p Document Type: Interview Retrieved March 19, 2007 From EBSCOHOST Database. Wolfe, Daniel (2007) PayPal, Skype Link A Play For Remittances.American Banker; 2/23/2007, Vol. 172 Issue 37, P1-9, 2p, 1bw Retrieved March 19, 2007 From EBSCOHOST Database. Zeithaml, V. A., & Bitner, M. J. (1996). Services Marketing. Mcgraw Hill: NY NY Read More