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KGSM CIS Lab




The Application of the Service-Profit Chain
                              to e-Services




             ...
KGSM CIS Lab




02.Literature Review




                                  2
1. E-Services                                                                 KGSM CIS Lab

Emergence of e-service
□ Two m...
1. E-Services                                                                                   KGSM CIS Lab

e-commerce v...
1. E-Services                                                                                              KGSM CIS Lab

D...
1. E-Services                                                                                               KGSM CIS Lab

...
1. E-Services                                                                                              KGSM CIS Lab

R...
2. Frameworks Linking Measures Related to Service Success                                      KGSM CIS Lab

The Service-P...
2. Frameworks Linking Measures Related to Service Success                                              KGSM CIS Lab

The S...
2. Frameworks Linking Measures Related to Service Success                           KGSM CIS Lab

The Quality-Value-Loyalt...
2. Frameworks Linking Measures Related to Service Success                                    KGSM CIS Lab

The Quality-Val...
2. Frameworks Linking Measures Related to Service Success                                               KGSM CIS Lab

The ...
3. E-Service Success Related Studies                                                   KGSM CIS Lab

E-Commerce Success (1...
3. E-Service Success Related Studies                                                                  KGSM CIS Lab

E-Comm...
3. E-Service Success Related Studies                                                    KGSM CIS Lab

E-Service Quality Di...
3. E-Service Success Related Studies                                                              KGSM CIS Lab

E-Service ...
3. E-Service Success Related Studies                                                    KGSM CIS Lab

E-Service Quality Di...
3. E-Service Success Related Studies                                                                    KGSM CIS Lab
Studi...
3. E-Service Success Related Studies                                                    KGSM CIS Lab
Studies empirically e...
KGSM CIS Lab




03.Research Model and
  Hypotheses




                                  20
Research Model and Hypotheses                                               KGSM CIS Lab

Research Model

        IT      ...
Research Model and Hypotheses                                                                      KGSM CIS Lab

Hypothese...
KGSM CIS Lab

Research Model

        Technology                             Customer                     Financial
      ...
Research Model and Hypotheses                                                                         KGSM CIS Lab

Hypoth...
Research Model and Hypotheses                                                   KGSM CIS Lab

Contribution
□ Main Contribu...
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Transcript of "KGSM CIS Lab KAIST Graduate School of Management"

  1. 1. KGSM CIS Lab The Application of the Service-Profit Chain to e-Services KAIST Graduate School of Management Corporation Information System Lab. Young-Sik KANG 1
  2. 2. KGSM CIS Lab 02.Literature Review 2
  3. 3. 1. E-Services KGSM CIS Lab Emergence of e-service □ Two most important long-term trends (Rust 2001, Auer and Petrovic 2004) – The transformation of economy from goods to services – The rapid expansion of the information economy and electronic networks □ Examples of e-service (Luarn and Lin 2003 ) – Banks – Travel agencies – Airlines – Car rental companies – Job placement agencies – Real estate agencies – Insurance agencies – Brokerage houses – Online publishers (e.g., newspapers, magazines, music, videos, games, etc) – Management consulting companies – Educational institutions 3
  4. 4. 1. E-Services KGSM CIS Lab e-commerce vs. e-service □ The difference between e-commerce and e-service – Voss 2000, Rust 2003 e-commerce e-service Category Selling goods Selling a bundle of Selling value- Selling Providing pure service and goods added service information Service – free or with service contract Example Selling CDs PCs Online travel Informediaries, Banking service, and books agent Selling music Status information – de Ruyter 2002 • e-commerce: the information and sales function of e-business • e-service: providing core services as well as peripheral service such as customer support – Stafford 2003 • E-service as a natural outgrowth of e-commerce – Zeithaml et al. 2002, Parasuraman et al. 2005 • Companies needed to shift the focus of e-business from e-commerce (the transactions) to e- services (all cues and encounters that occur before, during, and after the transactions) 4
  5. 5. 1. E-Services KGSM CIS Lab Definition of e-service Source Definition Fortune, 1998 Customized services that are delivered electronically through the Web Voss 2000 (Business The delivery of service using new media such as the web Strategy Review) Rust 2001 (JSR) The provision of service over electronic networks such as the Internet Rust & Lemon 2001 (IJEC) The role of service in cyberspace de Ruyter et al. 2001 An Interactive content-centered and Internet-based customer service, driven by (Intl Journal of Service customer and integrated with related organizational customer support processes and Industry Management) technologies with the goal of strengthening the customer-service provider relationship Boyer et al. 2002 (Journal Comprised of all interactive services that are delivered on the Internet using advanced of Operations Management) telecommunications, information, and multimedia technologies Hoffman 2003 (CACM) “Electronic offerings for rent” made available via the Net that complete tasks, solve problems, or conduct transactions Auer & Petrovic 2004 (IJEB) Service offered via an electronic channel excluding physical contact, with the aim to either create benefit in a specific context of its user or enable the provider to reduce costs 5
  6. 6. 1. E-Services KGSM CIS Lab Research on e-service (1/3) Main Focus Sources Comments E-service Voss 2000 Understanding the challenges of e-service and developing an e- Strategy (Business Strategy Review) service strategy Boyer et al. 2002 (Journal of E-services operating strategy Operations Management) Rust and Lemon 2001 (IJEC) The aspects of e-service and a firm’s e-strategy centered on e- Rust & Kannan 2003 (CACM) service Marketing Pitt et al. 1999 (Business Horizons) Marketing implications and challenges of e-services (traditional Implications of Hoffman 2003 (CACM) challenges to the service marketer such as intangibility, E-service Bolton 2003 (CACM) inseparability, heterogeneity, and perishability) Self-Service Dabholkar 1996 (Intl J. of Research in The sources of customer satisfaction and dissatisfaction in Technology Marketing) encounters involving SSTs. g Meuter et al. 2000 (JM) E-service van Riel et al. 2001 (Intl J of Service Understanding of how consumers evaluate e-services and develop Loyalty and Industry Management) e-loyalty Acceptance de Ruyter et al. 2001 (IJSIM) Yen and Gwinner 2003 (IJSIM) Luarn & Lin 2003 (JECR) Yang and Fang 2004 (IJSIM) Dabholkar 1996 (IJRM) Explaining e-service acceptance (intentions and behavior) Bobbit and Dabholkar 2001 (IJSIM) Dabholkar and Bagozzi 2002 (JAMS) Wang et al. 2003 (IJSIM) Hsu and Chiu 2004 (DSS) 6
  7. 7. 1. E-Services KGSM CIS Lab Research on e-service (2/3) Main Focus Sources Comments E-service Quality Zeithaml et al. 2002 (Academy of E-service quality dimensions development and e-Satisfaction Mkt Science) Dimension Yang & Jun 2002 (J of Business Strategies) Janda et al. 2002 (IJSIM) Santos 2003 (Managing Service Quality) Yang & Fang 2004 (IJSIM) Parasuraman et al. 2005 (JSR) Wang et al. 2001 (JECR) E-satisfaction dimensions development Wang and Tang 2004 (IJEB) E-service Liu et al. 2003 (Computer Designing an e-service platform for composite e-services Technology Standards & Interfaces) E-service and Gefen and Straub 2004 (OMEGA) Trust in the context of e-products and e-services Trust Performance Lu and Zhang 2003 (IJSIM) A research framework for e-service evaluation within four categories: Measurement cost, benefit, functions and development Auer and Petrovic 2004 (IJEB) The measurement of the performance of e-services based on BSC 7
  8. 8. 2. Frameworks Linking Measures Related to Service Success KGSM CIS Lab The Service-Profit Chain □ SPC framework overview – What is SPC framework? • The SPC is a framework for linking service operations, employee assessments, and customer assessments to the bottom line (Heskett et al. 1994, 1997) • The SPC is a simple conceptual framework linking employee satisfaction and loyalty, customer satisfaction and loyalty, and financial performance (Loveman 1998) • The SPC provides an integrative framework for understanding how a firm’s operational investments into service quality are related to customer perceptions and behaviors and how these translate into profits. (Kamakura et al. 2002) The Service-Profit Chain (Heskett et al. 1994, Loveman 1998) Employee Customer Financial Outcomes Outcomes Performance Internal External Revenue Employee Employee Customer Customer Service Service Growth & Satisfaction Loyalty Satisfaction Loyalty Quality Quality Profitability 8
  9. 9. 2. Frameworks Linking Measures Related to Service Success KGSM CIS Lab The Service-Profit Chain (2/3) □ History – The roots of the SPC • Reichheld and Sasser (1990) – Loyalty, not market share, was the primary determinant of profitability (customer outcomes) • Schlesinger and Heskett (1991) – Careful employee selection and the delivery of high levels of internal service quality to employees result in employee loyalty. • The intersection of these studies suggested a causal logic running from employee outcomes to customer outcomes and financial results □ Empirical studies for testing most linkages of the SPC – Rucci et al. 1998 • SPC application at Sears – Loveman 1998 • The most comprehensive application of the SPC in examining both customer behavior and revenue implications of service quality – Kamakura et al. 2000, 2002 • A comprehensive approach to examining the SPC at a firm 9
  10. 10. 2. Frameworks Linking Measures Related to Service Success KGSM CIS Lab The Quality-Value-Loyalty Chain (1/2) □ The framework overview (Parasuraman and Grewal 2000) – Service quality enhances perceived value, which, in turn, contributes to customer loyalty. – The quality-value-loyalty linkage is also consistent with the work on the service-profit chain. Expanded Model of Customer Loyalty Responsive Assurance Acquisition Transaction -ness Perceived Customer Reliability Value Loyalty Tangibles Empathy Redemption “In-Use” Product Quality Price 10
  11. 11. 2. Frameworks Linking Measures Related to Service Success KGSM CIS Lab The Quality-Value-Loyalty Chain (2/2) □ The perceived value construct (Dodds et al. 1991, Zeithaml 1988) – This construct is composed of • “get” component: the benefits a buyer derives from a seller’s offering • “give” component: the buyer’s monetary and nonmonetary costs of acquiring the offerings – This construct shows four different types of value (Grewal et al. 1998, 1999, Woodruff 1997) • Acquisition value: the benefits (relative to monetary costs) buyers believe they are getting by acquiring a product/service • Transaction value: the pleasure of getting a good deal • In-use value: utility derived from using the product/service • Redemption value: residual benefit at the time of trade-in or end of life (for products) or termination (for services) 11
  12. 12. 2. Frameworks Linking Measures Related to Service Success KGSM CIS Lab The Empirical Studies Studying Some Relationships of the SPC □ Empirical support for some of the relationships that form the SPC and the QVL Sources Relationships Schneider et al. 1980, A relationship between employee satisfaction and customer satisfaction Schneider and Bowen 1985, Schlesinger and Zornitsky 1991 Fornell 1992, A positive link between customer satisfaction and loyalty Anderson and Sullivan 1993, Boulding et al. 1993 Rust and Zahorik (1993) A relationship between customer satisfaction, customer loyalty, and profitability Anderson et al. 1994 Firms with higher customer satisfaction and retention can expect higher profits Bolton 1998 A relationship between overall satisfaction and actual repurchase behavior Zeithaml et al. 1996 A relationship between service quality and behavioral intention based on the SERVQUAL research □ The limitation of the above studies (Kamakura et al. 2002) – Unable to identify the causal and mediating mechanisms that managers need to understand to implement the SPC – An exclusive focus on isolated links had led to mixed and inconsistent findings. – Unless all of the pieces of the puzzle can be put together in the context of a single firm, it is hard to find acceptance for the SPC framework, thus impeding its application among firms. 12
  13. 13. 3. E-Service Success Related Studies KGSM CIS Lab E-Commerce Success (1/2) □ Molla’s Model [JECR 2001] – Overview • The extension and respecification of the original D&M model of IS success • Customer E-Commerce Satisfaction is proposed as a dependent variable to e-commerce success – The limitations • The validation and empirical testing of the model was not provided • Organizational impacts measures are not included in the model • This model does not fully capture the marketing view of e-commerce success EC System Use Trust Quality Customer Content Support & E-Commerce Quality Service Satisfaction E-Commerce Success 13
  14. 14. 3. E-Service Success Related Studies KGSM CIS Lab E-Commerce Success (2/2) □ D&M EC Success Model – A framework and model for measuring the complex-dependent variable in IS research (Delone & Mclean 2003) – The model was adapted to measure e-commerce system success (Delone & Mclean 2003, 2004) • They provided an extensive list of success metrics based on a comprehensive review of e- commerce articles in the IS and marketing literature • They demonstrated the utility of the proposed e-commerce success framework by using two case examples – Merits and demerits when applying the model to my e-service research • The model suggests a guideline on the performance perceptions of IT attributes that may impact customer satisfaction and behavior in e-service settings – Traditional service: operational investments into service quality – E-service: operational IT investments into system, information and service quality • As the model is focused on measuring IS success, it does not give clear explanation to the linkages among customer satisfaction, customer loyalty and the bottom line in e-service settings. 14
  15. 15. 3. E-Service Success Related Studies KGSM CIS Lab E-Service Quality Dimension Related Studies (1/3) □ E-Service quality dimensions studies are based on the two literature streams (Yang and Fang 2004) – Traditional service quality dimensions – Information systems quality dimensions • TAM (Davis 1989 and Davis et al. 1989) – Ease of use – Usefulness • Five quality dimensions determined to influence end-user satisfaction (Doll and Torkzadeh 1988, Doll et al. 1994) – Content – Accuracy – Format – Ease of use – Timeliness □ The extant research on e-service quality has been conducted based on the following stages (Yang and Fang 2004) – Web site design quality – E-Retailing service quality – E-Service quality other than e-retailing service quality 15
  16. 16. 3. E-Service Success Related Studies KGSM CIS Lab E-Service Quality Dimension Related Studies (2/3) Web Site Design E-Commerce E-Service Quality (E-Retailing Service Quality) • Performance • Usability IRSQ • Access • Design WebQual • Security • Information (5 dimensions) (5 dimensions) • Sensation • Trust (Janda et al. 2002) • Information • Empathy (Barnes and Vidgen Traditional 2002) Service WebQual eTailQ 16 Quality (12 dimensions) (4 dimensions) dimensions (Wolfinbarger and Gilly (Yang and Fang (Loiacono et al. 2002) SITEQUAL 2003) 2004) (4 dimensions) • Web site design • Responsiveness • Information fit to task • Reliability/Fulfillment • Interaction • Service reliability (Yoo and Donthu • Privacy/Security • Ease of use • Trust • Customer service • Response Time 2001) • Competence Information • Design • Ease of use Systems • Intuitiveness • Aesthetic design • Visual appeal • Processing speed Quality E-S-QUAL • Efficiency • Innovativeness • Security • Flow (4 dimensions) • Fulfillment • Integrated communication • System availability • Business process (Parasuraman et al. • Privacy • Substitutability 2005) 16
  17. 17. 3. E-Service Success Related Studies KGSM CIS Lab E-Service Quality Dimension Related Studies (3/3) □ After reviewing studies related to e-service quality dimensions, it can be tentatively concluded that – Currently developed e-service quality dimensions are composed of object-based beliefs (beliefs about an information system) and behavioral beliefs (beliefs about using e-service) • Object-based beliefs: aesthetic design, information, processing speed, security, system availability, etc. • Behavioral beliefs: ease of use, usability, performance, efficiency, fulfillment, etc. – For this reason, the relationship between e-service quality and customer satisfaction which is perceived by using e-service, was not clear. (Wolfinbarger and Gilly 2003, Parasuraman et al. 2005) – Thus, it would be theoretically better to divide e-service construct into object-based beliefs constructs and behavioral beliefs construct. (Fishbein and Ajzen 1975, Davis 1993, Wixom and Todd 2005) • Object-based beliefs: information and system quality • Behavioral beliefs: service quality – This division is also consistent with our framework linking technology outcomes such as information and system quality and customer outcomes such as service quality. 17
  18. 18. 3. E-Service Success Related Studies KGSM CIS Lab Studies empirically examining relationships between E-Service Success Measures (1/2) Authors Main Relationships New Constructs Target Comments Yen and Gwinner ISST attributes – Relational benefits Internet  The construct of relational 2003 (IJSIM) Relational benefits – (confidence benefits bookstores and benefits is utilized. Satisfaction and Loyalty and special travel agencies  Financial performance is not treatment benefits) considered. Luarn and Lin Trust, Customer Commitment Internet travel  Commitment and Loyalty are 2003 (JECR) satisfaction, Perceived agencies and used as separate constructs. value – Commitment VOD  Technology outcomes and and Loyalty Financial performance are not considered. Yang and Fang Service quality – E-Service quality Online  52 items across 16 major 2004 (IJSIM) Customer satisfaction securities service dimensions are brokerage uncovered. service  Key factors leading to dissatisfaction are tied to information systems quality. Bansal et al. 2004 Web site characteristics Online conversion, E-tailing firms  Technology outcomes are (JSM) and Customer service – Stickiness considered Satisfaction –  Financial performance is not Behavioral outcomes considered. Parasuraman et al. E-Service quality – E-Service quality E-retailing  E-S-QUAL scale, focusing on 2005 (JSR) Perceived value – service e-retailing services, was Loyalty developed.  The quality-value-loyalty chain was empirically tested in the e-retailing service context. 18
  19. 19. 3. E-Service Success Related Studies KGSM CIS Lab Studies empirically examining relationships between E-Service Success Measures (2/2) □ After reviewing the above studies, it can be tentatively concluded that – Research on examining relationships between e-service success measures is still in its early stages – No studies have attempted to examine all the relationships linking technology outcomes, customer outcomes, and financial performance. – No studies have considered object-based beliefs (beliefs about an information system) and behavioral beliefs (beliefs about using e-service) as separate constructs. • Yen and Gwinner (2003): ISST attributes (Performance, Perceived control, Convenience, Efficiency) can be considered as behavioral beliefs. • Yang and Fang (2004): Though object-based beliefs and behavioral beliefs are considered as e-service quality together, it was shown that behavioral beliefs such as Responsiveness, Service reliability, Ease of use, Competence have a main impact on customer satisfaction. • Bansal et al. (2004): Web site characteristics was composed of object-based beliefs such as Information available and behavioral beliefs such as Ease of use. • Parasuraman et al. (2005): E-Service quality was composed of object-based beliefs such as system availability and privacy and behavioral beliefs such as efficiency and fulfillment. 19
  20. 20. KGSM CIS Lab 03.Research Model and Hypotheses 20
  21. 21. Research Model and Hypotheses KGSM CIS Lab Research Model IT Customer Financial Outcomes Outcomes Performance H2 Information Quality H1 Service H5 Customer H6 Customer H7 Satisfaction Revenue Quality Loyalty H3 System Quality H4 21
  22. 22. Research Model and Hypotheses KGSM CIS Lab Hypotheses □ Hypotheses and related studies Related Studies No Relationship Offline context Online Context 1 Information quality → Igbaria et al. 1995, Venkatesh and Davis Hong et al. 2001-2002 Service quality 2000, Wixom and Todd 2005 2 Information quality → D&M 2003 Bansal et al. 2004 Customer Satisfaction 3 System quality → Wixom and Todd 2005 Hong et al. 2001-2002 Service quality 4 System quality → D&M 2003 Bansal et al. 2004 Customer Satisfaction 5 Service quality → Loveman 1998 Yang and Fang 2004 Customer Satisfaction 6 Customer Satisfaction Rust and Zahorik 1993, Anderson 1994, Luarn and Lin 2003, Yen and Gwinner 2003, → Customer Loyalty Bolton 1998 Bansal et al. 2004 7 Customer Loyalty → Loveman 1998, Kamakura et al. 2002 Revenue 22
  23. 23. KGSM CIS Lab Research Model Technology Customer Financial Outcomes Outcomes Performance Information H1 Customer Quality Satisfaction H2 H9 H7 H3 Service Customer H11 Quality Revenue Loyalty H4 H8 H5 H10 System Perceived Quality H6 Value 23
  24. 24. Research Model and Hypotheses KGSM CIS Lab Hypotheses and Related Studies Related Studies No Relationship Offline context Online Context 1 Information quality → D&M 2003 Bansal et al. 2004 Customer Satisfaction 2 Information quality → Igbaria et al. 1995, Venkatesh and Davis Hong et al. 2001-2002 Service quality 2000, Wixom and Todd 2005 3 Information quality → Perceived value 4 System quality → D&M 2003 Bansal et al. 2004 Customer Satisfaction 5 System quality → Wixom and Todd 2005 Hong et al. 2001-2002 Service quality 6 System quality → Parasuraman et al. 2005 Perceived Value 7 Service quality → Loveman 1998 Yang and Fang 2004 Customer satisfaction 8 Service quality → Parasuraman et al. 2005 Perceived Value 9 Customer Satisfaction Rust and Zahorik 1993, Anderson 1994, Luarn and Lin 2003, Yen and Gwinner 2003, → Customer Loyalty Bolton 1998 Bansal et al. 2004 10 Perceived value Luarn and Lin 2003, Parasuraman et al. → Customer Loyalty 2005 11 Customer Loyalty → Loveman 1998, Kamakura et al. 2002 Revenue 24
  25. 25. Research Model and Hypotheses KGSM CIS Lab Contribution □ Main Contributions – To our knowledge, the service-profit chain for e-service was suggested for the first time. The employee outcomes of the original service-profit chain was replaced by the IT outcomes to consider the replacement of the human service provider by IT which is the main difference between e-service and traditional service. – All the relationships comprising the service-profit chain for e-service was empirically validated as a simultaneous-equation model. – To clearly explain the relationship between e-service quality and customer satisfaction, e-service quality construct was separated into object-based beliefs (beliefs about an information system such as e-service site) constructs and behavioral beliefs (beliefs about using e-service) construct. 25
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