Executive Summary:
Finding a Strategic Balance: Complementing Service Relationships With Self-Service Technology
The adoption of self-service technology—whereby customers go online to fulfill their service needs—is arguably the hallmark of a successful dot-com venture. But in the context of the business-to-business environment, the relationship between customers and providers (or sales representatives) has traditionally been key in generating repeat business and, consequently, financial success. As a number of firms attempt to strike the balance between using self-service technology (SST) through the Internet for example, alongside traditional channels, this strategy raises questions about how customers choose their location along the SST-relationship continuum. The study “Complementing Self-Serve Technology with Service Relationships: The Customer Perspective” conducted by Ulrike Schultze of SMU Cox offers insights into the dynamics of these issues.
This research provides new insights by exploring customers’ reactions to the use of both SST and the service relationship within the same customer-provider relationship. The study applies qualitative methods to capture the richness of customers’ logic and reactions; the results are based on 60 interviews with brokers who used both SST and a personal service relationship offered by WebGA (a pseudonym), a dot-com general agent operating in the small group health insurance market. “Prior research and theory allows for the prediction of customer reactions on either end of the SST-service relationship continuum, but not the middle group, which uses SST and the service representative equally,” Schultze further explained. In her study, Schultze reveals how the customers that make up this middle group see their sales rep as a partner and a trusted resource, whose knowledge and expertise complement their own.
Key Findings
Schultze’s rich data set offer great detail on the brokers which were divided into categories by their level of usage of online quoting, that is, the percentage of cases for which they requested quotes online.
Users Relying Primarily on Service Relationships
The brokers that relied mostly on service relationships were highly dependent on their rep because of time constraints, low expertise in the group health insurance market and low technical expertise. In the face of these constraints, the brokers relied on their rep’s knowledge and skill to make up for their own lack thereof. However, the relatively high degree of social bonding among these “relationship” brokers suggests that despite the brokers’ dependence on their reps, many developed a high level of commitment and obligation toward their provider. This sense of obligation was key in motivating customers to write business through WebGA. As such, this group of customers generated the most revenues for WebGA.
50/50 Users
These brokers essentially had the knowledge and the skills to quote online by themselves. Nevertheless, these brokers viewed the rep as a partner, trusting the rep and valuing their expertise. This middle grouping of brokers also formed strong social bonds with their reps, which meant that they felt obliged to write business through them. Thus, the relationship of the middle group of brokers can be described as commitment-based, but not constraint-based. This finding represents a new insight that could not have been anticipated from prior research. Interestingly, the middle grouping was the most satisfied.
Users Relying Primarily on SST
The brokers that relied mostly on SST did not experience constraints that forced them into a relationship with a rep. They had both sufficient industry knowledge and technical expertise to be self-sufficient when it came to generating quotes. Indeed, these “SST brokers” saw the rep as a constraint in the quoting process and SST presented a way of avoiding the social bonds and obligations of service relationships. This group of brokers preferred to experiment with their quote and control the timing of the quoting process. Thus, the SST brokers had neither commitment nor constraints that held them in a relationship with their WebGA reps. Not surprisingly, they wrote significantly less business through WebGA than the other two groups did. As such, this group threatened WebGA’s revenue model.
Lessons
One lesson from the challenges that WebGA faced is that a service strategy using both a service relationship and SST needs to be coupled with a revenue model that addresses the entire spectrum of the continuum. In the case of WebGA, the revenue model based on a social contract and the customer’s sense of obligation was adequate for the relationship end of the service continuum. However, for the SST-end of the continuum, a different fee-based revenue model was needed.
From the firm’s perspective, the optimal customer location on this continuum needs to consider not only the types of relationships evident in the different customer groups, but also the groups’ contribution to the firm’s financial success. In the case of WebGA, the users of service relationships and the 50/50 users generated significantly more income for WebGA than did the SST brokers. As with most service operations, the more involved customers are in co-production the better. Thus, the most desirable customers were those that relied equally on SST and service relationships, i.e., the 50/50 users.
Knowing the levers that determine the customer’s mode of interaction should help firms move their customers to the optimal location on the relationship-SST continuum. Consequently, the challenges of designing a coherent service delivery strategy can be more easily overcome.
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