kgsm cis lab kaist graduate school of management

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KGSM CIS Lab

KAIST Graduate School of Management

Corporation Information System Lab.

Young-Sik KANG

The Application of the Service-Profit Chain

to e-Services

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KGSM CIS Lab

02.Literature Review

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KGSM CIS Lab

Emergence of e-service

1. E-Services

□ 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

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KGSM CIS Lab

e-commerce vs. e-service

1. E-Services

□ The difference between e-commerce and e-service – Voss 2000, Rust 2003

– 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-se

rvices (all cues and encounters that occur before, during, and after the transactions)

e-commerce

e-service

Category

Selling goods

Selling a bundle of service and goods

Selling value-added service

Selling information

Providing pure Service – free or with service contract

Example

Selling CDs and books

PCs Online travel agent

Informediaries,Selling music

Banking service, Status information

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KGSM CIS Lab1. E-Services

Definition of e-service

Source Definition

Fortune, 1998 Customized services that are delivered electronically through the Web

Voss 2000 (Business Strategy Review)

The delivery of service using new media such as the web

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 (Intl Journal of Service Industry Management)

An Interactive content-centered and Internet-based customer service, driven by customer and integrated with related organizational customer support processes and technologies with the goal of strengthening the customer-service provider relationship

Boyer et al. 2002 (Journal of Operations Management)

Comprised of all interactive services that are delivered on the Internet using advanced 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

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Research on e-service (1/3) Main Focus Sources Comments

E-service Strategy

Voss 2000 (Business Strategy Review)

Understanding the challenges of e-service and developing an e-service strategy

Boyer et al. 2002 (Journal of Operations Management)

E-services operating strategy

Rust and Lemon 2001 (IJEC)Rust & Kannan 2003 (CACM)

The aspects of e-service and a firm’s e-strategy centered on e-service

Marketing Implications of E-service

Pitt et al. 1999 (Business Horizons) Hoffman 2003 (CACM) Bolton 2003 (CACM)

Marketing implications and challenges of e-services (traditional challenges to the service marketer such as intangibility, inseparability, heterogeneity, and perishability)

Self-Service Technology

Dabholkar 1996 (Intl J. of Research in Marketing) Meuter et al. 2000 (JM)

The sources of customer satisfaction and dissatisfaction in encounters involving SSTs. g

E-service Loyalty and Acceptance

van Riel et al. 2001 (Intl J of Service Industry Management) de Ruyter et al. 2001 (IJSIM)Yen and Gwinner 2003 (IJSIM)Luarn & Lin 2003 (JECR)Yang and Fang 2004 (IJSIM)

Understanding of how consumers evaluate e-services and develop e-loyalty

Dabholkar 1996 (IJRM)Bobbit and Dabholkar 2001 (IJSIM)Dabholkar and Bagozzi 2002 (JAMS)Wang et al. 2003 (IJSIM) Hsu and Chiu 2004 (DSS)

Explaining e-service acceptance (intentions and behavior)

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Research on e-service (2/3)Main Focus Sources Comments

E-service Quality and e-Satisfaction Dimension

Zeithaml et al. 2002 (Academy of Mkt Science) 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)

E-service quality dimensions development

Wang et al. 2001 (JECR) Wang and Tang 2004 (IJEB)

E-satisfaction dimensions development

E-service Technology

Liu et al. 2003 (Computer Standards & Interfaces)

Designing an e-service platform for composite e-services

E-service and Trust

Gefen and Straub 2004 (OMEGA) Trust in the context of e-products and e-services

Performance Measurement

Lu and Zhang 2003 (IJSIM) A research framework for e-service evaluation within four categories: cost, benefit, functions and development

Auer and Petrovic 2004 (IJEB) The measurement of the performance of e-services based on BSC

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KGSM CIS Lab2. Frameworks Linking Measures Related to Service Success

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)

Internal Service Quality

EmployeeSatisfaction

EmployeeLoyalty

External Service Quality

CustomerSatisfaction

CustomerLoyalty

Revenue Growth &

Profitability

EmployeeOutcomes

CustomerOutcomes

Financial Performance

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KGSM CIS Lab

□ 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 i

n 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

The Service-Profit Chain (2/3)

2. Frameworks Linking Measures Related to Service Success

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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 chai

n.

Product Quality

Price

Reliability CustomerLoyalty

PerceivedValue

Assurance

EmpathyTangibles

Responsive-ness

Acquisition

Transaction

“In-Use”Redemption

Expanded Model of Customer Loyalty


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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 terminati

on (for services)


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□ Empirical support for some of the relationships that form the SPC and the QVL

□ 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.

The Empirical Studies Studying Some Relationships of the SPC

Sources Relationships

Schneider et al. 1980, Schneider and Bowen 1985, Schlesinger and Zornitsky 1991

A relationship between employee satisfaction and customer satisfaction

Fornell 1992, Anderson and Sullivan 1993, Boulding et al. 1993

A positive link between customer satisfaction and loyalty

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


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KGSM CIS Lab

□ 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 succe

ss – 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 Quality

ContentQuality

Use Trust

Support & Service

Customer E-Commerce Satisfaction

E-CommerceSuccess

E-Commerce Success (1/2)

3. E-Service Success Related Studies

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□ 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.

E-Commerce Success (2/2)


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KGSM CIS Lab

□ 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


E-Service Quality Dimension Related Studies (1/3)

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KGSM CIS Lab



Web Site Design

Quality E-Commerce

(E-Retailing Service Quality)

E-Service

WebQual(12 dimensions)

(Loiacono et al. 2002) SITEQUAL

(4 dimensions)

(Yoo and Donthu 2001)

WebQual(5 dimensions)

(Barnes and Vidgen 2002)

IRSQ(5 dimensions)

(Janda et al. 2002)

E-S-QUAL(4 dimensions)

(Parasuraman et al. 2005)

• Web site design• Reliability/Fulfillment • Privacy/Security • Customer service

• Efficiency • Fulfillment • System availability • Privacy

16 dimensions

(Yang and Fang 2004)

• Responsiveness• Service reliability • Ease of use • Competence

• Usability • Design • Information • Trust • Empathy

• Ease of use • Aesthetic design • Processing speed • Security

• Information fit to task • Interaction • Trust • Response Time • Design • Intuitiveness • Visual appeal • Innovativeness • Flow • Integrated communication • Business process • Substitutability

eTailQ(4 dimensions)

(Wolfinbarger and Gilly 2003)

• Performance • Access • Security • Sensation • Information

Traditional

Service

Quality

Information

Systems

Quality

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KGSM CIS Lab

□ 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 whi

ch 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.



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KGSM CIS Lab

Studies empirically examining relationships between E-Service Success Measures (1/2)Authors Main

Relationships New Constructs Target Comments

Yen and Gwinner 2003 (IJSIM)

ISST attributes – Relational benefits – Satisfaction and Loyalty

Relational benefits (confidence benefits and special treatment benefits)

Internet bookstores and travel agencies

The construct of relational benefits is utilized. Financial performance is not considered.

Luarn and Lin 2003 (JECR)

Trust, Customer satisfaction, Perceived value – Commitment and Loyalty

Commitment Internet travel agencies and VOD

Commitment and Loyalty are used as separate constructs. Technology outcomes and Financial performance are not considered.

Yang and Fang 2004 (IJSIM)

Service quality – Customer satisfaction

E-Service quality Online securities brokerage service

52 items across 16 major service dimensions are uncovered. Key factors leading to dissatisfaction are tied to information systems quality.

Bansal et al. 2004 (JSM)

Web site characteristics and Customer service – Satisfaction – Behavioral outcomes

Online conversion, Stickiness

E-tailing firms Technology outcomes are considered Financial performance is not considered.

Parasuraman et al. 2005 (JSR)

E-Service quality – Perceived value – Loyalty

E-Service quality E-retailing service

E-S-QUAL scale, focusing on e-retailing services, was developed. The quality-value-loyalty chain was empirically tested in the e-retailing service context.


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KGSM CIS Lab

□ 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 outcome

s, 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, Efficien

cy) 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.


Studies empirically examining relationships between E-Service Success Measures (2/2)

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03.Research Model and Hypotheses

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System Quality

Information Quality

ServiceQuality

Customer Satisfacti

on

Customer Loyalty Revenue

ITOutcomes

CustomerOutcomes


H2

H4

H1

H3

H5 H6 H7

Research Model

Research Model and Hypotheses

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Hypotheses


□ Hypotheses and related studies

Related Studies

No Relationship Offline context Online Context

1 Information quality → Service quality

Igbaria et al. 1995, Venkatesh and Davis 2000, Wixom and Todd 2005

Hong et al. 2001-2002

2 Information quality → Customer Satisfaction

D&M 2003 Bansal et al. 2004

3 System quality → Service quality

Wixom and Todd 2005 Hong et al. 2001-2002

4 System quality → Customer

Satisfaction


5 Service quality → Customer

Satisfaction

Loveman 1998 Yang and Fang 2004

6 Customer Satisfaction

→ Customer Loyalty

Rust and Zahorik 1993, Anderson 1994, Bolton 1998

Luarn and Lin 2003, Yen and Gwinner 2003, Bansal et al. 2004

7 Customer Loyalty → Revenue

Loveman 1998, Kamakura et al. 2002

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KGSM CIS Lab

System Quality

Information

Quality

ServiceQuality

Customer Satisfacti

on

Customer Loyalty

Revenue

Perceived Value

Research Model

TechnologyOutcomes

CustomerOutcomes


H1

H2

H3

H4

H5

H6

H7

H8

H9

H10

H11

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KGSM CIS Lab

Hypotheses and Related Studies


Related Studies

No Relationship Offline context Online Context

1 Information quality → Customer

Satisfaction


2 Information quality → Service

quality

Igbaria et al. 1995, Venkatesh and Davis 2000, Wixom and Todd 2005

Hong et al. 2001-2002

3 Information quality →

Perceived value

4 System quality → Customer

Satisfaction


5 System quality → Service quality

Wixom and Todd 2005 Hong et al. 2001-2002

6 System quality → Perceived Value

Parasuraman et al. 2005

7 Service quality → Customer

satisfaction

Loveman 1998 Yang and Fang 2004

8 Service quality → Perceived Value

Parasuraman et al. 2005

9 Customer Satisfaction→ Customer

Loyalty

Rust and Zahorik 1993, Anderson 1994, Bolton 1998

Luarn and Lin 2003, Yen and Gwinner 2003, Bansal et al. 2004

10 Perceived value→ Customer

Loyalty

Luarn and Lin 2003, Parasuraman et al. 2005

11 Customer Loyalty → Revenue

Loveman 1998, Kamakura et al. 2002

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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.

kgsm cis lab kaist graduate school of management

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