1

E-Service

• On-line Banking

• On-line Publishing

• On-line Advertising

• Changing Face of Service

2

Trends in Retail Banking

Cost reduction thru mergers

Non-bank competition from stock market

Consumer wants convenience and confidentiality

Regulations keep changing

Technology requires high sunk costs

3

Evolution of Distribution Channel Chain

• Physical branches have high cost structure

• ATM – Did it save money or give competitive advantage?

Branch ATM Phone Center

PC Banking Internet WWW

Reduced cost per interaction

• Phone Center – Limited functions and no visual interface

• PC Banking – proprietary client software

• Web – flexibility for banks and consumers

4

Traditional banks Cyber banks

Players - Citigroup, Inc - Wells Fargo - Bank of America

- Net.Bank - Security First Network Bank - Telebank

Goals - Embrace e-commerce - Increase user reach - Lower costs - Integrate various services - Provide better services

- Take advantage of new opportunity

- Become new leaders in the banking and financial industry

Strengths - - - -

- - - -

Traditional Banks vs. Cyber banks

5

Value Creation Efficiency Effectiveness Strategic

Time Single interface for all banking transactions.

Real-time account information.

24X7 Customer service.

Distance Small banks can reach wide range of customers.

Mobile customers with search engines.

Get customers before creating a physical presence.

Relationship One-stop shop for customer financial needs.

Micro marketing with web technologies.

Lock-in with functionality and content.

Interaction Use customer feedback to alter offerings.

Flexible user interface.

Knowledge sharing in on-line community

Product Automate user services using software agents.

On-line decision support services.

Use extranets to become the financial hub.

6

Financial Supply Chain

Services

Gateway

Access

Customers Consumers Small Business

Large Business

Online services Dial-up Broadband Wireless

Bank or non-bank company?

Stock trade Insurance Accounting / Tax

7

E-Service

• On-line Banking

• On-line Publishing

• On-line Advertising

• Changing Face of Service

8

On-Line Publishing

Critical Success Factors

Compelling content

– Unique, timely info

– Programming

– Packaging

– Services

Challenges

– Charge customer

– Advertising revenue

– Intellectual property protection

9

Drivers of on-line publishing

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•

•

•

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Digital Copyright Protection

Control Web Server Access

Control Document Access

Control Use of the Work

Electronic Contracts

Copyright Infringement

11

NTT DoCoMo’s I-Mode Wireless Service

– DoCoMo is a cell phone company with >55 million subscribers

– Launched in Feb99, I-Mode has >15 million subscribers who exchange 60 million emails, access the net 12 times daily

– 80% subscribers pay for additional content services

I-Mode ContentsE-mail with a cartoon

12

Business Model

– Content provider codes content for I-mode and can be on menu

– Content can be free or for a fee (no more than $3/month)

– User fee = Monthly charge, Transmission fee, Contents fee

– DoCoMo receives Monthly charge and Transmission fee

– DoCoMo gets 9% of Contents fee for billing / collection service

13

No More Free Content?

• WSJ (574,000 subscribers pay $29 to $59)

• Consumer Reports (550,000 subscribers pay $19-49)

• 555-1212.com allows 30 free queries before charging

• Online magazine Salon.com to charge $30/yr for

premium content only

• Rochester Post-Bulletin, Minn. to charge non-

subscribers $60/yr.

• Dot-com quest for money is to charge for content, but

how to change customer’s “mind-set”?

14

E-Service

• On-line Banking

• On-line Publishing

• On-line Advertising

• Changing Face of Service

15

Why On-line Advertising?

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•

•

•

•

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Traditional Advertising

• Seller decides on message

• Broadcast

• Seller to buyer

• Static

• Mostly one way

Web Advertising

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•

•

•

•

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Web Ads

Description Remarks Banners, rectangular strip Online staple, but limited effect

Skyscraper, tall and skinny Hard-to-miss, hard-to-read

Bulky box, big rectangle Hard-to-ignore

Pop-under ads Intrusive, lively?

Interstitial Ad Full page message between current & destination pages

Superstitial Ad Variable size, rich media ad

Buttons, business card size Fixed, non-interfering

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More Online Ads

Description Remarks E-mail newsletters Cheap, effective, clutter

Sponsorship Control, but credibility?

Banner swap Reduces costs

Banner exchange An intermediary is needed

Search engine inclusion Pay for inclusion / placement

Affiliates On-line affiliate presence

Catalogs Custom / dynamic catalogs

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Conversion / Attrition/

Abandonment / Retention

Unique Users / Reach

CPM

Impressions / Hits / Visits / Page Views

Stickiness / Recency

On-line Advertising

Effectiveness Measurement

Clickthrough / Acquisition Rate

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On-line Advertising Challenges

• Banner ads less effective than expected (0.1-0.5%)

• $6 B for ’01, 25% down, 10% of TV ad

• Need to exploit interactivity!

• Engage customers!

• Software filters (webwasher.com, internet.junkbuster.com)

21

E-Service

• On-line Banking

• On-line Publishing

• On-line Advertising

• Changing Face of Service

22

The Service Process Matrix

Service Shop Professional Service

Service Factory Mass Service

Low Labor Intensity High

High

Interaction & Customization

Low

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Attractor’s Grid

Service Center The Club

Utility Mass Entertainment

Low Interaction High

High

Customization

Low

24Strategies for Attractors

Sustainable Attractiveness

Ease of Imitation Examples• Easy Corporate brochure• Some efforts Software utilities

Search engine

• Costly SponsorshipRare resources

• Impossible Archive (exclusive features)Brand / corporate image

Stakeholders Broad

Specialized

Customized

Influence Filter Target Refractor Web Site

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Unique Properties

of Services

Heterogeneity: One size does not

fit all

Simultaneity: Errors visible to

customers

Perishability: No inventory

Intangibility: No physical

product

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• Provide evidence (email confirmation)

• Tangibilize the intangible (quality content, update)

• Sampling in the cyberspace (digital products)

• Multiplying memories (customer testimonials)

• Customization (personal information)

• Customer as a part-time employee (ordering, tracking)

• Innovation through customer participation (new product)

• Service industrialization (more info, search capability)

• Reducing customer errors (alert customer)

Managing

Intangibility

Managing

Simultaneity

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• Service standardization on the web (consistency)

• Electronic eavesdropping (listen to customers!)

• Service quality (on-line feedback)

• Managing supply (integrated channels)

• Directing demand (airline example)

Managing

Heterogeneity

Managing

Perishability

28

Key Points

• Service migration to on-line media is real!

• Revenue models are barriers

• Different velocities in different services