Chapter 1 Basic Tasks in Electronic Commerce. - 2 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Recommended.

Chapter 1Basic Tasks in

Electronic Commerce

- 2 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern

Recommended References

• S. Schmitt & B. Schneider (2001) Einsatzpotenziale der KI im Electronic Commerce. KI - Künstliche Intelligence 1/2001.

• F.Bliemel, G.Fassott, A. Theobald (Eds.): Electronic Commerce, 3.edition. Gabler Verlag 2000.

• S. Klein, N. Szyperski. Referenzmodell zum Electronic Commerce.

http://www.wi.uni-muenster.de/wi/literatur/refmod/rm-ecinf.htm


The Overall Scenario (1)

• The scenario has many agents• Each agent can play one of two roles

The customer role or the supplier role• At a fixed situation an agent plays one role but each

agent can play different roles in different situations.• The customer wants to buy something and the supplier

wants to sell something.• The sale takes place in a process called sales process.• There can be an arbitrary number of customers and

suppliers.


The Overall Scenario (2)

Customer 1

Customer 2

Customer 3

Customer n

Supplier 1

Supplier 2

Supplier 3

Supplier m

For maximal benefit of both partners they both have to know something about each other.


Preferences and Knowledge

• Each partner, customer and supplier has preferences which have to be understood as long term ones :– The customer wants that the demands are satisfied as much as

possible to the lowest price possible (from whatever supplier).– The supplier wants to get as much profit from the sales (to

whatever customer) as possible.

• As a consequence, the customer has free choice of the supplier and the supplier has free choice of the customer.

• For both partners it is therefore relevant to have some knowledge about the totality of all possible partners and in particular about the chosen partner.


Change of Roles

• Only in very rare situations the supplier is autonomous in the sense that every product is manufactured and delivered without any outside support.

• In order to get such support the supplier is in the role of a customer who needs products, services etc.

• For some part these roles are relatively separated but sometimes they are interleaved, e.g. when a particular customer demand requires additional parts of products or services.


The Role of Knowledge

• The purpose of knowledge is to perform better activities in processes.

• The e-commerce process is very complex.• Hence knowledge can result in higher financial gains.• Therefore it is important to locate in this process

where which knowledge is needed.• It is also important to discuss the acquisition and

maintenance of knowledge and to compare their cost with the possible gains.

• Finally, it is necessary to apply the right knowledge in the right situation.


The Complete Sales Cycle

Sales

Pre-SalesAfter-Sales,

Support

Experience

Knowledge

Know-how


Pre-Sales Phase

• The customer has a general interest in a certain

product area and looks for information material from

different possible suppliers.

• Based on this information the customer eventually

enters a shop in order to obtain more detailed

information.

• This phase can be repeated several times.

• Today almost all companies provide this information

using a WWW site in the internet.


Sales Phase

• The supplier and the customer actually get in contact.• They negotiate about

– the products of interest– the conditions of the sale

• In this negotiation the initiative alternates between the customer and the supplier, both change between an active and a passive role.

• This phase can and positively or negatively (the customer leaves the supplier). In E-C the customer can in addition interrupt the phase in such a way that the supplier does not realize this.

• The strategy used by the supplier is often crucial for catching a customer, i.e. for a successful sale.


After Sales Phase

• The customer is supported after ordering and obtaining the product:– information about correct handling of the product– maintenance– troubleshooting– repair– new parts

• The performance of the supplier in this phase is crucial for keeping the customer.


Detailed Steps: Customers View

Search for supplier

Getting product information

Negotiation(prices etc.) Order

Productdelivery Service CommunityPayment

• Some orders of the steps can be permuted and the first three steps can occur repeatedly

• The last two steps are in the after sales phase• The picture applies for traditional as well as for

electronic sales• We are interested in the specific instantiation for

electronic commerce


Discussion (1)

• This representation of the sales process is widely accepted although it is only a sketchy description .

• It should be emphasized that the actual process will vary from application to application.

• Some steps may totally disappear and others may be repeated or very complex.

• Also, the details of each step may look different depending on the application.

• Nevertheless, this principle view will guide us for our considerations.


Discussion (2)• Which background activities from the sales sides are necessary in

order to carry out the steps ? How are these activities distributed over business economics and computer science, in particular with respect to electronic commerce ? E - C requires to automate activities performed otherwise by humans.

• The customers view is complemented by the process as seen from the suppliers side.

• What is the process model for the activities from the suppliers side?

• Which activities have to do with the use of knowledge and knowledge management? (Will be marked in italics).

• The latter will give rise to the topics of this lecture.


Discussion (3)

• There are a number of differences between classical and electronic commerce which have an impact on the sales steps, e.g.:– A customer can physically at the same time only in shop be

present– The supplier always realizes if a customer leaves a shop

physically– In a classical shop the customer has physical contact to a

product, electronically only a representation is seen– An electronic shop can change its representation according to the

type of customer and demanded product


Customers Process Model

• The customers process model as outlined in the steps seen from customers view contains at a very difficult part the first step: Search for a supplier.

• This search may be iterated several times.• The process may be interrupted or stopped from the

customer during or after getting product information or negotiation where either backtracking to the search for supplier or a complete termination can take place.

• It is special feature of electronic commerce that the customer can search in several shops at the same time.


Suppliers Process Model (1)

• The activities of the supplier are intended to create the process as seen from the customer and which – satisfies all customer demands – is in addition sufficiently efficient (with respect to effort,

costs, etc).

• The quality of the supplier process is therefore measured in two ways:– Customer satisfaction– Suppliers efficiency

• It is desirable to have quantitative measures• The process of the supplier contains several activities

invisible to the customer.


Suppliers Process Model (2)

• Because the sales process has many different appearances it cannot be expected that there is only one suppliers process model.

• It is, however, desirable to have a general process model from which all others are a specialization or a slight modification.

• The general process model of the supplier will have several submodels which deal with special tasks (like e.g. negotiation) and which again will differ from application to application.


Search for Supplier (1): Customers View

• There can be more then one supplier, some may even be unknown initially. The first task is therefore to get an overview.

• Customers demand may be too heterogeneous, too complex or too large in order be satisfied by one supplier only. How to split the demand into parts ?

• Which suppliers have which advantages (quality, price, service, delivery) ?

• These questions result into a knowledge based search.


Search for Supplier (2): Suppliers View

• Offers have to be provided: How to formulate them

requires knowledge about– products and services offered

– possible customers and their demands

– how to do marketing and advertising

• Offers must be distributed over certain media:– Newspapers

– TV

– Internet : Customers have to be guided when searching

• There are competitive suppliers: How to react ?


Getting Product Information (1)

• The products need to be described from the manufacturers point of view

• The products need to be described from the customers point of view– possible and desired properties

– intended functionalities

• The gap between the knowledge of customers and producers (the way of expressing things and the intentions of the customer and of the sales person) has to be overcome

• For this purpose a dialogue has to be organized


Getting Product Information (2)

• For the supplier it is not always immediately clear whether a desired product is available:– Demands often describe products only indirectly or vaguely

– Existing products may need to be adapted to user demands

– Products consisting of many parts often have first to be configured

• Hence also for the supplier a search process is involved.

• This search process is usually knowledge intensive.

• It may happen that the supplier has cannot supply all parts of the demanded product or not the whole quantity. Both partners have to take this into account.


Two Types of Modifications

• Situation: A certain demand cannot be satisfied as stated• First kind of reaction:

– Modify/adapt the product appropriately– See chapter 9

• Second kind of reaction:– Modify/adapt the user demand

• The second reaction requires a negotiation with the user:– Explanation why the change of the demand is meaningful or may

even have advantages– See chapter 11.


Negotiation (1)

• Is concerned with.:– Pricing and way of payment– Details about delivery– Regulations about costs of delivery– ...

• If they are standardized then they do not require dialogues performed individually. Very often at least the dialogue itself can be standardized (details of payment).

• In negotiating details both partners have to take into account that there is a competitor situation (on both sides, in principle)

• The results of the negotiations have to be transferred to those institutions which have to react properly (e.g. delivery department).


Negotiation (2)

• Two kinds of negotiation:

• Cooperative: – Both partners work together in order to solve a problem. This is

e.g. the case when details about the product or the delivery are discussed.

• Competitive:– There is at least one conflict between customer and suppliers

interests. In order to achieve an optimal strategy for either one partner knowledge about the context (other suppliers, customers is required).

– See chapter 14.


Order

• Customers have to know how to order

• Orders must have a legal character

• Orders must be confirmed

• Orders must be transferred to the right places in the

company to carry out subsequent actions like

delivery, payment, ...


Payment

• A precondition is that there is already an agreement about the price.

• Payment has to be carried out: Requires e.g. database transactions, receipts etc.

• Special problems in electronic commerce: Secure payment. Different models have been developed and different systems are in use.

• Payment is only one example for safe execution of business transactions.


Product Delivery

• The products to be delivered have to be available:

problem of updating the storage contents

• Problems connected with the logistic chain: Which

locations and institutions have to be passed

• Delivery has to be in time

• Who in the company has to informed (storage

update, payment department, ...)


Service

• Pro-active service: Customer information about– calls back to the company due to failures– updates– new additions

• Service on demand: Customer has a problem– because of lack of knowledge using the product

appropriately– Due to a failure in the product

• This service requires knowledge about– the product– the customer and the possible actions of the customer


Community

• This step is a typical new step in the internet.

• Support for user groups for certain products– Exchange of experience about products or suppliers

– Additional user-driven services related to the product and its use

(not tied to a certain supplier).

• Requires means – for communication between users

– for exchange of user experience and knowledge

– search

• Technically related to the Steps “Service” and “Getting

Product Information”


Compile Time and Run Time

• Compile time (or planning time): The time before a customers appears and an actual sales process starts. Here the basic decisions are done:– How to organize the sales process, – Who does what,– Which products to sell etc.

• These decisions may be revised but not during an actual sales process.

• Run time (or execution time): When a customer has appeared and a sales process has started. The steps in the sales process are executed and individual decisions with respect to the customer have to be done.


Economics

• Economics provides the general models • These models are utility oriented: The target is to

optimize the profit• This is a very complex tasks because many aspects

are involved: Money, time, human satisfaction, social questions, laws,...

• The management has to take all these aspects into consideration

• There are different types of resources: Humans, computers, software, material,...

• The economicaspects are very important although they are not very much investigated in this course.


Special Roles

• Relationship manager: Deals with the relations to the customer.

• Product provider: Offers products. The relation manager may get products from a network of different product providers.

• Transaction processor: Is responsible for performing efficient and reliable transaction services (in e-commerce: e-services). The transaction processor has the relationship manager and the product provider as customers and is often invisible to the end customer;


Organizing Many Suppliers

• There are three main types to organize many suppliers:• E-Malls

– Electronic counterparts of classical malls

• Auctions– Like ordinary auctions but with additional electronic support

• Portals– Provide entries and support to complex processes which need

more than one supplier

• See chapter 14


Customer Relationship

• In the old days a customer was treated individually.

• Due to mass production this was lost: For individual

relations there was not enough personnel available.

• A basic problem: Can one improve the relations to

the customer with the help of computers ?

• We distinguish– Business to business relations

– Person to person relations


Customer Relationship Management (CRM) (1)

• CRM does not have a generally accepted definition.It involves among other aspects:– Acquiring and continuously updating knowledge about customer needs,

motivation and behavior over the lifetime of the relationship.

– Applying customer knowledge to continuously improve performance through a learning from successes and failures.

– Integrating activities of marketing, sales and service to achieve a common goal.

– Constantly flexing the balance between marketing, sales and service inputs against changing customer needs to maximize profits.

– Systems to support knowledge acquisition and measurement of success


Customer Relationship Management (2)• Successful CRM requires

– Optimal cooperation between all departments of the company– Optimal cooperation between human, techniques and

organization– intensive use of knowledge of various kinds

• The catch and keep principle: CRM is important for both: catching a customer and keeping a customer

• CRM will become a decisive factor for success• However, achieving satisfactory CRM provides big

difficulties, conceptually ones as well as technical ones• Because CRM is related to the whole sales process

there is no specific chapter in this course devoted to CRM. It will rather play a role in all chapters.


Big and Small Actions

• Big actions, e.g.,– starting a subsidiary company (business)– building a house (private)

• Small actions, e.g., – What kind of PC does the boss need? (business)– Do we pass our Easter holidays in St. Moritz? (private)


Customer Service - Part 1

• “Here are the yearly reports of the economic research institute. There, you can find everything of interest!”

• “I give you our complete catalogue of prefabricated houses!”

• “Tell me exactly which PC you want and I tell you if we have it or not!”

• “St. Moritz is booked out.” “Hurrah, we stay at home!”

• “Anyway: Why don’t you surf in the Internet? There is everything written!!!”Is th

is customer service???


They Could Not Find Each Other...

• The customer and the product ...(the investment plan, the PC, the house, holiday hotel, the information

• The goal was not clearly described and there were no signs on the way ...

... the customer was left alone.


The Problem of Customer Demands

• Often, one does not know exactly what he or she wants, but only what should be done with it

• One mixes the actual wish with its (partial) fulfilment

• One does not know if the desired product exists

• Maybe, one goes for a compromise after more detailed explanations


How to deal with customer demands

• Customer demands are incomplete: The task of negotiation is to obtain a more complete description of the demand: Leads to a goal directed dialogue (see chapters 9 and11)

• Customer demands are imprecise: They should be more precise (see chapters 9 and 11).

• Customers demands are unsatisfiable: They should be replaced by satisfiable but closely related demands (see chapters 6,9,10,11). This is a complex process.


Customer Service - Part 2The Human Being’s Part

• Man makes a wish step by step more precise.• He informs.• He acts as a pilot on the way to the fulfilment of

the customer’s wish• He is (or should be) a friend and an assistant

Therefore, he uses all his knowledge and his experiences!


The Consulting Problem

• The ideal consultant is rare and expensive

• Often, there is information missing for an ordinary consultant

Mostly, human beings are only good at clear situations in a small group of people.


The Service Problem

• Customer service is not a one step action

• It is rather an iterative process

• The purpose is to approach stepwise a situation in which the customer‘s needs are approximately optimal satisfied

Stepwiseapproachingan optimal

solution

The service needs its own process model !


Customer Service - Part 3Business for the Masses

• Business for the masses has sacrified customer service on the altar of turnover.

• Is it possible to introduce customer service again without a loss?

• Could customer service be a crucial competitive advantage even in business for the masses?


Customer Service in E-Commerce

• The advantages of e-Commerce are obvious:– world-wide and 24-hours availability, etc.

• These advantages have been achieved using machines

• Customer service, however, was always a domain of humans

• The problem is now to program machines in such a way that they can perform such a service, too


More Service - More Problems

• First step: Catalogues only– Customer can order products from the catalogue

• Second step: Customer can fill out a form– The customer can formulate demands but only one time

• Third step: One-to-one service– Dialogue with the customer

• These steps represent an increasing degree of both, possibilities and problems in the realization


Catalogues Only (1)

• Typical e.g. in mail order business• The forms of catalogues have an increasing flexibility:

– Printed catalogue– Electronic catalogue– Parallel channels: internet, mail, phone

• They are often used in parallel• Requires a cooperation between the different media

and channels which is not easy to realize (problem of consistency).


Catalogues Only (2)

• Tasks to solve: – Which products, services are suitable for electronic

commerce? Which constraints have they to satisfy?

– How to present the products in such a way that the customer obtains all necessary information in an understandable way ? How can the customer access the catalogue?

– Is the catalogue complete and correct ?

• Are all products presented ? Are the descriptions correct ? Are all presented products available and deliverable ?


Catalogues Only (3)

• The way how products are represented can in principle be chosen freely:– formal data– informal text– pictures, videos etc.

• Printed catalogues are more restricted that electronic catalogues (don’t allow e.g. videos).

• The representation type depends on the products and the intended customers.

• The more informal the representation is the more difficulties it provides to the supplier (see chapter 2).


Catalogues Only (4)

• The completeness and correctness problem for catalogues leads directly to the updating problem.

• It is in principle– easier for electronic catalogues– more difficult and expensive for paper versions.

• Consequence: Electronic catalogues can contain more information which changes fast.

• The knowledge management task: Split updating into two parts: – One where changes can be automatically transferred from

changes in other files– One where specific knowledge management activities are

necessary (see chapter 15).


Catalogues Only (5)

• In order to get access to he products described in the catalogue one has make a data base call.

• There are to ways to view this:– One knows exactly what one is looking for and makes a

precise call.– One has only an appropriate or partially implicit or informal

description and generates the data base query using some konowledge.

• The latter one is called intelligent catalogue search and will be a major topic of this lecture.


Forms (1)

• Some requirements: – Information from the customer shall contain valuable information but not

unnecessary information

– Do not ask questions which can be considered as touching the private

atmosphere; customers often want to be anonymous

– Evaluation of information is restricted by laws!

– Utterances of customers often contain valuable implicit information.

Try to make them explicit and evaluate them ! – Forms must be simple and easy to understand.


Forms (2)

• Forms in electronic form can be dynamic :

Certain questions will only be presented if previous questions have been answered in a specific way:– Product details depend on the type of the product– Delivery details may depend on the product– etc

• In order to create dynamic forms it is necessary to to define the process model of getting information in a precise way.

• In principle, a dynamic form represents a kind of standardized dialogue.


Forms (3)

• Dynamic forms represented a branching tree which is only partially visible to the customer.

• When the form is partially filled it will be automatically extended. This can be regarded as a rudimentary form of dialogue.

• The extension has to be carried out with care– not too early if this is unnecessary– not too late.

• It has to be taken into account that the customer may change the entries: Which part of the form is withdrawn (if at all) ? (See chapter 11)


One-to-One Service• Tasks and problems:

– Contact with customers is not a one-way street.– It is rather a dialogue which should be carried as efficient and goal

oriented as possible– We distinguish three possible states of a dialogue :

• Answering a question of the customer;• Presenting a question to the customer in order to make an

utterance of the customer more precise;• Pro active state: Taking the initiative in order to present facts to

the customer which are unknown but hopefully useful to him.

• This requires a process model for the negotiation and the dialogue with customer.

• Dialogues are extensions of dynamic forms (see chapter 11)


Call Center• Task : To answer questions raised by customers:

– Product information– Product orders– Trouble shooting– ...

• Conditions:– Correct and complete answers– adequate actions (e.g. in world wide hotel room reservation)– ...

• Traditionally call centers are operated by humans, some already by automatic voice generators

• Combination with email and internet: Customer asks in written form, call center person calls back


From Call Center to Customer Interaction Center

All media customer interaction center

Multimedia call center server

Internet call center server

CTI-server

Call center

Call center for phone, internet, fax, mail, SMS, E-commerce

Phone, internet, fax, mail (OCR for mail and fax routing)

Phone, internet

Phone, CTI

Phone (verbal communication)


Experts

Call-Centre

Customers

same problems- same experts

Same problems- different agents

Different problems- different customers

1st -Level

2nd -Level

3rd -Level

Call-Center Pyramid


The Distribution Problem

• Large Companies have many (e.g. several thousands) of experts who may be candidates for solving customer problems.

• These experts are usually distributed over different regions.

• The problem for the call center is to guide the customer to the right expert (competent, near by):

queriesCall Center

Experts

Has Knowledge See chapter 12


Summary• The actors in a sale are customer and supplier.

These are roles which can be changed.

• Both actors have preferences which guide their actions.

• The sale takes place in a sales process which is decomposed into steps.

• The individual steps require certain activities from the partners which can only be performed well if they have certain knowledge.

• An important aspect for the supplier is customer relationship management. This requires actions which traditionally have been performed by humans and provide enormous problems in electronic commerce.

Chapter 1 Basic Tasks in Electronic Commerce. - 2 - (c) 2000 Dr. Ralph Bergmann and Prof. Dr. Michael M. Richter, Universität Kaiserslautern Recommended.

Documents

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electronic commerce

sales process