Satisfied web customers don't come cheap

Donna Fluss, research director at analyst GartnerGroup, found a new hobby in 1998: encouraging people to send emails to companies they thought provided good customer service. The results were instructive.

"They would send 10 emails and maybe get one in response," she says. "Marketing and sales departments had opened websites, and didn't think of customer services. And too often, the customer services department didn't even know the website existed."

In the UK, electronic customer service isn't far beyond this stage. The Sainsbury's website says customers should allow three days for an email response; John Lewis asks online customers to email their postal address, saying that "it may not always be possible for us to reply by email".

Cracking up
Web natives haven't fared much better. Online bank Egg has had several problems since its launch last year. Numerous retail sites failed to provide delivery in the run-up to last Christmas (including supermarket Iceland - see case study one), potentially sending shoppers back to the high street.

The problem is that the web is being seen purely as a way to cut costs, says Giga Information Group vice president Martha Bennett. "This is an area where companies try to cut corners and save money," she says. "But you can't do ecommerce on the cheap if you want satisfied customers."

The internet will save you money - eventually. Liz Brown, a PricewaterhouseCoopers partner, says web-based transactions generally cost merchants about eight per cent of the equivalent telephone call. "On a cost analysis, this sounds great, but if you introduce a web channel, voice calls will get more expensive initially," she says.

Of course, this assumes the site is usable. "Gripe number one is a badly laid-out site," says Bennett. "You may think everyone knows this, but you should see some of the sites out there."

The cautionary tale of fashion retailer Boo.com, which launched its technically complex site months late, with a slow speed and broken links, shows the virtues of simplicity and functionality.

More fundamentally, it helps if the site actually loads. Many companies don't do proper capacity planning, Bennett says. "My favourite is Jungle.com, which ventured out in a blaze of publicity, then had to clear every music clip and graphic from the site when it became obvious that the site couldn't cope with the number of hits." Iceland opted for a low-key launch and a limit on numbers of customers.

Once the basics have been sorted, the priority is that customer information from all channels is combined, using an analysts' concept called the 'universal queue', in which all communications are queued by the software as equal. Smile and Iceland are close to achieving this, with the same team dealing with phone and email queries.

Shop 'till you drop the line
Many customers still abandon their online shopping baskets before they reach the till. So another move forward is the online equivalent of a shop assistant - chat-room operator available to provide instant pre-sales advice.

"By 2002, collaborative chat will be considered a baseline service for sales and service websites," says Fluss. "Sites without this will be considered deficient. If you're lucky, customers will telephone, otherwise they'll abandon the site." But, she warns, the claim of software houses that collaborative chat will triple sales is unlikely, as are claims that operators will be able to deal with six customers simultaneously. "Two is a more realistic target," she says.

Keeping things simple is the key to success. Retail consultant Paco Underhill, in his book Why We Buy (Orion, 1999), is amazed that companies don't offer to take orders on the web and then prepare them for collection at a convenient branch.

"Why, with a few exceptions, don't retailer websites offer such a simple, useful service? For a decidedly unbusiness-like reason - because it's too easy," he writes. "Requiring shoppers to visit an actual store runs counter to the agenda of the cyber-jockeys who are pulling the online shopping sled. There's something almost cult-like about these guys, and part of the cult's evangelical mission is to eradicate the physical world wherever they find it."

Case study one: Iceland Frozen Foods
Project: icelandfreeshop.com - the first UK-wide online supermarket
Start date: end of 1998. Tested on BT and Iceland employees from January to June 1999. Launched 4 October 1999
Resources: development by BT and Iceland's information systems department
Internal support: four staff, about to rise to eight, otherwise uses existing delivery infrastructure
Business aim: to expand Iceland's existing delivery service to the web
Problems: over complex password system.

An elderly woman in Birmingham is reading her weekly shopping list to Iceland supermarket. On a desolate industrial estate at Deeside in north Wales, an operator asks her how she wants to pay. The answer: by cheque please, dear.

This requires the issuing bank's card number, which the operator already has on screen, but needs to verify. "Oh, which number is that? I don't have it in front of me." The operator patiently steers her through to the information.

This is the kind of human touch a call centre can provide. So how is Iceland trying to transfer its claim of 'legendary customer service' - the words printed across the doors of the Deeside headquarters - to its website home delivery channel?

One thing Iceland refuses to do is send automated responses to emails, says call-centre manager Kerry Wallace. "I don't want standard answers flying out. We looked at email management systems recently, but they put me off." Instead, Wallace's internet support team individualises or writes every response. She mentions a recent email query from Australia, to which the operator replied, adding: "I am sure it must be much hotter where you are. We have been forecast snow here." This elicited a delighted response from the customer.

The team takes both calls and emails, using Lotus Notes, and the emphasis is on generating complimentary responses rather than clearing a certain number of jobs an hour. "If we get ISP-related queries, we try to help anyway," says internet operator Mike Townsend.

As he speaks, a woman calls in asking why drinks are not displayed as an option on the order page. Townsend logs into the site as the customer, using a connection equivalent to hers, after asking politely if she feels secure to give him her password. He encounters the same problem, finds a workaround for her and reports the glitch to information services. This takes time, but the first-time customer gets what she wants.

Like the phone ordering service, the website offers customers a choice of two-hour delivery slots, but there is only a finite number for each of the 500 delivering stores. "Christmas was extremely busy. The hardest thing was saying we couldn't offer a delivery slot," says Townsend. Instead, the firm sent out about a hundred £10 vouchers as compensation, even though the customers hadn't necessarily spent anything at that point. If it gets people hooked up to internet ordering, it's seen as worth it.

"We always thank people for placing an order, and we always give people the opportunity to reply and comment," says information services director Martin Chatwin. Several people have asked for improvements to the password system, which insists on two letters and a number in the chosen string.

Iceland's web drive
With little publicity, Icelandfreeshop.com is taking about 3000 orders a week and has 150,000 people registered, Chatwin says. This compares with the 90,000 weekly orders taken through Iceland's own catalogue-based Talking Food telephone ordering operation. The website uses the same system as the telephone service, which was set up with 85 call-centre staff and 1000 vans in 1997.

The website is hosted by BT, which sends the orders to RS/6000s running on AIX at Deeside. Web and telephone orders are allocated by postcode to the nearest delivering store, and are transmitted by ISDN to the store servers, which are currently OS/2-based, but which will move to Windows NT. The orders are assembled in stores, where customer's credit cards are debited - they are offered the choice of accepting equivalent goods of an equal or higher price if what they want is out of stock. On delivery, the customer is given the name of the store manager for queries.

This store-based approach, which is also used by Tesco, differs from competitors which are building warehouses known as 'picking centres' to service home delivery.

"We're using what's already there," Chatwin says. "And if there's a problem, you talk to your local store manager."

Martha Bennett at Giga says: "It impresses me that Iceland is the only retailer offering nationwide coverage. But how far can it scale with people in shops trying to fulfil the orders?"

A long way, according to Chatwin. Iceland stores are replenished daily on the basis of what they have sold, using software from E3 called Slim and Trim. "But we have the opportunity to trickle-feed stores if we want to. And we have an efficient supply-chain."

Mindful of the recent denial-of-service attacks suffered by eBay, Yahoo and CNN, Chatwin points out another service-minded feature - the web-based store has a capacity limit. "We've sized it to handle 5000 browsers at any one time. If we detect more, we intercept them, and say the shop's full, health and safety regulations won't let anyone else in at the moment." This keeps speed levels up for shoppers.

Sales have already topped £2m since launch, but Chatwin sees them heading much, much higher. "We see it being up to 10 per cent of our sales over the next three years," he says.

Case study two: The Co-operative Bank
Project: Smile.co.uk - the first UK full-service online bank
Start date: The Co-op's first internet banking service launched in April 1998, this was used as pilot for Smile, which was launched on 28 October 1999
Resources: development by external suppliers, led by FI Group
Internal support: 50 staff on opening, now rising to 80
Business aims: to find new customers for the bank
Problems: users initially had difficulties setting up accounts.

Much of Smile's customer service story is about reassurance. Research found security and privacy to be the fourth most important customer query, after the basics of interest rate levels, how to move to the bank, and how to get money in and out.

"We knew we had to address it head on," says Keith Girling, technology director for Co-operative Bank and effectively the founding chief executive of Smile.co.uk. "The only thing more sensitive than your bank account is your sex life, and people expect the same sort of confidentiality."

Girling says Smile uses "about 14 or 15 layers of hierarchical security" between Co-operative Bank's core mainframe and the customer's PC, with two layers of 128bit encryption. The bank has just been awarded the BS7799 standard for its security.

This emphasis has its drawbacks. Smile does not work on Apple Macs and cannot get through some university network firewalls, so the bank has not yet advertised its student account. Another security measure involves eschewing standard email: customers have to log on using both a passcode and one of five pieces of obscure personal information, to receive messages from the bank.

There is careful training to prevent the kind of leaks that Egg suffered last year - operators sent out credit card numbers in normal email, and it only tightened its procedures after queries from Computing newspaper. "New staff go through about five weeks of training, then are closely monitored for seven weeks, and also do spot checks," says Smile service centre team manager Neil Evans.

The human touch
Although Smile is a much larger operation than Iceland's online desk, it shares the food retailer's dislike of automated or standard responses to email. "We have some set up, but we edit them for the customer," says Evans. "Each customer asks things that are slightly different."

Smile's response centre staff, based in a mirrored glass ziggurat in Stockport, deal with both email and calls, while technical queries are sent to the bank's IT development partner, FI Group, in Edinburgh. An initial rate of 50p a minute for the technical helpline is being dumped in favour of a national rate charge. "We don't want to penalise people for it," says online marketing manager Joanne Dodds.

Customers are only able to apply online, but can call a national-rate number when they are signed up, in case they cannot access the web. "It's a natural reaction to pick up the phone," says Evans. "We wouldn't ever want to stop the phone service." As the better interest rates offered by Smile are predicated on minimal phone usage, phone use is monitored, but Smile has not yet asked anyone to make fewer calls. Evans says queries about setting up accounts are split 50:50 between email and phone. "But after that, customers generally use the secure email," he says.

In terms of reaction speed to emails, Evans says there is no service-level agreement yet. At busy times, calls are sent to whichever operator has been waiting longest, and they answer emails inbetween calls. When quiet, some staff work purely on email. Rather than have one big queue, Smile tries to ensure important queries are answered swiftly by providing some set subjects. "We'll always prioritise a direct debit cancellation," says Evans.

Teething problems
Last autumn, Smile experienced initial problems in letting customers set up accounts - tellingly, something the original service did not do - but has not seen Egg's level of problems.

"The key lessons [from the April 1998 service] were about capacity planning, stress testing and middleware integration," says Girling. The use of external suppliers made changes relatively easy: "We're experienced in managing multiple suppliers - we haven't done IT development for years."

The bricks part of Smile's strategy is different from Iceland's, where the relationship is set up with the local branch. Customers can use Co-operative Bank's branches for routine transactions - as well as Post Offices in England and Wales - but branches cannot open accounts or offer advice about Smile products.

For Girling, Smile is part of an evolution that started with online access to Co-operative Bank accounts in April 1998. Smile built on that experience, but has a new front-end developed by Leeds firm Technophobia, along with Java and middleware from German software house Brokat. Forty IT suppliers are involved in the development and support of Smile, which has a minimal IT team of its own.

Case study three: Brent Council
Project: www.brent.gov.uk - one of the first UK council websites
Launch date: January 1995. Ongoing project
Resources: developed with Riva Consulting and by Brent staff
Business aims: to deliver all possible council services electronically
Problems: different online progress levels within council departments

The north-west London borough of Brent, which includes Wembley Stadium, is no stranger to bricks and clicks. The council runs six drop-in centres, as well as a call centre, all of which aim to resolve 80 per cent of queries immediately.

The council's first website was a single page put up in January 1995, but the project grew rapidly. Last year it won the Local Government Association's website of the year award. Strengths include a user interface that allows residents to find services through a clickable map, and having information about the council's performance on the site.

Email queries are dealt with at two levels. If they are sent from a specific page, they go directly to the department which runs that part of the site. If they are sent from the homepage, they go through Notes to staff at the call centre and the one-stop shops. Brent's information manager Dane Wright says such enquiries have the same status as letters: they will definitely receive a reply in three or four days. "But it normally takes a few hours," he adds.

The site has very few central resources, says Wright. The costs for the servers and web connection are met out of the council's networking budget, and the public internet site is effectively a subset of the intranet: anything placed on the intranet marked for external publication is made available to the public.

"We give control to the individual service units," says Wright. "They get the tools to maintain their individual areas. Maintenance of information is therefore completely spun-out." Departmental staff are supplied with a template site and a database, and take a day-long course, which has led to different speeds of progress.

Planning is key
One of the leading areas is the planning section. Customers can make enquiries about their properties to the internal corporate database, link to information on other local services and find out who their area councillor is. The council plans to extend this to allow searches by postcode, instant provision of council tax band level, and displays of relevant planning information.

The system was built for Brent by Riva Consulting, which has worked on other parts of the site. "For really complex areas, it's cheaper to send it out rather than spend weeks on it ourselves," says Wright. Both the intranet and internet site are run on Lotus Notes, linking to SQL Server and Oracle databases. Pages are created as requested from Notes documents.

"We couldn't produce pages at the rate we do on static web pages," says Wright. This will allow Brent to develop personalisation services easily, he says. "You could only do that with a programmable system. Notes is a satisfactory and relatively cheap environment."

Karen Swinden, a director of state-sector technology analyst Kable, says Brent's website works with its other communication channels, such as the shops and the call centre, as well as being good value for money.

"Electronic channels alone can exacerbate social exclusion," she says. "All the channels have to fit together and that's what Brent is very good at."

How to provide a good web service

• Answer emails quickly. Send an acknowledgement, with an idea of how long the reply will take. Then reply fully within hours, not days
• Think carefully about fully automated email responses. Iceland has rejected this approach
• Ensure your delivery system is up to scratch. Offer delivery slots within hours, not days, if someone needs to accept the item
• It costs your customers money to access the internet, in terms of calls and hardware. If you're going to take advantage of their investment, pass on some of the savings. If not, someone else will and you'll lose the custom
• Feed all information about a customer into one system, whether it comes from email, letter or fax
• Make the launch low-key or run a pilot. First-mover advantage is worthless if your site becomes infamous for crashing.