Topics

1. Topics • Services in the Economy • Themes • Personalization and Customization—Limits • Financial Services—The Glass-Steagall Act of 1934 • Online Banking, Brokerage, Mortgage, Insurance • Real Estate Services • Travel Services • Career Services • Classifying Services • Product Based Services

2. Where are Services on the Value Chain?

3. Services

4. Services in the Economy • Services employ 76% of the US Labor Force • $7.7 Trillion (58%) of the US economy • What are the difference between services and products? • Name some consumer-oriented services • That can be delivered online? • That cannot be delivered online? • Can any of these be supported online? • Same for business-oriented services

5. Services and Productivity On the other hand, productivity [growth??] in the service sector has lagged far behind productivity in factories and on farms. Productivity in the service sector over the last decade has averaged about 1%, while farm and factory productivity has averaged about 5%. (page 587) • With 76% of the labor force and 58% of the GDP in services what are the implications of the situation described above? • Why do we have this state of affairs? • What can be done about it? What this means for e-commerce is that the service sector offers extraordinary opportunities insofar as e-commerce sites can deliver information, knowledge, and transaction efficiencies. (page 587)

6. Services in the Economy (cont.) • As with retail, we want to slice and dice the world of services • Find out which are succeeding online • Find out which are struggling • Find out why for each • Be able to: • Predict the reception for a new online service opportunity • Find new opportunities

7. Some Themes • Watch for the effect of customer preference (taste) on the viability of online services • Trust as a determinant of service delivery preference • Watch for pure information or knowledge-based services vs. services coupled to a physical good or asset • Watch for the importance of scale as a determinant of profitability • Watch for similarities (including one huge one) between successful online service sectors and successful online retailing establishments • Look for political or regulatory limitations on service delivery

8. Personalization & Customization of Services • Name some (traditional) services that are • Extremely personalized • Extremely commodity-like • Composite • Are there any patterns in the answers above in the services offered online? • What constraints apply to extremely personalized services online?

9. Personalization & Customization of Services (cont.) • What tools and capabilities do human service providers apply to their professions • Programmers? Physicians? Accountants? Attorneys? • Can these skills be mimicked by technologies? • Can these skills by supported by technologies? • What may be the role of consumer preference (taste) in determining service delivery?

10. The Glass-Steagall Act of 1934 • This Act is most important now for what was repealed in 1998 • Interstate banking • Multiple lines of business in the financial industry • Banking • Brokerage • Insurance • Why was the repeal of these provisions, coupled with the wide use of information technologies in the 1990s, so important? • And important for eCommerce?

11. Online Banking • A traditional bank spends $1.07 to process a transaction, whereas an online bank can perform the transaction for 1 cent (L&T 3d Edition, p. 619) • So the motivation for banks is there • What is the motivation for customers to use online banking? • Who is succeeding in online banking? Why? • What advantage did E*Trade's online banking have over other internet-only online banks?

12. Online Brokerage • What market space(s) do the online brokerage services serve? • Hint: How did stock investing work prior to the Internet brokerages? • What were the fee structures? • How were trades executed? • How have the online brokers affected the traditional part of the industry?

13. Online Mortgage Lending Services • Why have online mortgage lending services been very slow to take hold? • Compare to online brokerage • What does the book say? • What do you think?

14. Online Insurance Services • The success of online insurance sales have been mixed by sector • Which are succeeding and which are struggling? • What has been determining the successes and struggles? • How are insurance agents paid? • Why? • How are insurance companies disintermediating their own agents through online offerings?

15. Online Real Estate Services • There is a lot going on here • What is the role of the National Association of Realtors? • What is the importance of the NAR ownership of the Multiple Listing Service (MLS)? • Read the descriptions of online consumer behavior in the paragraph beginning at the end of p. 600. • What techniques does NAR use to retain its monopoly position? • Go to Realtor.Com and find your dream house—then report on the site's business model

16. Online Travel Services • What business models do we see here? • Look at the historical market structure/value chain described in Figure 9.7 and also on pp 609-613 • Why did this market structure make sense prior to the Internet? • What changes have Internet technologies introduced to the market structure? • Who has benefited? • Who lost? • Why?

17. Online Career Services • What revenue models do these sites use? • "It's Just Information: The Ideal Web Business" p. 619 • Do you agree? • Look at the market segmentation • Large general sites • "… explosion in specialty niche employment sites" • Does this sound familiar? • What have your personal experiences been?

18. Classifying Services • Let's classify services alongthree dimensions • Frequency of transactionsfor typical users • Importance of eachtransaction • Tie to physical resources(or information intensity) • Are there any trends to be seen by position, regardless of the nature of the transaction?

19. Product-Based Services • Chapter 9 mentioned product-based services • What are these? • How are they similar to the services we have been discussing? • How are they different?

20. Let's Invent a Service