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Blackwell Publishing LtdOxford, UKISJInformation Systems Journal1350-1917Blackwell Publishing Ltd, 200620061600135155Original ArticleDelivering customer services onlineN M Levenburg &

H A Klein

Info Systems J (2006) 16, 135155 135

Delivering customer services online:


identifying best practices of medium-sized
enterprises
Nancy M. Levenburg* & Helen A. Klein
*Management Department, Seidman College of Business, Grand Valley State University,
441-C DeVos Center, 401 W, Fulton Street, Grand Rapids, MI 49504, USA, email:
levenbun@gvsu.edu,and Management Department, Seidman College of Business, Grand
Valley State University, 439-C DeVos Center, 401 W, Fulton Street, Grand Rapids, MI 49504,
USA, email: kleinh@gvsu.edu

Abstract. The importance of using the internet to achieve competitive advantage


has been well documented. Many companies have benefited from capturing cus-
tomers interest in buying via the web. Additionally, an ever-expanding of technol-
ogies exist that enable firms to provide additional customer services online. Yet for
many firms, determining which customer service applications to use can be per-
plexing. This study examines the practices of small- and medium-sized enterprises
and analyses performance results of adopting selected customer service applica-
tions on the internet.

Keywords: small- and medium-sized enterprise, small business, customer service,


e-service, e-commerce, internet applications

INTRODUCTION

Despite the problems encountered by internet businesses over the last 5 or 6 years (Grover &
Saeed, 2004), there has been a continually increasing interest in the use of the internet for
online purchasing purposes (Greenspan, 2003). This increasing interest has produced a cor-
responding need to provide additional customer-related service online. Among governmental
bodies, this has led to providing citizens with online voting and license renewal services, in
addition to readily available information (Carter & Blanger, 2005). Moreover, if an organization
has a presence on the internet and is selling products or supplying information, customers
expect to get [customer] service through the same channel (Carlson, 2000). Even if a sale is
not consummated online, a growing body of literature documents the importance of the inter-
net in other phases of customers buying processes, processes that occur prior to or post pur-
chase, including search for sources, evaluation of alternatives and customer support (Chen,
1998; Kolesar & Galbraith, 2000; Walsh & Godfrey, 2000; Burke, 2002; Zeithaml, 2002;
Downie, 2003).

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136 N M Levenburg & H A Klein

Advances in technology have produced a vast menu of applications that can be used to
enhance customer service offerings (Armstrong & Hagel III, 1996, Kolesar & Galbraith, 2000).
However, there is a scarcity of knowledge about best practices and successful performance in
providing such services online (Chen, 1998; Griffith & Krampf, 1998). In addition, despite the
internets prevalence, growth and prolific use for marketing purposes, there are reports that e-
service is generally poor (Griffith & Krampf, 1998; Darian et al., 2001; Burke, 2002; Zeithaml,
2002; Downie, 2003). These facts either tend to discourage the use of the internet altogether
or confound decision-making with respect to selection and implementation of e-business
applications.
This situation is especially problematic for small- and medium-sized enterprises (SMEs).
SMEs account for the majority of businesses in the USA, employing more than 52% of the pri-
vate work force, contributing 51% of gross domestic product and providing two-thirds of all new
jobs annually (Kuratko, 2001, Longenecker et al., 2003). For these firms customer service is
particularly critical as it is a primary determinant of patronage and loyalty (Walters & Knee,
1989; Innis & La Londe, 1994; Walsh & Godfrey, 2000; Piron, 2001). It is the means by which
these companies tend to distinguish themselves from their larger competitors (Walters & Knee,
1989; Innis & La Londe, 1994; Gilmore et al., 1999; Piron, 2001; Billesbach & Walker, 2003).
Providing quality customer service in person tends to be labour-intensive and can strap
resources already in short supply for SMEs [90% have fewer than 20 employees (SBA Office
of Advocacy, 2004)]. For these firms, the internet and its ability to conduct business online
could represent a powerful tool to increase customer service offerings and at the same time
alleviate the time constraints that providing customer service in person places on small staffs
(Bunduchi, 2005). To determine just how the internet might be most effectively used by SMEs
for customer service, this exploratory study examines the level of importance SMEs attach to
using an array of customer service-related internet applications, and explores differences in
usage according to size categories (based on number of employees). Additionally, it seeks to
determine best practices in delivering customer services online for each SME size category
by examining relationships between the use of various e-business applications and perceived
company performance. In so doing, the intent is to provide insights into practices that can
enable SMEs to use the internet more effectively for customer service purposes and to provide,
as well, aspirational targets for these companies.

LITERATURE REVIEW

Customer value and customer services

The concept of customer value holds that the perceptions held by customers towards a firm
and its offerings are comprised of beliefs about the benefits received vis--vis a transaction and
the costs of obtaining those benefits (Perrealt & McCarthy, 1999). According to marketing lit-
erature, benefits can be classified along two dimensions: (1) the basic benefits of the product
(i.e. hygiene factors, the basic elements that determine a products fitness for use and which
customers expect all competitors to deliver); and (2) additional services, including (1) support

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services (e.g. customer assistance); (2) recovery services for resolving issues post sale; and
(3) other extraordinary services that further satisfy customers (e.g. free alterations or free gift-
wrapping) (Jones & Sasser, 1995; Perreault & McCarthy, 1999). Thus, beyond a products
basic benefits, providing additional services affords ways for organizations to differentiate their
products from competitors offerings and sustain customer loyalty by enhancing value. These
value-enhancing services may be introduced in any phase of the customers buying process
(i.e. problem recognition, information search, evaluation of alternatives, purchase and post-
purchase evaluation) (Devlin, 2001), whether online or off-line.
In this article, we define customer service as those additional services provided to customers
above and beyond a products basic benefits. These additional services are designed to
enhance the total value proposition, and therefore add to customer value. According to Hom-
burg et al. (2002; p. 86), customer services are designed to augment the core offering or add
value rather than represent the core offering itself. Over the past few decades customer ser-
vice and its measurement have become increasingly important (Wilson, 2002). This is because
of theoretical links between customer service, customer loyalty and business profits (Narver &
Slater, 1990; Taylor & Baker, 1994; Bitner, 1995; Jones & Sasser, 1995; Rust et al., 1995; Piron,
2001; Homburg et al., 2002; Lertwongsatien & Wongpinunwatana, 2003), and customer ser-
vice, customer loyalty and market share (Sterling & Lambert, 1987). Although customer ser-
vices may be delivered face to face, they may also be delivered vis--vis internet technologies,
which is the focus of this article. For example, customer services delivered online, e-services,
may include using email to communicate asynchronously with customers, using real-time, live
chats and providing product ordering and tracking capabilities. By providing customer services
online, firms can increase both the number of services offered and increase the number of cus-
tomers served by these offerings. These are two important ways to add value to product offer-
ings (Homburg et al., 2002), the former, more obviously, because it makes more services
available to customers and the latter, a little less obviously, because more customers who might
otherwise not have had access to such services may gain access for them value is added.

SMEs and customer services

According to Longenecker et al. superior customer service (service that exceeds customers
expectations) . . . is the ingredient that small firms are in a unique position to offer (Longe-
necker et al., 2003; p. 370). Small firms often compete in retail or service industries (SBA
Office of Advocacy, 2003), serving local markets in which their presence may be highly visible.
Consequently, small firms may be able to serve customers more directly and effectively than
larger competitors, and are able to do so without struggling through layers of bureaucracy
or breaking corporate policies that tend to stifle employee initiative. In many cases, customers
are personally acquainted with the entrepreneur and other key people in the small business
(Longenecker et al., 2003; p. 17).
Furthermore, serving customers well may take on heightened importance for SMEs because
so many of them are family-owned. In the USA, family-owned firms account for between 80%
and 95% of all incorporated businesses (Poza, 2004) and are estimated to represent the vast

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138 N M Levenburg & H A Klein

majority of small businesses (Davis & Harveston, 2000; McCann et al., 2001). In such orga-
nizations, there is a family dimension as well as a business dimension. Lyman (1991) found
significant variations between family and non-family firms in terms of how customer service
is conceptualized, designed and provided, arising in part from the perception that the quality
of customer service reflected on the owner. To wit, family businesses are reportedly more
involved with customer service than their non-family counterparts (Lyman, 1991).

Customer service on the internet

For firms that emphasize a customer orientation, the internet offers opportunities to reduce the
costs associated with providing customer service while simultaneously offering more of these
services to more customers (Lee, 2001; Zeithaml, 2002; Day & Hubbard, 2003; Downie, 2003;
Surjadjaja et al., 2003). However, it should be noted that increased use of the internet may sub-
sequently place additional demands on a company. Evidence exists that increasing use of web-
based technology is heightening customer expectation concerning the availability and the
nature of such services (Chen, 1998; Armistead & Kiely, 2003). According to McGaughey
(2003), Todays consumers do not just expect a high level of service, they demand it. In the
pre-purchase stage, internet users expect to be able to find product-related information
(Anckar et al., 2002) as well as information pertaining to the companys reputation because the
latter is often used as a surrogate measure for quality (Chen & Dubinsky, 2003). Shoppers also
want information regarding the availability of products, and how to order, pay for, track, receive
and return them, if necessary (i.e. post-sale support). In summary, if online customer services
are to successfully deliver enhanced customer value, the package must include services that
facilitate the sale and provide post-purchase support; it is these customer services that are the
keys to achieving superior value (Devlin, 2001).
It is particularly important for small firms to understand what works in terms of internet-deliv-
ered customer services because these firms are less likely to have in-house IT professionals
to advise and assist business managers in making appropriate technology-related decisions
(Vlosky & Smith, 2003). Additionally, as noted previously, the majority of smaller firms are
family-owned, which are often characterized as conservative and risk-averse (Donckels
and Frohlich, 1991; Ward, 1997; Gudmundson et al., 1999). This conservatism is particularly
important because investments are typically evaluated in terms of their impact on business
performance; for smaller firms in which investments in e-business technologies can represent
a substantial portion of available resources, it is critically important to understand what works
and what does not.
As noted in the Introduction, customer service on the internet (e-service) is generally poor
(Griffith & Krampf, 1998; Darian et al., 2001; Burke, 2002; Zeithaml, 2002; Downie, 2003). This
poor service may be due to the lack of standardized methods of evaluation within the internet
industry (Krishnamurthy, 2000; Shen, 2002), misuse of technology tools, including information
overload, spam, inappropriate design, poor focus/segmentation and inappropriate links/ban-
ners (Downie, 2003), or lack of attention to maintaining an updated web site (Downie, 2003).
Consequently, amid the rising importance of serving customers well off-line and online

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Delivering customer services online 139

recent work suggests that online customer service performance may be functioning in ways
that are contrary to marketing and customer service goals. Hence, an even stronger need to
understand what works well and what does not.

Best practices

Although there is no universally accepted definition of a best practice, the term generally
refers to the use of techniques, methodologies or operational practices that have proven suc-
cessful in particular circumstances, and reliably lead to a desired result. The term is used fre-
quently in the fields of hardware and software product development, operations management,
project management, health care, government administration and education, among others
(Stevenson, 2005).
The concept of best practices has its origins in the process of benchmarking, a well-accepted
quality management tool. Benchmarking involves comparing ones practices and procedures
against those of competitors, or those believed to be the best in the industry, or against the best
in any industry (Stevenson, 2005). Although early benchmarking efforts focused on analysing
competitors actions, recent work criticizes this approach because: (a) competitors are fre-
quently unwilling to provide information needed to conduct benchmarking (Stevenson, 2005);
and (b) even when they do, direct competitors strategies may or may not be relevant (Smith,
2000). Consequently, experts currently advocate establishing operating standards based upon
best practices (Smith, 2000). By examining the best practices of other firms, standards may be
established by which performance can be evaluated (Stevenson, 2005) and insights gained can
be used to improve an individual firms operations (Longenecker et al., 2003). Unfortunately, in
the case of internet customer service, no best practices literature currently exists.

METHODOLOGY

The objective of this study is to explore customer service practices among SMEs, particularly
those related to providing and enhancing customer service via the internet and to identify best
practices in the use of e-business applications for these firms. Critical to understanding these
issues is the definition of SME and the subcategories comprising it. In this study, SME and its
subcategories have been defined according to standards of the Commission of the European
Communities. This is because its size standards are more discriminating than those used by
the US Small Business Administration (SBA), which, in the USA, has been the traditional source
of such definitions. According to the European definition, a medium-sized firm has a maximum
of 250 employees, a small firm has a maximum of 50 employees, and a micro enterprise has
a maximum of 10 employees1. In the USA, the SBA has traditionally defined small businesses

1
Additional definition to these firm sizes: medium-sized firms experience a turnover of 50 million ECU and have a balance
sheet total of 43 million ECU; small-sized firms, a turnover of 10 million ECU and a balance sheet total of 10 million ECU;
micro firms, a turnover and a balance sheet total of less than or equal to 2 million ECU European_Commission (2003), Vol.
2004.

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140 N M Levenburg & H A Klein

as less than 500 employees. Although its size standards were recently revised to vary by indus-
try (as defined by the North American Industrial Classification System NAICS), with the
exception of the wholesale trade, the size maximum for most sectors remains at 500 employees.
In any case the European definition allows for finer distinctions than the SBA definition.
This research was part of a larger, more comprehensive study among small- and medium-
sized businesses in a region of a USA Midwestern state that is known for its rich history relating
to, and prominence of, locally owned small businesses. To carry out this more comprehensive
study, a six-page self-administered survey questionnaire was mailed to 4000 SMEs. A Dun and
Bradstreet database was used to select firms that were at least 5 years old, had five or more
employees and resided in the locale of interest.
The portion of the comprehensive survey supporting this research (see Appendix 1) was
divided into four separate sections designed to address the importance of customer service
and the use of e-business technologies to provide customer service and support. Using nom-
inal scales, Section I was comprised of nine questions that sought to obtain general business
and demographic information about a firm (e.g. industry, number of years in business, number
of employees, ownership status). Section II queried respondents about their business practices
with respect to eight customer service-related items (Narver & Slater, 1990). These items have
been traditionally used by customer service researchers to measure market (customer) orien-
tation and organizational culture (Heiens, 2000, Homburg & Pflesser, 2000; Hooley et al., 2000;
Matsuno & Mentzer, 2000; Slater & Narver, 2000). They were:

showing commitment to customers;


creating services/products that offer value to customers;
understanding customers needs;
having customer satisfaction as a major objective;
measuring customer satisfaction;
providing customers with follow-up calls/services;
various service/product divisions/departments working closely together to meet customers
needs; and
all units working together in offering value to the customers.
This section used an itemized rating scale to measure the extent of involvement with each
practice (1 = not at all involved, 5 = extremely involved).
Section III addressed the degree of importance that the firm placed on the use of 21 e-busi-
ness applications drawn from the literature (Soh et al., 1997; Carlson, 2000; Kolesar & Gal-
braith, 2000; Lee, 2001; Piccoli et al., 2001; Zeithaml, 2002; McGaughey, 2003). The chosen
applications represented a combination of those most frequently mentioned in the literature
and newer applications that appeared to be gaining momentum at the time the survey was
developed. The chosen applications were categorized into two groups, those that support cus-
tomer service activities, which were:

email current customers;


email prospective customers;
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Delivering customer services online 141

email customer service;


real-time online interactions;
online product demonstration;
online ordering;
online product delivery;
online order tracking;
target small or hard-to-reach markets;
enhance company image/brand;
online advertising; and
meet the demands of a large customer or supplier.
And those that do not support customer service activities:

email employees;
email support for channel partners;
find information about competitors;
find information about new sources of supply;
find new markets or customers;
find other marketing data;
general administrative uses;
participate in discussion groups; and
education/training.
This section used Likert-type scales to measure the importance of each item (1 = extremely
unimportant, 5 = extremely important). Section IV queried respondents concerning their per-
ceptions of the business impact (i.e. increased sales and net profit) as a result of internet usage
using a five-point itemized rating scale (1 = definitely untrue, 5 = definitely true). To encourage
potential respondents to participate, a summary copy of the study results was offered to all who
completed and returned the survey questionnaire.

FINDINGS AND DISCUSSION

A total of 461 responses were received, of which 395 were usable. Sixty-six firms were
excluded from the study: 50 failed to identify the size of their organization and 16 identified
theirs as a large organization (more than 250 employees). Although the response rate was
low (approximately 10%), it is similar to, or higher than, those obtained in other recent studies
focused on e-business in small firms (e.g. Thong, 1999; Pflughoeft et al., 2003; Grandon &
Pearson, 2004). Various reasons have been suggested for low response rates among this pop-
ulation, including the lack of relevance of the topic to the respondent, the perception that the
time spent on completing surveys does not add value compared with other tasks, the length of
the survey instrument, and change or closure of businesses because SMEs often suffer high
mortality rates (Grandon & Pearson, 2004). Additionally, the absolute size of the sample (395)

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142 N M Levenburg & H A Klein

Table 1. Size profile of sample

Internet user Overall sample

Size of organization n Per cent within size category n Per cent

Micro enterprise (010 employees) 162 70.2 231 58.5


Small (1150 employees) 113 90.5 125 31.6
Medium (51250 employees) 36 92.3 39 9.9
Total 311 100.0 395 100.0

Table 2. Level of involvement in customer-focused business practices among small- and medium-sized enterprises

Micro Small Medium

Factor Mean SD Mean SD Mean SD

Having customer satisfaction as a major objective 4.72 0.577 4.76 0.588 4.74 0.498
Showing commitment to customers 4.68 0.641 4.72 0.634 4.72 0.456
Creating services/products that offer value to customers 4.50 0.734 4.45 0.760 4.46 0.682
Understanding customers needs 4.56 0.664 4.60 0.698 4.49 0.683
All units work together in offering value to the customers 4.13 1.113 4.37 0.882 4.10 0.718
Various service/product divisions/departments work 3.95 1.197 4.19 0.927 3.87 0.923
closely to meet customers needs
Measuring customer satisfaction 3.78 1.065 3.72 1.113 3.77 1.087
Providing customers with follow-up calls/services 3.67 1.217 3.87 1.109 3.77 1.135
Scale: 1 = not at all involved, 5 = extremely involved.

is relatively large and compares favourably with those obtained in several prior studies [e.g. 166
(Thong, 1999); 67 (Poon, 2000)]. A sampling of early and late respondents using t-tests, as
advocated by Armstrong & Overton (1977) and others, found no significant differences in
responses, suggesting a low likelihood of a non-response bias.
As shown in Table 1, over 50% of responding organizations were micro enterprises. Among
the 395 SMEs, the mean firm age was 31 years. The majority of firms were family-owned
(88.1%), in their first generation (68.7%), and were headed by a male (86.5%) between the
ages of 45 and 54 years (38.7%). During the previous fiscal year, 43% reported revenues
under $1 000 000.

Customer service within SMEs

Across all firms, having customer satisfaction as a major objective was the most highly ranked
customer service business practice (see Table 2), with no significant differences found accord-
ing to firm size. This is not surprising because very few firms seek to establish a reputation
based on treating customers poorly. In fact, as noted by Mentzer et al. (1995), 50% of firms
studied establish corporate mission, vision and/or values statements that espouse high regard
for, and a fervent commitment to, customers.

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Delivering customer services online 143

Paradoxically, however, two items that most readily lend themselves to supporting this high-
est-rated practice (i.e. measuring customer satisfaction and providing customers with follow-up
calls/services) were rated the lowest. With means among all size groups below Somewhat
Involved (below 4.00), these two practices are fairly low priorities for most SMEs. This seems
odd because each could be easily implemented and measured objectively. For example, the
former could be tracked vis--vis customer satisfaction surveys and the latter by simply count-
ing follow-up telephone calls. This low rating is particularly unusual in the case of measuring
customer satisfaction as it is one very objective way to determine if the most important having
customer satisfaction as a major objective is actually being achieved.

SME best practices

Among the SMEs involved in the study, 311 of 395 (78.7%) indicated that their firm used the
internet for business purposes. Table 1 contains a profile by size of SME internet users.
Summary statistics on the importance of SMEs usage of the 21 e-business applications
listed in Section III of the questionnaire are shown in Table 3. Using ANOVA, testing for differ-
ences in means according to size categories was significant at P 0.05 for five applications,
including three customer service applications (email with current customers, email for cus-
tomer service and using the internet to meet the demands of a large customer or supplier). As
ANOVA is a flagging procedure, t-tests were then used to test for differences in means between
each size category for the flagged applications. Significant differences were found between
both micro and small firms as well as between micro- and medium-sized firms with respect to
these three customer service applications and two other applications, as shown in Table 3.
Only one significant difference was found between small- and medium-sized firms the use of
email with employees. In the case of all applications, means were highest among medium-
sized firms and lowest among micro firms, indicating that larger firms make more use of inter-
net technologies.
Thus, with only one exception (i.e. email with employees), all of the differences flagged by
ANOVA and confirmed via t-tests occurred between micro- and small- or medium-sized firms,
but not between small- and medium-sized firms. This suggests that firms with 10 or fewer
employees may do things differently.
To gain insight into possible reasons for this finding, cross-tabulation and chi-squared anal-
ysis was conducted between firm size and industry type. As prior work has demonstrated that
SMEs are predominantly engaged in retail or service industries (SBA Office of Advocacy,
2003), we wanted to find out how the firms in our sample fared in this regard and if the dif-
ferences we found would help shed light on the differences in application usage. The results
of this analysis are shown in Table 4. The Pearson chi-squared statistic was significant (X =
22.563, df = 6, Significance = 0.001).2 By inspection, one can see that micro firms, indeed, are

2
In order to conduct a valid chi-squared test, small and medium categories had to be combined because of low cell fre-
quencies among medium-sized firms (less than five) in four sectors: (1) services; (2) wholesaling and distribution; (3)
finance, insurance and real estate; and (4) other, violating a principle requirement of the chi-squared analysis (Malhotra
et al., 2004).

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Table 3. ANOVA for importance of internet applications among small- or medium-sized enterprises

Micro Small Medium

Internet application Mean SD Mean SD Mean SD F-Sig.

Customer service applications


Email current customers** 2.91 1.448 3.42 1.374 3.53 1.320 0.004
Email prospective customers 2.77 1.370 3.01 1.304 3.22 1.267 0.116
Email customer service*** 2.77 1.395 3.33 1.276 3.58 1.204 0.000
Real-time online interactions 1.76 1.047 1.56 0.921 1.74 1.010 0.245
Online product demonstration 2.09 1.208 2.15 1.338 2.19 1.142 0.856
Online ordering 2.41 1.350 2.71 1.456 2.33 1.219 0.157
Online product delivery 2.09 1.273 2.29 1.462 2.09 1.197 0.451
Online order tracking 2.27 1.317 2.26 1.392 2.17 1.159 0.893
Target small or hard-to-reach markets 2.80 1.388 2.64 1.285 2.81 1.091 0.596
Enhance company image/brand 3.25 1.385 3.59 1.295 3.47 1.055 0.108
Online advertising 2.17 1.240 2.04 1.144 2.22 0.989 0.569
Meet the demands of a large customer or supplier* 2.68 1.442 3.06 1.519 3.26 1.314 0.030
Other applications
Email employees** 2.32 1.367 2.87 1.449 3.47 1.444 0.000
Email support for channel partners* 2.30 1.375 2.73 1.186 2.88 1.250 0.008
Find information about competitors 3.03 1.285 2.95 1.196 3.08 1.131 0.794
Find information about new sources of supply 3.42 1.263 3.48 1.271 3.28 1.111 0.690
Find new markets or customers 2.98 1.364 3.00 1.227 3.08 1.131 0.913
Find other marketing data 3.05 1.300 3.16 1.130 3.17 1.108 0.718
General administrative uses 2.83 1.310 3.03 1.267 3.00 0.956 0.423
Participate in discussion groups 1.99 1.173 2.00 1.203 1.97 0.985 0.991
Education/training 2.66 1.306 2.72 1.289 3.17 1.248 0.106
Scale: 1 = extremely unimportant, 5 = extremely important.
Micro vs. small t-tests: *Sig. 0.05; **Sig. 0.01; ***Sig. 0.001.
Micro vs. medium t-tests: Sig. 0.05; Sig. 0.01; Sig. 0.001.
Small vs. medium t-tests: Sig. 0.05.
Sig., significance.

predominantly retail and service in nature; both of these are sectors where firms deal directly
with customers and where high levels of interpersonal contact may be the norm. For these
firms, the customer service that occurs through face-to-face transactions may be all that is
required to excel in the marketplace. On the other hand, small- and medium-sized firms rep-
resent a mixture of industries; in the case of these other industries, customer contact may be
less direct and the use of the more indirect e-business technologies more appropriate.
Instead of customer service, micro enterprises seem to use the internet for research; this is
demonstrated by the fact that the highest rated applications for micro firms were research-
related. Conversely, although using the internet to find new sources of supply is also important
to small- and medium-sized firms, both of these groups seem to place greater emphasis on
using the internet for customer service/value-enhancing applications, especially email with cur-

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Delivering customer services online 145

Table 4. Cross-tabulation for size of firm and industry sector (frequencies and column percentages shown)

Finance,
Wholesaling insurance
Size of and and real
firm Manufacturing Construction Retailing Services distribution estate Other Total

Micro 13 (36.1%) 33 (46.8%) 55 (67.9%) 41 (74.5%) 15 (44.1%) 14 (51.9%) 68 (61.3%) 228 (58.3%)
Small and 23 (63.9%) 25 (53.2%) 26 (32.1%) 14 (25.5%) 19 (55.9%) 13 (48.1%) 43 (38.7%) 163 (41.7%)
medium
Total 36 47 81 55 34 27 111 391

rent customers and email for customer service purposes, as evidenced by the higher means
on these items.
Although the above shows that most firms are making use of internet technologies in one
way or another, it does not mean that these technologies are used as much as they might be.
Despite a professed dedication to serving customers needs (Table 2), no internet application
(customer service-related or not) attained an importance rating of Somewhat Important (4.00/
5.00) or greater. Not only was this true at the aggregate level, but at the SME size-category lev-
els as well. Despite these indications of low usage, we wanted to determine if any positive ben-
efits seemed to be flowing to those companies that were using the internet for e-service. To
explore this, we then examined the relationship between the use of each e-business applica-
tion and perceived financial results (i.e. perceived increased revenue as a result of using the
internet and perceived increased profit as a result of using the internet). At the aggregate level
(i.e. all SMEs regardless of size), for perceptions of increased sales, ANOVA testing for differ-
ences in means revealed significant differences at the 0.05 level or higher for 19 of the 21 appli-
cations, including all customer service applications (see Table 5). Findings as they related to
perceptions of increased net profit were similar. At the aggregate level, for perceptions of
increased net profit, significant differences in means at the 0.05 level or higher were found in
20 of the 21 applications overall and 11 of 12 customer service applications (see Table 6). The
similarity in these findings were not surprising because sales revenue is one of the four vari-
ables that drive net income (Longenecker et al., 2003) and therefore is strongly related to profit.
Examining this relationship in our data showed that there was a moderate positive correlation
[r(318) = 0.529, P < 0.01] between perceived increased revenue as a result of using the inter-
net and perceived increased profit as a result of using the internet. This indicates a significant
linear relationship. Overall, these results suggest that, in general, when SMEs use the internet
to provide services to customers, the perception is that significant and positive results are
achieved. Firms implementing applications that facilitate sales and post-sale support, such as
email with prospective customers, online ordering, delivery, order tracking etc. (see Tables 5
and 6) seem to experience more successful performance.
Additionally, by examining the data as it relates to firm size it is noteworthy that these per-
ceived positive results are most pronounced for micro enterprises. When micro enterprises

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Journal compilation 2006 Blackwell publishing Ltd, Information Systems Journal 16, 135155
146 N M Levenburg & H A Klein

Table 5. ANOVA for importance of internet applications according to increased sales

Increased sales Sales did not increase

Micro Small Medium Micro Small Medium


Internet application n = 35 n = 27 n = 10 n = 117 n = 82 n = 25 F-Sig.

Customer service applications


Email current customers 3.43* 4.00* 3.40 2.75 3.24 3.60 0.002
Email prospective customers 3.37** 3.77*** 3.10 2.59 2.80 3.26 0.000
Email customer service 3.37** 3.96** 3.50 2.62 3.14 3.64 0.000
Real-time online interactions 2.20** 1.72 2.33* 1.60 1.50 1.56 0.000
Online product demonstration 2.94*** 2.52 2.80 1.81 2.06 2.00 0.000
Online ordering 3.23*** 3.16 3.00* 2.17 2.55 2.12 0.000
Online product delivery 2.94*** 2.52 2.50 1.82 2.21 1.96 0.000
Online order tracking 2.91*** 2.56 2.40 2.08 2.21 2.12 0.001
Target small or hard-to-reach markets 3.69*** 3.60*** 3.30 2.53 2.38 2.64 0.000
Enhance company image/brand 4.20*** 4.35*** 3.60 2.94 3.41 3.40 0.000
Online advertising 2.71*** 2.40 2.60 1.96 1.90 2.08 0.000
Meet the demands of a large customer or supplier 3.26** 3.80** 3.70 2.50 2.89 3.08 0.000
Other applications
Email employees 2.43 3.41* 3.40 2.32 2.78 3.56 0.132
Email support for channel partners 3.11*** 2.96 3.30 2.05 2.67 2.70 0.000
Find information about competitors 3.46* 3.15* 3.20 2.96 2.85 3.00 0.022
Find information about new sources of supply 3.89* 4.04 3.40 3.37 3.33 3.20 0.001
Find new markets or customers 3.89*** 3.85*** 3.40 2.77 2.71 2.96 0.000
Find other marketing data 3.65** 3.59* 3.30 2.92 3.02 3.12 0.000
General administrative uses 3.03 3.33 3.30 2.82 2.96 2.88 0.080
Participate in discussion groups 2.34* 2.40* 2.60* 1.85 1.87 1.72 0.000
Education/training 2.89 3.00 3.80 2.65 2.63 2.92 0.029
Scale: 1 = extremely unimportant, 5 = extremely important.
Increased sales vs. sales did not increase t-tests: *Sig. 0.05; **Sig. 0.01; ***Sig. 0.001.
Sig., significance.

extend their use of the internet above and beyond use for research to include communication
with customers and customer service, the results are striking: T-tests conducted between firms
experiencing perceived increases in sales/profits vs. no such increase revealed significant dif-
ferences with nearly all 12 customer service applications. The only exception was real-time
online interactions in the case of increased profits.
Similar, although less dramatic, results were found for small firms. These firms already seem
to attach a higher priority to using the internet for communication purposes, as evidenced by
generally higher means on email-related items (as shown in Table 3) compared with micro
firms. As indicated by the flagged, significant differences in Tables 5 and 6, gains seem to be
realized when these firms engage in email with current and prospective customers, email for
customer service purposes, as well as when they use the internet for online product ordering,

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Delivering customer services online 147

Table 6. ANOVA for importance of internet applications according to increased profits

Increased profits Profits did not increase

Micro Small Medium Micro Small Medium


Internet application n = 24 n = 22 n=4 n = 127 n = 87 n = 30 F-Sig.

Customer service applications


Email current customers 3.71** 4.38** 4.50 2.76 3.24 3.37 0.000
Email prospective customers 3.50** 4.00** 4.25 2.63 2.81 3.03 0.000
Email customer service 3.50** 4.19** 3.75* 2.66 3.17 3.53 0.000
Real-time online interactions 2.00 1.80 1.75 1.69 1.49 1.79 0.089
Online product demonstration 3.04*** 2.60 2.50** 1.90 2.09 2.13 0.000
Online ordering 3.50*** 3.75*** 2.75 2.19 2.49 2.27 0.000
Online product delivery 3.23*** 3.25** 2.25 1.88 2.10 2.03 0.000
Online order tracking 3.17*** 3.05* 2.50 2.08 2.16 2.13 0.000
Target small or hard-to-reach markets 3.83*** 3.50** 3.50 2.63 2.49 2.73 0.000
Enhance company image/brand 4.38*** 4.24 4.25 3.04 3.52 3.37 0.000
Online advertising 2.88** 2.40 2.25 2.00 1.93 2.23 0.001
Meet the demands of a large customer or supplier 3.54** 4.40*** 4.25 2.52 2.85 3.10 0.000
Other applications
Email employees 2.83 3.27 4.00 2.26 2.81 3.50 0.024
Email support for channel partners 3.13** 3.30 4.00 2.16 2.65 2.68 0.000
Find information about competitors 3.46 3.41* 3.75 3.02 2.84 2.93 0.006
Find information about new sources of supply 3.96* 4.14* 3.75 3.39 3.38 3.20 0.001
Find new markets or customers 3.96*** 3.91** 4.50* 2.80 2.80 2.87 0.000
Find other marketing data 3.71* 3.73 4.00 2.97 3.07 3.07 0.000
General administrative uses 3.08 3.73* 3.00 2.84 2.90 3.00 0.014
Participate in discussion groups 2.79*** 2.70* 2.25 1.80 1.87 1.90 0.000
Education/training 3.13 3.05* 4.00 2.61 2.66 3.07 0.019
Increased profits vs. Profits did not Increase t-tests: *Sig. 0.05; **Sig. 0.01; ***Sig. 0.001.
Scale: 1 = extremely unimportant, 5 = extremely important.

delivery, tracking and so on. Among medium-sized firms, the benefits of using internet appli-
cations appear to be more elusive. Here the only e-business applications that showed any rela-
tionship with perceived performance were (1) online ordering with perceived sales; (2) online
product demonstration with perceived net profits; and (3) engaging in email for customer ser-
vice purposes with perceived net profits. This relative lack of correlation may be a reflection of
the previous observation that larger firms may already be making more extensive use of inter-
net applications than their smaller counterparts, as evidenced by the higher means in Table 3.
Too, these firms may be more resource-endowed and able to place greater reliance on non-
internet applications, such as toll-free customer service telephone lines. Alternatively, larger
firms may be more involved than their smaller counterparts in resource-intensive, technology-
related initiatives (e.g. electronic data interchange). This would make it more difficult to
attribute gains in revenues or net profits to any single initiative.

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148 N M Levenburg & H A Klein

CONCLUSIONS

As use of the internet has flourished among business and consumer markets, some firms have
looked online to accomplish a variety of business purposes, including providing customer
service. However, few guidelines for successful e-service delivery have been established. In
examining the e-service behaviours of SMEs particularly as they relate to perceptions of finan-
cial success, a compelling case for using the internet to provide services to customers, espe-
cially for micro and small organizations has been made. Significant and positive benefits
accrue to those firms that have adopted the internet: Best practices in the use of e-business
applications as identified here include a host of customer service applications, among them,
using email to communicate with current and prospective customers, and using email for cus-
tomer service purposes.
As discussed by McGaughey (2003), there are two goals associated with customer rela-
tionship management, which are better meeting the needs of existing customers and attracting
and retaining new customers. Prior to making a buying decision, prospective customers,
according to the classical purchase decision model, often engage in a search for alternatives,
the extent of which depends largely on their understanding of the offering and their prior pur-
chase experience. The search process that these customers and potential customers inevita-
bly go through can be facilitated online not only by providing company and product information,
but also by taking initial steps to establish relationships with these customers. In particular,
real-time online interactions, although rated in this study among the lowest in importance, may
be especially useful in fostering relationships with new customers. Others have noted that
todays consumers seek engaging experiences online and seek to participate in service
encounters (Bettencourt, 1997; Keh & Teo, 2001). Email and real-time online interactions offer
outstanding opportunities for micro and small firms to simultaneously provide information/edu-
cation and build relationships with customers.
The data examined in this study also suggest that medium-sized organizations (51250
employees) are more experienced and sophisticated internet users; this is demonstrated by
comparatively higher means on the importance of both customer service applications and
other internet applications. For these firms, the perceived financial gains realized by using
internet applications are not so clear. However, it does appears that offering online ordering
capabilities has a positive impact on perceived sales, while online product demonstrations and
engaging in email for customer service purposes have positive impacts on perceived net
profits.

Limitations and implications for future research

One limitation of this research is the use of perceived increased revenue as a result of using
the internet and perceived increased profit as a result of using the internet as indicators of
company performance. Although the use of these variables implies that there may be a per-
ceived cause and effect relationship between the use of various internet applications and com-
pany performance, it cannot be taken as proof of such a relationship. An examination of the

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Delivering customer services online 149

actual cause and effect between internet usage and company performance is therefore an
area for future study.
As noted, a plethora of research exists that explores businesses use of the internet. Yet as
was found in this study, patterns of usage vary depending on firm size. This study has focused
on micro-, small- and medium-sized organizations with the majority of respondents represent-
ing family-owned micro enterprises. Because it seems likely that personality characteristics
(e.g. proactive vs. reactive) of owners/managers can influence the goals and strategic direction
in these organizations, it is likely that personality may also exert an impact on usage of internet
technology in family-owned enterprises. Consequently, one fruitful area of future study may be
the exploration of the impact of an owner/operators personality on the firms strategic use of
the internet for customer service purposes. Furthermore, as our goal was to focus explicitly on
SMEs usage of e-business applications for customer service purposes, differences between
family-owned vs. non-family firms was not addressed. To the best of our knowledge, this has
not yet been explored in the academic literature and suggests another area for future research.
Finally, it is also likely that variations on the use of e-business applications may relate to the
industry in which the firm competes, the manner of its competition (i.e. strategic orientation),
or even its cultural environment (e.g. USA vs. European or Asian countries). These issues sug-
gest other future research directions.
As noted by other researchers, because competitors also use information technology,
because new technologies are continually emerging and because customers are becoming
increasingly sophisticated and demanding (e.g. McGaughey, 2003), strategies must be fre-
quently re-evaluated and improved. Therefore, it is important to continually reassess customer
service measurement in online environments, and future studies along the lines of this
research must be re-initiated.
Finally, most firms recognize that a key to achieving long-term success is coordinating efforts
to achieve and manage customer service. Not surprisingly, this study found that SMEs profess
high levels of dedication to understanding customers needs and serving them well. Yet despite
apparent high regard for customers, most firms seem to attach a fairly low level of importance
to measuring customer satisfaction. One explanation for this seeming anomaly is that in estab-
lishing customer service programs, many small firms tend to access their effectiveness by
focusing on internal service-related activities (e.g. number of calls answered, average time of
customer interaction) rather than on the outcomes of those activities (e.g. increased customer
satisfaction) (Coates, 1991). This may be due to the fact that tracking internal activities is eas-
ier and more convenient to measure, particularly when these activities can be tracked mechan-
ically, whereas measuring customer satisfaction may entail tapping the services of external
marketing research professionals and incurring expenses beyond many SMEs marketing bud-
gets. Another explanation for this anomaly is that in SMEs the informal communication that
occurs between a company and its customers may be a sufficient gage of customer satisfac-
tion in the minds of company management; further measurement may seem superfluous. Nev-
ertheless, another fruitful area for research might be an exploration of the seeming reluctance
among SMEs to engage in measuring customer satisfaction, especially in light of the impor-
tance to these firms of customer satisfaction and loyalty.

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150 N M Levenburg & H A Klein

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Thong, J.Y.L. (1999) An integrated model of information agement Department at Grand Valley State University. She
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10, 323337. education.

APPENDIX 1: SMALL BUSINESS SURVEY

Directions: Thank you for completing this questionnaire. It has been designed so that you can complete it very quickly and
easily. Each section takes only a few minutes, and you need only check off your answers or jot down a number. A postpaid
return envelope has been included for your convenience. Please return your completed questionnaire in the enclosed
postpaid envelope by June 25.

As our thank you for your assistance, you can receive an Executive Summary of this study by providing your
name and address at the end of the survey.

Section I GENERAL INFORMATION


1. Which of the following best describes your business? (check one only)
a. Accounting/CPAs j. Gas Stations s. Radio & Television
b. Amusement & Entertainment k. Hotel & Motel t. Real Estate
c. Apartment, Mobile Home Parks l. Insurance u. Restaurants & Cafes
d. Architects & Engineers m. Investment/Brokerage Firm v. Retailing
e. Automobile Dealers n. Manufacturers & Processors w. Taverns
f. Auto Repair/Body Shops o. Non-Profit Organizations x. Transportation
g. Banks & S & Ls p. Physicians & Lawyers y. Wholesalers & Distributors
h. Business Consultants q. Printers z. Other
i. Construction r. Publishers

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Delivering customer services online 153

2. If you know, please provide your companys SIC code NAICS code
3. Where does your company produce its products or service? (check all that apply)
a. Kent or Ottawa Counties d. Great Lakes Region
b. West Michigan e. National
c. Statewide f. International
4. Where does your company sell its products or service? (check all that apply)
a. Kent or Ottawa Counties d. Great Lakes Region
b. West Michigan e. National
c. Statewide f. International
5. Is your business . . . ?
a. A Regular Corporation d. A Partnership
b. A Sub-S Corporation e. A Limited Liability Company
c. An ESOP f. A Sole Proprietorship
6. In what year was your business founded?
7. Approximately how many part time people does your company employ?
a. at your yearly peak b. at your yearly low
8. Approximately how many full time people does your company employ?
a. at your yearly peak b. at your yearly low
9. What are your companys approximate annual revenues?
a. Under $100,000 e. $10 million$24.9 million
b. $100 000$499,999 f. $25 million$49.9 million
c. $500 000$999,999 g. $50 million$99.9 million
d. $1 million$9.9 million h. $100 million+

Section II BUSINESS PRACTICES


10. How would you characterize your business strategy regarding your products or services?(check only one)
a. We stick to what we know how to do and do it as well or better than anyone else.
b. We are innovators and are willing to take the necessary risks of providing new products and services.
c. We do not want to be first in our industry to offer a new product or service, but we try to be close behind with a similar
product or service that is competitive.
d. We do not follow a specific program or plan for making us more competitive, although when we are faced with strong
threats, we definitely make changes.
11. Please indicate the extent to which your organization is involved in the following business practices. (Circle
the number that matches your response using a scale where 1 = Not at all Involved to 5 = Extremely Involved)

Not at All Extremely


EXTENT OF INVOLVEMENT IN YOUR ORGANIZATION: Involved Involved
Customer Orientation
a. Showing commitment to customers 1 2 3 4 5
b. Creating services/products that offer value to customers 1 2 3 4 5
c. Understanding customers needs 1 2 3 4 5

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154 N M Levenburg & H A Klein

d. Having customer satisfaction as a major objective 1 2 3 4 5


e. Measuring customer satisfaction 1 2 3 4 5
f. Providing customers with follow up calls/services 1 2 3 4 5
g. Promoting your firm as a family owned business 1 2 3 4 5
Competitor Orientation
h. People in charge of various services/product divisions discuss 1 2 3 4 5
competition information
i. People in charge of various services/product divisions respond rapidly to 1 2 3 4 5
competitors actions
j. Top managers discuss competitors strategies 1 2 3 4 5
k. Top managers target opportunities for competitive advantage 1 2 3 4 5
Inter-functional Coordination
l. Various service/product divisions/departments work close together to 1 2 3 4 5
meet customers needs
m. Various units share business information with each other 1 2 3 4 5
n. Business strategies are integrated among different units 1 2 3 4 5
o. All units work together in offering value to the customers 1 2 3 4 5
p. Different units/departments share resources with each other 1 2 3 4 5
12. Does your company currently have a Web site? (check only one)
a. YES
What is the address (URL) of your Web site? http://
When did your company first open its Web site? (month) (year)
b. NO
Do you anticipate having a Web site for your company within the next 6 months? YES NO
13. What was your companys approximate total dollar expense for Internet usage during the year 2000(including
Web site hosting, online advertising, etc.)? $ .
Against which account are your companys Internet usage expenses charged?
General & Ad. Manufacturing/Operations
Sales and Marketing Other

Section III E-BUSINESS PRACTICES


14. Indicate the degree of importance your organization places on each of the following uses of the Internet.(Cir-
cle the number that matches your response using a scale where 1 = Extremely Unimportant and 5 = Extremely Important)
Extremely Extremely
IMPORTANCE IN YOUR ORGANIZATION: Unimportant Important
a. E-mail current customers 1 2 3 4 5
b. E-mail prospective customers 1 2 3 4 5
c. E-mail customer service 1 2 3 4 5
d. E-mail support for channel partners 1 2 3 4 5
e. E-mail employees 1 2 3 4 5
f. Find information about competitors 1 2 3 4 5

2006 The Authors


Journal compilation 2006 Blackwell publishing Ltd, Information Systems Journal 16, 135155
Delivering customer services online 155

g. Find information about new sources of supply 1 2 3 4 5


h. Find new markets or customers 1 2 3 4 5
i. Find other marketing data 1 2 3 4 5
j. Enhance company image/brand 1 2 3 4 5
k. Target small or hard-to-reach markets 1 2 3 4 5
l. Online advertising (e.g. banner ads) 1 2 3 4 5
m. Realtime online interactions (i.e. chat rooms) 1 2 3 4 5
n. Online product demonstration 1 2 3 4 5
o. Online product delivery 1 2 3 4 5
p. Online ordering 1 2 3 4 5
q. Online order tracking 1 2 3 4 5
r. Meet the demands of a large customer or supplier 1 2 3 4 5
s. General administrative uses (e.g. travel reservations) 1 2 3 4 5
t. Participate in discussion groups 1 2 3 4 5
u. Education/training 1 2 3 4 5
v. Other (please specify:) 1 2 3 4 5

Section IV E-BUSINESS RESULTS


15. Which of the following has been a result of your use of the Internet? (Circle the number that matches your
response using a scale where 1 = Definitely Untrue to 5 = Definitely True)
Definitely Definitely
RESULT: Untrue Unsure True
a. Increased sales 1 2 3 4 5
b. Reduced administrative costs 1 2 3 4 5
c. Reduced direct costs to create product or service 1 2 3 4 5
d. Reduced shipping costs 1 2 3 4 5
e. Reduced advertising expenses for traditional media 1 2 3 4 5
f. Increased net profit 1 2 3 4 5

Thank-you for completing this questionnaire!


Please use the enclosed postpaid envelope and return your completed questionnaire.

2006 The Authors


Journal compilation 2006 Blackwell publishing Ltd, Information Systems Journal 16, 135155