Description
Switching costs refer to how much money and time it would cost a company to switch from one provider of a service or product to another. If you are a provider, you want your customers to face high switching costs, thus increasing the odds they will stay with you.
MARKETING REPORTS ON SITTING ON THE FENCE BETWEEN MANAGEMENT AND MARKETING
A Strategic look at Psychological Switching Costs
Abstract
With the Introduction of the internet and human technological advancement, our everyday lives have changed dramatically over the past 20 years and because of this, how we communicate, form social networks and purchase or sell goods have also developed. In the light of this, we have completed this thesis which concerns the influence of the internet and the possibilities of forming long lasting relationships between businesses and customers through what we have described as 'Locking in' the customer. This is done by forming 'Psychological Switching Costs' that make the cognitive process of switching too expensive or un-wanted by the customer. In order to develop an understanding of this we saw it as prudent to interview senior managers of businesses that operate mainly on the internet to discover if they attempt such strategic moves in, 'Locking in' customers. Thus forming the research question; How are Companies based on the internet using Psychological Switching Costs as a strategy to Lock in the customers? The process by which the information was collected was through a qualitative method and semi-structured interviews. We found from the respondents that were interviewed that when it comes to operating a business on the internet it is important to consider, Transparency, Twoway communication, Simplicity, Agility and Flexibility in creating a loyal customer who is positively locked in. These were the strategies considered by the respondents to have an effect on customers. One of the most interesting points that were made was that if the customer was locked in to the business, the business did not have to be as dynamic. Thus, according to the respondents, Psychological Switching Costs do have an influence on how they form strategy to Lock In customers. In that it can be beneficial to attempt to Lock in customers rather than develop other Dynamic Capabilities. This factor seems very relevant when considering communication, agility and flexibility, in that by forming relationships and strategies directly to the customer these companies are creating something that is difficult to substitute, unimitable for their competitors and convenient to the customer.
Keywords: Lock In, Psychological Switching Costs, Dynamic Capabilities
Table of Contents
1. Introduction ......................................................................................................................................... 7 1.1 Background .................................................................................................................................... 7 1.2 R esearch Problem .......................................................................................................................... 9 1.3 Proble m Statement ....................................................................................................................... 9 1.4 Purpose ...... .................................................................................................................................... 9 1.5 Clarification ........ ......................................................................................................................... 10 1.5.1 Inside vs. Outside perspective .............................................................................................. 10 1.5.2 Our Perspective of Lock?in ................................................................................................... 10 1.5.3 Switc hing Costs vs. Psychological Switching Costs ............................................................... 11 2. Method .............................................................................................................................................. 12 2.1 Preconceptions ............................................................................................................................ 12 2.2 C hoice of Subject ......................................................................................................................... 13 2.3 Method ological Assumptions ...................................................................................................... 13 2.3.1 View of Reality ...................................................................................................................... 13 2.3.2 View of knowledge ............................................................................................................... 14 2.3.3 Realit y and Knowledge Conclusion ...................................................................................... 14 2.4 Research Strategy ........................................................................................................................ 15 2.5 S cientific Approach ...................................................................................................................... 16 2.6 Resear ch Design and Data Collection .......................................................................................... 16 2.7 Choice of So urces ........................................................................................................................ 18 2.8 Presentation of res pondents ....................................................................................................... 20 2.8.1 Katshing ................................................................................................................................ 20 2.8.2 Prisjakt .................................................................................................................................. 20 2.8.3 Disc shop ............................................................................................................................... 20 2.8.4 RebelBetti ng ......................................................................................................................... 20 2.8.5 Company X ....... ..................................................................................................................... 21 2.9 Conducting Interviews ................................................................................................................. 21 2.10 L iterature Search ....................................................................................................................... 21 3. Theoretical Framework ..................................................................................................................... 22 3.1 Strategy ....................................................................................................................................... 22 3.2 Dynamic Capabilities ................................................................................................................... 23 3.3 Switc hing Costs ............................................................................................................................ 24 3.3.1 Procedural Switching Costs .................................................................................................. 26 3.3.2 Social Switching Costs and Benefits Loss Costs .................................................................... 26 3.3.3 Rela tional Benefits ............................................................................................................... 26 3.3.4 Calculative Commitment ...................................................................................................... 27 3.3.5 Conclusions for Commitment ............................................................................................... 28 3.4 First Mover Advantage ................................................................................................................ 29 3.5 Tr ust Development: "Price does not rule the web; trust does" .................................................. 29 3.6 Interface Design and Customer Experience in the Online Environment ..................................... 31 3.7 The Value Cha in ........................................................................................................................... 32 3.8 Competitive Advanta ge ............................................................................................................... 32 3
3.9 Critique ........................................................................................................................................ 34 3.10 Conclusion of the Theoretical Framework ................................................................................ 35 4. Empirical Data & Analysis .................................................................................................................. 37 4.1 Strategy and Dynamic Capabilities .............................................................................................. 37 4.1.1 Discshop ............................................................................................................................... 37 4.1.2 Katshing ................................................................................................................................ 38 4.1.3 Rebel Betting ......................................................................................................................... 39 4.1.4 Prisjakt ....... ........................................................................................................................... 41 4.1.5 Company X ........ .................................................................................................................... 41 4.1.6 Combined Analysis of Strategy & Dynamic Capabilities ....................................................... 43 4.2 Switching Costs ............................................................................................................................ 44 4.2.1 Discshop ............................................................................................................................... 44 4.2.2 Katshing ................................................................................................................................ 45 4.2.3 Rebel Betting ......................................................................................................................... 46 4.2.4 Prisjakt ....... ........................................................................................................................... 47 4.2.5 Company X ........ .................................................................................................................... 48 4.2.6 Combined Analysis of Switching Costs ................................................................................. 49 4.3 Trust ............................................................................................................................................. 50 4.3.1Discshop ................................................................................................................................ 50 4.3.2 Katshing ................................................................................................................................ 50 4.3.3 Rebel Betting ......................................................................................................................... 50 4.3.4 Prisjakt ....... ........................................................................................................................... 51 4.3.5 Company X ........ .................................................................................................................... 51 4.3.6 Combined Analysis of Trust .................................................................................................. 51 4.4 First Mover Advantage ................................................................................................................ 52 4.4.1 Discshop ............................................................................................................................... 52 4.4.2 Katshing ................................................................................................................................ 53 4.4.3 Prisja kt .................................................................................................................................. 53 4.4.4 Company X ............................................................................................................................ 54 4.4.5 RebelBetting .... ..................................................................................................................... 54 4.4.6 Combined Analysis of First Mover Advantage ..................................................................... 55 4.5 Interface Design ........................................................................................................................... 56 4.5.1 Discshop ............................................................................................................................... 56 4.5.2 Katshing ................................................................................................................................ 56 4.5.3 Prisja kt .................................................................................................................................. 57 4.5.4 Company X ............................................................................................................................ 57 4.5.5 RebelBetting .... ..................................................................................................................... 58 4.5.6 Combined Analysis of Interface Design ................................................................................ 58 4.6 Value Chain .................................................................................................................................. 59 4.6.1 Discshop ............................................................................................................................... 59 4.6.2 Katshing ................................................................................................................................ 59 4.6.3 Rebel Betting ......................................................................................................................... 59 4.6.4 Prisjakt ....... ........................................................................................................................... 59 4.6.5 Company X ........ .................................................................................................................... 60 4
4.6.6 Combined Analysis of the Value Chain ................................................................................. 60 4.7 Competitive Advantage ............................................................................................................... 61 4.7.1 Discshop ............................................................................................................................... 61 4.7.2 Katshing ................................................................................................................................ 61 4.7.3 Rebel Betting ......................................................................................................................... 62 4.7.4 Prisjakt ....... ........................................................................................................................... 63 4.7.5 Company X ........ .................................................................................................................... 63 4.7.6 Combined Analysis of Competitive Advantage .................................................................... 64 4.8 Theoretical Recap ........................................................................................................................ 65 4.9 R evised Model ............................................................................................................................. 66 5. Discussions & Conclusions ................................................................................................................. 68 5.1 Sub?purpose Questions answered .............................................................................................. 68 5.2 Str ategy and Dynamic Capabilities .............................................................................................. 68 5.3 Switchi ng Costs ............................................................................................................................ 69 5.4 Trust ............ ................................................................................................................................. 70 5.5 First Mover Adva ntage ................................................................................................................ 70 5.6 Interface Design .......... ................................................................................................................. 70 5.7 The Value Chain ................... ........................................................................................................ 71 5.8 Competitive Advantage ................. .............................................................................................. 71 5.9 Contribution to Theory ............................ .................................................................................... 71 5.9.1 Communication Influences Dynamic Capabilities ................................................................ 71 5.9.2 Flexibility and Agility ............................................................................................................. 72 5.9.3 Tran sparency ........................................................................................................................ 72 5.9.4 Are Companies based on the internet using Psychological Switching Costs as a Strategy to Lock In the customers, and if so how? .......................................................................................... 72 5.10 Further studies .......................................................................................................................... 73 6. Qua lity Criteria .................................................................................................................................. 74 6.1 Limitations ................................................................................................................................... 74 6.2 V alidity equals Credibility ............................................................................................................ 75 6.3 Reliabili ty equals Dependability .................................................................................................. 75 6.4 Confirmability .............................................................................................................................. 76 6.5 Authenticity ........... ...................................................................................................................... 76 6.6 Grounded Analysis ........ ............................................................................................................... 76 7. References ......................................................................................................................................... 77 7.1 Scientific Journals ........................................................................................................................ 77 7.1 B ook References .......................................................................................................................... 79 7.2 Other References ......................................................................................................................... 80
Appendix 1 Cover letter and interview guide ..................................................................................... 82 Appendix 2 Quotes in original language ............................................................................................. 88 Appendix 3 Introductory email ........................................................................................................... 99
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Figures
Figure 1. Different types of Switching Costs according to Burnham et al. (2003, p. 112) .................... 24 Figure 2. Switching Costs and its components ..................................................................................... 29 Figure 3. Ps ychological Strategies in locking in customers ................................................................... 35 Figure 4. Strategy & Dynamic Capabilities ............................................................................................ 43 Figure 5. Switching Co sts ....................................................................................................................... 49 Figure 6. Trust ..................... ................................................................................................................... 52 Figure 7. First Mover Advantage ........................................................................................................... 55 Figure 8. Interface Design ..................... ................................................................................................. 58 Figure 9. The Value Chain .............................. ........................................................................................ 60 Figure 10. Competitive Advantage .......................... .............................................................................. 64 Figure 11. Revised Model; Psychological Strategies in loc king in customers........................................ 66
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1. Introduction
In this chapter we explain the outline of our research area and why we feel it is relevant in the specific context of E-business and the influence of Switching Costs. The chapter will give examples of existing knowledge in Customer Loyalty and Switching Costs, as well as information about the development of commerce over the internet from Business to Customer (B2C), thus showing the importance of creating relationships and the relevance of combining these factors within a business context.
1.1 Background
The introduction of the internet in our everyday lives has had a tremendous effect on our behaviour and the way we as humans interact. Okin (2005, p. 17) discusses it in terms of an internet revolution by the means of how it has radically altered the way we communicate and form social structures in the virtual environment. Furthermore, Okin (2005, p. 17) argues that the internet has had an empowering effect on humans by enabling us to access information and obtain knowledge from a variety of resources that we previously could just imagine. However, for organisations and industries this transformation has not always been a smooth ride. The fast change that the internet revolution has brought with it has resulted in that organisations as well as legislation have had trouble adopting to this new and fast changing environment, as DeMark & Harcourt (2004, p. 9) discuss, rendering many business models obsolete. One example of this phenomenon is the debate regarding file sharing and how it to a large extent has affected the entertainment industry in both Sweden and elsewhere. As the CEO of Spotify, Daniel Ek reflects; "When I launched Spotify, I felt there was an inconsistency between how people consumed music and the way the business model worked" (IFPI Digital Music Report, 2010, p. 14). This exemplifies the significance for organisations in today's environment to be dynamic and able to quickly adapt their business models to new technical and social advances. Furthermore, it shows that companies today are increasingly having to use the internet to provide customers with their products and services, whether a small local business or a large international corporation. It is in the interest of all companies to invest in many aspects of ecommerce, from Marketing to Corporate Social Responsibility positioning. These factors mean it is an inevitability that a prospective customer is more likely to, and more able to do research on the products available as there is now a wealth of information that is easily accessible through the internet. There are companies that know how to use the internet to their own ends as a stage for gaining information on customers and even obtaining new innovative ideas from the development of online communities. The internet gives people the opportunity to be active in the development of the business as well as useful information given to the companies (Sawhney, 2002, p. 2). A great example of this is eBay and the online forums developed so that an interactive community can develop ideas for how to improve the services and the business offerings. This is also seen as a service which helps in customer retention. eBay which operates solely on the internet; in terms of generating income and e-commerce business; eBay had a turnover of sixty billion US dollars in 2008 (eBay 2009). In Sweden alone the business done on the internet and post order from January 2009 to November 2009 is in excess of one billion Swedish crowns (Statistiska Centralbyrån). This is
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quite a considerable marketplace and as such it is important for a company to have some consideration as to how much buyer power the customer has when making an internet purchase and the possible revenues from operating successfully in the e-commerce market. To fully exploit the internet in terms of customer satisfaction and locking in of the customer, businesses need to plan a system where not only is their product or service more desirable through, among other factors, the four P's of Marketing. But also committing customer's through other psychological methods of retention, such as Switching Costs. According to Johnson, Scholes & Whittington, (2008, p. 235) this can be a significant influence on a customer, where "the benefits of switching may simply not be worth the cost or risk". As seen from eBay, whether or not some focused planning was implemented, the relationships that eBay build are having a very positive influence on the bottom line for investors and the business. Further to this is the realisation of the value of lifetime customers whether businesses or individuals. Kotler, Wong, Saunders & Armstrong (2005, p. 474/5) express the importance of retaining customers and that companies go to great lengths to entice customers and create good relationships, even making loses in order to Lock In the consumer. One of the marketing strategies used by companies in locking in the consumer is Relationship Marketing, andthrough building relationships a degree of Customer Loyalty is developed (Kotler et al., 2005, p. 476). This process can be developed and controlled through Customer Relationship Management (CRM) which is a process of gathering information at every point of contact with a customer and developing a profile so that the relationship can be built up (Kotler et al., 2005, p. 481). From 2001 to 2006 the use of CRM technology was expected to increase from 9.7 billion to 16.5 billion US dollars (Maddox, 2002, p. 2). We can therefore see the importance of using strategies in planning the locking in of customers by a company, as mentioned when considering eBay. We also see a connection with a company's ability to create high Switching Costs as a strategy. Where the Core Competence are concerned with a company's ability to create a Rare, Un-inimitable, Non-substitutable and Valuable products or services to the prospective customer, these factors serve as giving a firm a Competitive Advantage. (Johnson et al., 2008, p. 102/3). However the Core Competences do not come from the product or service itself but rather the underlying influences and controls of management in operating the business to such ends. As said by Prahalad & Hamel (1990, p. 82) "The diversified corporation is a large tree. The trunk and major limbs are core products, the smaller branches are the business units; the leaves, flowers, and fruit are the products. The root system that provides nourishment, sustenance, and stability is the core competence. You can miss the strengths of competition by looking only at their end products, in the same way you miss the strength of a tree if you look only at its leaves." Switching Costs have gained more and more recognition as a relevant way of locking in the customers and influencing them to continue their relationship with the company. As both Jones, Reynolds, Mothersbaugh & Beatty (2007, p. 335, 350/1) and Vázquez-Carrasco & Foxall (2006, p. 367, 375/6) discuss there are, however, positive as well as negative effects associated with Switching Costs. Switching Costs that are negative in their nature generally are based on barriers trying to Lock In the customer to the organisation. Although proven to increase customer retention, they have often gained other negative effects such as bad Word of Mouth (WOM). Positive Switching Costs are on the other hand based upon the creation of
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relationships and social bonds that make the customer want to stay with the organisation. Positive Switching Costs achieve this by creating a feeling of control and choice where the customer perceives the choice to stay with the organisation to be made on his or her ownterms, instead of feeling locked in by the organisation. These types of social and psychological barriers have proven to be more effective when concerning customer retention and have also resulted in greater customer satisfaction (Jones et al., 2007, p. 350/1; VázquezCarrasco & Foxal, 2006, p. 375/6). Consequently, we argue, as do Vázquez-Carrasco and Foxall (2006, p. 375), that these barriers can be particularly useful to organisations because they are hard for competitors to imitate. This realization is of course even more relevant in today's internet environment where competition has been considered to be "just a click away" (Chen & Hitt, 2002, p. 257; Porter, 2001, p. 68) due to the low physical search costs in this environment (Balabanis et al., 2006, p. 217) as well as the very limited person to person interactions and relationships between the organisation and the customer (Reichheld &Schefter, 2000, p. 107). Based on the discussion above, we argue that it is very important for an organisation to build and maintain Psychological Switching Costs. This is especially important in the internet environment that has characteristics of very little interpersonal relationships inherent in the market.
1.2 Research Problem
We are thus investigating the specific significance of one aspect of Customer Loyalty and Retention and the locking in effects of Psychological Switching Costs for clients; to the extent of how business operating on the internet plan to influence this factor. We argue that by implementing strategic plans to influence consumer's Switching Costs on a psychological level, companies will be able to create a more valuable customer with a long customer lifetime. We see this as an important strategy of an organisation and as such a major Core Competence for a firm to be successful. Thus, through specific strategies other than Product, Price, Place and Promotion, companies will be able to not only reduce costs by operating on the internet. But use the internet to collaborate "with customers to co-create value" as consumer have more power and are more demanding (Sawhney, 2002, p. 2). Therefore, the intention of this thesis is to recognise this importance of planning to influence Switching Costs as well as attempt to understand the focus of companies considering such strategies. With the growth of e-commerce in Sweden and the rest of the world, we argue that the importance of such strategies can have significant effects on Customer Loyalty, specifically Psychological Switching Costs and therefore should be better realised, which leads us to the following research question;
1.3 Problem Statement
Are Companies based on the internet using Psychological Switching Costs as a Strategy to Lock In the customers, and if so how?
1.4 Purpose
The aim of this study is to asses if companies consider the effects of Psychological Switching Costs and from the companies interviewed, how does this influence the strategic processes of the company? In order to answer the problem statement we will consider these following subpurposes to this study, and they are: If senior managers are using Psychological Switching Costs, do they see it as important?
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Do they see the difference between Positive and Negative Switching Costs? How important for the managers are, Trust, First Mover Advantage, Design and The Value Chain in developing Psychological Switching Costs? Do senior managers see Psychological Switching Costs as giving them a Competitive Advantage?
1.5 Clarification
Due to the nature of this study we felt it prudent to discuss and clarify specific points concerning the concepts and the meanings that are referred to in this study. The reason for this is to help you as the reader to gain an understanding of how we approach this study when we discuss 'Switching Costs' and 'Locking In'.
1.5.1 Inside vs. Outside perspective
Traditionally, Switching Costs are perhaps most known and recognized through Michael Porter´s Five Forces framework; The Five Competitive Forces That Shape Strategy which are used to analyze the attractiveness of a market (Porter, 2008). As Bengtsson, Eriksson &Wåhlin (2009, p. 128/9) discuss; this type of framework has had a substantial impact in the field of management when utilizing an outside-in perspective of the organisation, meaning that it analyzes the outside world to see how the organisations are affected by their surroundings. In our research, however, we employ a different perspective and investigate Switching Costs from an inside-out perspective where we have chosen to look at the organisation and how it uses its strategy, resources and its capabilities to impact the outside world focusing specifically on Switching Costs (Bengtsson et al., 2009, p. 128/9). This distinction between the outside-in and the inside-out perspective is important to consider when reading our thesis to better understand the choices that we make throughout the study.
1.5.2 Our Perspective of Lock?in
A frequent recommendation with regard to strategy in service firms, according to Jones et al., (2007, p. 335), is that they should lock customers in to a relationship by increasing their perception of Switching Costs. One can assume that the term Lock-In has quite a negative feel to it as it implies that one should physically and mentally lock-in the customers into a relationship and these types of barriers are in fact connected to negative effects if the customer decides to end the relationship (Vázquez-Carrasco & Foxall 2006, p. 369). The negative aspects have led to a discussion among scholars arguing how valuable these types of barriers really are. There are however, two sides of the same coin. Therefore, this discussion among scholars has evolved into the notion of two different perspectives and that is; barriers can be both positive and negative. Negative barriers are seen as to try and Lock In the customer, while positive barriers aim to create constructive obstacles that make the customer want to stay with the organisation (Jones et al., 2007, p. 350-351 & VázquezCarrasco & Foxall 2006, p. 369/375-376). For the purpose of this study, our perspective of Lock-in is that locking in a customer, when used the right way, is that of a positive effect on the organisation and their relationship to the customer. This line of thought is considered throughout this thesis and will be developed further in the theoretical framework regarding positive and negative Switching Costs. We
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therefore consider it an important aspect to keep in mind and reflect upon right through the thesis as it has been a base for the choices that we make in our research.
1.5.3 Switching Costs vs. Psychological Switching Costs
For the purpose of this thesis we have chosen to adopt a definition of Switching Costs made by Jones et al. (2002, p. 441) which states that Switching Costs are "the perceived economic and psychological costs associated with changing from one alternative to another". As made clear from this definition; Psychological Switching Costs are one part of the broader concept of Switching Costs and are associated with the perceived mental barriers when changing from different alternatives. The concept of Switching Costs will be further developed in the theoretical framework; however, to be able to comprehend the choices that we make, this distinction is important to keep in mind throughout the thesis. We therefore want to make it clear that it is Psychological Switching Costs that is the main focus of this thesis, not the broader concept of Switching Costs.
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2. Method
In this chapter we explain our approach to producing this thesis and the methods used so as to give the opportunity for our work to be contested. We present our preconceptions that influence us as writers, as well as our reasoning behind choosing this area to study. Further to this we will address our methodological position when considering our views on knowledge and reality. The strategy of how we conducted our research will be explained and how we considered our approach to theory. Thus showing the line of thought that we have followed and why; so as to detail how we have completed our thesis and therefore justify our choice of method (Saunders, Lewis & Thornhill, 2009, p. 43).
2.1 Preconceptions
In the interest of giving a true picture of how we have completed this study it is important to recognise that we as individuals influence the outcome of our study. Our preconceptions affect how the data is collected, what data is collected, as well as how it is analysed. Therefore the information held within this chapter should be considered throughout this study. The reasons for this are to increase the exposure of our perspective to this subject area and where these preconceptions have come from. Therefore our interpretive approach in this study may well influence its outcome (Olivier, 2004, p. 14). However, steps have been taken to show transparency in our work which is further discussed in Chapter 6. Our understanding of the area in which we are conducting this research stems from our social background, previous education and life experiences. To give a somewhat objective view of the subject we both felt it to be beneficial to complete the research as a pair so that the thesis will not be one-sided or too narrow or broad in scope. Both of us have studied Business Administration, where we have completed our Bachelor studies, Laurence specialising in Service Marketing and Jonas in Accounting/Marketing. We are now completing our final term where we have chosen Management as our Post-Graduate subject area. The interest for this specific area stems from our discussion on what topic would best represent an interesting and relevant area of study within this field. Through our conversations we noted a difference in thought processes to how we use the internet when going to purchase goods or services. One of us is more reluctant and the other is more willing, both in the sense to change supplier and purchase goods. Further to this was the authors' realisation of the importance of companies operating at some level on the internet to be a successful organisation. Through the discussions in developing this study, both of the authors found that the age gap and the fact that they are from different countries as influential in coming to a research topic that they found relevant and interesting. The aim of the study grew from these differing perspectives where the age and cultural difference gave an enriching and interesting alternative viewpoint. Laurence being from England and ten years older than Jonas who comes from Sweden has inevitably impacted on the differing points of view. Furthermore the authors have different experiences in their working lives. Jonas has been working within the telecommunication sector for a number of years as his summer job whilst completing his studies and Laurence working in the service sector. An example of where their opinions differs has been in the use of purchasing goods on the internet, firstly Laurence has a distinct lack of trust for purchasing on the internet, but when he does find a site that he is comfortable with he sticks to it; whereas Jonas has no trouble switching to another provider or buying things over the internet.
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From these differences the authors have experienced using the internet as a tool to purchase goods and services in different ways. These differing perspectives have developed the authors' interest in gaining an understanding of companies operating on the internet and how they manage the Psychological Switching Costs to keep their customer base.
2.2 Choice of Subject
Over the past few years it has become increasingly important for companies wishing to be successful to have some form of online interface for prospective and existing customers. As Ives & Learnmonth (1984, p. 1193) discuss, the use of technology is seen to develop a competitive advantage and that it has had a distinct effect on businesses and how they develop their strategies. "How a firm develops and sustains a competitive advantage over its industrial rivals is a central issue for the field of strategic management" (Roland, Patterson & Ward 2009, p. 301). However our understanding is that it has gone further, in that it is no longer an advantage but a necessity to function as a business. Therefore companies have to take it to a higher level in so far as they must utilise such tools as Psychological Switching Costs as a barrier and as such a Competitive Advantage. As seen in the following theoretical chapter of this thesis, there is a substantial amount of theory covering Switching Costs, Dynamic Capabilities and its influence on E-business. However there seems to be little research concerning firms using Psychological Switching Costs as creating Competitive Advantage on the internet, it seems that this connection has not been made from a theoretical perspective. Therefore part of what we are examining is if companies are aware of the usefulness of such activities and if they attempt to implement such strategies to gain the Competitive Advantage. We see that creating Psychological Switching Costs as one area in which companies can create a Competitive Advantage. From this the ability to Lock In customers can be achieved in either a positive or negative way so that they continue to use the specific provider.
2.3 Methodological Assumptions
Data and theory collection as discussed previously (Chapter 2.1), is considered from differing perspectives according to our views on knowledge and reality. The fundamental factor being that our Ontological (view of reality) and Epistemological (view of knowledge) standpoint will affect the outcome of this study.
2.3.1 View of Reality
The understanding of the view of reality develops into two lines of thought from the world of philosophy. Where Ontology describes the "fundamental nature of the world and what it means to exist in that world" (Olivier, 2004, p. 28). The two extremes of Ontology are; Objectivism, which as the world implies, objective in approach, meaning that social phenomena is independent of social interaction and constant. Whereas, Constructionism is that these social phenomena are influenced by individuals and they are not constant (Bryman, 2008, p. 19). Saunders et al., (2008, p. 111) points out that it is the perceptions and consequential actions of social actors that determine reality in the context of Constructionism (also known as Subjectivism). Thus to be a Constructionist is to believe that an individual sees, in effect, what they want to see of the world around them. It is also seen that we as researchers view a specific point of social reality when completing some form of study, therefore through this reality, knowledge is not definitive (Bryman, 2008, p. 19). Bryman &Bell (2003, p. 45) also discuss this factor as the "experimenter effect" where the researchers create a bias by influencing their preferred research outcome.
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A simple example for individuals thought processes on reality and a well known metaphor for how people view things positively or negatively is; "it is better to see the cup as half full rather than half empty", implying that an individual's grasp on a situation may differ to another. Where one has a positive outlook that they still have half a cup left, someone of a negative disposition will be missing the half that is now gone. Whereas a believer in Objectivism would see the cup from the perspective of neither the positive or negative aspect but rather that it contains liquid of which half is still there and half is gone. For the purposes of this study we see our approach as Constructionist as an important factor because of the constant technological advancements happening today and how it effects business strategy as described by Rolland et al., (2009). Accordingly we have developed this study following this approach where the aim is to analyze the opinions of company managers (at a point in time) who decide the strategies for influencing Psychological Switching Costs. We see reality as constantly changing and temporal, and that we as well as our respondents may influence how reality is constructed and how reality is seen at a specific moment in time. In other words social reality in its true context cannot be interpreted completely and our thesis is based on reflection in a specific context that is not the only truth. Therefore we see ourselves as Constructionist, not Objectivist when considering our view of reality.
2.3.2 View of knowledge
The understanding of knowledge can also be seen from differing perspectives. Epistemology as it is known is the theory of knowledge and at what point should something be considered as knowledge (Bryman, 2008, p. 13). Easterby-Smith, Thorpe & Lowe (2002, p. 31) describe it as a "general set of assumptions about the best way of inquiring into the nature of the world". Thus Epistemology concerns how knowledge is actualised and to what extent can it be considered as true. The main theme being how and in what context knowledge is collected and analysed; the first assumption is that knowledge should be collected or rather observed in the same way as the traditional approach of observing natural science, known as Positivism. That is observing something in the social world should be objectively measured (Bryman, 2008, p. 13). Where the social world is seen as concrete and external, also that knowledge can only be considered as knowledge specific to the phenomena being observed (Easterby-Smith et al., 2002, p. 32). Alternatively a subjective approach known as Interpretivism, allows the acceptance of knowledge to be influenced or interpreted by the researcher and respondent. The understanding being that social sciences are fundamentally different to the natural sciences and therefore require different procedures and study techniques so as to reflect the distinctiveness of humans. The strategy being, that differences between the sciences means that the researcher must grasp the subjective meaning of the social action they are observing (Bryman, 2008, p.15/6). Thus we can consider the "Hawthorne Study" where researchers carrying out a study discovered that the actual awareness of those being studied made the respondents more productive, when in fact the study was supposed to cover the influence of lighting effects on the respondent's productivity (Bryman & Bell., 2007, p. 51/2).
2.3.3 Reality and Knowledge Conclusion
Thus we are collecting subjective accounts to describe what reality is true to the managers of companies operating on the internet and the effects of managing Psychological Switching Costs they believe have on their customers. We argue that the reality of PsychologicalSwitching Costs can be influenced by these managers in the context of businesses that we
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interviewed which operate on the internet. Therefore we do not assume that there is one true objective reality; and that knowledge is created by understanding the subjective meaning of its context. As such we are looking for the personal views of company executives so as to draw our conclusions from our view of reality and knowledge, which are Interpretivistic and Constructionist.
2.4 Research Strategy
The concept of research strategy is to differentiate between the methods available in collecting data, mainly showing the methods by which social research can be achieved (Bryman, 2008, p. 21). These methods are quantitative and qualitative; the former of these two is generally concerned with measuring procedure to social life where the set of variables are developed by the researcher, and they are uninvolved with the respondents so as not to have a subjective influence on the study. Further to this is that theory is tested through collecting a static image of the social world where the changes in variables are the important factors of the study. This is achieved through a very structured approach so as to investigate the precise issues the researchers study covers, so that they may make generalisable statements about the social world and its behaviour (Bryman & Bell 2007, p. 425/6). If we were to attempt such a study, the research question may be aimed at finding out if managers of companies operating on the internet use Psychological Switching Costs to create a stronger Lock In affect. However this would negate the deeper subjective understanding of how managers try to achieve this phenomenon in an online environment. Thus a qualitative approach uses words to present points of view from respondents, while the researcher develops an understanding of the issues so as to develop theory from the data collected within the context of which it is being collected; and as such the interconnectedness of time, social setting and participants (Bryman & Bell 2007, p. 425/6). Where in our case, the internet as the social setting and time being the rapid development of technologies influencing how social-beings interact in this virtual world and how managers try to influence the consumer as the participating parties. Moreover qualitative studies attempt to gain meaning that is rich and deep in a specific area of knowledge and reality that is context specific giving an understanding of the behaviour, values and beliefs (Bryman & Bell, 2007, p. 426) of the managers of firms that operate on the internet. Thus we are looking at the meaning of the actions by managers rather than the action itself. In a study made by Van Maanen (1983, cited in Easterby-Smith et al., 2002, p. 85) they define this method as, "an array of interpretive techniques which seek to describe, decode, translate and otherwise come to terms with the meaning, not the frequency, of certain more or less naturally occurring phenomena in the social world". The significant factor between the two approaches being that the quantitative method counts frequencies and the qualitative method attempts to understand the meaning of the action (Easterby-Smith et al., 2002, p.129) This study is aimed at understanding the meanings respondents attach to issues and situations in the context of existing relevant theory within the realms of Switching Costs. As such, this study is seen as reflective research; where existing theories are re-examined from different organisational and social contexts (Easterby-Smith et al., 2002, p. 9). In the case of this study it is well documented that Switching Costs play an important role in keeping customers loyal to a business, however there is very little literature on its influences on the internet. Therefore to develop the theory we see that it is necessary to start from a qualitative approach in asking
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industry executives if there is any importance in implementing processes to develop relationships and create high Switching Costs from a psychological perspective. According to Easterby-Smith et al., (2002, p. 117) there are two ways to analyse qualitative data, content analysis and grounded approach. We are following the grounded approach, where the authors' intuition in finding similarities between the respondents and the information that they have in common. This can then be used as a basis for interpreting the social context that we are investigating in this thesis. It is therefore important that the analysis "stays close to the data and any observations made have to be placed carefully in context". For this reason we have positioned the Empirical Data and Analysis side by side in this thesis as well as having the quotes in the appendix in their original language so that it may be scrutinised by the reader. This will be further discussed in Chapter 6.
2.5 Scientific Approach
The relationship between research and theory gives a framework for what scientific approach is required to complete a study and thus whether attempting to generate new theory or test existing theory. The deductive approach is based on theory and then collection of data relating to the theory to ascertain if the theory holds true or not. Whereas an inductive approach is to collect data from which to generate new theory (Johansson-Lindfors, 1993, p. 55). The deductive approach comes from the natural sciences, where controlled testing lays the basis for explaining events that happen in the social world (Saunders et al, 2007, p. 117). The inductive research approach attempts to develop theory from the data that is collected and analysed (Saunders et al., 2007, p. 118). However there is extensive literature that postulates that a combination of these two may be attempted. Saunders et al., (2007, p. 119) discusses the adopting of both an inductive and deductive approach as being 'advantageous'. JohanssonLindfors (1993, p. 154) describes an alternative known as an abductive approach, where, researchers find existing relevant theory from which to develop their data collection method. At which point they analyse the existing theory against their own empirical findings to ascertain if they can develop new theory. And Creswell (2009, p. 136) sees a mixed method where existing theory can be used to guide the practitioner. For the purposes of this study we will be using a mixed method approach by inductively developing our understanding of the uses of the internet by managers in attempting to Lock In their customer's through Psychological Switching Costs. We then deductively collect existing knowledge in the areas of Switching Costs and Dynamic Capabilities, that we see as necessary to develop our own theories; and an understanding of them, from the specific context of the influences of Switching Costs on the internet as seen by company managers. Thus a mixed method approach is used in this instance.
2.6 Research Design and Data Collection
The concept of research design is that it gives a framework for the collection and analysis of data (Bryman & Bell, 2007, p. 40) in ways that are most likely to achieve the research aims (Easterby-Smith et al., 2002, p. 43). It represents a structure that guides the execution of a research method and the analysis of the subsequent data (Bryman, 2008, p.30). Where the research method is the technique used for collecting data. However the design itself will inevitably come from our Ontological and Epistemological standpoints. These philosophical assumptions about how we view the world will underpin our research strategy and consequentially the research design (Saunders et al., 2007, p.101/2).
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Qualitative approaches to conducting studies have been developing over the past decades where postmodern perspectives are attacking the objectivist approach. Qualitative design can be utilized and adapted to suit many forms, where "theory becomes the end point" in a study; alternatively theories are introduced at the beginning of a study and consequentially modified, adjusted or built upon according to the respondents views (Creswell, 2009, p. 131/2, 134). For the purposes of this study, the researchers have developed this latter approach, adopting theories relative in nature to the research at hand. Thus we intend to utilize the existing theory regarding Switching Costs etc. and to modify, adjust or build upon it, when considering ecommerce. As mentioned is Chapter 2.4 where we adhere to a reflective approach as discussed by Easterby-Smith et al. (2002, p. 9). Easterby-Smith et al., (2002, p. 46/7) discuss the 'comparative method', where the researcher looks at the event or process in differing settings or situations. From here a researcher should start with no pre-suppositions and should allow ideas to emerge. The alternative being that one familiarizes oneself with prior research and uses a somewhat structured and mechanical approach in making sense of the data. In this study we are conducting the latter. We will be conducting a case-work method of collecting data which is considered as a medium between the two extremes of 'experimental design' and 'field work' (Easterby-Smith et al., 2002, p. 49). Where we will look at a small number of organisations at a specific point in time and the processes by which they develop Psychological Switching Costs over the internet to Lock In their customers. As such this case-work will emphasize the intensive examination of a setting (Bryman & Bell, 2007, p. 62) in which strategic decisions of managers influence the locking in effect of their customers. As explained previously, we are following an interpretive view of knowledge and a constructionist view of reality and as such we see there is no one true reality, and that it is constructed by the interaction of humans in the social world. We have therefore decided to conduct interviews to collect data in such a manner that we have the possibility to probe the respondents as they discuss their opinions on the subject at hand. Due to these factors we have chosen to have semi-structured interviews so that we may diverge from the interview guide in order to find the individuals standpoints on Psychological Switching Costs. Further to this it is necessary to point out that the sampling method used to collect the data is a 'Convenience' method, in which we chose respondents by virtue of accessibility and relevance to the research topic. This form of sampling is acceptable because we do not attempt to generalize the findings of the study (Bryman & Bell, 2007, p. 197/8). The idea of this study is to gain an understanding of how strategically important it is for company manager's to consider (or how they consider) Psychological Switching Costs when operating mainly in a virtual world. To achieve this we saw that a mixed method of using existing theory to have a clear idea of what the interview-guide content should be as valuable. But still having the freedom to diverge from the theory and so that we may gather revealing knowledge of the respondents, in the hope of finding a connection between existing Switching Cost theory and its significance in an online environment; and the consequential importance of Dynamic Capabilities for respondent's in developing Switching Costs. The interview guide was made up from existing theories within the areas of Switching Costs, Trust, First Mover Advantage, Value Chains, Dynamic Capabilities and Design. These areas where chosen as part of our mixed method approach. With the interview guide itself being made up of 29 questions, each pertaining to specific areas of the collected theory, mentioned
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above. Furthermore, being semi-structured it enabled us to analyze the data in a more organised fashion. The interview questions themselves were devised from the different theories taken up in the relevant section; Questions 1 to 4 pertaining to Strategy, 5 to 12 Competitive Advantage, 13 to 17 First Mover Advantage 18 to 20 Trust 21 to 25 Switching Costs 26 to 28 Dynamic Capabilities 25, 26 & 29 Value Chain All questions were devised with an emphasis on Switching Costs and how it influences these other concepts when relating specifically to operating on the internet. Also in order to make sure a deep understanding was gained many of the questions relating to these concepts overlap so the respondent had the opportunity to develop their explanations fully. To enhance the productivity of the interviews, the questions, along with a short explanation of the study were sent to respondent's at least three days prior to the interview. Whilst we understand this may have taken away some of the openness of the respondents, we agreed that it would give us more valuable information if the respondents had some background information. Also that the interviews were carried out on the telephone (except one) during working hours for all respondents and as such felt it was prudent to give them the opportunity to be prepared because of the limited time they had for interviewing. With the intention of modifying, developing or building upon existing theory through our mixed method approach, the questions were all made to be open ended. Each question was developed so as to gain a better insight of the strategies employed by managers in influencing Psychological Switching Costs to Lock In customers. Given our Interpretivistic and Constructionistic standpoints the opinions of the respondents will be compared with the aforementioned existing theories and hence conclusions will be made. The intension being that we will be able to modify the existing theories within the context of management development of Switching Costs on the internet. We are aware that some of these factors will call into question the validity and reliability of this study and these issues will be taken up in Chapter 6.
2.7 Choice of Sources
As stated in the previous chapter (2.6) we are completing a case study where we as researchers explore in depth an activity/process of managers (Creswell, 2009, p. 15) influencing Psychological Switching Costs to Lock In customers. So the choice of empirical sources is restricted to those who operate in this specific area and that is managers of companies that operate on the internet. The obvious purpose in completing a qualitative study is not to generalize the findings of the respondent, but to develop an understanding of the
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social world in a specific context. Therefore our sample method has been selective so that we may gain the in depth opinions of the managers. These opinions of the managers selected will be compared with the existing theory that we have compiled as well as the other respondents. This is done not to discover an optimal truth or something that can be measured in numbers, but to discover if there is a different understanding of Switching Costs and their uses in an online environment according to the individuals interviewed. And as such is there a common understanding between respondents so as to modify or build upon the theory within a specific context and timeframe. According to Easterby-Smith et al., (2002, p. 85-7) qualitative methods can simply be devices whereby a researcher wants to get close to organisational members so that the insights of those individuals can be understood in the context of the study being completed. Also that it is a fairly common practice to use a respondent that is a representative of the company so that an understanding of the issues related to the topic at hand can be addressed. However, there are limitations to this method in that respondent's may be biased to their role or that they do not necessarily know everything about the organisation and its practices (Bryman & Bell, 2007, p.197). We argue that this is countered by having a number of interviews from different company managers and that it is not the respondents role that was being questioned but the specific practices of developing Switching Costs within e-commerce. In order to complete this thesis we as authors considered it necessary to have only Swedish companies to interview as this would enable us to complete the thesis in time and within a small budget. Further to this we felt that by only considering Swedish companies a more balanced picture of the influences of Psychological Switching Costs within this market could be better identified as the social contexts of other countries may have an effect on the companies. Thus we want to gain a deeper understanding of the Swedish market when considering companies trying to manage Psychological Switching Costs. We have completed five interviews with five different companies and we argue that this is sufficient in gaining a deeper understanding of the subject area at hand. The reasons that these five will suffice is due to a number of factors. Firstly, when considering interview saturation we found that there was a certain amount of repetition in what was being discussed by the respondents (Bryman, 2008, p. 416). Secondly, through our own discussions as authors we felt that when going through the interviews that we were in agreement with the meaning of what was being said and as such no new information was coming to light. Thirdly, we saw that it was prudent in completing five interviews as this enabled us to develop a trust in what was being said by the respondents through the saturation of the information received. Finally we have made the interviews available to readers of this thesis if they so desire, so that they may decide for themselves if these factors are true (Easterby-Smith et al., 2002, p. 117). The selection process for deciding who to interview was conducted by compiling a list of companies that operate on the internet. When we had a list of approximately twenty companies we sent an introductory e-mail (see Appendix 3) to ask if we may conduct an interview with them, five companies responded positively and times for interviews were arranged. We chose the twenty companies on the basis that they offer their products or services through an online medium (the internet), thus, they would have a good understanding of the social world in the context of developing Psychological Switching Costs to Lock In customers.
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2.8 Presentation of respondents
As mentioned in the previous chapter the selection process gave us five companies that we were able to interview;
2.8.1 Katshing
Katshing is one of Sweden's largest Web based sellers of mobile telephones and related products/services. They are partners with both, mobile phone operators and producers as well as other mobile related products such as GPS. The company started in 2003 in Halmstad and in 2006 increased its operations in Falkenberg, where the customer-service, financial and administrative parts of the company are now based. The marketing and IT departments are situated in Gothenburg. The main focus of the business is to offer low cost simple and effective service while still offering high quality and service. This service is geared towards both B2B and B2C in offering mobile services. The company employees 12 members of staff as of year-end 2008 and a turnover of 74.7 million crowns in the last six months of the same year, and we were able to interview the Managing Director, Anders Steen. (Information found at Katshing homepage & AffärsData 29th April)
2.8.2 Prisjakt
Prisjakt Sverige AB was bought by Aftonbladet Tillväxtmedier AB in 2006, while the original owners still have a share. The company started originally in 2000 when the aim was to develop an online community for price comparisons of electronic goods, specifically Hifi and home entertainment systems. As it gained in popularity it expanded in to other electronic goods. It is mainly based in giving information to prospective clients who wish to find the right product for their needs, at the best price. The income comes from Prisjakt's B2B relationship in which they sell their service so that business get there products seen by Prisjakt's website viewers. The company employees 27 members of staff as of year-end 2008 and a turnover of 31.2 million crowns, and we were able to interview the Marketing Director, Magnus Bengtsson (Information found at Prisjakt homepage & AffärsData 29th April)
2.8.3 Discshop
Discshop Svensk Näthandel AB was first registered as a company in 2001, it is an internet based company selling videos, music and games as well as other items related to the entertainment industry. They offer news and reviews on the products that they have on offer and their recommendations, with an emphasis on secure purchasing through many forms of payment alternatives to make the customer feel safe. Discshop sees that the good assortment of products, fast service and well developed internet-shop give them a distinct offering to the customers. The company employees 31 members of staff as of year-end 2008 and a turnover of 172.4 million crowns, and we were able to interview the Vice President, Henrik Oscarsson. (Information found at Discshop homepage & AffärsData 29th April)
2.8.4 RebelBetting
RebelBetting is an online gambling site specializing in arbitrage betting. The company is a development of ClaroBet AB which was founded by Simon Renström. In 2008, four entrepreneurs started this firm with the idea of developing sophisticated computer programs that would enable guaranteed profits from betting on sports. RebelBetting now has users from over 80 countries. The company has 4 members of staff and on its webpage says it made a 12% profit in its first month of operation. As it is a very new company there is no financial information. We were able to interview the CEO and Lead Developer, Simon Renström.
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(Information found at Rebelbetting homepage & AffärsData 29th April)
2.8.5 Company X
The final company wished that the information that we received would be treated with confidentiality. The company itself is a service site that buys and sells goods for others over the internet, it started its operations in 1996 and we were able to interview the Vice President.
2.9 Conducting Interviews
All but one of the five interviews conducted were over the telephone, Saunders et al, (2007, p. 341/2) argue that this can often be more effective as access and speed at which the information can be collected is often improved. This was significant for our study as these four interviewees are all based in southern Sweden thus dramatically reducing cost and time required to conduct the interviews. The telephone interviews were conducted in a conference room on site at Umeå University, Sweden over a period of one week. The times for the interviews were decided by the respondents and their work schedules. The one face to face interview was conducted at the Umeå library in the centre of Umeå as this was also more convenient for the respondent. All interviews were recorded so that we may refer to the data collected when completing the analysis. Also, this enables a level of transparency to our study to give a more reliable and unbiased research paper (Saunders et al., 2007, p.333). This is also relevant when considering issues of Validity and Reliability, taken up in Chapter 6. The interviews were conducted with both of us present; however it was Jonas who asked the questions as he has a better grasp of the language in which the interviews were held. But Laurence was able to interject when he had follow up questions for the respondents as he also speaks the language. The interviews themselves were between half an hour and an hour. We felt that this would enable the respondents to be more inclined to have the interviews and collect enough data from which we could complete our analysis.
2.10 Literature Search
Following our mixed method approach we developed our own ideas regarding the research topic, from this perspective we were able to expand our understanding by searching relevant theories. The aim of our literature search is in line with Hair et al., (2007, p. 94) in that we develop and expand ideas into relevant research topics and this will deepen our understanding. We achieved this by first looking at wider theoretical concepts of Strategy, Dynamic Capabilities and Switching Costs to get a base from which to discuss and develop the research topic. From here we were able to develop our research area further in to more focused areas of Positive and Negative Effects on Switching Costs, Procedural Switching Costs, Social Switching Costs, Relational Benefits, Calculative Commitment, Trust Development, Interface Design and Customer Experience in the Online Environment, First Mover Advantage and Value Chain. Searches to find relevant articles were done through Business Source Premiere (EBSCO) via the Umeå University library homepage.
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3. Theoretical Framework
In this chapter we discuss the existing theory and studies relevant for this specific research topic in order to give the reader an understanding of the subject area. We attempt to bring forth relevant theories relating to Strategy and Dynamic Capabilities, Switching Costs, First Mover Advantage and Trust within E-commerce. This chapter will therefore illustrate appropriate theory from which we can continue with the empirical data. We have formed the theory so that it guides the reader through the significant topics relevant for this study; finally giving a concentrated summary and Model of the collected theory and how it is related in this context.
3.1 Strategy
The concept of Strategy has been in existence for over fifty years, developing from; tasks of managers and business policies, to corporate planning etc. The emphasis was to look at the strengths and weaknesses of an organisation and then act on those. Strategy has now developed further in to a devolution of this theoretical belief, that is to say the there is no clear path in analysing the best way of understanding or predicting the future strategies of an organisations (Johnson, et al., 2008, p. 16/7). In order to better understand Strategy; Complex Theory has been seen as one concept to explain the unexplainable. Taken from the natural sciences, it is a viewpoint in which; order brings chaos and in turn chaos brings order. The concept of chaos is seen as natural evolution where organisations adapt to their changing environment in order to compete in the market (Dolan, Garcia & Auerbach, 2003, p. 24/5). The difficulty therefore is for manager's to predict the future so that strategies can be made in order for the business to prosper. When considering the world of e-commerce this is of extreme importance. For example, Louviers, Driver & Powell-Perry (2003, p. 165) discuss the significance of companies having sufficient knowhow to operate not just only online but on many technological levels, so that customers will become more loyal. That is through technological advancements in communication channels business can gain a competitive edge by embracing the technology. By planning how to put web-based customer support and segmentation strategy in the hotel industry across multiple channels can improve customer relationships and their loyalty. To this extent times have change dramatically, in that Louviers et al., (2003, p. 165) discusses multiple forms of communicating as "e-communications portfolio" where there is personal computers and other internet access devices to communicate and develop relationships. Today however, just seven years later all this information sharing can be achieved on one device. For example the iPhone has applications so that you can connect directly to a specific site, such as Sf bio; the cinema company in Sweden, and watch trailers, book online and even pay (http://www.sf.se/iphone). These developments merely reiterate the significance of what Louviers et al., (2003, p. 167) say, that by establishing this relationship it is a strategic imperative to manage the dynamics of buyer behaviour. Thus if another cinema company was not offering the same service they would inevitably be at a disadvantage in today's technologically advanced world and the consumers that are in it. As stated previously the business transactions that are done online in Sweden top one billion crowns, and according to Forrester Research e-commerce in Europe it is expected to reach 1.5 trillion US dollars in 2004 (Perrott, 2005, p. 74). We can therefore note the importance of operating on the internet but also that it is no longer just about competitive advantage but more about being able to compete in the e-commerce market.
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Thus we see that the way to gain Competitive Advantage is through a company's ability to Lock In its customers mainly through Switching Costs, specifically, psychological. We see this being achieved through strategic decision making and planning in a rapidly changing environment, thus the relevance of Dynamic Capabilities.
3.2 Dynamic Capabilities
In the ever changing fast paced world that we live in today it has become more and more important for companies and managers to develop the capabilities of the organisation within all aspects of the business. Firms are going global and have to compete in an ever growing marketplace and as such managers need to have a deep understanding of the world around them. Identifying and seizing the strategic opportunities in order to stay on the competitive edge (Augier & Teece, 2009, p. 410). Managers have one of the most important roles in the business as they control the operations and divide the resources to make the company successful. These responsibilities have increased dramatically with the developments in both technology and speed of market changes. However mainstream economic theory has been slow in recognising the importance of technological enterprise and the realisation of its uses (Augier & Teece, 2009, p. 411). Thus, we argue that there is a gap in the understanding of the usefulness of Psychological Switching Costs and its strategic importance in the world of E-business. Dynamic Capabilities considers how an organisation deals with differing occurrences in the market and consequentially the ability to adapt, this is of specific importance in management literature (Barreto, 2010, p.256). If businesses do little about the changes in market environment, performance can be affected dramatically (Audia, Locke & Smith, 2000, p. 839). This is of dire importance when considering the development of technologies specifically internet capabilities, e-commerce and networking. As mentioned previously with the developments with iPhone (and Android technology1), services will have to be developed that keep up with technology otherwise companies will fall behind and become less competitive. Especially as firms are battling on a global scale and trying to develop, own and manage intangible assets, (such as Psychological Switching Costs) which is crucial in competing in the economic market today (Augier & Teece, 2009, p. 411). Teece, Pisano & Shuen (1997, p. 510) discuss the importance of gaining competitive advantage by companies being more efficient and effective. These are seen as firm specific capabilities that can be perceived as Competitive Advantages in the market place. However the challenges facing companies in becoming more efficient and effective are growing, thanks in no small part to Hypercompetition (D'Aveni, 1994, p. 46) Thus, the development of management strategy is to know and understand the environment in which it operates and therefore being able to make the right decisions in order to stay at the forefront of the market. This competence to establish the 'rules of the game' and control its development is central to being a successful company. Consequently, the company that has the ability to understand the interaction between its strategy and environment in which they operate possess the ability to either alter strategies or the business market itself (D'Aveni, 1999, p. 128). By attaining such Dynamic Capabilities as Psychological Switching Costs through operating on the internet, being first movers and developing the online relationship.
1
Android Technology is an operating system for mobile phones.
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Companies will strengthen their position, not by price, but by the relationships that they develop and to a greater extent have the ability to control. The concept of Dynamic Capabilities can be recognized as a place where the development and storage of competence that are difficult to copy, such as technology. And these assets can be of greater value than the products or services themselves. These competences represent distinct inimitable skills developed from within the organisation thus giving the company the competitive advantage (Augier & Teece, 2009, p. 418). Through these Dynamic Capabilities such as the one we wish to investigate, we want to ascertain if they are developed by companies who operate on the internet.
3.3 Switching Costs
Switching Costs have been defined in several ways. Porter describes it as "one-time costs facing the buyer of switching from one supplier's product to another's" (1980, p. 10). Burnham, Frels & Majahan (2003, p. 110) adapt a slightly wider approach where they "define switching costs as the onetime costs that customers associate with the process of switching from one provider to another". From the perspective of our study we have chosen to adopt a definition of switching costs from Jones, Mothersbaugh & Beatty (2002, p, 441) who state that in its widest form switching costs are; "the perceived economic and psychological costs associated with changing from one alternative to another" (2002, p. 441). Burnham et al., (2003) identifies eight different aspects of Switching Costs that are conceptualized in three general areas. The first general area regarding consumer's perceptions of Switching Costs is Procedural Switching Costs. Procedural Switching Costs are specifically time and effort related and include factors such as Economic Risk Costs, Evaluation Costs, Setup Costs, and Learning Costs. Economic Risk Costs are the costs associated with the consumer accepting the uncertainty that is inherent when adopting a new supplier where the consumer has insufficient information about the supplier. Evaluation Costs regards the time and effort in terms of searching and collecting information as well as analysis in terms of the mental effort to restructure and analyze the information available that is required for the consumer to make a knowledgeable decision to switch supplier (Burnham et al., 2003, p. 111/2).
Procedural Switching Costs Economic Risk Costs Evaluation Costs Setup Costs Learning Costs
Financial Switching Costs Benefit Loss Costs Monetary Loss Costs
Relational Switching Costs Personal Relationship Loss Costs Brand Relationship Loss Costs
Figure 1. Different types of Switching Costs according to Burnham et al. (2003, p. 112) The Learning Costs are costs associated with the time and effort to learn the skills and knowhow to be able to use a product from a new supplier efficiently. We see this as a significant factor when considering e-commerce and customers entering in to a new supplier relationship
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and relevant to using the internet. Furthermore, the effort to learn the skills and know-how is often bound to the specific supplier and when the consumer decides to switch supplier there will be a need to learn new skills as well as adapt their current skills and know-how to the new supplier. Setup Costs are associated with the time and effort required to initiate a relationship to the new supplier or to set up a product for its initial use. Furthermore, Burnham et al. argue that Setup Costs for services are highly dependent on the exchange of information to be able to understand the customers' needs and to reduce their selling risks (Burnham et al., 2003, p. 111/2). Therefore, learning costs can be seen as having a psychological influence on the customer, thus an emotional Switching Cost. Furthermore, the relation to the importance of First Mover Advantage can also be recognized as discussed further on in Chapter 3.4. The prominent features of Financial Switching Costs are that they first and foremost involve the risk of losing resources that are measurable in financial terms. Financial Switching Costs consists of Benefit Loss Costs and Monetary Loss Costs. Benefit Loss Costs are costs associated with contractual relationships that promotes economical benefits for example when switching to a new supplier a customer may lose discounts or accumulated points from bonus systems that are not transferable to the new supplier. Monetary loss costs are on the other hand regarded as the one-time financial expenditures that are necessary when a customer switches from one supplier to another. It is however important to point out that the costs of purchasing the product in itself is excluded from Monetary Loss Costs. Instead, Monetary Loss Costs include costs such as initiation costs and deposits as well as one-time costs for replacing transaction specific or shared resources (Burnham et al., 2003, p. 111/2). For the purposes of this research we will not concern ourselves with the Financial Switching Costs. This is due to the fact that we are looking at the capabilities of a company operating on the internet to develop Psychological Switching Costs. Relational Switching Costs addresses the psychological and emotional discomfort that arises because of broken relationships and loss of identity. Relational Switching Costs include factors such as Personal Relationship Loss and Brand Relationship Loss. According to Burnham et al. (2003, p. 111/2) the Personal Relationship Costs are associated with the emotional loss when breaking the relationships that has been shaped by the people who interact with each other. An example that we have previously taken up is eBay. Where there has been a development of online communities interacting on many levels, incorporating forums for discussion on all aspects of the eBay markets place. Through these forums and relationships the boundaries between customer and company dissolve, thus we can see the importance of eBay, as we see it, using their capabilities in creating strong emotional attachments, which we see as Psychological Switching Costs. Burnham et al., (2003, p. 111/2) states these relationships form a sense of comfort and a level of trust between the consumer and the supplier that in the beginning does not exist with the new supplier. Similarly, Brand Relationship Loss is associated with the emotional loss that a customer perceives when breaking the relationships and bonds of identification towards the organisation and its brand. They also state that consumers assign meaning to their purchases. This sense of meaning becomes a part of their identity and forms a bond to the brand and organisation which then is lost when the consumer switches from one supplier to another. Jones et al., (2007, p. 335) argue that Switching Costs have more and more become an acknowledged method for customer retention without considering the satisfaction of customers. Furthermore, they argue that a common strategic recommendation for
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organisations is that companies should increase their perceived switching costs to be able to Lock In their customers in a relationship with the organisation. However, Jones et al., (2007, p. 336) state that these strategic recommendations may, however, provide a much too limited and optimistic view of Switching Costs. Instead, managing Switching Costs in the sense of locking in the customer in a relationship may, despite the fact that it fosters customer retention, result in strong negative responses from the customers. Therefore, one part of our study is to gain a deeper understanding of the importance of developing strategies to carefully manage Psychological Switching Costs and if it has been realized by companies operating on the internet. Jones et al., (2007, p. 336/7) identifies three different general types of Switching Costs that are based on the previous framework developed by Burnham et al., (2003) and Jones et al., (2002). These types of Switching Costs are
1. Procedural Switching Costs 2. Social Switching Costs 3. Lost Benefits Costs. 3.3.1 Procedural Switching Costs
Procedural Switching Costs refer to the perhaps most traditional view, regarding Switching Costs as the time and effort that the customer perceives to be involved with the switch. Vázquez-Carrasco & Foxall (2006, p. 367-368) makes a similar distinction between different types of Switching Barriers however, with a slightly different language. They discuss Switching Barriers from three different perspectives; Relational Benefits, Switching Costs and Availability and Attractiveness of Alternatives. Jones et al., (2007; 2002) & Burnham et al. (2003) understanding of Switching Costs we see relates back to the example of SF Bio and the iPhone application (in Chapter 3.1). Where time and effort which is seen as Procedural Switching Costs, is reduced for the customer, who has this online service. We can therefore see the strategic importance of implementing strategies to Lock In customers from a psychological standpoint, thus we again see the significance of the Strategic Capabilities influencing Psychological Switching Costs.
3.3.2 Social Switching Costs and Benefits Loss Costs
Social Switching Costs are related to the probable loss of personal bonds and friendship to the organisation that the customer perceives will occur if they go through with the switch. The third type of Switching Costs is the Lost Benefits Costs, which involves the perceived loss of specific benefits such as special offers etc. if the customer decides to pursue the switch (Jones et al., 2007, p. 336/7). Here again we see the example of eBay and the relevance of developing relationships so as to influence an emotional attachment to both the organisation and its end users. When it concerns Lost Benefit Costs eBay uses a rating system for clients who buy and sell goods on their site. If a user leaves eBay they lose their benefits of the trust that has built up through the aforementioned rating system.
3.3.3 Relational Benefits
Relational Benefits of Vázquez-Carrasco & Foxall (2006) are closely connected to the Social Switching Costs. Relational Benefits refer to the social bonds, relationships and feelings of security that the customer develops towards the organisation (Vázquez-Carrasco & Foxal, 2006, p. 368).
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However, Relational Benefits also touches upon what Jones et al., (2007, p. 337) define as Lost Benefits Cost which involves the economic discounts or non-economic benefits that a customer gets access to when a relationship to the supplier has been developed. Availability of and Attractiveness of Alternatives concerns the customer's perception of the number of viable alternatives whereas if the customer perceives a lack of viable alternatives Vázquez- Carrasco & Foxall (2006, p. 368) argue that he or she is less likely switch to another supplier. When considering the different types of Switching Costs, both Jones et al., (2007, p. 337/8) and Vázquez-Carrasco & Foxall (2006, p. 369) recognise the need to categorize them, based on the nature of constraints that lie beneath the value of Switching Costs to an organisation. Switching Costs create a sense for the customer of being locked in to the relationship with the supplier and that these feelings stem from the negative consequences that the customer perceives if he or she is to proceed with the switch. The different types of Switching Costs are therefore distinguished on the basis of positive and negative sources of constraint. The difference between positive and negative sources of constraint is that the positive constraints originate from the creation of added value to the customer whereas the negative sources of constraints do not. Negative sources of constraint is therefore considered to be constraints such as the Time Inflexible contracts Perceived difficulty to switch to another supplier (typically procedural switching costs). Positive sources of constraints are on the other hand: The perceived loss of social bonds Relationships The loss of other more concrete benefits. The positive sources of constraints are consequently typically connected to the Social Switching Costs and Lost Benefits Costs (Jones et al., 2007, p. 337/8). Thus, the aspects of positive and negative Switching Costs locking in customers over the internet we argue can be an important Strategic Capability. It is according to Jones et al., (2007, p. 338) essential to do this distinction between positive and negative Switching Costs. This is due to their difference when it comes to the effect of commitment between the customer and the organisation. Jones et al., (2007) focus on two types of commitment. Calculative and Affective commitments which they argue are most likely to influence Switching Costs.
3.3.4 Calculative Commitment
Calculative Commitment or Continuance Commitment as it is also called refers to a link between the organisation and the customer because of need. Calculative commitment considers the fact that a customer may stay with a particular organisation because he/she perceives that he/she has to. Consequently, the customer may feel locked in to the organisation where the Calculative Commitment generally corresponds to constraint based relationships and especially negative Switching Costs and Procedural Switching Costs (Jones et al., 2007, p. 338-341).
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Affective Commitment, on the other hand, stems from a sense of affiliation, loyalty and identification based on the psychological connection between the organisation and the customer. Consequently, Affective Commitment motivates the consumer to stay in the relationship between the organisation and the customer because he or she actually wants to and it is therefore rooted in the positive aspects of a relationship. Thus, Affective Commitment generally refers to the Social Switching Costs and Benefit Loss Costs (Jones et al., 2007, p. 338-340).
3.3.5 Conclusions for Commitment
Jones et al. (2007, p. 341) also connects commitment to emotions where they discuss the customers perceived ability to make a conscious decision affects their emotional outcomes. If the perceived freedom to choose, control and self-determination is decreased it will lead to negative outcomes on both an emotional and psychological level. Conversely, if the perceived freedom of choice, control and self-determination is increased this will lead to positive outcomes on an emotional as well as psychological level. Our perspective is that people who use the internet to do business have a natural tendency to gain in these emotional and psychological effects through the knowledge that other choices are "just a click away" (Porter, 2001, p. 68). However, we intend to study this factor from the viewpoint of companies developing strategies to influence these effects and therefore if it has any affect. Furthermore, Jones et al., (2007, p. 341) argue that Calculative and Affective Commitment influence the customers perceived control on different levels. Affective Commitment is based, as previously stated, on the customers desire and want to maintain the relationship due to their psychological attachment to the organisation. Consequently, customers who possess a high level of Affective Commitment may choose to remain with the organisation because of the received positive benefits, such as eBay communities and the relationships that are formed. Based on these positive benefits, the customer also perceives a greater level of control and freedom of choice thus gaining greater positive emotions due to the Affective Commitment. On the contrary, Calculative Commitment, as previously discussed, bases its commitment on locking in the customer to preserve the relationship and to make the customer perceive that there is no other alternative. Consequently, when a customer's Calculative Commitment is high, the lock-in reduces the customer's perceived freedom of choice and control. Thus, the customer has more negative emotions and reactions (Jones et al., 2007, p. 341). To conclude, Jones et al., (2007, p. 350/1) argue that organisations should utilize Procedural Switching Costs and Calculative Commitment with great caution. This is due to the fact that they may be damaging to the organisation causing negative emotions and negative WOM. On the other hand, the development of social bonds and other benefits that bring added value and positive effects to the customer which can improve the Social Switching Costs as well as the Benefit Loss Costs that are encouraged by Jones et al., (2007, p. 351). This is because they both increase the Affective Commitment which has a positive effect on customers repurchase intentions and also reduces negative WOM (Jones et al., 2007, p. 351). These results are supported by Vázquez-Carrasco & Foxall (2006, p. 375/6) arguing that Switching Barriers have proven to be influential with regard to customer retention. Positive Switching Barriers such as Relational Benefits are considered particularly powerful because further to directly influencing customer retention they also affect it indirectly by increasing customer satisfaction; as previously discussed when considering eBay and their relationships with customers.
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Switching Costs
Figure 2. Switching Costs and its components
This figure depicts the main concepts of Jones et al., (2007) and Vázquez-Carrasco & Foxall (2006) when concerning specific concepts within the theories of Switching Costs as described in the previous section.
3.4 First Mover Advantage
First Mover Advantage can be utilised in the sustaining of Competitive Advantages over other firms in the market. But it is noted when the theory of Competitive Advantage was developed that if firms operating in the same market and having similar resources that the advantage is short lived (Barney, 1991, p. 104). However this does not relate to the internet and e-business; Perira (2004, p. 304/306) discusses the significance of First Mover Advantage as aCompetitive Advantage through the building of customer loyalty. Also that consumer's learn how to use the website as well as being able to bookmark the web-page so as to easily return, thus creating Switching Costs. Perrott's (2006, p. 303) empirical study showed that the nature and speed of which e-business occurs means it is imperative to be a first mover, not only for the previously mentioned reasons. But due to the constantly evolving technology, reiterates our belief in that Dynamic capabilities are required for developing systems that influence Psychological Switching Costs of a firm. To stay with the same example of iPhone and their Applications making it difficult to consider changing firms because the customer becomes used to the convenience of what they know (Reichheld & Schefter, 2000, p. 110). This advantage, we see, has come about by being the first mover in technological advancements. We do not see this as the only advantage, but rather an attribute of such. Therefore asking the question of what are the Strategies of a company being able to Lock In the customer through Psychological Switching Costs.
3.5 Trust Development: "Price does not rule the web; trust does"
Studies have shown that lack of trust is identified as one of the most difficult barriers for people to engage in e-commerce, which involves an exchange of financial and personal information between the customer and the e-merchants (Wang & Emurian, 2005, p. 105).
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According to Balabanis et al., (2006, p. 217) trust is perhaps even more important in an online context than in the conventional shopping context due to the fact that customers may have to pay for the product in advance and because they cannot be sure of when they will receive their purchased product. Reichheld & Schefter (2000, p. 106) support this view stating that "Price does not rule the web; trust does." They argue that to be able to gain loyal customers it is essential to first earn their trust. Furthermore, they discuss the risks and the uncertainty of shopping over the internet makes trust more important than ever because it is impossible to look the salesperson in the eye and it is impossible to touch and feel the products prior to purchase. Instead the customer has to rely on images and the information presented on the webpage. According to Reichheld & Schefter (2000, p. 107/8) when customers do trust the supplier they become more likely to share personal information which enables the organisation to form a more intimate relationship to the customer by offering products that are customized to fit each customers individual needs. Thus, the trust between the customer and the organisation is strengthened and as a result the customer loyalty is also beneficial. The relationship that a company develops with its customers can be a strong emotional connection for many reasons. One issue that many companies have had is gaining the trust of customers who actually purchase goods and services on the internet. There are examples of how companies are trying to remedy this, such as the company PayPal, which is an online banking system where you have one account online but can purchase from many different stores (Porter, 2001, p. 68). This company was bought by eBay in October 2002 and is said to be a safer and easier way to pay online, with over 150 million accounts worldwide (PayPal 2010). This is of course only part of the puzzle, there are other issues. According to Belicove (2009, p. 35) trust is a valuable asset when developing a relationship with a prospective customer over the internet. Accordingly the website should be functional in design, where it is the needs of the customers that are considered and that it should include details, such as the history of the company. As well as clear information on how to contact the company, with physical addresses and telephone numbers, which are essential for building trust. Research into the area of online trust, which is seen as the "willingness to depend" can be influenced by the individual's behaviour where integrity, ability and benevolence are the three areas in which a person perceives trust on the internet; integrity and ability influencing the credibility of a website and readiness to purchase; goodwill influencing how significant the price of the product is (Gefen, Benbasat & Pavlou 2008, p. 276/7). Trust is also something that develops over time, but it also becomes less important as the relationship continues. The value of trust depreciates over time, thus we see the connection to the importance of being a first mover. Hence the ability to develop the relationship where the consumer begins to rely on the usefulness of the relationship, rather than forming trust, when considering how they act when they are familiar with the company and specific website (Gefen et al., 2008, p. 277). "Relationships with consumers are developed through a long-term process of using the Web to establish mutual familiarity, trust and loyalty." (Zwass, 2003, p. 18) We therefore postulate that the ability to develop this trust in a swift fashion whilst being a first mover helps a company develop its ability to have a lasting relationship with the consumer. Through the evident Psychological Switching Cost of having to find a new supplier and gain trust as well as build new relationships with a new company, the customer is unlikely
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to want to attempt this. Thus the ability of a company to make use of these capabilities will stand them in a good position for locking in the customer.
3.6 Interface Design and Customer Experience in the Online Environment
Chang & Chen (2008, p. 2934/2940) support Balabanis et al. (2006, p. 217) arguing that online shoppers, despite the lower physical search costs, make less comparison shopping and do not switch supplier as frequently as they do with bricks and mortar suppliers. According to Chang & Chen (2008, p. 2932/2940) this phenomenon is clearly explained by the fact that the search costs will increase with the number of available alternatives across e-stores as well as the fact that if the number of alternatives at a single e-store increases, the time and search costs increases making it inconvenient to search for other alternatives. Furthermore, Louvieris et al., (2002, p. 169) argues that the website design is especially important for customers to be able to explore and evaluate the information available in a way that is comprehensible to them. Consequently, the importance of the customer interface ability to avoid wasting the customer's time through simple and clear design as it reduces the perceived risks of wasting time, frustration and deception as well as increases the trustworthiness is realized (Chang & Chen, 2008, p. 2932/2941; Louvieris et al., 2002, p. 169; Wang & Emurian, 2005, p. 117). However, even though a webpage interface is optimized for the customer to be perceived as simplistic and trustworthy, Wang & Emurian (2005, p. 117/122) argue that the customers still need to be aware of the risks as well as how to protect themselves in these types of transactions. This realization makes it relevant to connect customer interface design to the internet experience of the customer. This is because, as Chang & Chen (2008, p. 2933) discuss, users with a higher internet experience have a greater understanding in dealing with the interfaces and interactive applications and therefore are better suited to make use of offerings on the internet compared to users with a low internet experience. Here we see the possibility to connect Jones et al., (2007) and Vázquez-Carrasco & Foxall (2006) with the influences of positive and negative Switching Costs for not just bricks and mortar customers but customers who shop online. Chang & Chen (2008, p. 2940) connects satisfaction, interface design, and Switching Costs to the customer's internet experience and e-loyalty. Internet experience in this situation is defined by Chang & Chen (2008, p. 2933) as "a general experience by using a browser, such as Netscape or Internet Explorer, to access World Wide Web (WWW) pages." Their results indicate that there is a close relationship between customer interface design and satisfaction and e-loyalty. Furthermore, they see the moderating effects of internet experience on Switching Costs. Their results show no connection between the customer interface design and Switching Costs. However, when the customers have high internet experience the perceived customer interface design significantly affects Switching Costs. Chang & Chen (2008, p. 2940) argue that these results can be explained by customers with a lot of internet experience (compared to customers with low internet experience), having a higher standard and requirements concerning the customer interface design. Consequently, experienced internet users have lower customer satisfaction compared to customers with low internet experience. Furthermore, they point out that customers who are highly experienced in the internet environment are expected to recognize the e-store on the basis of its customization, convenience and character as well as being better at taking advantage of the information and services at hand. Consequently, Chang & Chen (2008, p. 2940) argues that customers with higher internet experience have higher Switching Costs. Again we can connect Burnham et al.
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(2003) and Vázquez-Carrasco & Foxall (2006) theories concerning relational Switching Costs to the influence of experienced internet users. This conclusion is however, not shared by Porter (2001, p. 69) who states that when customers get familiar and gain more experience with the technology, the initial loyalty that they have towards suppliers will be reduced as they discover that the Switching Costs are rather low.
3.7 The Value Chain
As stated previously the importance of managing customer relationships in the global market place is of crucial importance for the success of an organisation (Chakravorti, 2009, p. 299). Accordingly the importance of being able to deliver a product or service is no longer just about the price as there is now more significance being put on to the integration of the Value Chain in influencing customer relationships (Day, Magnan, Webb, & Hughes, 2008, p. 40). Sawhney & Zabin (2002, p. 315) discuss the quality of supplier relationships affecting the quality of the customer relationship. This ability to influence a customer from the perspective of Psychological Switching Costs can be a way of manipulating the relationship and locking in the customer. To achieve this, the implementation of essential Switching Costs based on the Resource-based view (Chakravorti, 2009, p. 300) where they are heterogeneous, valuable, rare, inimitable and non-substitutable we see has to be developed in to the Value Chain of the business. Where the activities of the business within the organisation bringing the product or service to the customer should include strategic processes to develop the relationship and Lock In the customer through Psychological Switching Costs, thus giving the firm a competitive advantage. The Value Chain itself comprises of all the elements of the business that go towards making its product or developing its service and the way in which this is achieved, through its strategies and implementation processes. The Value chain has two distinct areas; Primary activities and Support activities, the support activities are seen as those that help make the firm more effective and efficient thus creating better value for the firm (Porter, 1985, p. 36, 40-45). With the development of technology and the internet this area, in our opinion, has gained an unprecedented importance in the business world, especially when considering businesses that primarily operate on the internet. Thus as Zablah, Bellenger & Johnston (2004, p. 481) discuss, the important uses of market intelligence which companies can utilize in developing strong customer relationships has been realized as a support activity. Further to this that the recognition of generating a relationship can dramatically influence profits. And according to Sawhney et al. (2002, p. 304) these activities help in creating a competitive advantage for the company utilizing the relationship and developing a superior customer experience. These factors, we argue show the relevance of our study and its importance in the business world, and therefore to what extent such support activities (namely internet services) influence the Emotional Switching Costs and how companies develop them.
3.8 Competitive Advantage
According to the early theories relating to Competitive Advantages, companies that implement value creating strategies before other firms or in a more productive manner have an advantage over their competitors (Barney, 1991, p. 102). Moving on from this Johnson et al., (2008, p. 102) develops this into a wider perspective where the value of Strategic
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Capabilities are something distinctive within the organisation. However Barney (1991) sees that these Strategies are related to making a firm more effective and efficient. We wish to develop this understanding further in to e-commerce and the importance of Psychological Switching Costs being seen as a tool by which companies Lock In the consumer to the product or service they provide. This we see as a strategy that can give a Competitive Advantage and that companies need to work hard to achieve in a very fast paced technological environment. A company trying to develop its online activities can often find it a daunting task to expand, but if they do not the company may well start falling behind (Hayes & Finnegan, 2002, p. 365). The rapid growth of online business and being able to operate on this plane can make it very difficult for managers to make decisions in such an active field, where the strategic implications for the organisation may be misaligned (Perrott, 2005, p. 82). Again the realisation that a company has this ability and can use it as a Competitive Advantage and consequently, it can be seen as a Core Competence of that firm. We see the ability of a firm to create Psychological Switching Costs as an incredibly beneficial attribute to a successful company. The internet environment has been perceived to behave as a nearly perfect market where information is friction free, search costs are low and where buyers and sellers are brought together with great efficiency (Bakos, 1998, p. 1676; Kuttner, 1998, p. 20). Despite the effectiveness of the market and the many fickle customers, Reichheld and Schefter (2000, p. 110) state that the majority of the customers in an online environment seeks convenience above price, arguing that returning to a website that is familiar is much more convenient than searching for a new one. Furthermore, there is evidence that online shoppers perform less comparison shopping than the traditional brick and mortar customers (Balabanis et al., 2006, p. 215; Chang & Chen, 2008, p. 2932). Balabanis et al. (2006, p. 215-217) argue that the environment that surrounds e-businesses possess inherent switching barriers that are not bound to a specific organisation. Instead, these switching barriers are built in the market itself. They support the view that physical search costs on the internet are in general considered to be lower making it easier to search for information and prices from different suppliers. However, the cognitive search costs are considered to be higher in the online environment where customers who are inexperienced shopping online are especially exposed due to the large amount of information available and the difficulty of assessing what is relevant and what is irrelevant. According to Balabanis et al., (2006, p. 217) these cognitive search costs generated by the time and effort that is required to be able to filter important information can result in customers changing to the biggest and most well-known suppliers which may lead to more customer loyalty to familiar suppliers. Core Competence as seen by Coman & Ronen (2009, p. 5678) are "distinctive in their essential contributions to the firm's value and in the difficulty facing competitors wishing to emulate them." Thus, from the perspective of a company that has developed a relationship with its customer's, Psychological Switching Costs can be seen as competences not easily copied when the relationship has been developed over the internet and over time. Based on the inherent cognitive switching barriers in the online environment and the fact that the majority of online customers seek convenience; in that they do less comparison shopping than brick and mortar shoppers; We argue, as do Chen and Hitt (2002, p. 256), that carefully managing these Switching Costs can result in a strong Competitive Advantage, and as such a company does not have to be as competitive on price. Further to this the switching barriers
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help build a first mover advantage in locking in the customer as well as the promotion of customer loyalty.
3.9 Critique
There are however, critique to the possibility of creating First Mover Advantages and Competitive Advantages on the internet, Porter (2001, p. 67-69) states that it is a myth. He discusses the wide spread assumption concerning the internet and online e-commerce would increase Switching Costs and create network effects that would promote first movers with competitive advantages and good profitability. Consumer's would also become accustomed to an organisation's user interface and would not like to search for, register, and learn several other companies' user interface thus increasing Switching Costs. This would further promote Competitive as well as First Mover Advantages. Porter (2001, p. 67-69), however, argues that in reality it is the other way around. He argues that the Switching Costs are probably lower on the internet compared to the bricks and mortar way of doing business and that customers often have the ability to switch between suppliers with a few clicks on the mouse. Furthermore, the lack of human interaction and physical presence makes, according to Porter (2001, p. 69), the businesses in the online environment less concrete to the customer and consequently makes it more difficult to build and maintain internet brands. Our perception is that there are differences in the way scholars consider the behavior of online shoppers and the effects of Switching Costs in the online environment. Some researchers (for example Chang & Chen, 2008, p. 2932/2940; Balabanis et al., 2006, p. 217; Reichheld &Schefter, 2000, p. 110) consider the online customers to be convenient in their ways, searching less information than the more traditional way of shopping in "offline" stores and that there is inherent cognitive Switching Costs in the online environment. As mentioned above however, other scholars (for example Porter, 2001, p. 67-69) argue that Switching Costs are very low and that once a customer becomes familiar with the technology they will realize the low Switching Costs which will result in reduced loyalty. From our point of view these differences illuminates the significance of our study; whether or not Switching Costs are high or low in an online environment these differences illustrates that Switching Costs are an important factor to keep in mind when strategizing for the future of an organisation.
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3.10 Conclusion of the Theoretical Framework
To summarize the theoretical framework so as to give the reader an overview of what we consider as the relevant theories, relating to how companies based on the internet use Psychological Switching Costs as a strategy to Lock In the customers, we have produced a model (Figure 3). Further to this, the model will be used as a platform to develop the analysis and conclusions of this research and hence redefine the model according to the respondents.
Dynamic Capabilities
Switching Costs
Procedural, Social, Lost Benefit (PSL)
Trust
First Mover Advantage
Design
Value Chain
Support Primary
Lock In
Competitive Advantage
Figure 3. Psychological Strategies in locking in customers Dynamic capabilities are seen as how organisations deal with different occurrences in a market, and as such the ability to adapt. Thus we see the underlying factor in companies having an ability to develop Switching Costs in a technologically advanced environment as an imperative step in achieving a Competitive Advantage. Therefore it is seen as a starting point for our model. The connection to Switching Costs is consequentially made by the important role that it plays in traditional approaches to influencing customers as Michael Porter (2008, p. 83; 1979, p.140) describes in his Five Forces Framework where Switching Costs are seen as influences to 'buyer power'. We argue that Dynamic Capabilities as a concept is seen as the grounding by which companies form strategy to know and understand the environment in which they operate so as to be able to make informed decisions; specifically in this case when it comes to influencing Psychological Switching Costs. Therefore we make the connection with double headed arrows to reflect the influence of Dynamic Capabilities and Switching Costs as the grounding for developing a relationship with customers and influencing the Locking in effect.
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We then develop Switching Costs into five areas that are the main focus of this research. These five areas of Switching Costs; PSL, Trust, First Mover Advantage, Design and Value Chain; discussed previously in this chapter. These five areas we interpret as areas that have a psychological influence on customers and that companies that are able to utilise these factors will stand in a good position to Lock In the customers. Thus arrows pointing from the five areas of Switching Costs; PSL, Trust, First Mover Advantage, Design and Value Chain towards Lock In. PSL is a development of the differing types of Switching Costs which is concerned with positive and negative type Costs to buyers. For the purposes of this study they are considered from the perspective of managers and what types of Switching Costs are attempted by these managers to Lock In customers; thus the arrow towards Lock In. Trust is seen as an important aspect in developing relationships, therefore an arrow towards Lock In, as once trust is gained a customer is more likely to cement the relationship. First Mover Advantage can also be seen to have an arrow towards Lock In, due to the fact that customers become used to a service and therefore are less likely to switch. Design of web pages have also been considered as the significance of a simple structure verses a highly developed one that can influence the users comfort and thus their willingness to continue using the specific company, therefore having a Locking in effect, thus the arrow. Finally the Value Chain is considered as it can be seen as a tool that can influence relationships and therefore an arrow towards Lock In. The final piece of the puzzle of Lock In to Competitive Advantage is significant because we argue that if a customer is locked into a company then the company has achieved a Competitive Advantage over their competitors, not relying on Price, Product, Promotion or Placement.
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4. Empirical Data & Analysis
In this chapter we have compiled a detailed account of what the respondents felt about the issues relating to the theoretical chapter previous to this. We then match the empirical data with the theoretical section of this thesis to see the similarities and differences of what influences managers have on Switching Costs and the ability to create a Competitive Advantage in Locking in customers. This chapter will therefore highlight the significant attributes that the respondents found important in relation to this area in conjunction with the theoretical framework. At the end we take a brief look back of the relevant theory and continue with our revised model to show where the respondents and theory deviate, going on to analysis these differences and similarities. To increase the level of transparency in our research and to give the reader a better understanding of what the respondents actually have discussed, the quotes used in this thesis are found in its original language in Appendix 2.
4.1 Strategy and Dynamic Capabilities
4.1.1 Discshop
In response to questions based on Strategy and Dynamic Capabilities, Henrik from Discshop described a business model that he felt relevant as to why they have been so successful. The model itself is from the company and is known as "the three S's, which have built Discshop's success" (1). Accordingly it comes from the understanding that Discshop saw that to purchase on the internet "is nothing more that post-order, but with a digital catalogue" (2). Discshop therefore focused not on technology but the three S's, "the first and most important being S for Service" (3) where the customer is the central focus with their wants and need catered for. The second S being the website (Sajten) as the next important factor in serving the customer saying that it should be "sophisticatedly simple" (4). One such example that Henrik takes up is that "you do not need a user name" (5). "The third S is the Selection of goods that they offer" (6) and this large selection is a reason that Henrik feels that Discshop can compete so well compared to other business that operate in the physical world (7). So, from Henrik and Discshop's perspective the strategies revolve around these three S's and as such "service is one of the best ways to create loyalty" (8). Through this business strategy it is important to make a positive experience for the customer so that they want to come back; "it is incredibly important" (9). Henrik goes on to discuss the significance of service and how, if a customer has to exert themselves in the buying process it is easy for customers to go somewhere else when discussing the internet and therefore, through "good service you create the absolute strongest loyalty that one can think of" (10). In order for Discshop to develop its strategies Henrik sees there is a need to be careful, and accurate and to see the big perspective when deciding strategies to be implemented. Concerning specific Dynamic Capabilities Henrik sees it as imperative to be "quick and agile" in their branch as things can change very quickly (11). So in order to hold on to customers it is important to create loyalty and according to this respondent it is achieved by Discshop through its three S's and most important is service. "If one can Lock In, in some-way the customer, then you have won!" (12).
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So when asked why it is difficult to operate on the internet Henrik responded that the internet is so transparent, so if mistakes are made it can have a tremendous influence on the customer experience compared to someone who goes in to a 'physical shop'. As everything they do is so transparent and the flow of information on the internet is so fast that it is "very important to have clear guidelines, templates and process for how to run the business" (13). Furthermore that the strategies of the company should focus both on long-term and short-term service orientated goals as the product demand itself may well change over time, "one should focus somewhat on success-criteria around the service and protect the customers one has" (14). When considering these concepts we see that Henrik from Discshop is well aware of the importance of forming strategy and the central focus for them is the customer. Their strategy is called the 3 S's, which stands for Service, Site (website) and assortment (Sortiment in Swedish), in relation to operating successfully on the internet. As "service is one of the best ways to create loyalty" we can see that by establishing this relationship they can then influence buyer behaviour (Louviers et al, 2003, p. 167) which is relevant to Henrik's way of thinking when regarding the 3 S's. He goes on to say that in an internet environment it is necessary to be "quick and agile" as things can change in an instant, this is in line with Barreto (2010, p. 256) where it is considered to be significant in having the ability to adapt to the market. However Henrik also sees the advantages of locking in the customer that reduces the need to be as dynamic, but one of the main issues is the transparency of the internet, that you have to do things right the first time otherwise customers will go somewhere else. Thus in order to create this effect Discshop still need clear strategic guidelines as to how to operate, and that company strategies focus on service orientated goals as product demand and products themselves change over time, so what is important is gaining the relationship
4.1.2 Katshing
In response to these questions based on Strategy and Dynamic Capabilities, Anders from Katshing believes that there is an incredible difference between running a business through the internet compared to a physical shop. Saying that the internet is "brutal [...] and if one does not accept the rules one will be run-over" (1). Anders also agrees with Henrik that the internet is very transparent, saying that, "there are no secrets...one's strategy must endure to be open (2). Anders goes on to explain that communication is also an important demand for customer so that the customer knows who they are dealing with and can trust them (3). So in relation to what is important when considering how Katshing develops strategy on the internet they consider, how brutal the internet is, being transparent and having good lines of communication. However the processes by which they attempt to develop strategy and keep their customer base is "not to stick to long processes, but fast ones" (4). In that it can depend on the situation and so from that point strategies can develop according to the reality of the situation and how it may change; "?from how reality changes so does the need for where we align our strategies" (5). The reasons behind this are according to Anders that to over-complicate strategies can make it "difficult to use" (6). Thus by having their core-values as the base for the strategic processes he sees that they eliminate this need for over complicating such things. However, to a certain extent their inability to have long-term strategies in place is seen as a weakness as they are "living in the here and now, which is not as good as thinking 1,2 or 3 years ahead" (7).
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Anders also sees that to retain customers is of the upmost importance and is "central to everything they do" (8), the "focus being on delivering customer satisfaction and that customer's are always happy with what we do" (9). Mentioning similarly to Discshop that it is important to a have a customer-service that the customer can phone if they have queries, which is unlike their major competitor (10). Thus, when considering the importance of retaining customers Anders believes it to be a primary activity (11), and very important not to lose customers (12). Sound reasoning is a significant parameter when considering the importance of understanding the business environment; "without a good understanding of the business environment wrong decisions can easily be made" (13). He sees this as important because there are a lot of competitors and so it is easy for customers to choose someone else (14). In order to keep customers valuing Katshing and their product offering it is necessary for them to "want to be the absolute best suited for customers all the time" (15). Anders sees that there are many differences in running a business that operates on the internet, similarly to Henrik in that because it is transparent, strategies must be open ended so they can be adaptable. Also that lines of communication are a serious concern for an internet company and that it is a two way communication; firstly so the customer knows who they are dealing with and secondly because this helps develop trust (also noted by other respondents). From the business side it gives the company an opportunity to see what is wrong so they can quickly rectify issues (Barreto 2010) and develop the relationship. The significance of this is that if they do not do anything the market performance of the business can be influenced dramatically (Audia et al, 2000, p. 839) as the company will be out of touch from the customers. However Anders differs from Henrik's development of strategy in so far as Katshing see it as something that develops and should always come from something simple otherwise it can be difficult to follow. But he does agree with the importance of servicing the customer and their needs as of the up most importance in retaining them as customers, as in an online environment it is so easy to choose someone else. This is in line with Porter (2001, p. 67-9) who argues on a general level, Switching Costs are lower on the internet compared to bricks and mortar ways of doing business as it is just a couple of clicks on the mouse .
4.1.3 RebelBetting
In response to these questions based on Strategy and Dynamic Capabilities, Simon from RebelBetting indicated strongly that operating on the internet and how to approach business is a lot different to the normal physical shopping approach. One aspect being that the internet "is a lot more impersonal" (1) and as other respondents have stated, Simon also sees it is "very important how one communicates with the customers" (2). Simon goes further to mention that "the speed of the web" (3) has a strong influence on the customer, even mentioning something called a "bounce rate" (4) which shows how long an individual spends at a website before clicking off somewhere else. So "as soon as someone comes to 'a site' one must catch their interest" (5) "So it is very important how one communicates, that one has good marketing material, good outlook to the site so they want to read more" (6). Thus through communication and being open and honest with customers and not hiding things is important (7). Simon goes on to discuss the advantages of being a web-based business in that they can "create customer loyalty" (8) and that if a customer signs up for a
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newsletter, RebelBetting can keep contact with the individual where 'physical shops' cannot (9). The processes for developing strategy is something that RebelBetting consider as they are a relatively new company, for Simon it is important to put himself in the position of the customer and try to understand what is important for them, "to think like a customer is important" (10). He also considers, "building customer loyalty in the long-term ?as well as creating faith in the company" (11) when considering how to develop strategy "functionality is also of value to the customer" (12). Further to this they plan a subscribing service which according to Simon is "very important for return purchases and keeping the customer" (13). He goes on to say that they as a company are putting as much effort in to "marketing and customer loyalty as they do on development" (14). In attempting to develop relationships and "educate customers in how RebelBetting's service works, they have produced an E-book which is "of course designed specifically for their product" (15) along with "fast (software) development" and an attempt to "point out" to their customers this fast development (16). Further to this Simon mentions technical functions such as "auto surf" which he also sees as a "unique selling point which nobody else has." (17). According to Simon as they offer such a "complex product it draws in computer knowledgeable people," (18), "but it is important to widen the market place by making their service more user friendly" (19). So through these solutions Simon sees that this will help to Lock-in customers in the future and "when they are used to the site with its user-friendliness, nice interface they will not want to change to one of our competitors, even if they have a larger quantity on offer" (20) Simon from RebelBetting also sees business on the internet as different to the traditional method because it is a lot more impersonal and as Anders, Simon sees it as very important to communicate with customers. He goes on to say that the internet is a medium where customers discuss between themselves how companies are doing and how they are treated as well as the different offers. The speed of which the web works has a strong influence on customers according to Simon because, as mentioned by Porter (2001) it is only a couple of clicks to the next site. For this reason it is incredibly important to catch the interest of the visitor to the site immediately and how one communicates to the web-visitor is very important. Simon discusses the significance of being open and honest and as such they can develop a much more solid relationship; and to leave a good impression so that the customer remembers and sees RebelBetting as a "nicer company". Simon also sees that price is an important factor in giving them a competitive advantage, but it is worth noting that the company is less than two years old, which we interpret to mean in order to break into the market they must be competitive on price. Further to this, Simon puts some strong emphasis on the 'functionality' of the site as being of value to the customer. Thus we can see the significance of developing strategies that serve the customer without bringing specific monetary value to the business but helps in developing the relationship by offering a more user-friendly service. He also mentions different functions and their fast software development as "unique selling points which nobody else has". Thus we can see the evidence of RebelBetting becoming more efficient and effective compared to their competitors (Teece et al, 1997, p. 510) according to the advances Simon says RebelBetting are making.
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4.1.4 Prisjakt
In response to these questions based on Strategy and Dynamic Capabilities, Magnus sees that it is most important to "start from the perspective of what the customer really wants" (1). From here one has the ability to let the customer influence the strategy and influence the communication between the respective parties. (2) The processes by which strategy development occurs are developed from listening and communicating; and that customers have the opportunity to voice their opinion. "And in this way, one can influence the customer before they change to another supplier" (3). However according to Magnus suggestions come from all directions but the decisions are made by the board of directors (4). Such that strategy formation when concerning customers changing to another supplier, according to Magnus will be analyzed and questions asked as to why the switch, if it is found to be relevant it can lead to changes (in strategy) from (Prisjakt) (5). Magnus sees that customer retention strategies are of a very important nature in developing the service that they sell, this is due to the fact that the company itself "is built because 'someone' wants the services and that's why (they) are dependent on the customers appreciation [?] (Prisjakt) are dependent on their existing customers opinions in the process of developing strategies to keep their customers" (6). And from these they develop the service, as if they did not, they may well be developing services "that nobody wants" (7). Further to this, Magnus sees that customer retention is a primary activity and that it influences technological solutions as well as other departments in the strategic decision making within the company (8). When considering support activities that Lock In customers, Magnus saw that they did not attempt this (9), "but to create an environment in which they (customers) earn money, and in this way they become tied to us" (10) as a significant attempt to retain customers. Magnus feels that when forming strategy on the internet they have to start from what the customer really wants and let them influence the process through two-way communication. This communication gives Prisjakt according to Magnus the ability to influence the customer before they change to another. Therefore the realisation that the company that interacts between its strategy and environment posses the ability to alter strategies or the market itself (D'Aveni 1999, p128). Further to this Magnus sees it as very important in developing the 'service' that they offer so as to retain customers, and as such customer retentions is a primary activity which influences technological solution to issues relating to strategy. So again we can see the distinction of having capabilities that are adaptable, specifically for companies operating on the internet, and it can be seen as necessary to communicate between company and customers in order to develop the company in gaining competences and a competitive edge. Where creating an environment where the customer reaps benefits from this interaction has a positive influence in developing a Competitive Advantage for Prisjakt as the customers have evolved the company making the appeal intangible and very difficult to copy.
4.1.5 Company X
In response to these questions based on Strategy and Dynamic Capabilities, Respondent X sees the development of strategy on the internet can be advantageous because "one can find a business model that can be very good, while only having to invest a small amount and yet
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reach many people" (1). So according to respondent X "the most important thing to do when running an internet site is to make sure there is a lot of human traffic visiting the site and that different services are offered so that those people stay longer and look at many pages". It is also important to have a clear idea about the contents of what should be on the site so that one can steer traffic (2) and thus how to convert this traffic in to "paying traffic" (3). It is also important to reach a dominant place in the market, by finding "a balance between both traffic and advertising, so it is difficult for others to come in and take that position" (4). This is achieved, "partly by having good products that work and that are fast" (5) and as such through this (customers) gain a good experience (6) so there "is a lot of thought behind the scenes toachieve this" (7). In relation to what information is used to develop strategy Respondent X sees that the internet has an advantage in that you can gain "a lot of statistical information...and how customers move around the site"(8). Also that over time you can see how people's behaviour changes (9), as well as conducting market research (10) When considering customer retention Respondent X also sees this as a "decisive point" (11) in the decision making process when developing their products and services. And as such it is "the base decision in everything (they) do" (12). Respondent X says that they try to get people to stay on the site by giving them a good user-experience so that they will want to come back (13). Respondent X believes that by making customers satisfied they will keep coming back, (14) so according to them it is important to work on what can be done so customers will come back and what can be done to stop them from going somewhere else (15). Respondent X sees that the development of strategy on the internet is advantageous because it does not need huge resources to start up when compared to a bricks and mortar business and that one can reach a large amount of people. When running the site it is important to make sure there is a lot of 'human traffic', however Respondent X does not really go in to detail as to how this is achieved. Other than saying that the website itself should be simple to use and that there is a clear idea for what should be on the site so that they can steer the 'traffic'. They are of the opinion that just because they are a company that operates on the internet strategy should not and does not differ from any other business. This thought is seen in relation to the fact that the most important factors are a balance between 'human traffic' and 'advertising' so as to reach a dominant position in the market. This, they feel makes it difficult for the competitors to take the position and that it is achieved with a product/service that works and works fast. Although communications is not mentioned by this respondent, they do discuss collecting information on the customer and how the customer moves around their website so that they can develop it as they can see how people's behaviour changes, and by doing this they can give the 'user' a 'good experience' so the customer will want to return.
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4.1.6 Combined Analysis of Strategy & Dynamic Capabilities Rebel? Betting
How one Communic? ates Catching i nterest immediately Price Functionality Fast software develop? ment is a unique selling point
Discshop
Locking in customers reduces the need to be dynamic Importance in gaining relationship Ability to be agile
Katshing
Lines of Communic? ation 2 way relation? ship Relation? ship develop? ment Ability to be agile
Prisjakt
2 way Communica tion Customers influence strategic decision through 2 way communic? ation Interaction develops the intangible compe?t ences
Company X
Strategy is e asier than tr aditional business Ability to reach more c ustomers Information c ollection to help form strategy Dominant position makes it difficult for competitors
Strategy & Dynamic Capabilitie s
Communication
Figure 4. Strategy & Dynamic Capabilities All companies interviewed at some point made it known that the importance of transparency on the internet is a significant factor when developing strategy for their respective businesses. Although not all saw communication between customer and business as significant in forming strategy, but all did see that knowing the customer either through collecting statistical information (RebelBetting 'Bounce Rate' or Company X, how visitors moved through the site) or communicating between each other (customer and business) as very relevant in giving an advantage to the company and how they form strategy to influence the customer. We see this as attempts to help retain the customer and create a Lock In effect through these strategies or gain more traffic to the site. These factors also help companies in being able to be more responsive to change and the demands of the customers which can therefore influence the Locking In of customers to the company. We also saw that the respondents already started to discuss the theoretical concepts that we as researchers had seen as relevant in order to Lock In customers on the internet. As examples, Katshing mention trust and RebelBetting discussing functionality (interface design), these will be further addressed in the subsequent chapter.
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4.2 Switching Costs
When discussing Switching Costs and how the respondents consider Switching Costs and how they are affected by them we can see many similarities between the respondents but also several differences. Due to the fact that the different types of Switching Costs and the two types of Commitment, Affective and Calculative Commitment, are so closely interconnected and consequently dependant on each other; we have chosen not to separate them into several sections, but to analyze them all together in one segment.
4.2.1 Discshop
Regarding Switching Costs Henrik at Discshop states that "of course you want barriers that are as high as possible; however, it is difficult in our world to create real Switching Costs if we wish to live up to our motto to keep things simple and have good service."(1) According to Henrik it has been a natural part of the strategy process to consider Switching Costs. One example of this that Henrik highlights is where Discshop creates barriers is through their loyalty program saying that "it is such a clear example of where we create Switching Costs for our customers. They get points when purchasing and when you collect points you can achieve a better customer category and in turn get better prices, shipping terms and conditions so it has definitely been an element." (2) What Henrik emphasizes is that Switching Costs are important when creating customer loyalty stating that "Once again, it is important to create loyalty. It is cheaper to keep one loyal customer than to attract new, so if you can Lock In the customers you have a lot to gain."(3) Furthermore, Henrik emphasizes that it is "through good service that you create the strongest possible loyalty" (4). He points out that "first of all, we want to create a positive experience for the customer [?] so they want to come back. It is incredibly important" (5). This can also be seen from a relationship perspective where Henrik argues that the goal of building relationships to the customer is to create loyalty and that the best means of doing so "once again is to deliver the best possible service, to live up to their expectations" (6). However, when discussing how Switching Costs give the company an advantage compared to its competitors Henrik said that "Once again on the internet, the Switching Costs that you refer to are normally not that big. It is more of a psychological Switching Cost [?] there are no real costs, rather it is an alternative cost that you give up" (7) When considering psychological and financial barriers Henrik pointed to the importance of psychological barriers saying that "it creates much deeper roots with psychological barriers than financial. Financial barriers can change; you can have more or less salary and because of that your behavior may change. Consequently, I believe the psychological barriers are much harder to tear down" (8). As Henrik argues that the Switching Costs are normally not that big, we see the connection to Porter's (2001, p. 67-69) line of thought when discussing that Switching Costs are probably lower in the internet environment. However, this goes against the beliefs of several other researchers who argue that online customers are searching less information and are more convenient in their ways compared to the offline environment (Chang & Chen, 2008, p. 2932/2940; Balabanis et al., 2006, p. 217; Reicheld & Schelter, 2000, p. 110). Furthermore, when Henrik highlights that Discshop creates barriers through their loyalty program and that it is through good service that strong customer loyalty is created. In view of the fact that Social Switching Costs, Lost Benefits Costs, Relational benefits and Relational Switching Costs are focused on the relationships and other benefits and aspects that customers find valuable; the connection to the positive aspects of Switching Costs such as the Lost
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Benefits Costs and Social Switching Costs that Jones et al. (2007, p. 336-337) & Burnham et al. (2003, p. 111-112) discuss as well as the Relational Benefits that Vázquez-Carrasco & Foxall (2006, p. 368) is realized. This connection is even more clear when Henrik argue that first of all Discshop want to create a positive experience for the customer so that they want to come back and when he discusses the deep roots of psychological barriers.
4.2.2 Katshing
Anders at Katshing discusses along the same principles as Henrik arguing that "whatever we think about it, there are no big barriers. It is pretty easy to switch and if we do not do our job well the customer is gone." (1). As with Henrik, here we can see Anders making the connection to Porter's (2001, p. 67-69) view of the low barriers on the internet as well as contradicting Chang & Chen (2008, p. 2932/2940), Balabanis et al. (2006, p. 217) & Reicheld & Schelter (2000, p. 110). Similar to Henriks view on the advantage of having Switching Costs for the organisation; Anders states that Switching Costs gives you "not that big of an advantage I can say." (2) However, Anders recognized some historical Switching Costs that previously had been affecting Katshing. One thing that he mentioned as previously being a barrier was the first time a customer would make a purchase using a credit card. Nevertheless, he says that "we do not perceive this as a resistance anymore because there are so many other payment options, however, it has been an advantage but it is not a barrier no more" (3). Furthermore, he declares that Switching Costs is not a part of the strategy process today, however on an industry level it has previously been considered. The reason for this is according to Anders that when they started Katshing they decided that this was "not a route that they wanted to take" and that they instead "must deliver a transparent solution to all parties involved to deserve our relationship to the customer all the time. And in that sense you can say that we continuously talk about it; never to Lock In a customer." (4). According to Anders; trying to Lock In customers is a "reprehensible way of doing business" (5); he believes that the new generation is smarter and will not accept being locked in to a specific supplier. Although Anders argues that there are no big barriers he states that they are able to create barriers, when explaining their strategy, saying that "We are able to create higher barriers for the customer, however, that is not something that we wish to do. On the opposite, we try to have a strategy that includes putting all weapons in the customers hands and then deliver the highest possible customer value to get the customer to choose us every time." (6) This again reiterates the positive aspects of Switching Costs in form of Social Switching Costs, Lost Benefits Costs and Relational Benefits that Jones et al. (2007, p. 336-337) & VázquezCarrasco & Foxall (2006, p. 368) discusses. Furthermore, this points to Affective Commitment which stems from a sense of affiliation, loyalty and that it motivates the customer to stay in the relationship (Jones et al., 2007, p 338340). This we can also see that both Henrik and Anders touches upon when saying that Discshop would like to make the customer want to stay with the organisation and that Anders argue that they put all weapons in the customers' hands. Additionally, Affective Commitment is of course also based in positive aspects of a relationship and also is connected to Social Switching Costs and Benefit Loss Costs (Jones et al., 2007, p. 338-340).
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4.2.3 RebelBetting
Simon at RebelBetting has an equivalent line of thought when discussing how they consider Switching Costs in the strategy process saying that consider them "not that much right now actually [?] We have a few points that we try to work with to achieve a greater Lock-in such as recurring payments. However, on a more long-term basis we try to create trust and loyalty; that the customers perceives it to be a joyful experience when we release new versions and become better and better and will soon pass the best competitors in the business."(1) Furthermore Simon, similarly to the other respondents, do not feel that Switching Costs give them a great advantage over their customers arguing that "it does not give us much of an advantage right now, the different services are fairly similar; really it is the price and quantity that is valuable."(2) According to Simon the use of Switching Costs is important to them, however, it has not been a deliberate strategy on their part, saying that "it is not something that we have had as an articulated thing; however, unconsciously it has probably been discussed here and there.[?] We have never used the term Switching Costs or Lock-in because our customers are a quite disloyal group. When they have built up their skills and know that there are several competitors it is pretty easy to switch."(3) In regard to RebelBetting's strategy Simon also emphasizes the relationship, support and communication with the customer stating that "we get a lot of mail and we also have a live chat where we try to continuously think about giving an as good impression as possible. Because we know that if it is a customer or just someone who emails us with a question; if we treat this person as if it was a customer where we answer within the hour, then they for one will be surprised that they get an answer. They will be surprised that they get the answer so quickly and that they get a real answer, not some auto generated mail. Then they will remember us as a considerably more pleasant company compared to 99% of the companies that they have mailed in to."(4) Further to the strategy of having a good communication and relationship with the customer Simon identifies several aspects that they have been working on and that are affecting the psychological barriers. One example that Simon emphasizes is that "we released an E-book where we educate the customers how our service works and it is of course concentrated mainly on our service."(6) Another example that Simon emphasizes with regard to creating psychological barriers is that they try to keep a fast pace in the development of the service saying that "another thing is that our aim is to keep a rapid development pace on our service. We also try to point out to the customers that we have a fast development pace.[?] what we say in reality, without saying it is, look at our slow competitors that haven't even updated their website in six months."(7) One last thing that Simon emphasizes is the importance of usability saying that "One of our unique functions that we try to be best at is usability. [?] It should not be that hard to do this. If you are used to buying stocks on the internet you should be able to this. So usability is one thing that we think will contribute to lock-in in the future because once they are used to our nice and easy to use interface, they will not want to change to our competitors even though they have more quantity for example."(8) The emphasis that Simon puts on the importance of such factors such as customer service, support and communication with the customers again shows the significance of the positive aspects of Switching Costs and Affective Commitment previously discussed by Jones et al. (2007, p. 336-341) & Vázquez-Carrasco & Foxall (2006, p. 368). This is further shown when
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Simon argues that they try to create trust and loyalty and to make the customer have a joyful experience when using their service. However, Simon also states that they are trying to affect Switching Costs and trying to achieve a greater Lock In through for example recurring payments which means that money is automatically withdrawn from the customer's account each month. We see this as an example of an activity that can both relate to the positive as well as negative aspects of Switching Costs. On the positive side it can be seen as a service that makes it a hassle free experience to use RebelBetting's service in the sense that the customer do not have to pay any attention to the payment procedure every month, thus increasing the customers want to stay. Furthermore, it can give the customer a greater freedom choice and perceived control, thus increasing the positive emotions due to the Affective Commitment. However, in regard to the negative constraints the customer may also perceive a greater Lock-in effect in the sense that the contracts are more inflexible and it becomes more difficult to switch since they have to contact RebelBetting to ask them to cancel the subscription, thus reducing the perceived control and freedom of choice and consequently attracts negative emotions and reactions in the customer (Jonas et al., 2007, p. 341).
4.2.4 Prisjakt
Prisjakt has a more complex relationship to Switching Costs as they have two aspects or perspectives of the customers that are important to distinguish between. On one side they have the consumer that uses their site and on the other side are the companies that have their products listed on Prisjakt. As Magnus says "we live on a service that is free for the consumer. Without that service this company will not exist. However, our revenues come from the business to business segment but we get the traffic, volume and quality in our service from the consumer."(1) When considering in what ways Prisjakt consider Switching Costs in their strategies concerning the organisations (B2B) that have their products listed at Prisjakt; Magnus says that "in reality Switching Costs are not considered at all, however, we consider it in the sense that we have a strategy that makes it easy to try us, easy to join and easy to terminate our service."(2) This once more indicates a focus on the positive constraints of Switching Costs and Affective Commitment to increase the perceived freedom of choice and control while reducing Procedural Switching Costs such as Economic Risk (Burnham et al. 2003, p. 112) & Jones et al. (2007, p. 336-340). Furthermore, Magnus explained that due to the nature of the service that Prisjakt provides to their business customers Switching Costs does not work saying that "the problem in our business is that[?] you can be a customer at several suppliers at the same time. When you register with us you can at the same time register with Pricerunner or Kelkoo without it being an issue.[?] So Switching Costs does not work in our business."(3) As mentioned in the section above; from the business to business (B2B) perspective it has not been a natural thing for Prisjakt to develop strategies regarding Switching Costs and Magnus emphasizes that their strategy is based on simplicity saying that "it shall be easy to try how the service works and to start up as well as easy to terminate"(4). Furthermore, Magnus emphasizes that "the most important thing is to create a service that allows the B2B customer to still make money; benefits for the customer. If these benefits do not exist; it does not matter how good a relationship we have and since we do not have that type of Switching Cost they will not change supplier, they will stop using our service."(5) Again, we see the focus on the positive aspects of Switching Costs in Prisjakt's strategy.
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From the Business to Consumer (B2C) perspective Prisjakt has a different strategy. As Magnus discusses, "we wish to Lock In the consumer to use our services in different ways. Among other things, make sure that they, that there are possibilities to affect the service and that they for example can use the price watching service.[?] It is services like these that are important to Lock In the consumer, however we do not Lock In the organisations in the same manner. On a consumer level we have psychological barriers and try to create Switching Costs in the sense that we try to affect what price-comparison site they use."(6) The focus of Prisjakt's strategy towards their B2C customers is in line with the other respondents in the sense that they focus on the customer being able to affect their service, thus communicating with the customer and consequently build strong relationships and to provide services that give the customer an added value such as the price watching service. We see this as a way of strengthening the positive Relational and Social Switching Costs as well as increasing the Benefits Loss Costs while at the same time reducing the Calculative Commitment through the communication and increased perception of control for the customers (Jones et al., 2007, p. 338-341 & Vázquez-Carrasco & Foxall (2006, p. 368-369 & Burnham et al., 2003, p. 111112).
4.2.5 Company X
Respondent X has a comparable approach when he discusses how they consider Switching Costs in their strategy which he describes as to "not put temporary focus on activities that do not promote buying and selling"(1) meaning that they focus on activities that "make it easier and make life more simple for they buyers and sellers, otherwise we would not do it"(2). In regard to how Switching Costs affect them and how Switching Costs gives the organisation an advantage Respondent X takes a similar position as the other respondents when describing that "On the internet you always have an active choice and there are services that on the outside almost look like us and that are free. However, the most important barrier for people is that they want to be on the place where there exist a functioning market place where you actually get things sold and where you can find what you want to buy[?] it is not so much the cost for our users to switch, but it is more the experience that everything works."(3) According to respondent X with regard to Switching Costs it has not been that they have "sat down to plan a strategy about this; it is something that has come naturally. It is in everything we do, however, we haven't had any strategy work concerning this."(4) Furthermore Respondent X argue that for them, switching costs have not been important to develop saying that "for us it isn't important, however, we do not see it as barriers or Switching Costs; we want to make our customers satisfied so that they will come back. That is the most important thing. It is important to think about what we can do to get people to come back and what we should avoid to risk that people choose someone else."(5) We see that Respondent X's discussion on many levels is similar to the other respondents and it further shows the clear focus on the positive aspects of Switching Costs when discussing that they wish to make the customer satisfied so that they want to come back as well as make the life more easy and simple for the buyers and sellers. The focus of Respondent X is, as we have discussed with the other respondents, connected to aspects of Affective Commitment, Social Switching Costs, Loss Benefits Cost and Relational Benefits that Jones et al., (2007, p 336-340) & Vázquez-Carrasco & Foxall (2006, p. 368) discusses.
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4.2.6 Combined Analysis of Switching Costs
We can see there are different opinions among the respondents whether or not it is important to develop Switching Costs. Henrik argues that it is important to develop to create customer loyalty, while Anders stated that it was not a route they wanted to take and instead they have to create a transparent solution for all parties. Simon argued that it is very important to develop Switching Costs due to the fact that when the customer becomes more experienced they will know the pros and cons of every service and then it is important that the customer perceives it to be inconvenient to switch. Magnus argued that it is not important for the B2B customer because it does not work in their business. However, in the B2C filed they wish to create barriers. Respondent X said that it is not important and that they do not view it as Switching Costs or barriers and instead wants to make the customer satisfied. In the end all respondents agree on the fact that the internet has very few or low barriers All interviewed had a clear focus on the positive aspects of Switching Costs where they emphasized factors such as communication with the customer, the possibility to affect the services and to deserve the relationship to the customer every time. This focus is strongly connected, not only to the attention on Social Switching Costs, Benefits Loss Costs and Affective Commitment, but also on the reduction of the negative sides of Switching Costs such as Procedural Switching Costs and Calculative Commitment (Jones et al., 2007, p. 336341 & Vázquez-Carrasco & Foxall (2006, p. 368-369 & Burnham et al., 2003, p. 111-112).
Rebel? Discshop
Switching Costs are normally not that big Natural part of the strategy process Create a positive experience Switching Costs through loyalty
Katshing
No big barriers Not a road they wanted to take Deserve the relationship with the customer All weapons in the customers hands It is the price and quantity that is valuable Create a joyful experience Customer Service, Support, Communi? cation Recurring payments
Company Prisjakt Betting X
Does not work in their business (B2B) Try to Lock In B2C customers Possibility to affect the service and price watching for the customers It is not so much the cost for users to switch Has come naturally Satisfaction, make the customer want to come back Avoid risk of losing a customer
Switching Costs
Focus on Positive Switching Costs
Figure 5. Switching Costs
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4.3 Trust
4.3.1Discshop
When considering the issue relating to trust Henrik feels that it is incredibly important in developing relationships with customers, is so far as it is the "A to Z" (1) with "security and safety as one of the most important parameters" (2) This is supported by Reichheld &Schefter (2000, p. 106) in that to be able to gain loyal customers it is vital to first gain their trust. The ways in which they try to do this is by marketing themselves as a trustworthy company as they "try to market that they are a safe option for secure e-commerce" (3) and the importance of first impressions; as a positive experience means that the trust will grow. He also stresses once again the significance of their 3 S strategy and that service also helps build trust. "a positive experience then of course the trust increases, and it starts and ends with the 3 S's, if you give good service you build trust" (4).
4.3.2 Katshing
Anders from Katshing had a very different opinion to trust feeling that it has only now over the last couple of years become an issue, as he saw it in order to gain trust it was just a matter of the customer being satisfied with the product/service. He goes on to discuss the importance of just being satisfied with the purchase made on the internet is not enough (1). It is not just about gaining trust from customers wanting to pay online, but they need to have faith that the company is well established and is not going to be bankrupt. Saying "that there needs to be faith that companies will still be there tomorrow and there are some form of guarantees or similar" (2). Anders sees trust as a process (3) and that a "lifecycle is planned for each customer" (4) and if it works they have a very loyal customer who is Locked In to their company. So through this process they develop a relationship and then Katshing can form product offering suited to the customer, which in turn develops the trust between customer and company and hence the customer becomes very loyal (Reichheld & Schefter, 2000, p.107/8). And as such this process if it succeeds, Anders sees that they have a "very very high loyalty" (5) to the company. This he sees as very significant because "if you are on the internet a customer is only one click away from (our) worst enemy, if the customer is even the slightest bit unsure about (our) information, (our) prices (our) brand they will change to another" (6)
4.3.3 RebelBetting
Simon sees trust as a very important issue saying, "it is very important to get trust and loyalty already from the outset" (1) and he is very much of the opinion that it is necessary to be very transparent(2) about the company; who works there, their individual background. Even going so far as putting pictures of employees and physical address so that the customer can 'get to know' the actual people, and this is essential in order to form trust and it comes from the realisation that the internet is so anonymous. Therefore it is "critical to always be open" with the customer. To develop this trust, "support is a very determining factor" (3) and as such RebelBetting "always tries to help the customer and have good contact with them" (4). This is in line with Reichheld & Schefter (2000, p.106) where there is an uncertainty in shopping over the internet because of the lack of physical contact between parties. And as mentioned by Simon when concerning strategy, functionality is important when it comes to developing trust, which Belicove (2009, p. 35) agrees.
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Further to this Simon feels that as an organisation on the internet, trust is significant because the internet is "so much more anonymous" (5) and as such people are a lot more careful with new ways of doing things (6).
4.3.4 Prisjakt
Trust for Prisjakt is also important and as such their site and the information contained within it needs to be trustworthy and credible to develop trust, saying that it "means a lot, as there must be credible and trustworthy information on (their) site" (1). This is partly achieved through the two way communication that has been discussed earlier. Further to this, Magnus considers 'building' a degree of trust over time and through these efforts the integrity of the website and the readiness to purchase is improved (Gefen et al, 2008, p. 276/7). If the information given on the site is incorrect, for example the customer has the possibility to go in and say that the information is incorrect (2); as also mentioned by Simon where the negative effects are more noticeable through the internet than physical shopping. According to Magnus it is about "building up a degree of trustworthiness on the information that is presented" (3) and so long as this is done correctly (4) trust can develop.
4.3.5 Company X
Company X sees trust as very important and that the company works hard to develop it by improving the website to a high quality where it is simple to use, even though the software is elaborate. Respondent X also feels that it is a crucial factor in showing the consumer what they do by communicating 'outwards', this again is in line with Belicove (2009, p. 35) where functionality and design go a long way in developing trust between customer and business. When considering issues relating to trust Respondent X states that, "if one can feel trust" (1) when operating over the internet and that they "work very hard to keep the site of the highest quality" (2) when it comes to being able to trust them. Going on to say that "even if it is difficult to take out the unserious on our webpage, we always strive for it" (3), and the reasons that it is so decisive is because; "if someone has a bad experience (using their site) and then do not get the help they need, (the customer) will not have the same (positive) view when they use the website in the future." (4). Therefore Respondent X recognises the importance of trying to earn the customers trust to develop a relationship (Reichheld & Schefter 2000, p. 106). They also see as do other respondents that it is necessary to "show what we do" (5) and as such "communicate outwards" (6) with respect to showing how they develop trust in the organisation.
4.3.6 Combined Analysis of Trust
All companies interviewed at some point made it known the importance that 'first impressions count' as a significant factor when developing trust with the customers. And again communication between customer and businesses was seen as an influence by most to influence trust. Company X discussing outward communication and RebelBetting being transparent and giving physical information so the customer can see who they are dealing with and thus earn the customers trust (Reichheld & Schefter 2000, p. 106). The ability to gain the trust of the customer is seen as a vital part of a relationship and once it is achieved the respondents saw that the loyalty was very significant and to that extent a development of a two way relationship created a strong bond.
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Dischop
Vital to gain Trust
Katshing
Not just about being satisfied Faith in the company being around in the future Trust is a Process
Rebel? Betting
Company needs to be Transparent Essential to get to know the actual people to form trust Reduce uncertainty
Prisjakt
Trustworthy and Credible to develop trust achieved partly by 2 way communic? ation Building trust (a process)
Company X
The site should be of high quality t o develop trust Transparent Outward communic? ation
Trust
First Impressions count Positive Experience
Transparency
Figure 6. Trust
4.4 First Mover Advantage
4.4.1 Discshop
When considering First Mover Advantages, Henrik argues that "in itself, there is no value in being a first mover."(1) This goes against Perira (2004, p. 304/306) who argue that First Mover Advantages promotes customer loyalty. However, he also argues that when it is appropriate, it is of course a positive thing to be a first mover. On the topic of First Mover Advantages connected to customer retention and loyalty Henrik argues that there is a connection. There are customers who always want to be at the forefront and take part in the latest and based on this discussion he elaborates that "I don't believe it hurts"(2) meaning that it is probably a good thing to be a first mover. On the other hand, Henrik also recognises that it can be a disadvantage because, as he says "furthermore, there are those customers that are a bit conservative, that want everything to be as it always have been, so it is not just to the positive"(3) aspects of being a first mover. However, in general Henrik does not view First Mover Advantages as an important issue saying that "I don't see it as a really big deal."(4) At the same time as Discshop does not view First Mover Advantages as a big deal, they are for example focusing a lot in new technology. One example that Henrik emphasizes is mobile shopping or "M-commerce" as Henrik calls it. They realized that M-commerce sooner or later will be a big thing and therefore developed a platform for this, and as Henrik states "we saw an opportunity and we are at the forefront. I believe that we are one of the few retailers in Scandinavia that have this type of solution."(5) Furthermore, he goes on discussing that today
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they do not make a lot of money on this service, however, "we believe that in 2-5 years a substantial amount of our sales will come from M-commerce, and then we will have a good position."(6) This discussion goes along the same line as Perrott (2006, p. 303) who argues that it is imperative to be a First Mover because of the constantly evolving technology.
4.4.2 Katshing
Anders argues that it is very important for Katshing to be a first mover. According to Anders their goal is to build the "world's coolest mobile site" which puts a lot of pressure on the entire organisation. Furthermore, Anders argues that being a first mover is important for them because it is a part of the position as a market leader. Additionally, he says that "if we had been a challenger we could copy with pride those that are the best. However, that is not our strategy, so it puts a lot of tension on innovation, speed, flexibility and of course excellence." (1) This again corresponds to Perrott's (2006, p. 303) argument that it is important to be a First Mover due to the ever changing technology. Furthermore, Anders sees no connection between customer retention and loyalty compared to being a first mover. However, when discussing the customers strive to change supplier connected to First Mover Advantages, he explains that if you have a very narrow view of your customer base you can build loyalty through being a First Mover in the sense that your customer base is the "Early adopters, internet users that are well prepared and very interested"(2). However, he says, "if you have the goal, as we do, to become the biggest. Not just on the internet but also in the physical store, we need to win over the 'cool guy' in the big city, as well as the father with small children and the senior citizen [?] Then you need to strive outside this category."(3) When considering customer retention and First Mover Advantages, Anders and Henrik have similar viewpoints, where Anders does not see a connection between customer retention and being a First Mover. However, Anders goes on discussing that if you have a narrow view of who your customer is; you can build loyalty through being a First Mover, which is in support of Perira (2004, p. 304/306). As with Henrik, Anders brings up the example of early adopters and internet users that are well prepared and very interested where he argues that by being a First Mover you can keep that customer category loyal.
4.4.3 Prisjakt
From the perspective of Prisjakt, Magnus argues that being a First Mover is essential saying that "it is very important. There is an interest to try new solutions and there are many people on the internet who really enjoy keeping up with what is considered new and exciting."(1) Magnus furthermore argues that if you are second into this kind of situation it is no longer new and exciting and then you lose the group who enjoy trying new things. According to Magnus Prisjakt has not been First Movers in the sense of entering new markets, however, when considering technical solutions he argues that they are in the forefront. Once more, Magnus brings up AJAX search functionality as an example and also their new Android application for mobile phones where you can scan barcodes of products to see what a product costs in another store while you at the same time are looking at the product in the physical store. Magnus again emphasizes the importance of being a First Mover saying that "within technical areas it is incredibly important that we are first."(2) Magnus furthermore elaborates that "if a technical solution exists that we do not use, then we have been criticized for that."(3) In regard to the connection between being a First Mover and customer retention and loyalty Magnus argues that "we believe that it exists, however it is nothing that we have measured directly."(4) This again is gives some support to Perira's (2004, p. 304/306) discussion
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regarding First Mover Advantages and the building of customer loyalty. Furthermore, Magnus discusses that by using a service that is in the forefront technologically the customer creates an identity of being at the forefront of technology. Magnus says that "there is a special feeling of using a service where they are at the forefront technically and in that way you create an identity connected to the customer that he or she also are technically at the forefront merely by the fact that they use a site or service that is technically far ahead."(5) This again shows the significance of being a technological First Mover (Perrott, 2006, p. 303). Based on Magnus's discussion we can also see the connection First Mover Advantages and Switching Costs. Particularly for the more experienced internet user who wants to be in the forefront and consequently does not want to switch to another service that is not perceived to be as technologically advanced. Being a First Mover on the technological field we therefore see as a Switching Cost in the sense that it creates benefits that the customer will lose if deciding to switch. Consequently, a Benefits Loss Costs (Jones et al., 2007, p. 337-338).
4.4.4 Company X
Respondent X argues that for them "it was a huge advantage to be the first on the market."(1) Further to this, Respondent X argues that one important factor that influenced their early success was that the already established actors in the offline market were slow to react and realize the importance of the internet. However, Respondent X also points out that "we have also entered many markets where other actors already exists and it has worked just fine as well.(2) As we see it Respondent X has a quite nuanced relationship to First Mover Advantages. This is due to the fact that Respondent X says that it has been a big advantage for them while at the same time discussing their successes in markets where they have not been a First Mover. Respondent X also emphasizes that being a First Mover is all about continuous development. He says that they have "received criticism because the site looks the same as it has always done, however, that is a conscious strategy. The changes we make are small but we develop all the time to continuously be at the forefront and become even more efficient."(3) The importance of continuous development that Respondent X highlights in regard to being a First Mover, we consider to give additional support to Perrott (2006, p. 303) in the discussion regarding the ever evolving technology. On the basis of this continuous development, we can also see a connection to Barney (1991, p. 104) who argue such Competitive Advantages are short lived. Respondent X does not see a clear connection between customer retention and loyalty and being a First Mover, however, he says "those that have purchased services for several years and had a good experience are bit loyal I suppose."(4) When discussing customers strive to change suppliers in connection to First Mover Advantages Respondent X does not think that it has a great influence. In contrast, Respondent X argues that what is determining the customer's choice is based in functionality saying that "it is where you find what you are looking for and where you can sell what you want to get rid of that is crucial."(5)
4.4.5 RebelBetting
Simon discusses that they try to be a First Mover. On the technological side he says "we have been a First Mover in some aspects. For example we went over to the Cloud Server technique as fast as we possibly could. [ ?] Because we are a small organisation we cannot waste money on an enormous server park that collects odds. Instead we need to be innovative and find creative solutions."(1)
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Because it is such a small industry, Simon argues that it has not affected them so much in being a First Mover. Furthermore, he says that "right now it isn't that important as in other types of industries because it is a fairly unknown phenomenon."(2) At the same time Simon believes, similarly to several other respondents, that the advantages of being a First Mover is that you get customers just because people perceive them as being at the forefront which again supports Perrot (2006, p. 303). Simon feels that a First mover Advantage affects different types of customers differently. According to him, the customers that have a large experience in this phenomenon also have a good overview of the different services that exists on the market and they know what service offer them the most quantity and what services that have the best technical solution. Consequently, Simon argues that a First Mover advantage among this type of customer is very important. However, he says "the professional players are a fairly small part of our customers. The largest part of our customers are beginners and in this segment a First Mover Advantages has no importance because they do not know that other services exits so to them we are the first mover, the only mover."(3) Here we can also see the connection to Switching Costs, both for the inexperienced user and the professional user. We can connect the First Mover Advantage in this area to Switching Costs through the strategy that RebelBetting utilize. For example in the sense that the customers that they have and that at the beginning are not aware of any competitors get familiar and accustomed to their user friendly interface, which according to Simon, is a unique feature for them. Consequently, the customers will be reluctant to switch since they will lose the benefits of usability hence we see the connection to Lost Benefits Costs (Jones et al., 2007, p. 336-337).
4.4.6 Combined Analysis of First Mover Advantage Rebel? Betting
Try to be a Firs Mover Being a First Mover has not affected them that much.
Discshop
Katshing
Prisjakt
Company X
Has been a huge advantage Continuous develop? ment
In itself no value
First Mover Advantag e
If an opportunity arises it is a positive thing
Very important to be a First Mover A natural aspect of being a m arket lead er
Being a First Mover is essential. A connection between customer retention and First Mover Advantages exist.
Figure 7. First Mover Advantage
The respondents have different opinions regarding the importance of being a First Mover. For some it has been a big advantage, while others say that it has no value in itself to be a First Mover. There seems, however, to be a consensus among the respondents regarding First
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Mover Advantages that they attract the customers that are eager to try new things and that are early adopters. In regard to this customer segment we can see a connection to Switching Costs and particularly Benefits Loss Costs as these types of customers are not interested in changing from using a service that is in the technological forefront.
4.5 Interface Design
4.5.1 Discshop
When discussing the interface design Henrik at Discshop relates back to their strategy and the three S's and the term sophisticated simplicity. Sophisticated simplicity is a part of the second S, the Site, meaning that they "would like to have the broadest and deepest site, however, it must still be simple. I believe that simplicity is the number one watchword. Don't go in the Boo.com trap and make it complicated. As I said, if you take the car to K-rauta you might be able to live with the fact that it isn't exactly like you want it. However, on the internet it is just one click away to go to a competitor so it has to be simple, lucid and as few barriers aspossible."(1) Here we see the connection to Chang & Chen (2008, p. 2932/2941) & Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) who discusses the importance of not wasting the customer's time by creating a simple and clear design for the reason that it reduces the perceived frustration, risk of wasting time and deception but also increases the perceived trustworthiness of the site. Henrik elaborates this discussion stating that "we all know the difference between coming in to a well organized physical shop, for example H&M or to come in to 'Pelle on the corner' where it really looks like shit. Of course you are much more inspired to come in to the well organized store where it is nice and tidy, all prices and campaign products are clearly labelled. It is therefore super-important that the customer embrace the site."(2) When discussing in which ways the design affects the customer and their choice of returning to the site Henrik once again refers to simplicity saying that "because they think it is smooth and easy and I mean, we know that even our competitors steal a lot of information from us because they know that we have reliable information. It is the same way with the customers, if they come here and find what they are looking for and it is fast; then they will return."(3)
4.5.2 Katshing
Anders discusses the interface design more from a brand and marketing perspective where he referred to a previous Master thesis he participated in. The conclusion in that thesis was according to Anders that almost all big E-businesses do not care about the layout, design and the brand. Instead, the only thing they strive for is to become known and then process everything from point A to B as cheaply as possible. Anders believes that a strategy like that is completely incorrect stating that "I think that, that kind of reasoning is totally wrong. If you listen to a "know it all" such as Alexander Bard they say that the brand on the internet and what the values that the brand is loaded with are more important over time compared to the physical store and I think that is true."(1) Furthermore, Anders emphasizes the importance of loading the values of the brand saying that "number one, the brand had to draw attention to it and be very visible because as a new player you usually don't have a big wallet. We cannot do it like Mediamarkt and lose hundreds of millions, close to a billion in losses before it turns around. We do not have that kind of money. Therefore we need to reach out much faster and you need to break through the huge amounts of noise because that is number 1, break through. Number two was to mediate the values that the organisation shall stand for; and we have spent copious amounts of time
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discussing this. [...] we want our site to signal the values that our brand stands for. Trust is a part of that but there are many parts, so I would say that it has a very significant role."(2) Here we can see the connection to Wang & Emurian (2005, p. 116-118) & Chang & Chen (2008, p. 2940) when discussing the importance of trust and trustworthiness. When considering how the design affects customer retention Anders states that "Yes it can affect, absolutely. The choice to come back or the choice to not come back, however you would like to put it. It goes both ways."(3)
4.5.3 Prisjakt
Magnus had a similar point of view as Henrik with regard to simplicity saying that "a good design is a design that makes it easy to find and easy to use the service, It has to be pretty straightforward to understand what to choose to get where you want to go and to present new features. So how the customer uses our site affects the way we design it."(1) In regard to how the interface design affects customer retention, Magnus has a similar position as Henrik saying that "I don't believe that the design is crucial, instead I believe that it is the functionality on the site that in the end determine whether or not the customers decide to come back or not."(2) One thing that Magnus takes as an example in regard to functionality is their AJAX search function which makes searching for products and prices faster and easier because the user do not have to type in the entire word and the press enter. According to Magnus you just have to "type in two letters and then the search results starts to show up."(3) Here we can once again see the connection to Chang & Chen (2008, p. 2932/2941) & Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) when discussing the importance of not wasting the customers time and frustration etc. When considering what Balabanis et al. (2006, p. 217) & Chang & Chen (2008, p. 2932/2940) argue that internet users make less comparison shopping compared to what they do with bricks and mortar suppliers and that this phenomenon can be explained by the fact that there is a correlation between the number of viable alternatives and the physical search costs; meaning that when the viable alternatives increases, so does the search costs. From this perspective it is also interesting to keep in mind that Prisjakt's entire service for the B2C customer is intended to reduce the physical search costs and to make it easier to find relevant information on prices and so forth.
4.5.4 Company X
With regard to interface design Respondent X, as with other respondents argue the importance of simplicity saying that "Simplicity is the most important thing. It cannot be too much things going on around the users that make them confused in how to use the service."(1) As Respondent X argues that simplicity is the most important thing this reiterates the connection to Chang & Chen (2008, p. 2932/2941) & Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) regarding not wasting the customers time and so forth. Furthermore, Respondent X elaborates that it is better to have fewer features than too many to be able to keep it simple. Respondent X also emphasizes that it is "hard to make things simple" (2) and that they have a challenge in having to appeal to everyone. As respondent X says, "even a 75 year old lady shall be able to use our service" (3) meaning that they cannot develop advanced features for the experienced internet user because the everyone should be able to use it. Here we realize the significance of simplicity connected to the user's internet experience as Chang & Chen (2008, p. 2933) discusses that users with a higher internet experience have a greater understanding in dealing with this type of interface and as a consequence are better suited to make use of offerings on the internet compared to users with low internet experience.
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4.5.5 RebelBetting
Simon emphasizes clarity with regard to interface design and that clarity is something that they really have been trying to work with. According to Simon they have a pedagogical problem to try and explain their product to beginners since it is a rather complex service. Therefore, RebelBetting has a motto that states "Clarity beats persuasion"(1) and that they try to actively to follow. This means that it is better to be clear about what the service is all about and to explain it in a god way rather than have a large purchase button. As Simon argues "first, explain the concept, then will the ones who understand the concept and are interested enough like the idea and want to buy."(2) As with respondent X, we can clearly see the connection to the aspect of user experience that Chang & Chen (2008, p. 2933) discusses when Simon argue that they first explain the concept to the beginner customer and then those who really understand the concept and are interested enough will purchase. When considering the pure design of the site, Simon has a similar view as the other respondents saying that they "try to keep a clean and simple design and focus on what is important on each page."(3) Here we can once again see the connection to Chang & Chen (2008, p. 2932/2941) & Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) when they discuss about not wasting the customers time and to reduce frustration and deception as well as increasing the trustworthiness through a simple and clear design. However, when discussing how the design affects customer retention Simon believes that it has not that big of an effect, saying that "it is probably very few who come back because of that."(4) According to Simon this is because they do not have that much useful information on the site once the customer know the service and are up and running. However, it is when the customer is "new to the service and is trying to get started or when the customer has encountered a problem"(5) that they need to consult the webpage.
4.5.6 Combined Analysis of Interface Design
All five respondents emphasize simplicity and that it must be easy to navigate and to quickly find what you as a customer are looking. Here we see the connection to Chang & Chen (2008, p. 2932/2941); Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) when they talk about increasing the trustworthiness through a simple and clear design as well as not wasting the customers time and to reduce frustration and deception. Simon from RebelBetting and Respondent X also discusses the internet experience of the customer (Chan & Chen, 2008, p. 2940) where Respondent X says that their strategy builds upon that everyone should be able to use their service. At the same time Simon brings up their pedagogical problem to educate the customers.
Discshop
Katshing
Rebel? Betting
Internet experience
Prisjakt
Company X
Internet experience
Interfac eDesign
Smooth and easy
Brand Values
AJAX search functionality
Simplicity
Figure 8. Interface Design
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4.6 Value Chain
4.6.1 Discshop
Henrik is well aware of the support activities that are involved in operating on the internet and as such sees "service" (1) as the answer to how they develop relations and attempt to Lock In their customers. Further to this Henrik explains that in order to develop this service "clear guidelines and what the (customer) expects is done," (2) and "how one expects to be taken care of when contact with customers is made, as well as the level of service" (3) are all part of what Henrik sees as the support activities. Henrik is very much aware of the importance of these activities that they engage in, namely the 3 S's. Again the emphasis is on Service and influencing the customer relationship which is considered by Day et al, (2008, p. 40) as a significant part of the Value Chain. Part of the reason for why Discshop have service is in order to be transparent in what they do which influences the customer and makes them more loyal (4).
4.6.2 Katshing
Anders is of quiet a different opinion, saying that mainly because they have so many competitors that the customer experience is not that dissimilar between actors in the market(1). This contradicts the other respondents, but again, Anders does take up the issue of delivering transparent solutions (2) which he feels improves the relationships they have with their customers. This in itself seems to be a contradiction of what he originally said about 'Support Activities'. We feel this may be a misunderstanding in the terminology used by us during the interview and therefore Anders may not have understood specifically what we meant by Support Activities, thus in this instance no specific activities were mentioned.
4.6.3 RebelBetting
Simon was aware of the activities that they do which are supporting the business; even going so far as saying that their website is a support activity in that it is a marketing tool by which they communicate with the outside world. As an example of the support activities that his company try Lock In the customers he mentions "the E-book" (1) and their "fast technological progression" (2) as ways in which they attempt this. However this and other activities that generate value to the firm have been an unconscious development in how they do business. Other activities that Simon sees as supporting the business include the giving the customer an understanding of the products that they offer and how they work. This we can see as very good use of market intelligent where they are utilising the internet environment to develop relations with prospective customers (Zablah et al, 2004, p. 481). Furthermore Simon sees that the website itself should also be user friendly (3) and effective and these we see as support activities that create more value in their company as addressed by Porter (1985, p. 36), which is similar to Company X's belief in being simple to use, and therefore these activities according to Simon "generate value, customer loyalty and trust" (5) in his organisation.
4.6.4 Prisjakt
Magnus from Prisjakt says that they do not at all "try to form Psychological barriers because he knows what can happen if they do" (1) and he does not want to experience this. When considering the activities that generate value for the company. Magnus discusses certain functions of their webpage as the support activities that give them the most value (2) This function he sees as an important solution, and to that extent "binds the consumer" (3) to them,
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further to this that it also enables the company to be more transparent,. This is in agreement with Sawhney et al, (2002, p. 304) understanding that support activities help in creating a Competitive Advantage for companies, such as Locking In the customer. An important point that Magnus makes although to a certain extent specific to his market is that "they are a service which is free to the consumer?but they get money from the business using the site, but without the traffic of the consumer and quality of service that (they) offer" (4) they would not be able to operate.
4.6.5 Company X
Respondent X sees that the strategy formation is a natural process and as such there are no specific support activities that Lock In the customers. The process for forming strategy "comes naturally" and "it lays in everything they do" (1), however there are no concrete support activities that they do which attempts to Lock In their customers (2), not even a "loyalty program" (3). But they do believe in offering a service that is simple to use and yet technologically advanced to add value to the customer so they will want to come back (4).
4.6.6 Combined Analysis of the Value Chain
Again the significant factor for the majority of respondent was the importance of being transparent in the activities that they do as having an influence on Locking In customers to their specific business. Further to this most respondent's companies attempt to offer a technologically advanced site that is still simple to use, this is also in line with the importance of Interface Design and Customer Experience. However some respondents felt that it has been a natural process of forming strategies and the use of the Support Activities while others have been aware of it importance in Locking In customers.
Rebel? Betting
Website is a support activity Tool by which they communicate User?friendly functions
Discshop
Katshing
Not a big deal as so many actors in the market but important to offer transparent solutions
Prisjakt
Website functions Enabling them to be more transparent
Company X
Natural process Making website simple to use even if technologi? cally advanced
The Value Chain
Service is a support Transparent
Transparency
Figure 9. The Value Chain
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4.7 Competitive Advantage
4.7.1 Discshop
In response to these questions based on Competitive Advantage Henrik discusses the three S's and "as long as they do them better than their competitors he believes they can maintain their advantage" (1) He also goes onto say that although price is important it is the three S's that give them a "very very strong edge compared to their competitors" (2). So within their organisation "everybody understands what is important" (3) and "that is that the customer is the most important" (4) when considering strategies to influence Competitive Advantage. Barney (1991, p. 102) discusses implementing value creating strategies before other firms to gain a Competitive Advantage, and again Henrik is aware of this in the decisions that are made at Discshop in that they are looking at new trends in the market. According to Henrik they are working towards using different mediums of communication to sell the products/services, namely M-commerce2 (5). Which he says is an emerging future marketplace in which he feels that are at the forefront and as such gives them an advantage over their competitors. And as such this is one way that technology can give them an advantage in
the future.
When asked what he thought made customers return to Discshop he answered "by offering a good service they come back" (6) and this is all part of the three S strategy. He goes on to state that if you want to buy cheap you can go to another shop, "but if you want to be comfortable, and you want it delivered the next day with a flexible and easy purchase process, then they are the right place." (7). When considering the advantages gained by forming Psychological Switching Costs Henrik sees that they must be best in the areas of the 3 S's in order to maintain the advantage in the market. And price while important is not what stops customers going to their competitors but rather their 3 S strategy. So as Reichheld & Schefter (2000, p. 110) argue, customers value convenience more than price as reasons for why customer return to a familiar website and Henrik follows this line of argument when considering what he sees as important to gain a Competitive Advantage. Thus the significance of creating, at the very least, strategies that keep customers loyal (if not locking in) to Discshop are at the forefront of Henrik's decision making processes.
4.7.2 Katshing
In response to these questions based on Competitive Advantage Anders believes that they have the best value today and as such "customers experience the best player, whilst not the biggest, (we) are best" (1). Thus when considering internet-shopping what has contributed to Katshing being best is "good delivery prices, price-quality, price-quality-trademark and security" also that "customer needs have increased a lot faster that physical shopping has" (2) This has meant that Katshing have been more focused on "giving a good experience in customer quality in all its forms" (3). Thus the reasons that customers return to Katching is "that (customers) are satisfied with their order" (4). Accordingly, "rich or poor (people) want to shop at a good price" (5). However Anders sees that price is just a "given" (6) and as mentioned previously it is other factors such as customer
2
M?commerce stands for purchases being made from mobile phones.
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satisfaction and customer quality experience that count. This has been made possible according to Anders, partly because of the size of the company in that they now have the resources to offer better customer service through, for example employing more staff, so there are "shorter waiting times, better opening times and higher availability" (7) for customers. Anders believes that they do not have a high threshold in stopping customers changing to another company, and in order to be the "customer's best friend" he feels that it is in their interest not to have such barriers (8). The strategy that leads to Katshing being successful is that they want to "deliver the highest possible customer-value so Katshing are chosen every time" (9). Katshing also feels that there advantages come from the experience that the customer has from using the website, and this has developed because the customer's needs have increased dramatically. So again Reichheld & Schefter (2000, p. 110) argument of convenience over price is a significant factor when considering what Anders thinks about how they gain their Competitive Advantage. Even stating that price is just a 'given' and that customer satisfaction is more highly valued.
4.7.3 RebelBetting
In response to these questions based on Competitive Advantage Simon finds it difficult to see where customer retention can give his company a Competitive Advantage when the competitors and the customers are relatively secretive (1). He does however say that there are online forums that discuss RebelBetting's products and their competitors and "there (we) have seen that (we) are getting good reviews" (2). Simon discusses to some extent that he sees the functionality of the product giving value and this may give an extra boost through loyalty and support, that is what they are hoping for (3) in so far as strategies contributing to giving them a competitive advantage over their competitors. This is in line with Barney (1991, p. 102) where they are trying to implement value creating strategies that will give them a competitive advantage. In regard to changes in the business climate and how they adapt their strategies to fit changes Simon sees the importance of communication with customers as a good way in discovering changes. From this they can priorities (flexible) in the short-term what needs to be done and go from there, he therefore feels that they "adjust quite quickly compared to larger companies" (4). Thus, when asked about the reasons why customers return to their home page, Simon noted that "the site is seen as a marketing channel and possibly as support" (5) rather than where they perform their business. But in relation to where Competitive Advantage comes from he sees this as price being the main factor as "the products themselves are very similar to their competitors and it is easy to change" (6). However he goes on to say that the functions that are unique to them he hopes will make the customer return to them as customers will value these functions so highly that they will not want to change (7). Further to this is RebelBetting's desire to be the biggest actor in their field because as Simon sees it, the ones that are seen most, gain a very large percentage of the customers (8). Also as stated by Katshing, Simon also feels that size matters, so that with more staff they could "specialise in a specific area of the business, because as it stands now everyone does a bit of everything...if (we) were a bigger company we would have more resources, both, financially and in terms of time to market ourselves even more" (9). Simon therefore believes strongly in
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marketing as it is that, that sets them apart from the competitors (10) as well as a "good development tempo" (11). We can see here the significance of Balabanis et al., (2006, p. 215-217) understanding of the cognitive search costs that are considered higher in an online environment and the time and effort required by a customer to change company. Therefore the customer is more likely to go with the most recognisable and biggest, which can lead to a higher level of customer loyalty and thus a Competitive Advantage in simply trying to be the biggest, as stated by Simon.
4.7.4 Prisjakt
In response to these questions based on Competitive Advantage Magnus sees that they and the competitors work in a similar fashion with regard to fitting products and services, thus he does not see any strategic differences between them (1). He does go on to say however that in order to adjust to changes in the market and give them an advantage over their competitors "that it demands flexibility in the internet-world, and that there is no long term planning, but a base philosophy to work from" (2). From this perspective we see the significance of what Perrott (2005, p. 82) discusses in regard to the rapid growth of the online environment making it difficult to form concrete strategy. Thus when it comes to Prisjakt they do not change the basic strategies but their base philosophies "and it has a more practical effect on strategies, it's more a way of working and finding technological solutions" (3) says Magnus. In relation to repeat customers Magnus sees it as a "clear mathematical calculation" (4), in finding the right product for the right price. So when it comes to what strategies/activities are involved in gaining an advantage over their competitors Magnus sees that for Prisjakt "they show all shops selling a product as a competitive advantage for them" (5). Further to this it is also important for Prisjakt to be the biggest and most welknown, but for them it means being more recognised and accepted as a source for finding reliable information, and in this way (they) gain more credibility from the information they give out (6). So again we recognise Balabanis et al., (2006, p. 215-217) point of being a big actor in the market or well recognised that customers can become more loyal, and as such a Competitive Advantage is gained. As with other respondent, Magnus feels that their "technological solution lay at the front" (7) of them keeping the position ahead of the competitors, and part of this is that they "update the price 3 to 4 time a day" (8) thus the customer gets faster information compared to the competition.
4.7.5 Company X
In response to these questions based on Competitive Advantage, Respondent X sees that it is important to talk a lot about the product/service within the organisation and that the "user experience" (1) should be easy. This can be achieved according to Respondent X by having the "right competences" (2) when considering technology and being aware about "what is happening around you," (3) both internally and externally. This we see as their attempt to reduce the cognitive search costs discussed by Balabanis et al., (2006, p. 215-217) so that inexperienced internet users find it easy to use and not over inundated with unnecessary information. So when it comes to customers returning to Company X the respondent feels that if they do come back it is because the customer has succeeded with a business transaction (4) and that it worked well (5). Going on to say that from "a bad meeting experience from customer-service or similar, means the risk of the customer not coming back is greater , so it is important to always focus on the user (customer)" (6).
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When considering Reichheld & Schefter (2000, p. 110) understanding of customers seeking convenience above price company X sees that a very simple exterior internet site, and yet very advanced under the surface, as well as how they run the website, gives the user a good experience (7) compared to the competitors. Going on to say that they "think a lot about the quality and contents of their webpages" as well as the years of experience in knowing how things work (8). Respondent X also speaks of the attributes that keep them ahead of the competitors as being the abilities in their technological competences, and the marketing format as well as the business progression and the people that work for the company (9) giving them the edge.
4.7.6 Combined Analysis of Competitive Advantage
Although it was difficult to understand from such short interviews we argue that these can all be competences that give these companies the ability to manage the Switching Cost so that they have a strong Competitive Advantage over their competitors. And according to Chen &Hitt (2002, p. 256) means that they do not necessarily need to compete on price, as mentioned by at least two of the respondents. Another important factor considered by the majority of respondents when considering how they develop a Competitive Advantage over their competitors is to be flexible. This factor seems to be a common feature throughout this research not just when concerning Competitive Advantages, and as such we see this as something that can be very relevant to companies operating on the internet. Further to this we see that the majority of respondents also considered that the size of the business and the resources that they have available to them can have an effect on how competitive they are.
Rebel? Discshop
3 S's better than anyone else New trends in the market Comfortable in purchasing Flexible Price is not what stops customers from switching
Katshing
Customer quality experience Meet customer needs more than bricks and mortar shopping Resources Price is just a 'given'
Betting
Functionality Flexibility Size matters so one has the resources Marketing &Technology Being the biggest Communic? ation Price is important but functions are unique
Prisjakt
Flexibility Biggest & most Well? known develops loyalty Unbiased and reliable information gives them c redibility Technological solution lay at the front of gaining Competitive Advantage
Company X
User experience should be easy Technologic ally advanced Having the right compe? tences Marketing Being the biggest helps
Figure 10. Competitive Advantage
Competitiv eAdvantag e
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4.8 Theoretical Recap
In the theory chapter we considered the relevant theories relating to Switching Costs and how top level managers can influence them through differing strategies. These are accomplished through the Dynamic Capabilities of a firm in developing strategies that influence these Switching Costs. Where Dynamic Capabilities are seen as being able to identify and seize opportunities in order to stay on the competitive edge (Augier & Teece, 2009, p. 410). And Switching Costs are the perceived economic and psychological costs associated with changing from one alternative to another (Jones et al, 2002, p. 441). Examples of strategies that we have taken up are 'Trust Development' on the internet as according to Belicove (2009, p. 35) is a valuable asset when developing a relationship with a prospective customer over the internet. And 'Interface Design and Customer Experience' as website design is very important for customers, so that they can evaluate and explore the information available to them in a way that is comprehensible (Louviers et al, 2003, p. 169).
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4.9 Revised Model
Communication
Dynamic Capabilities
Flexibility Agility
Positive Switching Costs
Trust Transparency
Design Simplicity
Value Chain Transparency
Competitive Advantage
Lock In
Figure 11. Revised Model; Psychological Strategies in locking in customers We have now developed our theoretical model from its original form to represent the factors that are relevant to respondents and thus show the adjustments which influence the strategic processes of developing a Lock In effect by companies that operate on the internet. As stated in the previous model (Figure 3) Dynamic Capabilities are a significant influence in gaining advantages within a market. What was noted by the respondents was that two way communication between the company and the customer in an online environment influencing the capabilities by listening to the customers as it makes them more responsive to the customer's wants and needs, thus creating a valuable relationship. The respondents believed therefore that in able to develop Switching Costs, it is important to be flexible and agile in their actions, as stated by one respondent, to let the customer develop the strategy and the ability to respond created a more loyal customer. Where flexibility means the speed at which they can change their strategy, and agility the actual ability to change. When considering the ways in which the companies influence the different aspects of Switching Costs, we have firstly removed First Mover Advantage, as none of the respondents felt that it was of any large significance. One respondent discussed that they have moved in to 11 other markets without being the first mover and it has not influenced customers in changing to their website service. We have also incorporated the PSL into the Switching Costs box as we have found that it was a very large conceptual area and still very difficult to separate, this is reflected upon in Chapter 4.2. From this point on we have preserved Trust, Design and the Value Chain as having an influence, the development has come from the respondents recognising certain factors that
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have a significant influence. When considering Trust and the Value Chain, the respondents say that they are transparent in what they do in order for the customer to be more willing to use them. When considering Trust it means to Simon at RebelBetting that they give physical information about themselves so that the customer can feel more connected to them. And when considering the Value Chain, Henrik sees that by offering services over and above just their product offerings Discshop gain more loyal customers. Design has also been developed in to incorporating simplicity as the most important factor for making customers more loyal to the business, Company X going so far as saying it must be simple enough for a 75 year old to use. Thus the realisation of the influence on customers that simple design can make customers more loyal. Finally we have switched the positions of Lock In and Competitive Advantage as the aforementioned factors of flexibility, agility, transparency and simplicity are seen by the respondents as giving them a Competitive Advantage and it is that which locks in the customer. Therefore the arrows from flexibility, agility transparency and simplicity go directly to Competitive Advantage. The understanding of the respondents was that it was these factors that gave them a Competitive Advantage and from this a Lock In effect occurs. Furthermore that there are arrows going from flexibility and agility to Switching Costs showing the importance of companies being able to change strategy in relation to influencing Switching Costs factors.
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5. Discussions & Conclusions
In this chapter we will show the significance of our research and where we have tried to develop a deeper understanding of the research we have undertook. The aim of this study has been to asses if companies consider the effects of Psychological Switching Costs and from the companies interviewed, how this influences the strategic processes of the company We will first attempt to answer the sub-purpose questions presented in Section 1.4 and from here we will endeavour to incorporate the theories discussed and the respondent data and our own understanding in order to develop the modify, adjust and hopefully build upon theory.
5.1 Sub?purpose Questions answered
If senior managers are using Psychological Switching Costs, do they see it as important? From the respondents that were interviewed we found that on a general level strategies to influence Psychological Switching Costs are not what is seen as important per se. More that they try to develop relations with customers so that customers will not want to change to another supplier, and as such all respondents felt this to be very important. Do they see the difference between Positive and Negative Switching Costs? The respondents most definitely saw a difference, where it was important for prospective customer to feel as though they do have a choice. This was seen as very important in creating a good relationship to use positive Switching Cost experiences. How important for the managers are, Trust, First Mover Advantage, Design and The Value Chain in developing Psychological Switching Costs? We found that the respondents valued Trust, Design and the Value Chain when developing Psychological Switching Costs. But the majority of respondents did not see First Mover Advantage as being influential in developing barriers for customers. Do senior managers see Psychological Switching Costs as giving them a Competitive Advantage? From the respondents interviewed we saw that from their understanding of Switching Costs that they did not see a direct effect of Psychological Switching Costs on Competitive Advantage. However through the interviews we got the impression that there are certain activities that each company does to develop relationships which will give them a Competitive Advantage when considering Psychological Switching Costs.
5.2 Strategy and Dynamic Capabilities
From the theory relating to Dynamic Capabilities where organisations need to adapt in order to be competitive (Barreto, 2010, p. 256) we can immediately see the significance of adding flexibility and agility as stated by most respondents as having a major influence on how strategy is formed. As taken up by Katshing, where long term strategies are sacrificed so that they can be more adaptive to the customers desires, alternatively Prisjakt say they have no long term planning, but basic strategies that they follow in order to be adaptive. Further to this is the consideration of communicating between customers and business, this was discussed by all respondents as a very significant point in deciding strategy. We got the impression that this was not just from the perspective of forming a Lock In effect, but a
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general understanding of their strategy formation. However the emphasis being on creating a service/product that the customer would want and chose above the competitors, thus we could see the relevance to two way communication, this was also seen in the example of eBay taken up in Section 1.1. Interestingly enough Henrik from Discshop brought up a very interesting point in that if the customer is Locked in to the business then the company does not have to be so dynamic. That is to say that even if they sell the same product/service as others in the same way, that by creating the relationship they do not have to be so adaptive. Although not explicitly stated by the other respondents, other statements were made in which this was stipulated. Another point raised by some of the respondents was the significance of giving a good first impression from the site as it is so simple to move to another site with just one click. Both Company X and RebelBetting made comments as to this physical ease to find another company and that they use statistical information, such as the bounce rate to understand the customer and how they work. So not only first impressions, but catching the interest of the prospective customer immediately is important, thus a balance of service and adverts as stated by Respondent X. Finally we noted that in order to be flexible, size can play an important role in the companies' ability to be flexible, we argue that this is due to the bureaucracy that grows when a company grows. RebelBetting, which is a very small business describe how they can priorities differing things on a daily basis, whereas Company X had difficulty going in to the details of how they can be adaptive.
5.3 Switching Costs
When considering Switching Costs and especially what Switching Costs are, we argue that the respondents in general had a perception that Switching Costs are negative. This is perhaps most visible when Anders from Katshing argues that it is an 'appalling' way of doing business. However, when discussing their strategies it soon became clear that the respondents focus, perhaps unconsciously, lies in the positive aspects of Switching Costs. This may also stem from the fact that the respondents perceive that Switching Costs are very low on the internet and that it is very difficult to create barriers. All the respondents argued that the internet is brutal and that the competition is fierce and, as a consequence, they are forced to focus on the customer and giving the customer the best service and the best value possible. From this point of view we recognize the importance of utilizing these positive aspects and to promote Affective Commitment as well as Social Switching Costs and Benefits Loss Costs to make the customer want to stay with the organisation. With regard to the different types of Switching Costs it was fascinating to see the relationship between the negative Switching Costs such as Procedural Switching Costs in relation to the positive Switching Costs where the respondents sometimes argued that they try to lower the negative sources of constraint, thus increasing the positive sources of constraint and commitment. As mentioned previously this relationship was one of the reasons for us to not separate the different types of Switching Costs in the analysis. Furthermore, it was interesting to see the differences in strategies regarding Switching Costs in different types of business areas. For example the service that Prisjakt provides which is built exclusively on the B2C customers and their traffic volume. The B2C customers Prisjakt try to Lock In and create barriers to make them continue to use their service. At this point it is
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very interesting to see the difference between the B2B and the B2C customers as Magnus at the same time argues that Switching Costs does not work in the B2B environment. According to Magnus they do not try to Lock In the B2B customer in the same manner as the B2C customer because it does not work in the B2B environment.
5.4 Trust
When we consider the issues relating to trust all respondents see it as a very important factor on the internet, however as we are not doing a comparative study we cannot say if this is more specific to companies operating on the internet rather than bricks and mortar businesses. But we have seen that in order to gain trust it must be developed from the outset and that the company itself must be transparent. Further to this it has been seen as more than just trust, but a faith that the company is not a whimsical operation, but a solid company that will be around for some time, thus size can also play a part in developing trust. According to the respondents, trust is not just about having 'trust', but in order to develop trust certain criteria influence how it develops. For example Henrik from Discshop discusses the benefits to trust when a customer has a positive experience, Anders goes so far as saying that it is not just about the customer being satisfied anymore. Therefore we see that trust transcends its simple meaning when considering this aspect of influencing strategies in forming Psychological Switching Costs on the internet. Thus the companies interviewed see a distinctive need to develop trust in order to form long lasting relationships and this is in line with Reichheld & Schefter (2000).
5.5 First Mover Advantage
With regard to First Mover Advantages we saw differences between the respondents where most of them argued that it had little significance in relation to customer retention and that it is no value in itself to be a First Mover. The consensus was however, that if you have a rather narrow view of your customer base in the sense that you focus on Early Adopters and people who are at the forefront of technology, being a First Mover might be a good strategy where you are able to Lock In your customers. However, when having a broader view of who the customer is, the respondent had differing opinions on the actual advantages of being a First Mover. Simon touches upon one interesting aspect of First Mover Advantages while arguing that they are the only mover for the inexperienced users that do not know of any competitors. This we see is a good example of where an organisation has been able to enter an unexploited market segment. Furthermore, we find it interesting that Simon does not feel that this is giving them much of a First Mover Advantage. This is especially interesting when Simon discusses their E-book and their pedagogical problem to educate the customers as this education is focused mainly on RebelBettings own service rather than the phenomenon of arbitrage betting as a whole.
5.6 Interface Design
When considering Interface Design it was apparent that all respondents perceived simplicity to be the most important aspect of the interface design. According to the respondents it is extremely important that the site is simple and easy to use. The information that the customers are looking for must be easy to find and even the most inexperienced internet user must be able to use the service. Furthermore, it was interesting to see the connection between simple design and the positive sides of Switching Costs and Commitment where the customer get an
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increased perceived control and freedom of choice thus increasing Affective Commitment and the customer's desire to stay with the relationship to the organisation. Furthermore, the influence of the internet as a market place on both the interface design as well on the organisations strategies are realised as the respondents describe the internet as a difficult environment to do business that requires transparency and simplicity for the business to survive in the long run.
5.7 The Value Chain
When looking at the issues relating to the Value Chain the respondents find that it is important to be transparent in what they do. As the Value Chain can influence the relationship with the customer (Day et al., 2008, p. 40) by being transparent this relationship can develop. Simon for example describes their internet website as a tool by which they communicate with the customers, this we argue shows that even the website can be seen as a support activity that gives transparency to what it is that they actually sell. Respondent X describes the importance of having a site that is technologically advanced but simple to use, this we also see as a support activities that develops the relationship between customer and business because by making the site simple to use the customer may become at ease with the service of the site and thus be more willing to be a purchasing customer.
5.8 Competitive Advantage
We argue that Competitive Advantages are gained by these companies through other factors than price and these include developing the relationship between customer and business. Thus when considering these aspects, Psychological Switching Costs play an important part in Locking in the customer. Henrik is fixated on the 3 S's of his company and how this is what gives them a very strong edge over their competitors, implying that through the 3 S's customers are more loyal. Henrik is not the only one that recognises the significance of other factors than price, this we see is in line with Reichheld & Schefter (2000, p. 110) where customers value convenience more. In regard to developing a Competitive Advantage, it also pays to be flexible in being able to adapt strategies that can influence the customers that use the website. This flexibility can help develop a relationship with the customer by being able to offer a better service because the company can adapt to the wants of the customer. Here we see the connection between Dynamic Capabilities, Flexibility and Agility as describe in Figure 11. An example may be RebelBetting's user friendly auto-surf function which they have seen is a unique function which helps to Lock In the customer because of the extra service that they provide. Another aspect that has been discussed by the respondents is that size can play an important role in Locking in customers to a company. This is in line with Balabanis et al., (2006, p. 217) where it is quite often easier to stick with what is known so customers become loyal to the biggest or most prominent (through marketing, given as an example by Simon).
5.9 Contribution to Theory
As stated in Section 2.5 the idea of this study has been to develop, modify or adjust existing theory, thus from the qualitative data that we have collected we have been able to develop the following outcomes.
5.9.1 Communication Influences Dynamic Capabilities
When concerning the ability for companies on the internet to Lock In customers we established that the companies found that through communicating with customers helps them
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to develop strategies in Locking in the customer because the companies develop according to the demands of the customer which inevitably makes the customer more loyal. This ability to communicate with the customer we argue is important as it is a lot more specific to companies on the internet where information is a lot more readily available. By this we mean that a bricks and mortar business has to collect information by possibly doing surveys on customers as they enter the store, whereas the company operating on the internet has the ability to watch the behaviour of the customers through the internet site. Also as stated by other respondents they have the ability to communicate directly through forums and such to discuss what customers' value and thus change things that influence customer loyalty.
5.9.2 Flexibility and Agility
From the data collected from the respondents we recognised a significant influence of the company's ability to be flexible (speed at which the company changes their strategy) and agile (the actual ability to change). And if the companies can respond to customers' wants quickly they gain a Competitive Advantage over the competitors in relation to influencing Psychological Switching Costs.
5.9.3 Transparency
Another factor that was seen by the respondents to influence how they may develop relationships with customer was the importance of being transparent in all that they do as this creates a level of trust. When considering the Value Chain we interpret transparency from the respondents that the activities that are involved throughout the business are visible to customers and by doing this they develop a relationship.
5.9.4 Are Companies based on the internet using Psychological Switching Costs as a Strategy to Lock In the customers, and if so how?
From this study we have been able to see that companies that operate on the internet do attempt to Lock In Customers. The realisation has come from the issues relating to these companies forming Positive Psychological Switching Costs to influence customers: Communication between customer and business is a lot more viable on the internet as it is a communication medium itself, and from this the businesses can develop the relationship between the two parties thus cementing the relationship, thus a Lock In effect. Transparency in what the companies do helps to develop trust, and transparency in the support activities, where the website can be seen as such an activity. These actions help in binding the customer to the company and thus a Lock In effect. Flexibility in the ability to change strategies. This is seen as a direct Competitive Advantage. But also having an influence on developing the Switching Costs barriers by expanding the competences of the individual company partly through the ability to communicate Agility in actually changing those strategies. This is seen as a direct Competitive Advantage. But also having an influence on developing the Switching Costs barriersby expanding the competences of the individual company partly through the ability to communicate We argue that we have found a significant number of examples where this is the case. The influence of online business operating in such a rapid growth environment means that the strategic decisions that are made can greatly influence the effectiveness of the business (Perrott, 2005, p. 82). We have seen different approaches to how this effect can be dampened,
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either by Locking in customers through a better service or developing services (such as RebelBetting's E-book) in order to negate the need to be that dynamic. However we do not say that the companies that were interviewed are not dynamic, as one of the most important points raised was the need to be communicative with customers and being able to develop strategy either to meet the needs of the customers or developing strategies on a daily basis as the customers' needs change (Company X watching the behaviour over time of customers using their site). And as Dynamic Capabilities are seen as being able to identify and seize opportunities in order to stay on the competitive edge (Augier & Teece, 2009, p. 410) we see that these companies do attempt this. We argue that these companies Core Competences are distinctive in contributing to the firms' value (Coman & Ronen (2009, p. 5678) to a significant extent through the ability to communicate with their customers and develop strategies and adapt them, that makes the customer become more loyal to the company, in a positive manner. Thus Companies based on the internet using Psychological Switching Costs are using strategies to Lock In their customers. However in light of this information we do not attempt to generalise for all companies that operate on the internet. Further to this it is on the words of the respondents that they say what gives them a Competitive Advantage; as we make no attempt to define if these companies do actually have a Competitive Advantage. But we do see that from this qualitative study a quantitative study may be conducted to cement these findings and see if they may be more generalisable.
5.10 Further studies
From our qualitative study we have gained a significant understanding within the social context of strategies influencing Psychological Switching Costs on the internet. However, there is room to develop the understanding of the research question by completing a quantitative study showing how customers may perceive Psychological Switching Costs on the internet. Further to this, because of the way our research was performed, we see that a deeper study of a specific market within businesses that operate on the internet can contribute to a deeper understanding of the influences of Psychological Switching Costs. Another issue when considering qualitative study, is that a deeper level of interview with one of the respondents to gain a better understanding of the core competences that make the company competitive with regard to Psychological Switching Costs could be beneficial.
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6. Quality Criteria
In this final chapter we will discuss the quality of this study as well as give the reader the criteria from which they may judge the credibility of this thesis.
6.1 Limitations
From the outset, we as authors spent a lot of time discussing this research and the purpose of this research so that we could have a clear understanding of what it was we were attempting to achieve. This has meant however that in order to complete this study we have had to focus our research on companies that have been willing to give us the time for interviews. While all companies do operate on the internet we were unable to concentrate on one specific business 'branch' but rather a mix. The underlying factor however being that these businesses are internet based and we are not attempting to generalize this study, but gain an understanding of what or how strategies are used to influence Psychological Switching Costs by companies that operate on the internet. Another influence being that while we have attempted a mixed method approach to this study we have used the term 'Switching Costs' and 'Lock In' as positive terms in how companies create relationships with customers and how the keep long term relationships. However it was felt that these terms have confused our respondents when the interviews were held, we did try to give a clear picture of these terms (sending a cover letter with explanations of Switching Costs, See Appendix 1), but found that respondents responded negatively to them. Often saying that they do not attempt to 'create barriers' for their customers, however this gave way to some contradiction to our understanding of these factors when the respondents would discuss how they form relationships. We felt that only one respondent had grasped our meaning of 'Lock In' as they were not afraid to use the term in discussing how they created these relationships. Therefore in an attempt to clarify such details we added Section 1.5 in the Introduction of this thesis. We have also attempted to discuss where the companies involved in this study have discussed creating relationships rather than having a 'Lock In' or high 'Switching Costs'. Another point that we must raise is that again because we have attempted a mixed method study we may not have covered all areas of theory that are relevant to completing this study more effectively. An example being that since completing the study we have been made aware of, by the respondents, the importance of being 'agile' in the business world and that this is an important concept that we did not discuss in great detail. However we see that the literature that was collected is of substantial size and is of good quality so as to represent a good base in which we could evaluate our findings compared to the theoretical framework. The way in which we selected our sample of companies, as discussed in Section 2.6 was done from a subjective approach in which we discussed what companies operate on the internet and may try to influence the customer relationship through strategies that do not revolve around price. We are aware that a more objective approach could have been done in choosing companies, but due to the nature of the study and the responses we got from the companies from the initial contact we felt that these five were acceptable. Going on from this were are aware that price is a significant factor when purchasing goods or services in any environment, but we felt that there are other influences that keep a customer going back to the same establishment time after time. Nonetheless it is we who develop this as an important factor on the internet and therefore this can bring into question the usefulness
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of this study as they may well be other factors that may have an influence. We argue however that our thesis represents a good grounding for why Psychological Switching Costs are of value to companies operating on the internet. Another issue pertained to our study is that we cannot clearly state that any of our respondents companies were market leaders. Even though some of the respondents said they were, we cannot back this up with unbiased evidence as we only have the words of the respondents. In this sense the respondents may not be able to give a completely truthful account as they can be biased towards their own company. However, we see that it does not reflect significantly on this research and through the transparent nature of our study were we have provided quotes to allow the reader to judge for themselves. Finally we would like to raise the issue of language, where the meaning of what has been said in Swedish may have been lost in translation, we have tried to counter this by making available the quotes and remarks in Swedish. They are to be found in Appendix 2 where each section corresponds to a specific section in the Empirics and numbered so that the reader can judge for themselves the meaning of the respondents (if they can speak Swedish).
6.2 Validity equals Credibility
When completing a qualitative study, credibility is seen as taking the place of validity because in a qualitative study the information collected is about understanding a social reality at a specific time thus it cannot be proven to be valid as respondents' understandings may have changed. Therefore credibility allows for a belief in us the researchers to follow good practice guidelines (Bryman, 2008, p. 377). We have therefore provided our respondents with a copy of their transcribed interview and given them a week to respond to any misgiving in misinterpretation of what they have said so as to validate what they have said. Further to this we have included the quotes used in this study so that the reader may judge if the empirical data matches that, that the respondent's have said, we can also make available on request the full transcribe interviews. Another aspects of validity includes transferability, which is where, in qualitative research, it refers to small contextual grouping, and the ability to make judgments about the possible transferability of findings. Accordingly, it is therefore important to produce a rich account of the details (Bryman, 2008, p. 378). In order to do this we have included in Section 2.7 a detailed description of the businesses and respondents that were interviewed, so that the reader of this thesis can judge for themselves where and how this study can be transferred to a different social setting.
6.3 Reliability equals Dependability
Reliability is the idea that a study once completed by one person (or group) can be repeated when considering a quantitative study. However in a Qualitative such as ours, dependability comes from the openness of the information that has been collected. Thus included in this thesis are the Interview guides, correspondence from us to companies interviewed and the quotes taken from the respondents and if requested the full transcription of all respondents except one which wishes to be anonymous are available. This is in line with Bryman (2008, p. 378/9) allowing all who read this thesis with the opportunity to audit the study. This will be completed by the opposition that is to take place where this thesis will be reviewed by our peers, therefore determining the dependability of this study.
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6.4 Confirmability
In order to give this thesis a degree of objectivity we argue that it is the responsibility of our opponents to see that this is done properly. We as the authors have completed this research in good faith and tried to be as objective as possible, however we must recognise that as we have completed a qualitative study our subjective understanding of the social world has been some influence (Bryman, 2008, p. 379). To combat this we have both been present in all five interviews and discussed thoroughly the data and the meaning of the data so as to add a distinct element of objectivity. Further to this we will have the opportunity for our thesis to be audited by our peers to confirm the fair objectivity of this study.
6.5 Authenticity
When considering the fairness of whether we have a viewpoint that gives a fair representation of the social setting that we have studied. We argue that this has been done from the perspective that all respondents come from companies that operate on the internet and that they do not all compete for the same market segment. Furthermore that all respondents are in positions of high responsibility when forming strategy that may influence Switching Costs and Locking in the customers, and therefore a fair representation of the social setting in which their understanding of the social world is valid. We therefore feel that our research offers a fair view of reality (Bryman, 2008, p. 379) by interviewing prominently placed respondents with regard to the social setting that we are investigating. Also that this will help the reader of this thesis gain a better understanding of what it means to consider Psychological Switching Costs when forming strategy to Lock In the customer to a company that operates on the internet.
6.6 Grounded Analysis
In order to give this thesis further value, we see it as necessary to describe further the development of how we analysed the data that was collected. As discussed in Chapter 2.4 grounded theory was the approach we saw as getting the most out of the data we collected. In order to do this we first familiarised ourselves with the companies themselves as well as going through the collected data repeatedly. The next step was to reflect over the data between ourselves to see if we came to a common understanding of what was being said. After this we categorised the different concepts into the collected theory, in part due to the set-up of the interview questions as well as our understanding of the data. We have also attempted to link the data from each respondent by showing a model of the commonalities between respondent after each section (see figures 4, 5, 6, 7, 8, 9 and 10) as well as an overall analytical conclusion of the particular theoretical concept being analysed. In light of this we were then able develop a holistic understanding of the subject matter at hand which is in line with grounded approach according to Easterby-Smith et al., (2002, p. 122-124). This approach we argue shows that we have analysed the data correctly so as to give a true picture of the respondent's position and what it means to develop strategies that relate to Locking in customers to the respective businesses. Furthermore, as stated previously in this chapter, we offer the interviews that have been transcribed for scrutiny by readers of this thesis. This we argue offers a transparent and valid thesis from which to base future studies within this area.
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7. References
7.1 Scientific Journals
Audia, G. P., Locke, A.E. & Smith G.K. (2000) "The Paradox of Success: an Archival and a Laboratory study of Strategic Persistence following Radical Environmental Change", Academy of Management Journal; Vol. 43; No. 5; 837-853 Augier, M. & Teece, D.J. (2009) "Dynamic Capabilities and the Role of Managers in Business Strategy and Economic Performance", Organisation Science; Vol. 20; No. 2; 410421 Bakos, Y.J. (1997). Reducing Buyer Search Costs: Implications for Electronic Marketplaces. Management Science, 43(12), 1676-1692. Balabanis, G. & Reynolds, N., & Simintiras, A. (2005). Bases of e-store loyalty: Perceived switching barriers and satisfaction. Journal of Business Research, 59, 214-224. Barney, J. (1991) "Firms Resources and Sustained Competitive Advantage", Journal of Management, Vol. 17 No. 1, 99-120 Barreto, I. (2010) "Dynamic Capabilities: A Review of Past Research and an Agenda for the Future", Journal of Management; 36; 256-280 Belicove, E.M. (2009) "A matter of online trust", Entrepreneur, Vol. 37, 8, 35-35 Burnham, T.A., & Frels, J.K., & Mahajan, V. (2003). Consumer Switching Costs: A Typology, Antecedents, and Consequences. Journal of the Academy of Marketing Science, 31(2), 109-126. Chang, H.H., & Chen, S.W. (2008). The impact of customer interface quality, satisfaction and switching costs on e-loyalty: Internet experience as a moderator. Computers in Human Behavior, 24, 2927-2944. Chakravorti, S. (2009) "Extending Customer Relationship Management to the Value Chain Partners for Competitive Advantage", Journal of Relationship Marketing; 8; 299-312 Chen, P.Y, & Hitt, L.M. (2002). Measuring Switching Costs and the Determinants of Customer Retention in Internet-Enabled Businesses: A Study of the Online Brokerage Industry. Information Systems Research, 13(3), 255-274. Coman, A., & Ronen, B. (2009) "Focused SWOT: diagnosing critical strengths and weaknesses", International Journal of Production Research, Vol. 47, No. 20, 5677-5689. D'Aveni, A. Richard. (1995) "Coping with hypercompetition: Utilizing the new 7S's framework", Academy of Management Executive; Vol.9; No. 3; 45-57 D'Aveni, A.R. (1999) "Strategic Supermacy through Disruption and Dominance", Sloan Management Review, Spring; 127-135 Day, M., Magnan, G., Webb, M., & Hughes, J. (2008) "Strategic Supplier Relationship Management", Supply Chain Management Review, Vol.12; No. 3; 40-48
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DeMark, E.F., & Harcourt, R.R. (2004) Companies Must Adopt to the Internet to Survive. The CPA Journal, 74(4), 9. Dolan, S. L., Garcia, S. & Auerbach, A. (2003) "Understanding and Managing Chaos in Organisations", International Journal of Management; Vol. 20 No.1, 23-35 Gefen, D., Benbasat, I., & Pavlou, A. P. (2008) "A Research Agenda for Trust in Online Environments", Journal of Management Information Systems; Vol. 24, No.4, 275-286 Harris, L.C., & Goode, M.M.H. (2004). The four levels of loyalty and the pivotal role of trust: a study of online service dynamics. Journal of Retailing, 80, 139-158. Hayes, J., & Finnegan, P. (2003) "Assessing the of Potential of e-business models: towards a framework for assisting decision-makers", European Journal of Operations Research; 160, 365-379 Ives, B., & Learnmont, P.G. (1984) "The Information System as a Competitive Weapon", Communications of the ACM, Vol.27; Issue 12; p. 1193-1201 Jones, M.A., & Mothersbaugh, D.L., & Beatty, S.E. (2002). Why customers stay: measuring the underlying dimensions of services switching costs and managing their differential strategic outcomes. Journal of Business Research, 55, 441-450. Jones, M.A, & Reynolds, K.E., & Mothersbaugh, D.L., & Beatty, S.E. (2007). The Positive and Negative Effects of Switching Costs on Relational Outcomes. Journal of Service Research, 9(4), 335-355. Kuttner, R. (1998), "The net: a market too perfect for profits", BusinessWeek, Vol. 35 No.77, pp.20 Louvieris, P., Driver, J., & Powell-Perry, J. (2003) "Managing customer behaviour dynamics in the multi-channel e-business environment: Enhancing customer relationships capital in the global hotel industry", Journal of Vacation Marketing; 9; 164; Sage Publication Maddox, K. "CRM to outpace other IT spending" B to B; 3/11/2002, Vol. 87 Issue 3, p2 Perrott, B. (2005) "Towards a manager's model for e-business strategy decision", Journal of General Management; Vol. 30 No. 4, 73-89 Perrott, B. (2006) "Efficiency and effectiveness considerations in determining strategic and operational paths to ebusiness enablement", Data Base Marketing & Customer Strategy Management; Vol. 13, 4, 300-308 Porter, E.M. (1979). "How competitive forces shape strategy", Harvard Business Review; March, Vol. 57 Issue 2, p137-145 Porter, E.M. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. First Free Press Edition 1980. New York: The Free Press Porter, E.M. (2001). Strategy and the Internet. Harvard Business Review, March, 63-78. Porter, E.M. (2008) "The Five Competitive Forces That Shape Strategy", Harvard Business Review; January, Vol. 86 Issue 1, p78-93
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Prahalad, C.K.; Hamel, G. (1990) "The core competence of the corporation", Harvard Business Review, May-June, pp. 79-91 Reichheld, F.F., & Schefter, P. (2000). E-loyalty Your Secret Weapon on the Web. Harvard Business Review, July-August, 105-113. Rolland, E., Patterson, A.R., & Ward, F.K. (2009) "Dynamic Capabilities and e-Service", Canadian Journal of Administrative Sciences, 26(4), 301-315 Sawhney, M., & Zabin, J. (2002) "Managing and Measuring Relational Equity in the Network Economy", Journal of the Academy of Marketing Science; 30; 313-332 Sawhney, M. "Don't just relate - Collaborate" MIT Sloan Management Review; Spring 2002, Vol. 43 Issue 3, p96-96, 1p Teece, J.D. Pisano, G., & Shuen, A. (1997) "Dynamic Capabilities and Strategic Management", Strategic Management Journal; Vol. 18:7; 509-533 Vasudevan, H., & Gaur, S.S., & Shinde, R.K. (2006). Relational Switching Costs, Satisfaction and Commitment A study in the Indian manufacturing context. Asia Pacific Journal of Marketing and Logistics, 18(4), 342-353. Vázquez-Carrasco, R., & Foxall G.R. (2006). Positive vs. negative switching barriers: the influence of service consumers' need for variety. Journal of Consumer Behavior, 5, 367-379. Wang, Y.D., & Emurian, H.H. (2005). An overview of online trust: Concepts, elements, and implications. Computers in Human Behavior, 21, 105-125. Zablah, R.A., Bellenger, N.D., & Johnston, J.W. (2004) "An Evaluation of divergent perspectives on customer relationship management: Towards a common understanding of an emerging phrnomenon", Industrial Marketing Management; 33; 475-489 Zwass, V. (2003) "Electronic Commerce and Organisational Innovation: Aspects and Opportunities", International Journal of Electronic Commerce; Vol.7 No. 3 7-37
7.1 Book References
Bengtsson, M., Eriksson, J., Wåhlin, N. (2009). Ledarskap och strategisk förändring. I S. Jönsson, red. & L. Strannegård, red. Ledarskapsboken. Upplaga 1:1. Malmö: Liber AB. ss. 123-154 Bryman, A. (2008). Social Research Methods. 3rd edition, Oxford University Press, Oxford Bryman, A., & Bell, E. (2003). Business Research Methods. Press
1st
edition, Oxford University
Bryman, A., & Bell, E. (2007). Business Research Methods. 2nd edition, Oxford University Press Creswell, W.J. (2009). Research Design. 7th edition, Sage Publications, Inc. Thousand Oaks, California Easterby-Smith, Mark., Thorpe, Richard., Lowe, Andy., (2002). Management Research. 2nd edition, Sage Publications Ltd. London
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Hair Jr, F.J., Money, H.A., Samouel, P. & Page. M. (2007). Research Methods for Business. West Sussex: John Wiley & Sons Ltd. Johansson-Lindfors, M. (1993). Att Utveckla kunskap, om metodologiska och andra vägval vid samhällsvetenskaplig kunskapsbildning. Studentlitteratur, Lund, Sweden Johnson, G., Scholes, K., & Whittington R. (2008). Exploring Coporate Strategy: 8th edition. Harlow: Prentice Hall Kotler, P., Wong, V., Saunders, J., & Armstrong, G. (2005). Principles of Marketing: 4 th edition. Harlow: Prentice Hall Okin, J.R. (2005). The Internet revolution: the not-for-dummies guide to the history, technology, and use of the Internet. Ironbound Press, Winter Harbor Olivier, P. (2004). Writing your Thesis. Sage Publications, London Saunders, M., Lewis, P., & Thornhill, A. (2007). Research methods for business students. 4th edition, Peason Education Limited, Essex Saunders, M., Lewis, P., & Thornhill, A. (2008). Research methods for business students. 5th edition, Peason Education Limited, Essex
7.2 Other References
Affärsdata [Retrieved 2010-04-29] Discshop [Retrieved 2010-04-29] Discshop (2009). Annual report 2008 [electronic] Available via Affärsdata: [Retrieved 2010-04-29] eBay (2009). Annual report 2008. [electronic] Available via: [Retrieved 2010-02-09] IFPI Digital Music Report (2010) [electronic] Available via: [Retrieved 2010-03-20] Katshing [Retrieved 2010-04-29] Katshing (2009). Annual report 2008. [electronic] Available via Affärsdata: [Retrieved 2010-04-29]
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PayPal [Retrieved 2010-0209] PayPal [Retrieved 2010-02-09] Prisjakt [Retrieved 2010-04-29] Prisjakt (2009). Annual report 2008. [electronic] Available via Affärsdata: [Retrieved 2010-04-29] RebelBetting [Retrieved 2010-04-29] SF Bio AB [Retrieved 2010-03-16] Statistiska Centralbyrån (SCB) [Hämtad 2010-01-21]
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Appendix 1 - Cover letter and interview guide
Cover Letter
The idea of this study is to gain an understanding of how strategically important it is for companies to consider Psychological Switching Costs as opposed to Financial Switching Costs when operating mainly in a virtual world. We are completing our D-Thesis within the area of Management and we are therefore concentrating on the strategic perspective of companies, rather than the Marketing influence. We as students have completed our Bachelor studies in Marketing and Accounting, and now we wish to develop our understanding of the business world from a more strategic perspective. Our interest for this specific area stems from our discussion on what topic that would best represent an interesting and relevant area of study within this field. Through our conversations we noted a difference in thought processes to how we use the internet when going to purchase goods or services. One author is more reluctant and the other is more willing, both in the sense to change supplier and purchase goods. These differences between us brought forth our decision to investigate how Psychological barriers that people experience when considering companies based on the internet are influenced from the strategic perspective of the company. The interview will take between 30 minutes and an hour, and will be held in Swedish. In the final form the material will be translated into English for the purpose of completing the study and we will send you a copy of the transcribe interview, where you will have a week to respond if there are anything you do not agree with. Explanation Competitive Advantage - Companies that implement value creating strategies before other firms or in a more productive manner, to have an advantage. First Mover Advantage - The building of customer loyalty through being the first to develop relationships online Switching Costs- The Psychological and Financial costs of a individual to change from one supplier to another Primary activities- The activities involved in producing the product or service Secondary activities- The activities that are seen as helping in the production process
Introduktionsbrev
Syftet med vår studie är att få en ökad förståelse för hur internetbaserade företag kan använda sin strategiska kapacitet för att behålla sina kunder genom att påverka dess relation och känslomässiga band mellan kund och företag.
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Vi slutför nu vår Magisteruppsats inom Management och fokuserar därmed på organisationen utifrån ett strategiskt perspektiv. Vårt intresse för detta område har sin grund i en diskussion om vad som skulle kunna vara ett relevant och lämpligt ämne att skriva om. Under våra diskussioner insåg vi att det är en markant skillnad mellan oss och våra tankeprocesser när det gäller hur vi använder och konsumerar olika produkter och tjänster på internet. En av oss är mer villig att byta leverantör och köpa saker på internet, medan en av oss är väldigt lojal och motvillig till att byta leverantör och köpa produkter och tjänster på internet. Denna skillnad mellan oss som individer resulterade i att vi beslutade oss för att undersöka hur de psykologiska hinder som människor upplever vid situationer av förändring används av företag baserade på internet ur ett strategiskt perspektiv. Intervjun kommer att ta mellan 30 minuter och en timme samt genomföras på svenska. I sin slutgiltiga form kommer materialet däremot att översättas till engelska. Vi kommer även att skicka de transkriberade intervjuerna till er där ni har en vecka att svara om det är något som inte stämmer överens. Begreppsförklaringar Competitive Advantage - Företag som implementerar värdeskapande strategier före, alternativt på ett mer produktivt sätt, för att få en fördel gentemot sina konkurrenter. First Mover Advantage - Byggandet av kundlojalitet som baseras på att organisationen är först med att utveckla relationer på internet. Switching Costs - De psykologiska och finansiella kostnader som en individ upplever när denne funderar på att byta från en leverantör till en annan. Primary Activities - Aktiviteter som rör själva produktionen av en produkt eller tjänst. Support Activities - Aktiviteter som syftar till att underlätta produktionsprocessen.
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Questions
1. What is (in your opinion) important when developing strategies for doing business on the internet? 1. Vad är i din mening viktigt att ta hänsyn till när man utvecklar strategier för att göra affärer på internet? 2. What is the process of developing strategies for customer retention? ?To what extent are strategies considered? ?How influential are the strategies? ?At what level are the decisions made? ?What type of information do you base your decisions and strategies upon? 2. Hur ser processen ut för att utveckla strategier för att undvika att kunder byter till en annan leverantör? ? I vilken utsträckning beaktas dessa strategier? ?Hur inflytelserika är dessa strategier? ?På vilken nivå fattas beslut om dessa strategier? ?Vilken typ av information ligger till grund för utformningen av dessa strategier och beslut? 3. To what extent is customer retention strategies considered as a part of the decision making process in developing the products and services that you sell? 3. I vilken utsträckning beaktas frågan om hur ni ska kunna behålla befintliga kunder i besluts processen rörande utvecklingen av de produkter och tjänster som ni erbjuder? 4. When considering customer retention/loyalty/locking in of the customer, is it seen as a primary activity (production of the products and services) or support activity (support activities such as HRM) within the organisation? 4. Om vi tänker på att förmå kunderna att stanna kvar hos er och inte byta leverantör. Kan det ses om en Primary Activity (i nivå med produktion av produkter/tjänster) eller kan det ses som en Support Activity (liknar mer stödfunktioner som tex. HRM) inom organisationen? 5. To what extent are these strategies giving your company a competitive advantage over your competitors? ?In what sense has these strategies contributed to the competitive advantage? 5. I vilken utsträckning ger dessa strategier för att behålla kunder er en fördel gentemot era konkurrenter? ? På vilket sätt har dessa strategier bidragit till detta försprång gentemot era konkurrenter? 6. In what ways have these strategies affected the organisation? 6. På vilket sätt har dessa strategier påverkat er organisation? 7. When considering changes in the business environment, how do you implement strategies to discover and adapt the organisation to these changes? ? To what extent are they considered? ? How influential are they? ? At what level are the decisions made? ? If this is done, does the company see this as giving them a competitive advantage?
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7. Om vi ser till förändingar i företagsklimatet och dess omgivning, hur använder ni strategier för att upptäcka och anpassa er till förändingar i organisationens omgivning? ?I vilken utsträckning beaktas dessa strategier? ?Hur inflytelserika är strategierna? ?På vilken nivå fattas denna typ av beslut? ?Om dessa strategier att upptäcka och anpassa sig till förändringar existerar, ser ni det som att det ger er en fördel över era konkurrenter och i så fall på vilket sätt? 8. Why do customers return to your website? 8. Varför tror ni kunder återvänder till er hemsida? 9. Do you see a competitive advantage more so in the support activities of your offerings that make it more convenient or in price? 9. Upplever du att den fördel ni besitter gentemot era konkurrenter har sin grund i de aktiviteter som gör det mer bekvämt för kunden att handla hos er eller att det har sin grund i priset ni erbjuder? 10. Is it important for your company to be the biggest and most well known in your field? ?From this perspective, do you try and influence customer loyalty? 10. Är det viktigt för ert företag att vara det största och mest välkända företaget i er bransch? ?Från detta storleksperspektiv, försöker ni aktivt påverka kundlojaliteten och på vilket sätt påverkar organisationens storlek lojaliteten hos era kunder? 11. Can you point out the distinctive attributes of your firm which keep you one step ahead of your competitors? 11. Har ni några konkreta attribut som gör att er organisation kan behålla dess position framför sina konkurrenter? 12. To what extent does Switching Costs give your company competitive advantage? ? are these switching costs that you consider on a financial level or a psychological level? ?In what ways do you consider Switching Costs in the process of strategy making? 12. I vilken utsträckning ger Switching Costs er organisation en fördel gentemot era konkurrenter? ?Är dessa Switching Costs som ni beaktar av ett finansiellt eller psykologiskt slag? ?På vilka sätt beaktas Switching Costs i strategiskapandeprocessen? 13. What is the effect for the organisation in being a first mover? Is it important to be a first mover? Why? ?do you see any advantages or disadvantages of being a first mover? 13. På vilket sätt påverkar det organisationen att vara en First Mover? Är det viktigt att vara en First Mover och varför? ? Ser du några fördelar respektive nackdelar med att vara First Mover? 14. Do you attempt to be a first mover? What are the advantages? Do you see any effects on customer loyalty as a consequence of this? 14. Försöker ni vara en First Mover? ?Ser du något samband mellan kundlojalitet och att vara First Mover? 15. How do technological advancements influence your ability to attract customers? 15. På vilket sätt påverkar teknologiska framsteg er förmåga att attrahera kunder? 85
16. How do you experience a First Mover Advantage affect customers willingness to change supplier from a psychological perspective? 16. Hur upplever du att ett First Mover Advantage påverkar kundernas strävan att byta leverantör ur ett psykologiskt perspektiv? 17. Is there a natural evolution of your company when concerning changes in the environment in which you act? 17. Upplever du att organisationen utvecklats på ett naturligt sätt när man tänker på förändingar i den miljö som organisationen agerar? 18. What role does trust play for your organisation and your strategies when developing relationships with clients on the internet? 18. Vilken roll spelar tillit och förtroende för er organisation och dess strategier vid utveckling av relationer till era kunder på internet? 19. How is trust developed from a strategic perspective? 19. Hur utvecklas kundens tillit/förtroende till organisationen från ett strategiskt perspektiv? 20. From your perspective, how important is trust between customer and organisation and why? 20. Utifrån ert perspektiv, hur viktigt är tillit/förtroende mellan kunden och organisationen på internet och varför? 21. What role does the interface design play in your organisation (strategy wise) and what aspects are important in a good design? ?In what ways does the interface design affect customer retention? 21. Vilken roll spelar utformning och design av er sidas interface från ett strategiskt perspektiv och vilka aspekter är viktiga i en bra design? ? På vilket sätt påverkar designen kunderna och dess val att komma tillbaka till er sida? 22. In your view, is it more important to form financial barriers or psychological barriers to achieve customer retention? Why? 23. Från ditt perspektiv, är det viktigare att forma finansiella eller psykologiska barriärer för att kunna behålla kunder? Varför?
23. How do you develop relationships with your customers? How important is this relationship? ?What is the goal with building relationships to the customers? 23. Hur utvecklas relationen till kunden på bästa sätt? Hur viktig är denna relation? ? Vad är målsättningen med att bygga dessa relationer till kunden? 24. When developing strategies for Switching Costs, do you consider as more important 1. Added value (gains or losses for the customer if they were to switch from your company) and relationships or 2. Locking in (influencing the perceived ability for the customer to switch from your company) the customers?
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24. När ni utvecklar strategier som rör Switching Costs, vad anser ni vara viktigast? 1. Att skapa mervärde (Fördelar eller nackdelar för kunden om han/hon bestämde sig för att byta leverantör) och relationer eller 2. "Locking in" (påverka hur kunden uppfattar dess möjlighet att byta leverantör)? 25. Has it been a natural part of the process for you to develop strategies on the internet concerning Switching Costs? 25. Har det varit en naturlig del i processen för er organisation att utveckla strategier på internet som rör Switching Costs? 26. Can you point out any support activities that develop your relationship and Lock In the customer through forming psychological barriers? 26. Kan du beskriva några Support Activities som utvecklar relationen samt "låser in" kunden till er organisation genom att skapa psykologiska hinder? 27. In what sense is it important for management to understand the environment in which they operate? 27. På vilket sätt är det viktigt för ledningen att förstå den affärsmässiga miljön som omsluter organisationen? 28. To what extent is it important to develop emotional switching costs? 28. I vilken utsträckning är det viktigt att utveckla psykologiska Switching Costs? 29. In what ways do the activities that create value to your products/services have the ability to influence customer relationships? 29. På vilket sätt påverkar de aktiviteter som genererar värde till era produkter och tjänster er relation till kunden?
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Appendix 2 - Quotes in original language
Strategy and Dynamic Capabilities Discshop 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. "3 S som har byggt Discshops framgång" "det är ingenting annat än postorder. Men med en digital catalog". "Det första S:et och det är också det viktigaste S:et, och det handlar om kunden och det handlar om service" "sofistikerad enkelhet" "Hos oss så behöver du inte tex. ett användarnamn som du måste komma ihåg" "tredje S:et är ju då sortiment" Därför har vi 17000 filmer i vårt sortiment, vi har 3-4000 spel, etcetera etcetera. Så att kunden verkligen kan mätta sitt lystmäte. Och det är också där vi ser att vi har en otrolig konkurrensfördel "Alltså service är ju ett av dom bästa sätten för att skapa lojalitet" "för det första vill vi ju skapa en positiv upplevelse för kunden, från A till Ö som egentligen omfattar alla dom tre S:en som jag nämnde där, att dom vill komma tillbaka. Det är ju otroligt viktigt" "På internet, om du får för mycket barriärer tidigt i köpprocessen, då går du lätt vidare någon annanstans för det är ju bara ett knapptryck bort. Och genom att ha bra service då skapar du den absolut starkaste lojalitet man kan tänka sig" "Det är A och O. Alltså, jag menar det är ju så otroligt snabbrörlig bransch och lutar du dig tillbaka och inte är med noterna då går det väldigt väldigt fort. Så att nä du det är superviktigt". så att kan man på något sätt då så att säga låsa in kunderna så har du mycket vunnet". "Så att viktigt med tydliga riktlinjer, och mallar och processer för hur man sköter verksamheten" "man får nog fokusera lite på framgångskriterierna kring service och värna om dom kunderna man har" Katshing 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. "?internet är brutalt, det är oerhört brutalt och om man inte fattar och accepterar dom spelreglerna så kommer man bli överkörd" "det finns inga hemligheter som du kan dölja utan din affärside måste tåla att synas och dina strategier måste tåla att vara öppna" "Att man måste acceptera att kunden har ett annat krav på kommunikation ? så måste du verkligen lita på motparten. Och då måste du veta vad som finns på andra sidan" "inte fastna i långa processer, utan ha väldig snabbhet i dom" "utefter hur verkligheten förändras så är kravet där vi sätter en strategi" "som aldrig kan nyttjas" "Lever man mycket här i nuet så är man inte lika bra på att tänka 1, 2, och 3 år framåt. Det är jäkligt svårt alltså" "central i allt vi gör" "fokus för oss var att leverera kundnytta och att hela tiden no matter what se till att kunderna trivs med det vi gör" "Sveriges bästa näthandlare och dom har en kundtjänst som du inte ens kan ringa till. Så det är inte, det var ett annat val" "Jaja, den är helt primär" "viktigt det är att inte tappa en kund" "utan den så fattar man fel beslut rätt igenom" "därmed är det lätt för kunden att välja bort den som inte har tex. en bra kundtjänst eller tex. hög tillgänglighet eller vad det kan nu vara" "vi vill vara den absolut bästa friaren till kunden hela tiden" 88
11. 12. 13. 14.
RebelBetting 1. 2. 3. 4. 5. 6. 7. 8. 9. "Det som skiljer är väl mycket att man har ett mycket mer opersonligt bemötande man har med kunden" "väldigt viktigt hur man kommunicerar med kunderna" "snabbhet är väldigt viktigt på webben" "bounce rate" "Man måste direkt dom kommer till sidan måste man få in dom, få dom intresserade" "Så att det är väldigt viktigt hur man kommunicerar, att man liksom har bra marknadsföringsmaterial, bra copy på sidan så att dom lockas att läsa mer" "Där är det ju då ännu viktigare att vara öppen och ärlig och verkligen, inte liksom försöka dölja någonting som väldigt många gör" "skapa kundlojalitet" "dom signar upp för ett nyhetsbrev, man får deras email så kan man ju då fortsätta att bearbeta den här kunden långt efter, han kanske bara kommer till sidan, signar upp på nyhetsbrevet och glömmer bort det. Då kan man ju skicka ett mail om en månad och påminna han eller berätta någon nyhet eller göra någonting som gör att han kanske kommer tillbaka då. Det är en möjlighet som är svårare när man har en fysisk butik då. Så det gäller ju att, ja det är ju sådana saker som man tänker på hela tiden" "Så att tänka som kunden är viktigt" "Att bygga lojalitet långsiktigt?att skapa förtroende också" "priset en viktig konkurrensfördel såklart som gör att vi kan behålla kunderna. Men sen är det ju också funktionaliteten, då alltså värdet som kunden får" "men vi har lite grejjer planerade. Till exempel att man kan, det är ju en prenumerationstjänst vi har så det är väldigt viktigt med återköp då, att behålla kunderna" "För att just nu försöker vi lägga ungefär lika mycket på marknadsföring och kundlojalitet som vi gör i utveckling" "släppt en E-book tex där vi utbildar kunderna hur tjänsten fungerar som är såklart då inriktad mot just vår product." "En annan sån sak är att vi försöker hålla en snabb utvecklingstakt. Och vi försöker även peka på att vi har en snabb utvecklingstakt så att kunderna blir medvetna om det." "Och sen finns det vissa tekniska funktioner som det här autosurf som är lite grann av vår unika selling point liksom som ingen annan har" Just eftersom det är en komplex produkt så har det dragit till sig en målgrupp som är ganska datakunniga" "Men för att bredda den marknaden så försöker vi vara ganska användarvänliga" "Så det är också en sån, som säkert kommer att bidra till lock-in i framtiden. När dom har vant sig med att sitta vid det här användarvänliga, trevliga gränssnittet så kommer dom inte att vilja byta till konkurrenten även om den har mer kvantitet då till exempel." Prisjakt 1. "det är att utgå från vad konsumenten eller kunden verkligen önskar" 2. "påverkas alltså att den är kommunikativ. Att du låter kunden förändra strategin under tiden som du jobbar" 3. "Och på så sätt så kan du påverka före kunden väljer att byta till en annan leverantör" 4. "från alla typer och sen så finns där ju en styrelse och en VD och det är ju VD-nivå som dom flesta strategiska beslut tas" 5. "Ja då väljer vi ju att analysera, alltid när en kund slutar så frågar vi ju varför kunden väljer att sluta och så får vi då den informationen. Och sen så väljer vi om den information som butiken då ger i samband med att dom slutar är så relevant så att den leder till en förändring hos oss" 6. "Ja alltså alla tjänster som vi erbjuder bygger ju på att någon vill ha dom. Eller att butiken vill ha dom, så därför så är vi ju helt beroende av att dom uppskattas. Så därför så är vi helt beroende befintliga kunders åsikter i processen" 7. "Utvecklar vi tjänster som ingen vill ha" 89
10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.
8. "Och den påverkar ju inte bara dom som sitter på support och säljer och det. Utan det påverkar också dom tekniska lösningarna och dom strategiska besluten i företaget." 9. "Nej. Vi försöker väl undvika att låsa in kunden helt enkelt" 10. "Därför så binder, så försöker vi inte låsa in dom på något sätt utan att skapa en miljö där dom tjänar pengar. På så sätt binda dom till oss" Company X 1. "det som är fördelen med internet är väl egentligen att man kan hitta affärsmodeller som kan väldigt bra,alltså att det är till ganska en låg investering så kan du nå ut till mycket folk" 2. "klar idé om vilket innehåll man ska ha på sidan för att kunna driva mycket trafik" 3. "konvertera till någon form av betalande trafik." 4. "Och sedan tror jag att när man väl har nått en position som en dominerande marknadsplatta, man har hittat den här balansen och med höga volymer både på trafik och annonser, så blir det svårt för någon annan att komma in och ta den positionen." 5. "dels gäller det att ha en bra produkt som funkar, som är snabb, som alltid fungerar" 6. "som rent tekniskt är en snabb och bra produkt, som av andra upplevs bra," 7. "så ligger det väldigt mycket tanke och arbete bakom det, just att det faktiskt ska funka" 8. "fördelen med internet är ju att du har väldigt mycket statistik. Du kan se hur folk rör sig ute på sajten" 9. "tid, se förändringar i beteenden och vad folk är intresserade av och inte intresserade av" 10. "även mer marknadsundersökningar" 11. "Det är ett avgörande egentligen" 12. "det är liksom grundbestämningen i allt vi gör." 13. "Vi försöker få folk att stanna på sajten genom att ge dem en bra anvandarupplevelse när man hamnar i sajten så att de ska komma tillbaka," 14. "vi ser på att vi gör våra kunder nöjda så att dom ska komma tillbaka." "Det är viktigt såklart att fundera på vad kan vi göra för att få folk att komma tillbaka och vad ska vi undvika att göra för att riskera att folk går någon annan stan. " Switching Costs Discshop 1. "Ja men självklart så vill man ju att dom ska vara så höga som möjligt, men det är svårt att I vår värld skapa reella Switching Costs om vi då ska leva upp till vår devis att det ska vara enkelt och service och det ena med det andra." 1. "Det är ju ett sånt tydligt exempel på där vi skapar Switching Costs för kunderna. Dom har poäng hos oss, och samlar man på sig poäng då kan man få en kundkategori, och då i sin tur få bättre priser, bättre fraktvillkor och det ena med det andra så absolut har det varit en del." 2. "Ja men än en gång, det är vitkigt för att skapa lojaliteten. Det är billigare att behålla en lojal kund än att ragga nya, så att kan man på något sätt då så att säga låsa in kunderna så har du mycket vunnet." 3. "genom att ha bra service då skapar du den absolute starkaste lojalitet man kan tänka sig." 4. "för det första vill vi ju skapa en positive upplevelse för kunden [...], att dom vill komma tillbaka. Det är ju otroligt viktigt." 5. "än en gång leverera bästa möjliga service, att dom får leva upp till deras så att säga förväntningar." 6. "Alltså än en gang internet, Switching Costs som du refererar till här är normalt sett inte jättestora. Så att det är snarare en psykologisk Switching Cost [...] men det finns ju inga reella kostnader, det är snarare en alternativ kostnad som man ger upp så att säga." 7. "det skapar mycket djupare rötter med psykologiska barriärer än finansiella. Finansiella kan ändras, du kan få mer eller mindre i lön och då kan ditt beteende förändras. Men jag tror de psykologiska barriärerna är mycket svårare att riva ner."
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Katshing 1. "det är inga stora trösklar, vad vi än tycker om det så är det inte det. Det är ganska enkelt att skifta och sköter vi inte oss så är kunden borta." 2. "Inte så stor fördel kan jag säga" 3. "Vi upplever inte alls att det är ett motstånd längre för det finns så många andra betalningsalternativ, men det har varit en fördel. Men det är ingen hög tröskel längre." 4. "vi vill aldrig hamna I det spåret för det kommer inte tillhöra framtiden, utan vi måste leverera en transparent lösning för alla inblandade parter och förtjäna vår relation till kunden hela tiden. Så på så vis kan man säga att vi pratar om det hela tiden för vi pratar aldrig någonsin om att låsa in en kund." 5. "fullständigt förkastligt sätt att göra affärer på." 6. "Vi skulle kunna lägga store trösklar för kunden men det gör vi absolut inte, utan vi försöker precis tvärt om att ha en strategi som innebär att vi lägger egentligen alla vapen i kundens händer och sen så vill vi leverera högsta möjliga kundvärde för att bli valda varje gång." RebelBetting 1. "Ganska lite just nu faktiskt [?] vi har några punkter som vi försöker jobba med nu för att få mer Lock-in då till exempel recurring payments. Men sen är det väl egentligen det här mer långsiktiga, det här med att skapa förtroende ich lojalitet och att dom tycker det är trevligt att veta att vi kommer med nya versioner hela tiden, vi blir bättre och bättre och kommer snart att gå om dom bästa i branschen." 2. "inte så mycket just nu, just för att, som sagt, tjänsterna är ganska lika än så länge och det är egentligen priset och kvantiteten som är värdefull" 3. "det är ingenting som vi har haft, liksom som en uttalad grej. Däremot så har det väl omedvetet kanske kommit med här och var. [...] vi har ladrig använt termen Switching Costs eller lock-in egentligen för att våra kunder är en ganska illojal målgrupp kan man säga, när dom blivit duktiga och vet att det finns flera konkurrenter, då är det ganska enkelt att byta." 4. "vi får ju mycket mail och vi har även så här livechat och grejjer och där försöker vi också tänka på att hela tiden ge ett så bra intryck som möjligt. För vi vet att även om det här är en kund en kund, eller det kanske inte ens är en kund, det kanske bara är nån som mailar in och frågar. Men vi vet att om vi liksom behandlar den personen som om det var en kund som verkligen, vi svarar inom en timme, då blir domdels förvånade att dom får ett svar. Dom blir förvånade att dom får svar inom en timme, och dom får liksom ett vettigt svar och inte liksom bara ett automatiskt. Då kommer dom att komma ihåg oss och se oss osm ett klart trevligare företag än 99% av dom som dom mailat in till." 5. "Även om priset ör högre så handlar det mycket om att skapa, alltså kundens upplevda värde är ju det som är viktigt, inte vad det står på prislappen. Om han upplever att våran produkt är värd 5000 i månaden, då är den ju värd det för honom. Och då spelar det ingen roll vad den kostar sen." 6. "vi har släppt en E-bok där vi utbildar kunderna hur tjänsten fungerar som är såklart inriktad mot just vår produkt." 7. "En annan sån sak är att vi försöker hålla en snabb utvecklingstakt. Och vi försöker även peka på att vi har en snabb utvecklingstakt så att kunderna blir medvetna om det. [...]Och utan att säga nåt liksom, det vi egentligen säger är att kolla på dom här mossiga konkurrenterna som inte har uppdaterat sin hemsida på ett halvt år." 8. "En av våra unika funktioner lite grann som vi försöker vara bäst på är det här med användarvänlighet. [...] Det ska inte vara så jävla svårt att hålla på med det här. Sitter man med internetbanken och köper aktier så kan man hålla på med det här ungefär. Så det är också en sån, som säkert kommer bidra till lock-in i framtiden." Prisjakt 1. "vi lever ju på att vi har en tjänst som är gratis för konsumenterna. Utan den tjänsten så hade inte företaget existerat. Men vi får ju pengarna via business to business, men vi får trafiken och volymen och kvaliteten i tjänsten via konsumenter." 91
2. "egentligen så beaktas det inte alls. Men vi beaktar det på så sätt att vi har en strategi som gör att det är, det ska vara lätt att testa oss, lätt att gå med och lätt att avsluta hos oss. 3. "Ja problemet I vår bransch är ju att [?] du kan ju ligga hos många samtidigt. När du registrerar dig hos oss så kan du samtidigt registrera dig hos Pricerunner eller hos Kelkoo utan att det är något problem. [...] Så Switching Costs funkar inte i vår bransch." 4. "det ska vara enkelt att testa hur det fungerar så att det ska vara lätt att starta upp och det ska vara lätt att avsluta hos oss." 5. "det viktigaste, det absolute viktigaste är ju att skapa en tjänst så att dom fortfarande kan tjäna pengar. Alltså fördelar då för kunden. Finns inte dom fördelarna så spelar det ingen roll hur bra relation och hur bra det är och vi har ju inte den Switching Costen så att dom byter leverantör utan dom avslutar hos oss." 6. "konsumenten önskar vi ju att binda upp till att använda våra tjänster på olika sätt. Bland annat genom att se till att dom, att det finns möjligheter att påverka tjänsten och att det finns möjlighet att till exempel använda prisbekningsfunktionen [...] sådana funktioner, sådan lösningar är viktiga då för att binda konsumenten, men vi binder inte butiken på samma vis. Så det skiljer sig där. Så på konsumentnivå har vi psykologiska hinder och försöker skapa Switching Costs på det sättet vilken prisjämförelsesajt dom använder." Company X 1. "Det är ju att inte lägga tillgälligt focus på sådant som inte främjar köp och sälj" 2. "underlättar och gör livet enklare för våra köpare och säljare, då skulle vi inte göra det. 3. "På nätet finns alltid ett aktivt val och det finns tjänster som på utsidan ser nästan ut som oss, som är gratis, men den viktigaste barriären för folk det är ju att man vill vara på det stället där det finns en fungerande marknadsplats, där man faktiskt får saker och ting salt och där man hittar det man vill köpa [...] Det är inte det att det kostar våra användare någonting att byta utan det är mer att man upplever att allting fungerar." 4. "Nej det är inte så att vi suttit ner och tänkt att nu ska vi lägga upp en strategi för det här, utan det är sånt som kommit, fallit sig naturligt. Det ligger ju liksom i allt vi gör, men det är inte så att vi har haft så att säga strategiarbete kring det, nej." 5. "för oss är det ju inte viktigt, men som sagt det är ju en, vi ser ju inte på det som barriärer eller Switching Costs. Utan vi ser op att vi gör våra kunder nöjda så att dom ska komma tillbaka. Så att det är ju som sagt det viktigaste. Det är viktigt såklart att fundera på vad kan vi göra för att få folk att komma tillbaka och vad ska vi undvika att göra för att riskera att folk går någon annanstans."
Trust Discshop 1. 2. 3. 4. "Det är A och O" "men trygghet för kunden är en av dom viktigaste parametrarna" "vi försöker marknadsföra att vi är med i trygg e-handel" "lojalitet, alltså om du handlar hos oss och du får en positiv erfarenhet så självklart kommer ditt förtroende och din tillit att öka. Det börjar och slutar med dom 3 S:en liksom, ger du god service så kommer du bygga ett förtroende" Katshing "jag menar när jag var och köpte mina första prylar p internet så var ju tanken från min sida att kommer dom fram så är jag ju nöjd" 2. " att firman finns kvar imorn och att det finns en garantimöjlighet och liknande" 3. "det är ju lite av en process" 4. "kundlivscykeln på så vis att vi har ju en plan hur vi bearbetar varje kund." 1. 92
5. 6.
"ett personligt plan. Och i dom fallen vi lyckas med det så har vi ju en väldigt, väldigt hög lojalitet" "Men idag då har du ju, går du på nätet så brukar vi säga det att kunden är en klick bort från din värsta fiende hela tiden. Är kunde minsta, minsta, osäker på våra uppgifter, våra priser, vårt varumärke så byter dom."
RebelBetting "det är väldigt viktigt att få förtroende och lojalitet redan från början." "att hela tiden då vara öppna" "supporten är ju en sån här viktig grej" "Att man hela tiden hjälper kunderna och har bra kommunikation med dom." "så mycket mer anonym på internet som företag. Så är det nog viktigare än utanför internet för man vet inte vem man pratar med" 6. "Sen är det ju också, folk är ju alltid lite försiktiga med nya sätt." 1. 2. 3. 4. 5. Prisjakt 1. "Mycket stor betydelse, för det måste finnas trovärdighet i den information som står på vår sajt" 2. "har vi en felaktig engenskap på en produkt till exempel så kan kunden själv gå in och säga till att det här, den här information är fel." 3. "Det handlar ju om att man bygger upp en pålitlighet på den datan som vi presenterar" 4. "vi gör det på ett korrekt sätt rent tekniskt så att dom får känna att när dom har skickat in sin information till oss så kommer också informationen visas korrekt utåt. Det är mycket viktigt." Company X 1. "Det tror jag är helt avgörande att man känner tillit" 2. "att vi jobbar väldigt hårt med att hålla hög kvalitet på sajten" 3. även om det är svårt eller omöjligt att plocka bort allt oseriöst på sidan så är det vår strävan," 4. "det är någon som har en dålig upplevelse och inte får den hjälp eller stöd som man behöver, så har man inte samma syn på företaget eller tjänsten framöver," 5. "det gäller att visa på vad vi gör också" 6. "något som vi kommunicerar utåt också"
Interface Design Discshop "vill gärna ha den bredaste och djupaste sidan, men det måste fortfarande vara enkelt. Jag tror enkelhet är ledordet nummer ett. Och inte gå i Boo.com-fällan och göra det komplicerat. Kunden i och med att, som jag sa, åka till K-rauta då kanske du kan leva med att det kanske inte är hundra för du har åkt dit med bilen och det ena med det andra. På internet, det är en knapptryckning bort att gå till en konkurrent så att det måste vara enkelt, överskådligt, ja så få barriärer som möjligt." 2. "Vi vet alla skillnaden mellan att komma in I en välorganiserad fysisk butik till exempel, ja ved det nu kan vara H&M eller komma in på Pelle på hornet där det ser ut som fan helt enkelt. Självklart blir man mycket mer inspirerad av att komma in i en välordnad där det det är snyggt och prydligt, det är prismärkt, kampanjvaror är tydligt uppmärkta etc. Så att sajten, hur kunden tar till sig sajten är superviktigt". 3. "För att dom tycker det är enkelt och smidigt och jag menar att vi vet att våra konkurrenter till och med själ ju väldigt mycket information från oss för dom vet ju att vi har tillförlitlig information och rätt information etc. Det ör ju på samma sätt kunderna, kommer dom hit och dom hittar vad dom söker och det går fort, då är det klart att dom kommer tillbaka."
1.
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Katshing 1. "Jag tror att det är totalt felakigt att resonera på det viset. Lyssnar man på förståsigpåare som Alexander Bard och liknande så säger dom att varumärket på internet och laddningen på varumärket är än viktigare över tid än i den fysiska butiken eller den fysiska verksamheten och jag tror det stämmer." 2. "nummer 1 var det att det skulle sticka ut och synas för att som ny actor har man ofta en liten börs och vi kan inte göra som Mediamarkt, gå med hundratals miljonr eller närmare miljarder I förlust innan det vänder. Dom pengarna har inte vi. Vi måste nå fram mycket snabbare och det måste sticka ut och bryta igen det enorma bruset för det var nummer 1, bryta igenom. Och nummer 2 sen var att förmedla dom värdena som ditt bolag ska stå för. Och det har vi lagt kopiöst mycket tid på att diskutera. [...] vi ska signalera dom värden vårt varumärke ska stå för. Trygghet är en del av det men det finns många delar. Så jag skulle säga att det har en mycket väsentlig del." 3. "Ja det kan påverka, absolut. Valet att komma tillbaka eller valet att inte komma tillbaka hur man nu vänder på det. Det går åt bägge håll." Prisjakt 1. "En bra design är ju en design som gör att det är lätt att hitta, och lätt att använda tjänsten. Lätt att förstå vad man ska välja för att komma in dit man vill och presentera nya funktioner. Så den påverkar ju valet, eller hur kunden går in in på sajten påverkar ju hur vi designar." 2. "Jag tror inte designen I sig är avgörande utan jag tror det är funktionaliteten på sidan som avgör om dom kommer tillbaka eller inte." 3. "efter två bokstäver så kommer allt sökresultatet" Company X 1. "Enkelhet är det viktigaste, att det inte finns för mycket, ja för mycket saker runtomkring som gör användarna förvirrade I hur man ska använda den." 2. "Det svåra är att göra saker enkelt" 3. "även en 75-årig dam ska kunna använda våran tjänst." RebelBetting 1. "Clarity beats persuasion" 2. "Förklara först vad det går ut på, och sen kommer då dom som förstår conceptet att vilja köpa. För att dom som förstår konceptet och är tillräckligt intresserade kommer att gilla idén tillräckligt mycket" 3. "vi försöker hålla en ren och enkel design, fokusera på det som är viktigast på varje sida." 4. "det är nog väldigt få som kommer tillbaka på grund av det tror jag." 5. "förutom när dom stöter på problem eller när dom just håller på att komma igång" First Mover Advantage Discshop 1. "det finns inget egenvärde I att vara first mover" 2. "så jag tror inte det skadar" 3. "det finns ju dom kunderna som också är lite bakåtsträvande och vill att allting ska vara som det har varit, så att det är inte bara till det positiva." 4. "jag ser inte det som en jätte-big deal." 5. "vi såg en möjlighet här och vi är på framkant, jag tror vi är den enda, en av dom få enda återförsäljarna I norden som har en sån lösning." 6. "vi tror att om 2-5 år så kommer det vara en betydande del av vår försäljning och då ligger vi väl så att säga positionerade."
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Katshing 1. "hade vi varit en säker utmanare så hade vi kunnat kopiera med stolthet dom som är bäst, men det är ju inte våran strategi. Så det är oerhört stora krav, både på innovation, på snabbhet och på flexibilitet, och på excellence såklart." 2. "Early adopters, internet användare, pålästa, väldigt intresserade" 3. "har du som oss målet att bli störst, inte bara på nätet utan vi vill bli större i den fysiska butiken så måste vi vinna coola snubben i storstockholm, småbarnspappan i Sveg, eller pensionären. [...] Och det är klart att då måste du sträva utanför den kategorin." Prisjakt 1. "det är mycket viktigt, det finns ett intresse för att testa nya lösningar och det är många på nätet som tycker det är jätteroligt att följa med på det som är nytt och spännande." 2. "Så inom tekniska områden så är det otroligt viktigt att vi är först." 3. "om en teknisk lösning finns som vi inte använder så har vi fått kritik för det." 4. "Inte som vi har mätt, alltså vi tror ju att den finns där, men vi har inte matt det direct. Men vi tror ju att det finns." 5. "det finns ju en känsla av att använda en tjänst där dom ligger långt frame rent tekniskt så att man själv ligger långt frame rent tekniskt och på så sätt skapar man en identitet med kunden på att, at than/hon är också tekniskt långt fram genom att dom använder en sajt eller tjänst som är tekniskt långt frame." Company X 1. "det var en väldig fördel för "företag X" att vara först" 2. "vi har kommit in på väldigt många marknader där det redan finns aktörer och det visar sig att det funkar där också." 3. "vi kan ju ibland kanske få kritik för att utsidan ser väldigt lik ut och det är en medveten strategi, att det är väldigt små förändringar som görs men att vi hela tiden utvecklas, att hela tiden ligga i framkant och bli ännu mer effektiva." 4. "De som handlar tjänster på internet under många år och som haft en bra upplevelse är väl lite lojala skulle jag tro." 5. "Det är där man hittar det man söker eller där man kan sälja det man kan bli av med som är avgörande." RebelBetting 1. "Teknologiskt har vi varit en First Mover I några aspekter då. Vi har som exempel, gick vi över till Cloud Server-tekniken så fort vi kunde egentligen. [...] Alltså som en liten organisation som inte har så mycket pengar så kan man inte ha en enorm serverpark som sitter och hämtar odds, utan vi har fått lösa det där, liksom hitta på kreativa lösningar då." 2. "Just nu så är det nog inte så viktigt som i andra branscher just för att det är en ganska okänd företeelse än så länge." 3. "den här proffsdelen är en ganska liten del av våra kunder, dom flesta av våra kunder är liksom nybörjare. Och där har det nästan ingen betydelse för att dom känner inte till att det finns flera movers, utan vi är the first mover, den enda liksom." Value Chain Discshop 1. 2. 3. "Ja men då service då har du svaret på frågan" "tydliga riktlinjer, vad dom förväntas göra," "hur man förväntas ta hand om kundkontakten, servicenivån. Nyckeltalsuppföljning vad gäller lager, kundtjänst." 95
4. "Ja, i och med att internet är ju så otroligt transparent så måste man ju hela tiden göra allting till punkt och pricka med kvaliteten," Katshing 1. "Näe utan dom har vi ingen roll kan jag säga. Det är en ganska betydande del milt uttryckt, alltså man måste komma ihåg att vi har kanske en 250 konkurrenter idag. Och skillnaden av kunderna upplevs inte alltid stora" 2. "utan vi måste leverera en transparent lösning för alla inblandade parter och förtjäna vår relation till kunden hela tiden." RebelBetting 1. "släppt en E-book" 2. "snabb utvecklingstakt" 3. "försöker vara bäst på är det här med användarvänlighet" 4. "en av dom här aktiviteterna som genererar värde det är ju liksom kundlojalitet och förtroende" Prisjakt 1. "Vi försöker undvika psykologiska hinder för att sen så är det ju så att jag vet så kan det ju hända att kunden eller butikerna känner att det finns psykologiska hinder som inte vi ser eller upplever." 2. "det finns möjligheter att påverka tjänsten och att det finns möjlighet att, prisbevaknings funktionen som gör att dom får information om oss." 3. "Prisbevaking är att du lägger, säg att du vill köpa en viss produkt till ett visst pris så ger vi information när den produkten finns att köpa till det priset. Och sådana funktioner, sådana lösningar är viktiga då för att binda konsumenten," 4. "Men vi lever ju på att vi har en tjänst som är gratis för kosnumenterna. Utan den tjänsten så hade inte det här företaget existerat. Men vi får ju pengarna via B2B, men vi får trafiken och volymen och kvaliteten i tjänsten via konsumenter." Company X 1. "Nej det är inte så att vi suttit ner och tänkt att nu ska vi lägga upp en strategi för det här, utan det är sånt som kommit, fallit sig naturligt. Det ligger ju liksom i allt vi gör, men det är inte så att vi har haft så att säga strategiarbete kring det," 2. "Inte några konkreta aktiviteter som jag kan komma på faktiskt." 3. "inga sådana lojalitetsprogram" 4. "men om vi strävar efter enkelhet så påverkar det förhoppningsvis användarna att dom tycker att det är enkelt att använda tjänsten också. Competitive Advantage Discshop 1. 2. 3. 4. 5. "vi tror ju väldigt mycket på dom här 3 S:en och så länge vi gör dom bättre än våra konkurrenter så tror jag att vi kommer att kunna hävda oss" Men vi tror ju att det här ger oss en väldigt, väldigt stark edge gentemot våra konkurrenter." "alla har förståelse här för vad som är viktigt" "Så att allting ska ju ha kunden i centrum "nya trender som vi bör hoppa på eller några nya trender som vi förväntar oss kommer bli stora. Jag menar vi ett sånt lysande exempel är ju mobilen tex. När vi förra året insåg att mobil, alltså M-commerce istället för E-commerce, kommer ju någon gång förr eller senare att slå. Och då vill vi ju vara på framkant rent teknologiskt så att vi tog ju fram en fullskalig mobil plattform så att man kan handla via mobilen." 96
6. "det är att erbjuda bra service för då kommer kunderna tillbaka" 7. "för att jag tror inte att pris är i dagsläget hos oss är vår prioritet nummer 1. vill du handla billigare då kan du göra det på Elgiganten eller liknande, men vill du få det bekvämt, vill du ha det i din brevlåda nästa dag, smidig köpprocess. Då är vi i rätt butik." Katshing 1. "genererar bäst värde för er idag vilken som ni upplever är den bästa aktören, kanske inte den största men den bästa. Då skulle 100% svara Katshing," 2. "Alltså om vi tar näthandeln så har den gått från att bara leverera pris till pris-kvalitet, pris-kvalitetvarumärke och trygghet. Så kundkraven har ökat mycket, mycket snabbare än i fysisk handel" 3. "Det har att göra med vad vi fokuserar på. För oss kan man väl säga då att ha en god upplevd kundkvalitet i alla dess former" 4. "det främsta skälet är ju såklart att man är nöjd med sin leverans." 5. "Rik eller fattig vill ju handla till ett bra pris". 6. "Så jag skulle säga att pris är bara en hygienfaktor, det är inte mer än så" 7. "kundtjänst tidigare. Hennes enda uppgift är att arbeta mot befintliga kunder och att ha relevant och strukturerad kommunikation med varje enskild individ. För det hade vi aldrig haft muskler till för ett år sedan, men det har vi nu. Vi är fler personer på våran kundtjänst, det gör att vi kan ha kortare svarstider, bättre öppettider, högre tillgänglighet." 8. "har ingen jättehög tröskel i det avseendet, det tycker jag inte att vi har. Vi skulle gärna haft en högre tröskel såklart, men samtidigt så vill vi vara kundens bästa vän hela tiden och i det ligger ju det bästa för kunden och därmed sänker vi tröskeln också." 9. "strategi som innebär att vi lägger egentligen alla vapen i kundens händer och sen så vill vi leverera högsta möjliga kundvärde för att bli valda varje gång." RebelBetting 1. "Ja det är lite svårt att veta för våra konkurrenter är så jävla hemliga." 2. "det finns ju Communitys där det diskuteras då våra produkter och våra konkurrenters produkter och där har vi ju märkt att vi har börjat få ganska bra rykte där" 3. "Men samtidigt som vi bygger på funktionaliteten och bygger på värdet så har ju vi kanske då, kan få en extra boost genom lojaliteten och supporten och liksom, så att det är ju det vi hoppas på." 4. "Men eftersom vi försöker hålla liksom så bra kommunikation med kunderna som möjligt så brukar vi upptäcka det här ganska fort. Och då göra prioriteringar på kort sikt för att anpassa oss efter det här. Så jag misstänker att vi anpassar oss ganska fort jämfört med större företag." 5. "Alltså hemsidan i sig är ju inte, hemsidan används ju som en marknadsföringskanal och kanske lite grann som support sen också då." 6. "Just nu tror jag det är mer priset faktiskt. För just nu, eller produkterna är ganska lika dom som finns på marknaden då så att det är ganska lätt att byta," 7. "Vi har ju några funktioner som är unika som vi hoppas att kunderna kommer att vänja sig med och värdera så pass högt att dom inte vill byta bort dom då" 8. "det är ju väldigt viktigt för man vet ju att den som syns mest får ju en väldigt stor procent av kunderna." 9. "Det hade varit bättre om vi hade varit 5 till så att man hade kunnat fokusera på en specialområde, nu sitter alla och gör lite allt möjligt och man måste prioritera om väldigt ofta och så där. Så det är klart, hade vi varit ett större företag hade vi ju haft mer resurser, både finansiellt och tidsmässigt att marknadsföra oss ännu mer." 10. "Ja just nu är det ju det är med marknadsföringen som är den stora skillnaden" 11. "alltså bra utvecklingstempo" Prisjakt 1 "Jag tror att våra konkurrenter jobbar också jobbar på liknande sätt med att dom anpassar sina produkter och tjänster efter butikerna så jag tror inte det är någon strategisk skillnad på oss mot våra konkurrenter." 97
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"jobbar rätt flexibelt. Inom internetvärlden och inom den branschen vi är i så krävs det ju en flexibilitet, alltså en strategi. Det finns inga 5-årsplaner om man säger så, på exakt vad man ska göra, utan det är en grundläggande filosofi att vi ska" "Så vi skiljer på en grundstrategi och grundfilosofi och det hära mer praktiska strategierna, mer arbetssätt och tekniska lösningar och den biten." "Och det är ju en ren matematisk uträkning som dom gör så att säga" "Och Prisjakt har valt en strategi där man visar alla butiker som säljer en vara och där har vi en konkurrensfördel" " då går det ju ett rykte om oss att det är mer känt och accepterat och används som källa för att hämta hem priser eller hämta hem prisinformation. Och på det sättet så blir det en trovärdighet på den informationen vi lämnar utåt sett." "Dom tekniska lösningarna ligger vi i framkanten av." vi uppdaterar våra priser 3-4 gånger per dag" Company X
"vi talar väldigt mycket om produkten och användarupplevelsen även om det är en väldigt enkel och avskalad sajt så handlar det om att vi alltid ska utveckla saker för någon annan." 2. "Men om det var kopplat till själva organisationsutvecklingen så handlar det ju om att ha rätt kompetens" 3. "ja det handlar ju om att vara vaken på vad som händer runt omkring, utanför också." 4. "dom har använt den och lyckats med en affär" 5. "att den funkar på ett bra sätt" 6. "ett dåligt bemötande i kundtjänst eller liknande, så finns det en risk att man inte kommer tillbaka, och därför är det viktigt atr jobba hela tiden med användaren i fokus." 7. "hur den funkar, som sagt även om den är väldigt enkel på utsidan så är det väldigt mycket som är väldigt avancerat under huden, hur man driver sajten på bästa sätt och hur man får en bra, kan ge en bra användarupplevelse till användarna" 8. "vi tänker väldigt mycket på kvalitet, sidan och innehållet och sedan så har vi hållit på med det här länge så vi vet hur saker och ting funkar." 9. "det är väl både vad gäller teknisk kompetens, men även marknadsmässigt, affärsutvecklingsmässigt så försöker vi rekrytera de bästa personerna" 1.
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Appendix 3 - Introductory email
Hej, Vi är just nu i processen att skriva vår D-uppsats inom företagsekonomi med inriktning mot Management. För närvarande studerar vi Masterprogrammet inom Management på Umeå Universitet och vi ämnar undersöka hur internetbaserade företag kan använda sin strategiska kapabilitet för att behålla sina kunder genom att påverka dess relation och känslomässiga band mellan kund och företag. Vi tror därför att ert företag passar väldigt bra för vår undersökning och vi hoppas även att vår uppsats kan vara till stort värde för ert framtida arbete. Vi vet inte riktigt vem vi ska kontakta, men vi undrar om det finns möjlighet att få göra en intervju med någon i ert företag som är inblandad i ert strategiarbete? Upplägget för vår intervju är tänkt att i ett första steg ske skriftligen via email någon gång februari. Vi skickar då ut en intervjuguide som berörd person får svara på och skicka tillbaka till oss. Vid behov ser vi också möjligheten att att genomföra en eventuell telefonintervju för att förtydliga vad som framkommit i det skriftliga första steget.
Mvh Jonas Liedgren & Laurence Butler
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doc_360866150.docx
Switching costs refer to how much money and time it would cost a company to switch from one provider of a service or product to another. If you are a provider, you want your customers to face high switching costs, thus increasing the odds they will stay with you.
MARKETING REPORTS ON SITTING ON THE FENCE BETWEEN MANAGEMENT AND MARKETING
A Strategic look at Psychological Switching Costs
Abstract
With the Introduction of the internet and human technological advancement, our everyday lives have changed dramatically over the past 20 years and because of this, how we communicate, form social networks and purchase or sell goods have also developed. In the light of this, we have completed this thesis which concerns the influence of the internet and the possibilities of forming long lasting relationships between businesses and customers through what we have described as 'Locking in' the customer. This is done by forming 'Psychological Switching Costs' that make the cognitive process of switching too expensive or un-wanted by the customer. In order to develop an understanding of this we saw it as prudent to interview senior managers of businesses that operate mainly on the internet to discover if they attempt such strategic moves in, 'Locking in' customers. Thus forming the research question; How are Companies based on the internet using Psychological Switching Costs as a strategy to Lock in the customers? The process by which the information was collected was through a qualitative method and semi-structured interviews. We found from the respondents that were interviewed that when it comes to operating a business on the internet it is important to consider, Transparency, Twoway communication, Simplicity, Agility and Flexibility in creating a loyal customer who is positively locked in. These were the strategies considered by the respondents to have an effect on customers. One of the most interesting points that were made was that if the customer was locked in to the business, the business did not have to be as dynamic. Thus, according to the respondents, Psychological Switching Costs do have an influence on how they form strategy to Lock In customers. In that it can be beneficial to attempt to Lock in customers rather than develop other Dynamic Capabilities. This factor seems very relevant when considering communication, agility and flexibility, in that by forming relationships and strategies directly to the customer these companies are creating something that is difficult to substitute, unimitable for their competitors and convenient to the customer.
Keywords: Lock In, Psychological Switching Costs, Dynamic Capabilities
Table of Contents
1. Introduction ......................................................................................................................................... 7 1.1 Background .................................................................................................................................... 7 1.2 R esearch Problem .......................................................................................................................... 9 1.3 Proble m Statement ....................................................................................................................... 9 1.4 Purpose ...... .................................................................................................................................... 9 1.5 Clarification ........ ......................................................................................................................... 10 1.5.1 Inside vs. Outside perspective .............................................................................................. 10 1.5.2 Our Perspective of Lock?in ................................................................................................... 10 1.5.3 Switc hing Costs vs. Psychological Switching Costs ............................................................... 11 2. Method .............................................................................................................................................. 12 2.1 Preconceptions ............................................................................................................................ 12 2.2 C hoice of Subject ......................................................................................................................... 13 2.3 Method ological Assumptions ...................................................................................................... 13 2.3.1 View of Reality ...................................................................................................................... 13 2.3.2 View of knowledge ............................................................................................................... 14 2.3.3 Realit y and Knowledge Conclusion ...................................................................................... 14 2.4 Research Strategy ........................................................................................................................ 15 2.5 S cientific Approach ...................................................................................................................... 16 2.6 Resear ch Design and Data Collection .......................................................................................... 16 2.7 Choice of So urces ........................................................................................................................ 18 2.8 Presentation of res pondents ....................................................................................................... 20 2.8.1 Katshing ................................................................................................................................ 20 2.8.2 Prisjakt .................................................................................................................................. 20 2.8.3 Disc shop ............................................................................................................................... 20 2.8.4 RebelBetti ng ......................................................................................................................... 20 2.8.5 Company X ....... ..................................................................................................................... 21 2.9 Conducting Interviews ................................................................................................................. 21 2.10 L iterature Search ....................................................................................................................... 21 3. Theoretical Framework ..................................................................................................................... 22 3.1 Strategy ....................................................................................................................................... 22 3.2 Dynamic Capabilities ................................................................................................................... 23 3.3 Switc hing Costs ............................................................................................................................ 24 3.3.1 Procedural Switching Costs .................................................................................................. 26 3.3.2 Social Switching Costs and Benefits Loss Costs .................................................................... 26 3.3.3 Rela tional Benefits ............................................................................................................... 26 3.3.4 Calculative Commitment ...................................................................................................... 27 3.3.5 Conclusions for Commitment ............................................................................................... 28 3.4 First Mover Advantage ................................................................................................................ 29 3.5 Tr ust Development: "Price does not rule the web; trust does" .................................................. 29 3.6 Interface Design and Customer Experience in the Online Environment ..................................... 31 3.7 The Value Cha in ........................................................................................................................... 32 3.8 Competitive Advanta ge ............................................................................................................... 32 3
3.9 Critique ........................................................................................................................................ 34 3.10 Conclusion of the Theoretical Framework ................................................................................ 35 4. Empirical Data & Analysis .................................................................................................................. 37 4.1 Strategy and Dynamic Capabilities .............................................................................................. 37 4.1.1 Discshop ............................................................................................................................... 37 4.1.2 Katshing ................................................................................................................................ 38 4.1.3 Rebel Betting ......................................................................................................................... 39 4.1.4 Prisjakt ....... ........................................................................................................................... 41 4.1.5 Company X ........ .................................................................................................................... 41 4.1.6 Combined Analysis of Strategy & Dynamic Capabilities ....................................................... 43 4.2 Switching Costs ............................................................................................................................ 44 4.2.1 Discshop ............................................................................................................................... 44 4.2.2 Katshing ................................................................................................................................ 45 4.2.3 Rebel Betting ......................................................................................................................... 46 4.2.4 Prisjakt ....... ........................................................................................................................... 47 4.2.5 Company X ........ .................................................................................................................... 48 4.2.6 Combined Analysis of Switching Costs ................................................................................. 49 4.3 Trust ............................................................................................................................................. 50 4.3.1Discshop ................................................................................................................................ 50 4.3.2 Katshing ................................................................................................................................ 50 4.3.3 Rebel Betting ......................................................................................................................... 50 4.3.4 Prisjakt ....... ........................................................................................................................... 51 4.3.5 Company X ........ .................................................................................................................... 51 4.3.6 Combined Analysis of Trust .................................................................................................. 51 4.4 First Mover Advantage ................................................................................................................ 52 4.4.1 Discshop ............................................................................................................................... 52 4.4.2 Katshing ................................................................................................................................ 53 4.4.3 Prisja kt .................................................................................................................................. 53 4.4.4 Company X ............................................................................................................................ 54 4.4.5 RebelBetting .... ..................................................................................................................... 54 4.4.6 Combined Analysis of First Mover Advantage ..................................................................... 55 4.5 Interface Design ........................................................................................................................... 56 4.5.1 Discshop ............................................................................................................................... 56 4.5.2 Katshing ................................................................................................................................ 56 4.5.3 Prisja kt .................................................................................................................................. 57 4.5.4 Company X ............................................................................................................................ 57 4.5.5 RebelBetting .... ..................................................................................................................... 58 4.5.6 Combined Analysis of Interface Design ................................................................................ 58 4.6 Value Chain .................................................................................................................................. 59 4.6.1 Discshop ............................................................................................................................... 59 4.6.2 Katshing ................................................................................................................................ 59 4.6.3 Rebel Betting ......................................................................................................................... 59 4.6.4 Prisjakt ....... ........................................................................................................................... 59 4.6.5 Company X ........ .................................................................................................................... 60 4
4.6.6 Combined Analysis of the Value Chain ................................................................................. 60 4.7 Competitive Advantage ............................................................................................................... 61 4.7.1 Discshop ............................................................................................................................... 61 4.7.2 Katshing ................................................................................................................................ 61 4.7.3 Rebel Betting ......................................................................................................................... 62 4.7.4 Prisjakt ....... ........................................................................................................................... 63 4.7.5 Company X ........ .................................................................................................................... 63 4.7.6 Combined Analysis of Competitive Advantage .................................................................... 64 4.8 Theoretical Recap ........................................................................................................................ 65 4.9 R evised Model ............................................................................................................................. 66 5. Discussions & Conclusions ................................................................................................................. 68 5.1 Sub?purpose Questions answered .............................................................................................. 68 5.2 Str ategy and Dynamic Capabilities .............................................................................................. 68 5.3 Switchi ng Costs ............................................................................................................................ 69 5.4 Trust ............ ................................................................................................................................. 70 5.5 First Mover Adva ntage ................................................................................................................ 70 5.6 Interface Design .......... ................................................................................................................. 70 5.7 The Value Chain ................... ........................................................................................................ 71 5.8 Competitive Advantage ................. .............................................................................................. 71 5.9 Contribution to Theory ............................ .................................................................................... 71 5.9.1 Communication Influences Dynamic Capabilities ................................................................ 71 5.9.2 Flexibility and Agility ............................................................................................................. 72 5.9.3 Tran sparency ........................................................................................................................ 72 5.9.4 Are Companies based on the internet using Psychological Switching Costs as a Strategy to Lock In the customers, and if so how? .......................................................................................... 72 5.10 Further studies .......................................................................................................................... 73 6. Qua lity Criteria .................................................................................................................................. 74 6.1 Limitations ................................................................................................................................... 74 6.2 V alidity equals Credibility ............................................................................................................ 75 6.3 Reliabili ty equals Dependability .................................................................................................. 75 6.4 Confirmability .............................................................................................................................. 76 6.5 Authenticity ........... ...................................................................................................................... 76 6.6 Grounded Analysis ........ ............................................................................................................... 76 7. References ......................................................................................................................................... 77 7.1 Scientific Journals ........................................................................................................................ 77 7.1 B ook References .......................................................................................................................... 79 7.2 Other References ......................................................................................................................... 80
Appendix 1 Cover letter and interview guide ..................................................................................... 82 Appendix 2 Quotes in original language ............................................................................................. 88 Appendix 3 Introductory email ........................................................................................................... 99
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Figures
Figure 1. Different types of Switching Costs according to Burnham et al. (2003, p. 112) .................... 24 Figure 2. Switching Costs and its components ..................................................................................... 29 Figure 3. Ps ychological Strategies in locking in customers ................................................................... 35 Figure 4. Strategy & Dynamic Capabilities ............................................................................................ 43 Figure 5. Switching Co sts ....................................................................................................................... 49 Figure 6. Trust ..................... ................................................................................................................... 52 Figure 7. First Mover Advantage ........................................................................................................... 55 Figure 8. Interface Design ..................... ................................................................................................. 58 Figure 9. The Value Chain .............................. ........................................................................................ 60 Figure 10. Competitive Advantage .......................... .............................................................................. 64 Figure 11. Revised Model; Psychological Strategies in loc king in customers........................................ 66
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1. Introduction
In this chapter we explain the outline of our research area and why we feel it is relevant in the specific context of E-business and the influence of Switching Costs. The chapter will give examples of existing knowledge in Customer Loyalty and Switching Costs, as well as information about the development of commerce over the internet from Business to Customer (B2C), thus showing the importance of creating relationships and the relevance of combining these factors within a business context.
1.1 Background
The introduction of the internet in our everyday lives has had a tremendous effect on our behaviour and the way we as humans interact. Okin (2005, p. 17) discusses it in terms of an internet revolution by the means of how it has radically altered the way we communicate and form social structures in the virtual environment. Furthermore, Okin (2005, p. 17) argues that the internet has had an empowering effect on humans by enabling us to access information and obtain knowledge from a variety of resources that we previously could just imagine. However, for organisations and industries this transformation has not always been a smooth ride. The fast change that the internet revolution has brought with it has resulted in that organisations as well as legislation have had trouble adopting to this new and fast changing environment, as DeMark & Harcourt (2004, p. 9) discuss, rendering many business models obsolete. One example of this phenomenon is the debate regarding file sharing and how it to a large extent has affected the entertainment industry in both Sweden and elsewhere. As the CEO of Spotify, Daniel Ek reflects; "When I launched Spotify, I felt there was an inconsistency between how people consumed music and the way the business model worked" (IFPI Digital Music Report, 2010, p. 14). This exemplifies the significance for organisations in today's environment to be dynamic and able to quickly adapt their business models to new technical and social advances. Furthermore, it shows that companies today are increasingly having to use the internet to provide customers with their products and services, whether a small local business or a large international corporation. It is in the interest of all companies to invest in many aspects of ecommerce, from Marketing to Corporate Social Responsibility positioning. These factors mean it is an inevitability that a prospective customer is more likely to, and more able to do research on the products available as there is now a wealth of information that is easily accessible through the internet. There are companies that know how to use the internet to their own ends as a stage for gaining information on customers and even obtaining new innovative ideas from the development of online communities. The internet gives people the opportunity to be active in the development of the business as well as useful information given to the companies (Sawhney, 2002, p. 2). A great example of this is eBay and the online forums developed so that an interactive community can develop ideas for how to improve the services and the business offerings. This is also seen as a service which helps in customer retention. eBay which operates solely on the internet; in terms of generating income and e-commerce business; eBay had a turnover of sixty billion US dollars in 2008 (eBay 2009). In Sweden alone the business done on the internet and post order from January 2009 to November 2009 is in excess of one billion Swedish crowns (Statistiska Centralbyrån). This is
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quite a considerable marketplace and as such it is important for a company to have some consideration as to how much buyer power the customer has when making an internet purchase and the possible revenues from operating successfully in the e-commerce market. To fully exploit the internet in terms of customer satisfaction and locking in of the customer, businesses need to plan a system where not only is their product or service more desirable through, among other factors, the four P's of Marketing. But also committing customer's through other psychological methods of retention, such as Switching Costs. According to Johnson, Scholes & Whittington, (2008, p. 235) this can be a significant influence on a customer, where "the benefits of switching may simply not be worth the cost or risk". As seen from eBay, whether or not some focused planning was implemented, the relationships that eBay build are having a very positive influence on the bottom line for investors and the business. Further to this is the realisation of the value of lifetime customers whether businesses or individuals. Kotler, Wong, Saunders & Armstrong (2005, p. 474/5) express the importance of retaining customers and that companies go to great lengths to entice customers and create good relationships, even making loses in order to Lock In the consumer. One of the marketing strategies used by companies in locking in the consumer is Relationship Marketing, andthrough building relationships a degree of Customer Loyalty is developed (Kotler et al., 2005, p. 476). This process can be developed and controlled through Customer Relationship Management (CRM) which is a process of gathering information at every point of contact with a customer and developing a profile so that the relationship can be built up (Kotler et al., 2005, p. 481). From 2001 to 2006 the use of CRM technology was expected to increase from 9.7 billion to 16.5 billion US dollars (Maddox, 2002, p. 2). We can therefore see the importance of using strategies in planning the locking in of customers by a company, as mentioned when considering eBay. We also see a connection with a company's ability to create high Switching Costs as a strategy. Where the Core Competence are concerned with a company's ability to create a Rare, Un-inimitable, Non-substitutable and Valuable products or services to the prospective customer, these factors serve as giving a firm a Competitive Advantage. (Johnson et al., 2008, p. 102/3). However the Core Competences do not come from the product or service itself but rather the underlying influences and controls of management in operating the business to such ends. As said by Prahalad & Hamel (1990, p. 82) "The diversified corporation is a large tree. The trunk and major limbs are core products, the smaller branches are the business units; the leaves, flowers, and fruit are the products. The root system that provides nourishment, sustenance, and stability is the core competence. You can miss the strengths of competition by looking only at their end products, in the same way you miss the strength of a tree if you look only at its leaves." Switching Costs have gained more and more recognition as a relevant way of locking in the customers and influencing them to continue their relationship with the company. As both Jones, Reynolds, Mothersbaugh & Beatty (2007, p. 335, 350/1) and Vázquez-Carrasco & Foxall (2006, p. 367, 375/6) discuss there are, however, positive as well as negative effects associated with Switching Costs. Switching Costs that are negative in their nature generally are based on barriers trying to Lock In the customer to the organisation. Although proven to increase customer retention, they have often gained other negative effects such as bad Word of Mouth (WOM). Positive Switching Costs are on the other hand based upon the creation of
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relationships and social bonds that make the customer want to stay with the organisation. Positive Switching Costs achieve this by creating a feeling of control and choice where the customer perceives the choice to stay with the organisation to be made on his or her ownterms, instead of feeling locked in by the organisation. These types of social and psychological barriers have proven to be more effective when concerning customer retention and have also resulted in greater customer satisfaction (Jones et al., 2007, p. 350/1; VázquezCarrasco & Foxal, 2006, p. 375/6). Consequently, we argue, as do Vázquez-Carrasco and Foxall (2006, p. 375), that these barriers can be particularly useful to organisations because they are hard for competitors to imitate. This realization is of course even more relevant in today's internet environment where competition has been considered to be "just a click away" (Chen & Hitt, 2002, p. 257; Porter, 2001, p. 68) due to the low physical search costs in this environment (Balabanis et al., 2006, p. 217) as well as the very limited person to person interactions and relationships between the organisation and the customer (Reichheld &Schefter, 2000, p. 107). Based on the discussion above, we argue that it is very important for an organisation to build and maintain Psychological Switching Costs. This is especially important in the internet environment that has characteristics of very little interpersonal relationships inherent in the market.
1.2 Research Problem
We are thus investigating the specific significance of one aspect of Customer Loyalty and Retention and the locking in effects of Psychological Switching Costs for clients; to the extent of how business operating on the internet plan to influence this factor. We argue that by implementing strategic plans to influence consumer's Switching Costs on a psychological level, companies will be able to create a more valuable customer with a long customer lifetime. We see this as an important strategy of an organisation and as such a major Core Competence for a firm to be successful. Thus, through specific strategies other than Product, Price, Place and Promotion, companies will be able to not only reduce costs by operating on the internet. But use the internet to collaborate "with customers to co-create value" as consumer have more power and are more demanding (Sawhney, 2002, p. 2). Therefore, the intention of this thesis is to recognise this importance of planning to influence Switching Costs as well as attempt to understand the focus of companies considering such strategies. With the growth of e-commerce in Sweden and the rest of the world, we argue that the importance of such strategies can have significant effects on Customer Loyalty, specifically Psychological Switching Costs and therefore should be better realised, which leads us to the following research question;
1.3 Problem Statement
Are Companies based on the internet using Psychological Switching Costs as a Strategy to Lock In the customers, and if so how?
1.4 Purpose
The aim of this study is to asses if companies consider the effects of Psychological Switching Costs and from the companies interviewed, how does this influence the strategic processes of the company? In order to answer the problem statement we will consider these following subpurposes to this study, and they are: If senior managers are using Psychological Switching Costs, do they see it as important?
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Do they see the difference between Positive and Negative Switching Costs? How important for the managers are, Trust, First Mover Advantage, Design and The Value Chain in developing Psychological Switching Costs? Do senior managers see Psychological Switching Costs as giving them a Competitive Advantage?
1.5 Clarification
Due to the nature of this study we felt it prudent to discuss and clarify specific points concerning the concepts and the meanings that are referred to in this study. The reason for this is to help you as the reader to gain an understanding of how we approach this study when we discuss 'Switching Costs' and 'Locking In'.
1.5.1 Inside vs. Outside perspective
Traditionally, Switching Costs are perhaps most known and recognized through Michael Porter´s Five Forces framework; The Five Competitive Forces That Shape Strategy which are used to analyze the attractiveness of a market (Porter, 2008). As Bengtsson, Eriksson &Wåhlin (2009, p. 128/9) discuss; this type of framework has had a substantial impact in the field of management when utilizing an outside-in perspective of the organisation, meaning that it analyzes the outside world to see how the organisations are affected by their surroundings. In our research, however, we employ a different perspective and investigate Switching Costs from an inside-out perspective where we have chosen to look at the organisation and how it uses its strategy, resources and its capabilities to impact the outside world focusing specifically on Switching Costs (Bengtsson et al., 2009, p. 128/9). This distinction between the outside-in and the inside-out perspective is important to consider when reading our thesis to better understand the choices that we make throughout the study.
1.5.2 Our Perspective of Lock?in
A frequent recommendation with regard to strategy in service firms, according to Jones et al., (2007, p. 335), is that they should lock customers in to a relationship by increasing their perception of Switching Costs. One can assume that the term Lock-In has quite a negative feel to it as it implies that one should physically and mentally lock-in the customers into a relationship and these types of barriers are in fact connected to negative effects if the customer decides to end the relationship (Vázquez-Carrasco & Foxall 2006, p. 369). The negative aspects have led to a discussion among scholars arguing how valuable these types of barriers really are. There are however, two sides of the same coin. Therefore, this discussion among scholars has evolved into the notion of two different perspectives and that is; barriers can be both positive and negative. Negative barriers are seen as to try and Lock In the customer, while positive barriers aim to create constructive obstacles that make the customer want to stay with the organisation (Jones et al., 2007, p. 350-351 & VázquezCarrasco & Foxall 2006, p. 369/375-376). For the purpose of this study, our perspective of Lock-in is that locking in a customer, when used the right way, is that of a positive effect on the organisation and their relationship to the customer. This line of thought is considered throughout this thesis and will be developed further in the theoretical framework regarding positive and negative Switching Costs. We
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therefore consider it an important aspect to keep in mind and reflect upon right through the thesis as it has been a base for the choices that we make in our research.
1.5.3 Switching Costs vs. Psychological Switching Costs
For the purpose of this thesis we have chosen to adopt a definition of Switching Costs made by Jones et al. (2002, p. 441) which states that Switching Costs are "the perceived economic and psychological costs associated with changing from one alternative to another". As made clear from this definition; Psychological Switching Costs are one part of the broader concept of Switching Costs and are associated with the perceived mental barriers when changing from different alternatives. The concept of Switching Costs will be further developed in the theoretical framework; however, to be able to comprehend the choices that we make, this distinction is important to keep in mind throughout the thesis. We therefore want to make it clear that it is Psychological Switching Costs that is the main focus of this thesis, not the broader concept of Switching Costs.
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2. Method
In this chapter we explain our approach to producing this thesis and the methods used so as to give the opportunity for our work to be contested. We present our preconceptions that influence us as writers, as well as our reasoning behind choosing this area to study. Further to this we will address our methodological position when considering our views on knowledge and reality. The strategy of how we conducted our research will be explained and how we considered our approach to theory. Thus showing the line of thought that we have followed and why; so as to detail how we have completed our thesis and therefore justify our choice of method (Saunders, Lewis & Thornhill, 2009, p. 43).
2.1 Preconceptions
In the interest of giving a true picture of how we have completed this study it is important to recognise that we as individuals influence the outcome of our study. Our preconceptions affect how the data is collected, what data is collected, as well as how it is analysed. Therefore the information held within this chapter should be considered throughout this study. The reasons for this are to increase the exposure of our perspective to this subject area and where these preconceptions have come from. Therefore our interpretive approach in this study may well influence its outcome (Olivier, 2004, p. 14). However, steps have been taken to show transparency in our work which is further discussed in Chapter 6. Our understanding of the area in which we are conducting this research stems from our social background, previous education and life experiences. To give a somewhat objective view of the subject we both felt it to be beneficial to complete the research as a pair so that the thesis will not be one-sided or too narrow or broad in scope. Both of us have studied Business Administration, where we have completed our Bachelor studies, Laurence specialising in Service Marketing and Jonas in Accounting/Marketing. We are now completing our final term where we have chosen Management as our Post-Graduate subject area. The interest for this specific area stems from our discussion on what topic would best represent an interesting and relevant area of study within this field. Through our conversations we noted a difference in thought processes to how we use the internet when going to purchase goods or services. One of us is more reluctant and the other is more willing, both in the sense to change supplier and purchase goods. Further to this was the authors' realisation of the importance of companies operating at some level on the internet to be a successful organisation. Through the discussions in developing this study, both of the authors found that the age gap and the fact that they are from different countries as influential in coming to a research topic that they found relevant and interesting. The aim of the study grew from these differing perspectives where the age and cultural difference gave an enriching and interesting alternative viewpoint. Laurence being from England and ten years older than Jonas who comes from Sweden has inevitably impacted on the differing points of view. Furthermore the authors have different experiences in their working lives. Jonas has been working within the telecommunication sector for a number of years as his summer job whilst completing his studies and Laurence working in the service sector. An example of where their opinions differs has been in the use of purchasing goods on the internet, firstly Laurence has a distinct lack of trust for purchasing on the internet, but when he does find a site that he is comfortable with he sticks to it; whereas Jonas has no trouble switching to another provider or buying things over the internet.
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From these differences the authors have experienced using the internet as a tool to purchase goods and services in different ways. These differing perspectives have developed the authors' interest in gaining an understanding of companies operating on the internet and how they manage the Psychological Switching Costs to keep their customer base.
2.2 Choice of Subject
Over the past few years it has become increasingly important for companies wishing to be successful to have some form of online interface for prospective and existing customers. As Ives & Learnmonth (1984, p. 1193) discuss, the use of technology is seen to develop a competitive advantage and that it has had a distinct effect on businesses and how they develop their strategies. "How a firm develops and sustains a competitive advantage over its industrial rivals is a central issue for the field of strategic management" (Roland, Patterson & Ward 2009, p. 301). However our understanding is that it has gone further, in that it is no longer an advantage but a necessity to function as a business. Therefore companies have to take it to a higher level in so far as they must utilise such tools as Psychological Switching Costs as a barrier and as such a Competitive Advantage. As seen in the following theoretical chapter of this thesis, there is a substantial amount of theory covering Switching Costs, Dynamic Capabilities and its influence on E-business. However there seems to be little research concerning firms using Psychological Switching Costs as creating Competitive Advantage on the internet, it seems that this connection has not been made from a theoretical perspective. Therefore part of what we are examining is if companies are aware of the usefulness of such activities and if they attempt to implement such strategies to gain the Competitive Advantage. We see that creating Psychological Switching Costs as one area in which companies can create a Competitive Advantage. From this the ability to Lock In customers can be achieved in either a positive or negative way so that they continue to use the specific provider.
2.3 Methodological Assumptions
Data and theory collection as discussed previously (Chapter 2.1), is considered from differing perspectives according to our views on knowledge and reality. The fundamental factor being that our Ontological (view of reality) and Epistemological (view of knowledge) standpoint will affect the outcome of this study.
2.3.1 View of Reality
The understanding of the view of reality develops into two lines of thought from the world of philosophy. Where Ontology describes the "fundamental nature of the world and what it means to exist in that world" (Olivier, 2004, p. 28). The two extremes of Ontology are; Objectivism, which as the world implies, objective in approach, meaning that social phenomena is independent of social interaction and constant. Whereas, Constructionism is that these social phenomena are influenced by individuals and they are not constant (Bryman, 2008, p. 19). Saunders et al., (2008, p. 111) points out that it is the perceptions and consequential actions of social actors that determine reality in the context of Constructionism (also known as Subjectivism). Thus to be a Constructionist is to believe that an individual sees, in effect, what they want to see of the world around them. It is also seen that we as researchers view a specific point of social reality when completing some form of study, therefore through this reality, knowledge is not definitive (Bryman, 2008, p. 19). Bryman &Bell (2003, p. 45) also discuss this factor as the "experimenter effect" where the researchers create a bias by influencing their preferred research outcome.
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A simple example for individuals thought processes on reality and a well known metaphor for how people view things positively or negatively is; "it is better to see the cup as half full rather than half empty", implying that an individual's grasp on a situation may differ to another. Where one has a positive outlook that they still have half a cup left, someone of a negative disposition will be missing the half that is now gone. Whereas a believer in Objectivism would see the cup from the perspective of neither the positive or negative aspect but rather that it contains liquid of which half is still there and half is gone. For the purposes of this study we see our approach as Constructionist as an important factor because of the constant technological advancements happening today and how it effects business strategy as described by Rolland et al., (2009). Accordingly we have developed this study following this approach where the aim is to analyze the opinions of company managers (at a point in time) who decide the strategies for influencing Psychological Switching Costs. We see reality as constantly changing and temporal, and that we as well as our respondents may influence how reality is constructed and how reality is seen at a specific moment in time. In other words social reality in its true context cannot be interpreted completely and our thesis is based on reflection in a specific context that is not the only truth. Therefore we see ourselves as Constructionist, not Objectivist when considering our view of reality.
2.3.2 View of knowledge
The understanding of knowledge can also be seen from differing perspectives. Epistemology as it is known is the theory of knowledge and at what point should something be considered as knowledge (Bryman, 2008, p. 13). Easterby-Smith, Thorpe & Lowe (2002, p. 31) describe it as a "general set of assumptions about the best way of inquiring into the nature of the world". Thus Epistemology concerns how knowledge is actualised and to what extent can it be considered as true. The main theme being how and in what context knowledge is collected and analysed; the first assumption is that knowledge should be collected or rather observed in the same way as the traditional approach of observing natural science, known as Positivism. That is observing something in the social world should be objectively measured (Bryman, 2008, p. 13). Where the social world is seen as concrete and external, also that knowledge can only be considered as knowledge specific to the phenomena being observed (Easterby-Smith et al., 2002, p. 32). Alternatively a subjective approach known as Interpretivism, allows the acceptance of knowledge to be influenced or interpreted by the researcher and respondent. The understanding being that social sciences are fundamentally different to the natural sciences and therefore require different procedures and study techniques so as to reflect the distinctiveness of humans. The strategy being, that differences between the sciences means that the researcher must grasp the subjective meaning of the social action they are observing (Bryman, 2008, p.15/6). Thus we can consider the "Hawthorne Study" where researchers carrying out a study discovered that the actual awareness of those being studied made the respondents more productive, when in fact the study was supposed to cover the influence of lighting effects on the respondent's productivity (Bryman & Bell., 2007, p. 51/2).
2.3.3 Reality and Knowledge Conclusion
Thus we are collecting subjective accounts to describe what reality is true to the managers of companies operating on the internet and the effects of managing Psychological Switching Costs they believe have on their customers. We argue that the reality of PsychologicalSwitching Costs can be influenced by these managers in the context of businesses that we
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interviewed which operate on the internet. Therefore we do not assume that there is one true objective reality; and that knowledge is created by understanding the subjective meaning of its context. As such we are looking for the personal views of company executives so as to draw our conclusions from our view of reality and knowledge, which are Interpretivistic and Constructionist.
2.4 Research Strategy
The concept of research strategy is to differentiate between the methods available in collecting data, mainly showing the methods by which social research can be achieved (Bryman, 2008, p. 21). These methods are quantitative and qualitative; the former of these two is generally concerned with measuring procedure to social life where the set of variables are developed by the researcher, and they are uninvolved with the respondents so as not to have a subjective influence on the study. Further to this is that theory is tested through collecting a static image of the social world where the changes in variables are the important factors of the study. This is achieved through a very structured approach so as to investigate the precise issues the researchers study covers, so that they may make generalisable statements about the social world and its behaviour (Bryman & Bell 2007, p. 425/6). If we were to attempt such a study, the research question may be aimed at finding out if managers of companies operating on the internet use Psychological Switching Costs to create a stronger Lock In affect. However this would negate the deeper subjective understanding of how managers try to achieve this phenomenon in an online environment. Thus a qualitative approach uses words to present points of view from respondents, while the researcher develops an understanding of the issues so as to develop theory from the data collected within the context of which it is being collected; and as such the interconnectedness of time, social setting and participants (Bryman & Bell 2007, p. 425/6). Where in our case, the internet as the social setting and time being the rapid development of technologies influencing how social-beings interact in this virtual world and how managers try to influence the consumer as the participating parties. Moreover qualitative studies attempt to gain meaning that is rich and deep in a specific area of knowledge and reality that is context specific giving an understanding of the behaviour, values and beliefs (Bryman & Bell, 2007, p. 426) of the managers of firms that operate on the internet. Thus we are looking at the meaning of the actions by managers rather than the action itself. In a study made by Van Maanen (1983, cited in Easterby-Smith et al., 2002, p. 85) they define this method as, "an array of interpretive techniques which seek to describe, decode, translate and otherwise come to terms with the meaning, not the frequency, of certain more or less naturally occurring phenomena in the social world". The significant factor between the two approaches being that the quantitative method counts frequencies and the qualitative method attempts to understand the meaning of the action (Easterby-Smith et al., 2002, p.129) This study is aimed at understanding the meanings respondents attach to issues and situations in the context of existing relevant theory within the realms of Switching Costs. As such, this study is seen as reflective research; where existing theories are re-examined from different organisational and social contexts (Easterby-Smith et al., 2002, p. 9). In the case of this study it is well documented that Switching Costs play an important role in keeping customers loyal to a business, however there is very little literature on its influences on the internet. Therefore to develop the theory we see that it is necessary to start from a qualitative approach in asking
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industry executives if there is any importance in implementing processes to develop relationships and create high Switching Costs from a psychological perspective. According to Easterby-Smith et al., (2002, p. 117) there are two ways to analyse qualitative data, content analysis and grounded approach. We are following the grounded approach, where the authors' intuition in finding similarities between the respondents and the information that they have in common. This can then be used as a basis for interpreting the social context that we are investigating in this thesis. It is therefore important that the analysis "stays close to the data and any observations made have to be placed carefully in context". For this reason we have positioned the Empirical Data and Analysis side by side in this thesis as well as having the quotes in the appendix in their original language so that it may be scrutinised by the reader. This will be further discussed in Chapter 6.
2.5 Scientific Approach
The relationship between research and theory gives a framework for what scientific approach is required to complete a study and thus whether attempting to generate new theory or test existing theory. The deductive approach is based on theory and then collection of data relating to the theory to ascertain if the theory holds true or not. Whereas an inductive approach is to collect data from which to generate new theory (Johansson-Lindfors, 1993, p. 55). The deductive approach comes from the natural sciences, where controlled testing lays the basis for explaining events that happen in the social world (Saunders et al, 2007, p. 117). The inductive research approach attempts to develop theory from the data that is collected and analysed (Saunders et al., 2007, p. 118). However there is extensive literature that postulates that a combination of these two may be attempted. Saunders et al., (2007, p. 119) discusses the adopting of both an inductive and deductive approach as being 'advantageous'. JohanssonLindfors (1993, p. 154) describes an alternative known as an abductive approach, where, researchers find existing relevant theory from which to develop their data collection method. At which point they analyse the existing theory against their own empirical findings to ascertain if they can develop new theory. And Creswell (2009, p. 136) sees a mixed method where existing theory can be used to guide the practitioner. For the purposes of this study we will be using a mixed method approach by inductively developing our understanding of the uses of the internet by managers in attempting to Lock In their customer's through Psychological Switching Costs. We then deductively collect existing knowledge in the areas of Switching Costs and Dynamic Capabilities, that we see as necessary to develop our own theories; and an understanding of them, from the specific context of the influences of Switching Costs on the internet as seen by company managers. Thus a mixed method approach is used in this instance.
2.6 Research Design and Data Collection
The concept of research design is that it gives a framework for the collection and analysis of data (Bryman & Bell, 2007, p. 40) in ways that are most likely to achieve the research aims (Easterby-Smith et al., 2002, p. 43). It represents a structure that guides the execution of a research method and the analysis of the subsequent data (Bryman, 2008, p.30). Where the research method is the technique used for collecting data. However the design itself will inevitably come from our Ontological and Epistemological standpoints. These philosophical assumptions about how we view the world will underpin our research strategy and consequentially the research design (Saunders et al., 2007, p.101/2).
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Qualitative approaches to conducting studies have been developing over the past decades where postmodern perspectives are attacking the objectivist approach. Qualitative design can be utilized and adapted to suit many forms, where "theory becomes the end point" in a study; alternatively theories are introduced at the beginning of a study and consequentially modified, adjusted or built upon according to the respondents views (Creswell, 2009, p. 131/2, 134). For the purposes of this study, the researchers have developed this latter approach, adopting theories relative in nature to the research at hand. Thus we intend to utilize the existing theory regarding Switching Costs etc. and to modify, adjust or build upon it, when considering ecommerce. As mentioned is Chapter 2.4 where we adhere to a reflective approach as discussed by Easterby-Smith et al. (2002, p. 9). Easterby-Smith et al., (2002, p. 46/7) discuss the 'comparative method', where the researcher looks at the event or process in differing settings or situations. From here a researcher should start with no pre-suppositions and should allow ideas to emerge. The alternative being that one familiarizes oneself with prior research and uses a somewhat structured and mechanical approach in making sense of the data. In this study we are conducting the latter. We will be conducting a case-work method of collecting data which is considered as a medium between the two extremes of 'experimental design' and 'field work' (Easterby-Smith et al., 2002, p. 49). Where we will look at a small number of organisations at a specific point in time and the processes by which they develop Psychological Switching Costs over the internet to Lock In their customers. As such this case-work will emphasize the intensive examination of a setting (Bryman & Bell, 2007, p. 62) in which strategic decisions of managers influence the locking in effect of their customers. As explained previously, we are following an interpretive view of knowledge and a constructionist view of reality and as such we see there is no one true reality, and that it is constructed by the interaction of humans in the social world. We have therefore decided to conduct interviews to collect data in such a manner that we have the possibility to probe the respondents as they discuss their opinions on the subject at hand. Due to these factors we have chosen to have semi-structured interviews so that we may diverge from the interview guide in order to find the individuals standpoints on Psychological Switching Costs. Further to this it is necessary to point out that the sampling method used to collect the data is a 'Convenience' method, in which we chose respondents by virtue of accessibility and relevance to the research topic. This form of sampling is acceptable because we do not attempt to generalize the findings of the study (Bryman & Bell, 2007, p. 197/8). The idea of this study is to gain an understanding of how strategically important it is for company manager's to consider (or how they consider) Psychological Switching Costs when operating mainly in a virtual world. To achieve this we saw that a mixed method of using existing theory to have a clear idea of what the interview-guide content should be as valuable. But still having the freedom to diverge from the theory and so that we may gather revealing knowledge of the respondents, in the hope of finding a connection between existing Switching Cost theory and its significance in an online environment; and the consequential importance of Dynamic Capabilities for respondent's in developing Switching Costs. The interview guide was made up from existing theories within the areas of Switching Costs, Trust, First Mover Advantage, Value Chains, Dynamic Capabilities and Design. These areas where chosen as part of our mixed method approach. With the interview guide itself being made up of 29 questions, each pertaining to specific areas of the collected theory, mentioned
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above. Furthermore, being semi-structured it enabled us to analyze the data in a more organised fashion. The interview questions themselves were devised from the different theories taken up in the relevant section; Questions 1 to 4 pertaining to Strategy, 5 to 12 Competitive Advantage, 13 to 17 First Mover Advantage 18 to 20 Trust 21 to 25 Switching Costs 26 to 28 Dynamic Capabilities 25, 26 & 29 Value Chain All questions were devised with an emphasis on Switching Costs and how it influences these other concepts when relating specifically to operating on the internet. Also in order to make sure a deep understanding was gained many of the questions relating to these concepts overlap so the respondent had the opportunity to develop their explanations fully. To enhance the productivity of the interviews, the questions, along with a short explanation of the study were sent to respondent's at least three days prior to the interview. Whilst we understand this may have taken away some of the openness of the respondents, we agreed that it would give us more valuable information if the respondents had some background information. Also that the interviews were carried out on the telephone (except one) during working hours for all respondents and as such felt it was prudent to give them the opportunity to be prepared because of the limited time they had for interviewing. With the intention of modifying, developing or building upon existing theory through our mixed method approach, the questions were all made to be open ended. Each question was developed so as to gain a better insight of the strategies employed by managers in influencing Psychological Switching Costs to Lock In customers. Given our Interpretivistic and Constructionistic standpoints the opinions of the respondents will be compared with the aforementioned existing theories and hence conclusions will be made. The intension being that we will be able to modify the existing theories within the context of management development of Switching Costs on the internet. We are aware that some of these factors will call into question the validity and reliability of this study and these issues will be taken up in Chapter 6.
2.7 Choice of Sources
As stated in the previous chapter (2.6) we are completing a case study where we as researchers explore in depth an activity/process of managers (Creswell, 2009, p. 15) influencing Psychological Switching Costs to Lock In customers. So the choice of empirical sources is restricted to those who operate in this specific area and that is managers of companies that operate on the internet. The obvious purpose in completing a qualitative study is not to generalize the findings of the respondent, but to develop an understanding of the
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social world in a specific context. Therefore our sample method has been selective so that we may gain the in depth opinions of the managers. These opinions of the managers selected will be compared with the existing theory that we have compiled as well as the other respondents. This is done not to discover an optimal truth or something that can be measured in numbers, but to discover if there is a different understanding of Switching Costs and their uses in an online environment according to the individuals interviewed. And as such is there a common understanding between respondents so as to modify or build upon the theory within a specific context and timeframe. According to Easterby-Smith et al., (2002, p. 85-7) qualitative methods can simply be devices whereby a researcher wants to get close to organisational members so that the insights of those individuals can be understood in the context of the study being completed. Also that it is a fairly common practice to use a respondent that is a representative of the company so that an understanding of the issues related to the topic at hand can be addressed. However, there are limitations to this method in that respondent's may be biased to their role or that they do not necessarily know everything about the organisation and its practices (Bryman & Bell, 2007, p.197). We argue that this is countered by having a number of interviews from different company managers and that it is not the respondents role that was being questioned but the specific practices of developing Switching Costs within e-commerce. In order to complete this thesis we as authors considered it necessary to have only Swedish companies to interview as this would enable us to complete the thesis in time and within a small budget. Further to this we felt that by only considering Swedish companies a more balanced picture of the influences of Psychological Switching Costs within this market could be better identified as the social contexts of other countries may have an effect on the companies. Thus we want to gain a deeper understanding of the Swedish market when considering companies trying to manage Psychological Switching Costs. We have completed five interviews with five different companies and we argue that this is sufficient in gaining a deeper understanding of the subject area at hand. The reasons that these five will suffice is due to a number of factors. Firstly, when considering interview saturation we found that there was a certain amount of repetition in what was being discussed by the respondents (Bryman, 2008, p. 416). Secondly, through our own discussions as authors we felt that when going through the interviews that we were in agreement with the meaning of what was being said and as such no new information was coming to light. Thirdly, we saw that it was prudent in completing five interviews as this enabled us to develop a trust in what was being said by the respondents through the saturation of the information received. Finally we have made the interviews available to readers of this thesis if they so desire, so that they may decide for themselves if these factors are true (Easterby-Smith et al., 2002, p. 117). The selection process for deciding who to interview was conducted by compiling a list of companies that operate on the internet. When we had a list of approximately twenty companies we sent an introductory e-mail (see Appendix 3) to ask if we may conduct an interview with them, five companies responded positively and times for interviews were arranged. We chose the twenty companies on the basis that they offer their products or services through an online medium (the internet), thus, they would have a good understanding of the social world in the context of developing Psychological Switching Costs to Lock In customers.
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2.8 Presentation of respondents
As mentioned in the previous chapter the selection process gave us five companies that we were able to interview;
2.8.1 Katshing
Katshing is one of Sweden's largest Web based sellers of mobile telephones and related products/services. They are partners with both, mobile phone operators and producers as well as other mobile related products such as GPS. The company started in 2003 in Halmstad and in 2006 increased its operations in Falkenberg, where the customer-service, financial and administrative parts of the company are now based. The marketing and IT departments are situated in Gothenburg. The main focus of the business is to offer low cost simple and effective service while still offering high quality and service. This service is geared towards both B2B and B2C in offering mobile services. The company employees 12 members of staff as of year-end 2008 and a turnover of 74.7 million crowns in the last six months of the same year, and we were able to interview the Managing Director, Anders Steen. (Information found at Katshing homepage & AffärsData 29th April)
2.8.2 Prisjakt
Prisjakt Sverige AB was bought by Aftonbladet Tillväxtmedier AB in 2006, while the original owners still have a share. The company started originally in 2000 when the aim was to develop an online community for price comparisons of electronic goods, specifically Hifi and home entertainment systems. As it gained in popularity it expanded in to other electronic goods. It is mainly based in giving information to prospective clients who wish to find the right product for their needs, at the best price. The income comes from Prisjakt's B2B relationship in which they sell their service so that business get there products seen by Prisjakt's website viewers. The company employees 27 members of staff as of year-end 2008 and a turnover of 31.2 million crowns, and we were able to interview the Marketing Director, Magnus Bengtsson (Information found at Prisjakt homepage & AffärsData 29th April)
2.8.3 Discshop
Discshop Svensk Näthandel AB was first registered as a company in 2001, it is an internet based company selling videos, music and games as well as other items related to the entertainment industry. They offer news and reviews on the products that they have on offer and their recommendations, with an emphasis on secure purchasing through many forms of payment alternatives to make the customer feel safe. Discshop sees that the good assortment of products, fast service and well developed internet-shop give them a distinct offering to the customers. The company employees 31 members of staff as of year-end 2008 and a turnover of 172.4 million crowns, and we were able to interview the Vice President, Henrik Oscarsson. (Information found at Discshop homepage & AffärsData 29th April)
2.8.4 RebelBetting
RebelBetting is an online gambling site specializing in arbitrage betting. The company is a development of ClaroBet AB which was founded by Simon Renström. In 2008, four entrepreneurs started this firm with the idea of developing sophisticated computer programs that would enable guaranteed profits from betting on sports. RebelBetting now has users from over 80 countries. The company has 4 members of staff and on its webpage says it made a 12% profit in its first month of operation. As it is a very new company there is no financial information. We were able to interview the CEO and Lead Developer, Simon Renström.
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(Information found at Rebelbetting homepage & AffärsData 29th April)
2.8.5 Company X
The final company wished that the information that we received would be treated with confidentiality. The company itself is a service site that buys and sells goods for others over the internet, it started its operations in 1996 and we were able to interview the Vice President.
2.9 Conducting Interviews
All but one of the five interviews conducted were over the telephone, Saunders et al, (2007, p. 341/2) argue that this can often be more effective as access and speed at which the information can be collected is often improved. This was significant for our study as these four interviewees are all based in southern Sweden thus dramatically reducing cost and time required to conduct the interviews. The telephone interviews were conducted in a conference room on site at Umeå University, Sweden over a period of one week. The times for the interviews were decided by the respondents and their work schedules. The one face to face interview was conducted at the Umeå library in the centre of Umeå as this was also more convenient for the respondent. All interviews were recorded so that we may refer to the data collected when completing the analysis. Also, this enables a level of transparency to our study to give a more reliable and unbiased research paper (Saunders et al., 2007, p.333). This is also relevant when considering issues of Validity and Reliability, taken up in Chapter 6. The interviews were conducted with both of us present; however it was Jonas who asked the questions as he has a better grasp of the language in which the interviews were held. But Laurence was able to interject when he had follow up questions for the respondents as he also speaks the language. The interviews themselves were between half an hour and an hour. We felt that this would enable the respondents to be more inclined to have the interviews and collect enough data from which we could complete our analysis.
2.10 Literature Search
Following our mixed method approach we developed our own ideas regarding the research topic, from this perspective we were able to expand our understanding by searching relevant theories. The aim of our literature search is in line with Hair et al., (2007, p. 94) in that we develop and expand ideas into relevant research topics and this will deepen our understanding. We achieved this by first looking at wider theoretical concepts of Strategy, Dynamic Capabilities and Switching Costs to get a base from which to discuss and develop the research topic. From here we were able to develop our research area further in to more focused areas of Positive and Negative Effects on Switching Costs, Procedural Switching Costs, Social Switching Costs, Relational Benefits, Calculative Commitment, Trust Development, Interface Design and Customer Experience in the Online Environment, First Mover Advantage and Value Chain. Searches to find relevant articles were done through Business Source Premiere (EBSCO) via the Umeå University library homepage.
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3. Theoretical Framework
In this chapter we discuss the existing theory and studies relevant for this specific research topic in order to give the reader an understanding of the subject area. We attempt to bring forth relevant theories relating to Strategy and Dynamic Capabilities, Switching Costs, First Mover Advantage and Trust within E-commerce. This chapter will therefore illustrate appropriate theory from which we can continue with the empirical data. We have formed the theory so that it guides the reader through the significant topics relevant for this study; finally giving a concentrated summary and Model of the collected theory and how it is related in this context.
3.1 Strategy
The concept of Strategy has been in existence for over fifty years, developing from; tasks of managers and business policies, to corporate planning etc. The emphasis was to look at the strengths and weaknesses of an organisation and then act on those. Strategy has now developed further in to a devolution of this theoretical belief, that is to say the there is no clear path in analysing the best way of understanding or predicting the future strategies of an organisations (Johnson, et al., 2008, p. 16/7). In order to better understand Strategy; Complex Theory has been seen as one concept to explain the unexplainable. Taken from the natural sciences, it is a viewpoint in which; order brings chaos and in turn chaos brings order. The concept of chaos is seen as natural evolution where organisations adapt to their changing environment in order to compete in the market (Dolan, Garcia & Auerbach, 2003, p. 24/5). The difficulty therefore is for manager's to predict the future so that strategies can be made in order for the business to prosper. When considering the world of e-commerce this is of extreme importance. For example, Louviers, Driver & Powell-Perry (2003, p. 165) discuss the significance of companies having sufficient knowhow to operate not just only online but on many technological levels, so that customers will become more loyal. That is through technological advancements in communication channels business can gain a competitive edge by embracing the technology. By planning how to put web-based customer support and segmentation strategy in the hotel industry across multiple channels can improve customer relationships and their loyalty. To this extent times have change dramatically, in that Louviers et al., (2003, p. 165) discusses multiple forms of communicating as "e-communications portfolio" where there is personal computers and other internet access devices to communicate and develop relationships. Today however, just seven years later all this information sharing can be achieved on one device. For example the iPhone has applications so that you can connect directly to a specific site, such as Sf bio; the cinema company in Sweden, and watch trailers, book online and even pay (http://www.sf.se/iphone). These developments merely reiterate the significance of what Louviers et al., (2003, p. 167) say, that by establishing this relationship it is a strategic imperative to manage the dynamics of buyer behaviour. Thus if another cinema company was not offering the same service they would inevitably be at a disadvantage in today's technologically advanced world and the consumers that are in it. As stated previously the business transactions that are done online in Sweden top one billion crowns, and according to Forrester Research e-commerce in Europe it is expected to reach 1.5 trillion US dollars in 2004 (Perrott, 2005, p. 74). We can therefore note the importance of operating on the internet but also that it is no longer just about competitive advantage but more about being able to compete in the e-commerce market.
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Thus we see that the way to gain Competitive Advantage is through a company's ability to Lock In its customers mainly through Switching Costs, specifically, psychological. We see this being achieved through strategic decision making and planning in a rapidly changing environment, thus the relevance of Dynamic Capabilities.
3.2 Dynamic Capabilities
In the ever changing fast paced world that we live in today it has become more and more important for companies and managers to develop the capabilities of the organisation within all aspects of the business. Firms are going global and have to compete in an ever growing marketplace and as such managers need to have a deep understanding of the world around them. Identifying and seizing the strategic opportunities in order to stay on the competitive edge (Augier & Teece, 2009, p. 410). Managers have one of the most important roles in the business as they control the operations and divide the resources to make the company successful. These responsibilities have increased dramatically with the developments in both technology and speed of market changes. However mainstream economic theory has been slow in recognising the importance of technological enterprise and the realisation of its uses (Augier & Teece, 2009, p. 411). Thus, we argue that there is a gap in the understanding of the usefulness of Psychological Switching Costs and its strategic importance in the world of E-business. Dynamic Capabilities considers how an organisation deals with differing occurrences in the market and consequentially the ability to adapt, this is of specific importance in management literature (Barreto, 2010, p.256). If businesses do little about the changes in market environment, performance can be affected dramatically (Audia, Locke & Smith, 2000, p. 839). This is of dire importance when considering the development of technologies specifically internet capabilities, e-commerce and networking. As mentioned previously with the developments with iPhone (and Android technology1), services will have to be developed that keep up with technology otherwise companies will fall behind and become less competitive. Especially as firms are battling on a global scale and trying to develop, own and manage intangible assets, (such as Psychological Switching Costs) which is crucial in competing in the economic market today (Augier & Teece, 2009, p. 411). Teece, Pisano & Shuen (1997, p. 510) discuss the importance of gaining competitive advantage by companies being more efficient and effective. These are seen as firm specific capabilities that can be perceived as Competitive Advantages in the market place. However the challenges facing companies in becoming more efficient and effective are growing, thanks in no small part to Hypercompetition (D'Aveni, 1994, p. 46) Thus, the development of management strategy is to know and understand the environment in which it operates and therefore being able to make the right decisions in order to stay at the forefront of the market. This competence to establish the 'rules of the game' and control its development is central to being a successful company. Consequently, the company that has the ability to understand the interaction between its strategy and environment in which they operate possess the ability to either alter strategies or the business market itself (D'Aveni, 1999, p. 128). By attaining such Dynamic Capabilities as Psychological Switching Costs through operating on the internet, being first movers and developing the online relationship.
1
Android Technology is an operating system for mobile phones.
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Companies will strengthen their position, not by price, but by the relationships that they develop and to a greater extent have the ability to control. The concept of Dynamic Capabilities can be recognized as a place where the development and storage of competence that are difficult to copy, such as technology. And these assets can be of greater value than the products or services themselves. These competences represent distinct inimitable skills developed from within the organisation thus giving the company the competitive advantage (Augier & Teece, 2009, p. 418). Through these Dynamic Capabilities such as the one we wish to investigate, we want to ascertain if they are developed by companies who operate on the internet.
3.3 Switching Costs
Switching Costs have been defined in several ways. Porter describes it as "one-time costs facing the buyer of switching from one supplier's product to another's" (1980, p. 10). Burnham, Frels & Majahan (2003, p. 110) adapt a slightly wider approach where they "define switching costs as the onetime costs that customers associate with the process of switching from one provider to another". From the perspective of our study we have chosen to adopt a definition of switching costs from Jones, Mothersbaugh & Beatty (2002, p, 441) who state that in its widest form switching costs are; "the perceived economic and psychological costs associated with changing from one alternative to another" (2002, p. 441). Burnham et al., (2003) identifies eight different aspects of Switching Costs that are conceptualized in three general areas. The first general area regarding consumer's perceptions of Switching Costs is Procedural Switching Costs. Procedural Switching Costs are specifically time and effort related and include factors such as Economic Risk Costs, Evaluation Costs, Setup Costs, and Learning Costs. Economic Risk Costs are the costs associated with the consumer accepting the uncertainty that is inherent when adopting a new supplier where the consumer has insufficient information about the supplier. Evaluation Costs regards the time and effort in terms of searching and collecting information as well as analysis in terms of the mental effort to restructure and analyze the information available that is required for the consumer to make a knowledgeable decision to switch supplier (Burnham et al., 2003, p. 111/2).
Procedural Switching Costs Economic Risk Costs Evaluation Costs Setup Costs Learning Costs
Financial Switching Costs Benefit Loss Costs Monetary Loss Costs
Relational Switching Costs Personal Relationship Loss Costs Brand Relationship Loss Costs
Figure 1. Different types of Switching Costs according to Burnham et al. (2003, p. 112) The Learning Costs are costs associated with the time and effort to learn the skills and knowhow to be able to use a product from a new supplier efficiently. We see this as a significant factor when considering e-commerce and customers entering in to a new supplier relationship
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and relevant to using the internet. Furthermore, the effort to learn the skills and know-how is often bound to the specific supplier and when the consumer decides to switch supplier there will be a need to learn new skills as well as adapt their current skills and know-how to the new supplier. Setup Costs are associated with the time and effort required to initiate a relationship to the new supplier or to set up a product for its initial use. Furthermore, Burnham et al. argue that Setup Costs for services are highly dependent on the exchange of information to be able to understand the customers' needs and to reduce their selling risks (Burnham et al., 2003, p. 111/2). Therefore, learning costs can be seen as having a psychological influence on the customer, thus an emotional Switching Cost. Furthermore, the relation to the importance of First Mover Advantage can also be recognized as discussed further on in Chapter 3.4. The prominent features of Financial Switching Costs are that they first and foremost involve the risk of losing resources that are measurable in financial terms. Financial Switching Costs consists of Benefit Loss Costs and Monetary Loss Costs. Benefit Loss Costs are costs associated with contractual relationships that promotes economical benefits for example when switching to a new supplier a customer may lose discounts or accumulated points from bonus systems that are not transferable to the new supplier. Monetary loss costs are on the other hand regarded as the one-time financial expenditures that are necessary when a customer switches from one supplier to another. It is however important to point out that the costs of purchasing the product in itself is excluded from Monetary Loss Costs. Instead, Monetary Loss Costs include costs such as initiation costs and deposits as well as one-time costs for replacing transaction specific or shared resources (Burnham et al., 2003, p. 111/2). For the purposes of this research we will not concern ourselves with the Financial Switching Costs. This is due to the fact that we are looking at the capabilities of a company operating on the internet to develop Psychological Switching Costs. Relational Switching Costs addresses the psychological and emotional discomfort that arises because of broken relationships and loss of identity. Relational Switching Costs include factors such as Personal Relationship Loss and Brand Relationship Loss. According to Burnham et al. (2003, p. 111/2) the Personal Relationship Costs are associated with the emotional loss when breaking the relationships that has been shaped by the people who interact with each other. An example that we have previously taken up is eBay. Where there has been a development of online communities interacting on many levels, incorporating forums for discussion on all aspects of the eBay markets place. Through these forums and relationships the boundaries between customer and company dissolve, thus we can see the importance of eBay, as we see it, using their capabilities in creating strong emotional attachments, which we see as Psychological Switching Costs. Burnham et al., (2003, p. 111/2) states these relationships form a sense of comfort and a level of trust between the consumer and the supplier that in the beginning does not exist with the new supplier. Similarly, Brand Relationship Loss is associated with the emotional loss that a customer perceives when breaking the relationships and bonds of identification towards the organisation and its brand. They also state that consumers assign meaning to their purchases. This sense of meaning becomes a part of their identity and forms a bond to the brand and organisation which then is lost when the consumer switches from one supplier to another. Jones et al., (2007, p. 335) argue that Switching Costs have more and more become an acknowledged method for customer retention without considering the satisfaction of customers. Furthermore, they argue that a common strategic recommendation for
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organisations is that companies should increase their perceived switching costs to be able to Lock In their customers in a relationship with the organisation. However, Jones et al., (2007, p. 336) state that these strategic recommendations may, however, provide a much too limited and optimistic view of Switching Costs. Instead, managing Switching Costs in the sense of locking in the customer in a relationship may, despite the fact that it fosters customer retention, result in strong negative responses from the customers. Therefore, one part of our study is to gain a deeper understanding of the importance of developing strategies to carefully manage Psychological Switching Costs and if it has been realized by companies operating on the internet. Jones et al., (2007, p. 336/7) identifies three different general types of Switching Costs that are based on the previous framework developed by Burnham et al., (2003) and Jones et al., (2002). These types of Switching Costs are
1. Procedural Switching Costs 2. Social Switching Costs 3. Lost Benefits Costs. 3.3.1 Procedural Switching Costs
Procedural Switching Costs refer to the perhaps most traditional view, regarding Switching Costs as the time and effort that the customer perceives to be involved with the switch. Vázquez-Carrasco & Foxall (2006, p. 367-368) makes a similar distinction between different types of Switching Barriers however, with a slightly different language. They discuss Switching Barriers from three different perspectives; Relational Benefits, Switching Costs and Availability and Attractiveness of Alternatives. Jones et al., (2007; 2002) & Burnham et al. (2003) understanding of Switching Costs we see relates back to the example of SF Bio and the iPhone application (in Chapter 3.1). Where time and effort which is seen as Procedural Switching Costs, is reduced for the customer, who has this online service. We can therefore see the strategic importance of implementing strategies to Lock In customers from a psychological standpoint, thus we again see the significance of the Strategic Capabilities influencing Psychological Switching Costs.
3.3.2 Social Switching Costs and Benefits Loss Costs
Social Switching Costs are related to the probable loss of personal bonds and friendship to the organisation that the customer perceives will occur if they go through with the switch. The third type of Switching Costs is the Lost Benefits Costs, which involves the perceived loss of specific benefits such as special offers etc. if the customer decides to pursue the switch (Jones et al., 2007, p. 336/7). Here again we see the example of eBay and the relevance of developing relationships so as to influence an emotional attachment to both the organisation and its end users. When it concerns Lost Benefit Costs eBay uses a rating system for clients who buy and sell goods on their site. If a user leaves eBay they lose their benefits of the trust that has built up through the aforementioned rating system.
3.3.3 Relational Benefits
Relational Benefits of Vázquez-Carrasco & Foxall (2006) are closely connected to the Social Switching Costs. Relational Benefits refer to the social bonds, relationships and feelings of security that the customer develops towards the organisation (Vázquez-Carrasco & Foxal, 2006, p. 368).
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However, Relational Benefits also touches upon what Jones et al., (2007, p. 337) define as Lost Benefits Cost which involves the economic discounts or non-economic benefits that a customer gets access to when a relationship to the supplier has been developed. Availability of and Attractiveness of Alternatives concerns the customer's perception of the number of viable alternatives whereas if the customer perceives a lack of viable alternatives Vázquez- Carrasco & Foxall (2006, p. 368) argue that he or she is less likely switch to another supplier. When considering the different types of Switching Costs, both Jones et al., (2007, p. 337/8) and Vázquez-Carrasco & Foxall (2006, p. 369) recognise the need to categorize them, based on the nature of constraints that lie beneath the value of Switching Costs to an organisation. Switching Costs create a sense for the customer of being locked in to the relationship with the supplier and that these feelings stem from the negative consequences that the customer perceives if he or she is to proceed with the switch. The different types of Switching Costs are therefore distinguished on the basis of positive and negative sources of constraint. The difference between positive and negative sources of constraint is that the positive constraints originate from the creation of added value to the customer whereas the negative sources of constraints do not. Negative sources of constraint is therefore considered to be constraints such as the Time Inflexible contracts Perceived difficulty to switch to another supplier (typically procedural switching costs). Positive sources of constraints are on the other hand: The perceived loss of social bonds Relationships The loss of other more concrete benefits. The positive sources of constraints are consequently typically connected to the Social Switching Costs and Lost Benefits Costs (Jones et al., 2007, p. 337/8). Thus, the aspects of positive and negative Switching Costs locking in customers over the internet we argue can be an important Strategic Capability. It is according to Jones et al., (2007, p. 338) essential to do this distinction between positive and negative Switching Costs. This is due to their difference when it comes to the effect of commitment between the customer and the organisation. Jones et al., (2007) focus on two types of commitment. Calculative and Affective commitments which they argue are most likely to influence Switching Costs.
3.3.4 Calculative Commitment
Calculative Commitment or Continuance Commitment as it is also called refers to a link between the organisation and the customer because of need. Calculative commitment considers the fact that a customer may stay with a particular organisation because he/she perceives that he/she has to. Consequently, the customer may feel locked in to the organisation where the Calculative Commitment generally corresponds to constraint based relationships and especially negative Switching Costs and Procedural Switching Costs (Jones et al., 2007, p. 338-341).
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Affective Commitment, on the other hand, stems from a sense of affiliation, loyalty and identification based on the psychological connection between the organisation and the customer. Consequently, Affective Commitment motivates the consumer to stay in the relationship between the organisation and the customer because he or she actually wants to and it is therefore rooted in the positive aspects of a relationship. Thus, Affective Commitment generally refers to the Social Switching Costs and Benefit Loss Costs (Jones et al., 2007, p. 338-340).
3.3.5 Conclusions for Commitment
Jones et al. (2007, p. 341) also connects commitment to emotions where they discuss the customers perceived ability to make a conscious decision affects their emotional outcomes. If the perceived freedom to choose, control and self-determination is decreased it will lead to negative outcomes on both an emotional and psychological level. Conversely, if the perceived freedom of choice, control and self-determination is increased this will lead to positive outcomes on an emotional as well as psychological level. Our perspective is that people who use the internet to do business have a natural tendency to gain in these emotional and psychological effects through the knowledge that other choices are "just a click away" (Porter, 2001, p. 68). However, we intend to study this factor from the viewpoint of companies developing strategies to influence these effects and therefore if it has any affect. Furthermore, Jones et al., (2007, p. 341) argue that Calculative and Affective Commitment influence the customers perceived control on different levels. Affective Commitment is based, as previously stated, on the customers desire and want to maintain the relationship due to their psychological attachment to the organisation. Consequently, customers who possess a high level of Affective Commitment may choose to remain with the organisation because of the received positive benefits, such as eBay communities and the relationships that are formed. Based on these positive benefits, the customer also perceives a greater level of control and freedom of choice thus gaining greater positive emotions due to the Affective Commitment. On the contrary, Calculative Commitment, as previously discussed, bases its commitment on locking in the customer to preserve the relationship and to make the customer perceive that there is no other alternative. Consequently, when a customer's Calculative Commitment is high, the lock-in reduces the customer's perceived freedom of choice and control. Thus, the customer has more negative emotions and reactions (Jones et al., 2007, p. 341). To conclude, Jones et al., (2007, p. 350/1) argue that organisations should utilize Procedural Switching Costs and Calculative Commitment with great caution. This is due to the fact that they may be damaging to the organisation causing negative emotions and negative WOM. On the other hand, the development of social bonds and other benefits that bring added value and positive effects to the customer which can improve the Social Switching Costs as well as the Benefit Loss Costs that are encouraged by Jones et al., (2007, p. 351). This is because they both increase the Affective Commitment which has a positive effect on customers repurchase intentions and also reduces negative WOM (Jones et al., 2007, p. 351). These results are supported by Vázquez-Carrasco & Foxall (2006, p. 375/6) arguing that Switching Barriers have proven to be influential with regard to customer retention. Positive Switching Barriers such as Relational Benefits are considered particularly powerful because further to directly influencing customer retention they also affect it indirectly by increasing customer satisfaction; as previously discussed when considering eBay and their relationships with customers.
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Switching Costs
Figure 2. Switching Costs and its components
This figure depicts the main concepts of Jones et al., (2007) and Vázquez-Carrasco & Foxall (2006) when concerning specific concepts within the theories of Switching Costs as described in the previous section.
3.4 First Mover Advantage
First Mover Advantage can be utilised in the sustaining of Competitive Advantages over other firms in the market. But it is noted when the theory of Competitive Advantage was developed that if firms operating in the same market and having similar resources that the advantage is short lived (Barney, 1991, p. 104). However this does not relate to the internet and e-business; Perira (2004, p. 304/306) discusses the significance of First Mover Advantage as aCompetitive Advantage through the building of customer loyalty. Also that consumer's learn how to use the website as well as being able to bookmark the web-page so as to easily return, thus creating Switching Costs. Perrott's (2006, p. 303) empirical study showed that the nature and speed of which e-business occurs means it is imperative to be a first mover, not only for the previously mentioned reasons. But due to the constantly evolving technology, reiterates our belief in that Dynamic capabilities are required for developing systems that influence Psychological Switching Costs of a firm. To stay with the same example of iPhone and their Applications making it difficult to consider changing firms because the customer becomes used to the convenience of what they know (Reichheld & Schefter, 2000, p. 110). This advantage, we see, has come about by being the first mover in technological advancements. We do not see this as the only advantage, but rather an attribute of such. Therefore asking the question of what are the Strategies of a company being able to Lock In the customer through Psychological Switching Costs.
3.5 Trust Development: "Price does not rule the web; trust does"
Studies have shown that lack of trust is identified as one of the most difficult barriers for people to engage in e-commerce, which involves an exchange of financial and personal information between the customer and the e-merchants (Wang & Emurian, 2005, p. 105).
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According to Balabanis et al., (2006, p. 217) trust is perhaps even more important in an online context than in the conventional shopping context due to the fact that customers may have to pay for the product in advance and because they cannot be sure of when they will receive their purchased product. Reichheld & Schefter (2000, p. 106) support this view stating that "Price does not rule the web; trust does." They argue that to be able to gain loyal customers it is essential to first earn their trust. Furthermore, they discuss the risks and the uncertainty of shopping over the internet makes trust more important than ever because it is impossible to look the salesperson in the eye and it is impossible to touch and feel the products prior to purchase. Instead the customer has to rely on images and the information presented on the webpage. According to Reichheld & Schefter (2000, p. 107/8) when customers do trust the supplier they become more likely to share personal information which enables the organisation to form a more intimate relationship to the customer by offering products that are customized to fit each customers individual needs. Thus, the trust between the customer and the organisation is strengthened and as a result the customer loyalty is also beneficial. The relationship that a company develops with its customers can be a strong emotional connection for many reasons. One issue that many companies have had is gaining the trust of customers who actually purchase goods and services on the internet. There are examples of how companies are trying to remedy this, such as the company PayPal, which is an online banking system where you have one account online but can purchase from many different stores (Porter, 2001, p. 68). This company was bought by eBay in October 2002 and is said to be a safer and easier way to pay online, with over 150 million accounts worldwide (PayPal 2010). This is of course only part of the puzzle, there are other issues. According to Belicove (2009, p. 35) trust is a valuable asset when developing a relationship with a prospective customer over the internet. Accordingly the website should be functional in design, where it is the needs of the customers that are considered and that it should include details, such as the history of the company. As well as clear information on how to contact the company, with physical addresses and telephone numbers, which are essential for building trust. Research into the area of online trust, which is seen as the "willingness to depend" can be influenced by the individual's behaviour where integrity, ability and benevolence are the three areas in which a person perceives trust on the internet; integrity and ability influencing the credibility of a website and readiness to purchase; goodwill influencing how significant the price of the product is (Gefen, Benbasat & Pavlou 2008, p. 276/7). Trust is also something that develops over time, but it also becomes less important as the relationship continues. The value of trust depreciates over time, thus we see the connection to the importance of being a first mover. Hence the ability to develop the relationship where the consumer begins to rely on the usefulness of the relationship, rather than forming trust, when considering how they act when they are familiar with the company and specific website (Gefen et al., 2008, p. 277). "Relationships with consumers are developed through a long-term process of using the Web to establish mutual familiarity, trust and loyalty." (Zwass, 2003, p. 18) We therefore postulate that the ability to develop this trust in a swift fashion whilst being a first mover helps a company develop its ability to have a lasting relationship with the consumer. Through the evident Psychological Switching Cost of having to find a new supplier and gain trust as well as build new relationships with a new company, the customer is unlikely
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to want to attempt this. Thus the ability of a company to make use of these capabilities will stand them in a good position for locking in the customer.
3.6 Interface Design and Customer Experience in the Online Environment
Chang & Chen (2008, p. 2934/2940) support Balabanis et al. (2006, p. 217) arguing that online shoppers, despite the lower physical search costs, make less comparison shopping and do not switch supplier as frequently as they do with bricks and mortar suppliers. According to Chang & Chen (2008, p. 2932/2940) this phenomenon is clearly explained by the fact that the search costs will increase with the number of available alternatives across e-stores as well as the fact that if the number of alternatives at a single e-store increases, the time and search costs increases making it inconvenient to search for other alternatives. Furthermore, Louvieris et al., (2002, p. 169) argues that the website design is especially important for customers to be able to explore and evaluate the information available in a way that is comprehensible to them. Consequently, the importance of the customer interface ability to avoid wasting the customer's time through simple and clear design as it reduces the perceived risks of wasting time, frustration and deception as well as increases the trustworthiness is realized (Chang & Chen, 2008, p. 2932/2941; Louvieris et al., 2002, p. 169; Wang & Emurian, 2005, p. 117). However, even though a webpage interface is optimized for the customer to be perceived as simplistic and trustworthy, Wang & Emurian (2005, p. 117/122) argue that the customers still need to be aware of the risks as well as how to protect themselves in these types of transactions. This realization makes it relevant to connect customer interface design to the internet experience of the customer. This is because, as Chang & Chen (2008, p. 2933) discuss, users with a higher internet experience have a greater understanding in dealing with the interfaces and interactive applications and therefore are better suited to make use of offerings on the internet compared to users with a low internet experience. Here we see the possibility to connect Jones et al., (2007) and Vázquez-Carrasco & Foxall (2006) with the influences of positive and negative Switching Costs for not just bricks and mortar customers but customers who shop online. Chang & Chen (2008, p. 2940) connects satisfaction, interface design, and Switching Costs to the customer's internet experience and e-loyalty. Internet experience in this situation is defined by Chang & Chen (2008, p. 2933) as "a general experience by using a browser, such as Netscape or Internet Explorer, to access World Wide Web (WWW) pages." Their results indicate that there is a close relationship between customer interface design and satisfaction and e-loyalty. Furthermore, they see the moderating effects of internet experience on Switching Costs. Their results show no connection between the customer interface design and Switching Costs. However, when the customers have high internet experience the perceived customer interface design significantly affects Switching Costs. Chang & Chen (2008, p. 2940) argue that these results can be explained by customers with a lot of internet experience (compared to customers with low internet experience), having a higher standard and requirements concerning the customer interface design. Consequently, experienced internet users have lower customer satisfaction compared to customers with low internet experience. Furthermore, they point out that customers who are highly experienced in the internet environment are expected to recognize the e-store on the basis of its customization, convenience and character as well as being better at taking advantage of the information and services at hand. Consequently, Chang & Chen (2008, p. 2940) argues that customers with higher internet experience have higher Switching Costs. Again we can connect Burnham et al.
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(2003) and Vázquez-Carrasco & Foxall (2006) theories concerning relational Switching Costs to the influence of experienced internet users. This conclusion is however, not shared by Porter (2001, p. 69) who states that when customers get familiar and gain more experience with the technology, the initial loyalty that they have towards suppliers will be reduced as they discover that the Switching Costs are rather low.
3.7 The Value Chain
As stated previously the importance of managing customer relationships in the global market place is of crucial importance for the success of an organisation (Chakravorti, 2009, p. 299). Accordingly the importance of being able to deliver a product or service is no longer just about the price as there is now more significance being put on to the integration of the Value Chain in influencing customer relationships (Day, Magnan, Webb, & Hughes, 2008, p. 40). Sawhney & Zabin (2002, p. 315) discuss the quality of supplier relationships affecting the quality of the customer relationship. This ability to influence a customer from the perspective of Psychological Switching Costs can be a way of manipulating the relationship and locking in the customer. To achieve this, the implementation of essential Switching Costs based on the Resource-based view (Chakravorti, 2009, p. 300) where they are heterogeneous, valuable, rare, inimitable and non-substitutable we see has to be developed in to the Value Chain of the business. Where the activities of the business within the organisation bringing the product or service to the customer should include strategic processes to develop the relationship and Lock In the customer through Psychological Switching Costs, thus giving the firm a competitive advantage. The Value Chain itself comprises of all the elements of the business that go towards making its product or developing its service and the way in which this is achieved, through its strategies and implementation processes. The Value chain has two distinct areas; Primary activities and Support activities, the support activities are seen as those that help make the firm more effective and efficient thus creating better value for the firm (Porter, 1985, p. 36, 40-45). With the development of technology and the internet this area, in our opinion, has gained an unprecedented importance in the business world, especially when considering businesses that primarily operate on the internet. Thus as Zablah, Bellenger & Johnston (2004, p. 481) discuss, the important uses of market intelligence which companies can utilize in developing strong customer relationships has been realized as a support activity. Further to this that the recognition of generating a relationship can dramatically influence profits. And according to Sawhney et al. (2002, p. 304) these activities help in creating a competitive advantage for the company utilizing the relationship and developing a superior customer experience. These factors, we argue show the relevance of our study and its importance in the business world, and therefore to what extent such support activities (namely internet services) influence the Emotional Switching Costs and how companies develop them.
3.8 Competitive Advantage
According to the early theories relating to Competitive Advantages, companies that implement value creating strategies before other firms or in a more productive manner have an advantage over their competitors (Barney, 1991, p. 102). Moving on from this Johnson et al., (2008, p. 102) develops this into a wider perspective where the value of Strategic
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Capabilities are something distinctive within the organisation. However Barney (1991) sees that these Strategies are related to making a firm more effective and efficient. We wish to develop this understanding further in to e-commerce and the importance of Psychological Switching Costs being seen as a tool by which companies Lock In the consumer to the product or service they provide. This we see as a strategy that can give a Competitive Advantage and that companies need to work hard to achieve in a very fast paced technological environment. A company trying to develop its online activities can often find it a daunting task to expand, but if they do not the company may well start falling behind (Hayes & Finnegan, 2002, p. 365). The rapid growth of online business and being able to operate on this plane can make it very difficult for managers to make decisions in such an active field, where the strategic implications for the organisation may be misaligned (Perrott, 2005, p. 82). Again the realisation that a company has this ability and can use it as a Competitive Advantage and consequently, it can be seen as a Core Competence of that firm. We see the ability of a firm to create Psychological Switching Costs as an incredibly beneficial attribute to a successful company. The internet environment has been perceived to behave as a nearly perfect market where information is friction free, search costs are low and where buyers and sellers are brought together with great efficiency (Bakos, 1998, p. 1676; Kuttner, 1998, p. 20). Despite the effectiveness of the market and the many fickle customers, Reichheld and Schefter (2000, p. 110) state that the majority of the customers in an online environment seeks convenience above price, arguing that returning to a website that is familiar is much more convenient than searching for a new one. Furthermore, there is evidence that online shoppers perform less comparison shopping than the traditional brick and mortar customers (Balabanis et al., 2006, p. 215; Chang & Chen, 2008, p. 2932). Balabanis et al. (2006, p. 215-217) argue that the environment that surrounds e-businesses possess inherent switching barriers that are not bound to a specific organisation. Instead, these switching barriers are built in the market itself. They support the view that physical search costs on the internet are in general considered to be lower making it easier to search for information and prices from different suppliers. However, the cognitive search costs are considered to be higher in the online environment where customers who are inexperienced shopping online are especially exposed due to the large amount of information available and the difficulty of assessing what is relevant and what is irrelevant. According to Balabanis et al., (2006, p. 217) these cognitive search costs generated by the time and effort that is required to be able to filter important information can result in customers changing to the biggest and most well-known suppliers which may lead to more customer loyalty to familiar suppliers. Core Competence as seen by Coman & Ronen (2009, p. 5678) are "distinctive in their essential contributions to the firm's value and in the difficulty facing competitors wishing to emulate them." Thus, from the perspective of a company that has developed a relationship with its customer's, Psychological Switching Costs can be seen as competences not easily copied when the relationship has been developed over the internet and over time. Based on the inherent cognitive switching barriers in the online environment and the fact that the majority of online customers seek convenience; in that they do less comparison shopping than brick and mortar shoppers; We argue, as do Chen and Hitt (2002, p. 256), that carefully managing these Switching Costs can result in a strong Competitive Advantage, and as such a company does not have to be as competitive on price. Further to this the switching barriers
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help build a first mover advantage in locking in the customer as well as the promotion of customer loyalty.
3.9 Critique
There are however, critique to the possibility of creating First Mover Advantages and Competitive Advantages on the internet, Porter (2001, p. 67-69) states that it is a myth. He discusses the wide spread assumption concerning the internet and online e-commerce would increase Switching Costs and create network effects that would promote first movers with competitive advantages and good profitability. Consumer's would also become accustomed to an organisation's user interface and would not like to search for, register, and learn several other companies' user interface thus increasing Switching Costs. This would further promote Competitive as well as First Mover Advantages. Porter (2001, p. 67-69), however, argues that in reality it is the other way around. He argues that the Switching Costs are probably lower on the internet compared to the bricks and mortar way of doing business and that customers often have the ability to switch between suppliers with a few clicks on the mouse. Furthermore, the lack of human interaction and physical presence makes, according to Porter (2001, p. 69), the businesses in the online environment less concrete to the customer and consequently makes it more difficult to build and maintain internet brands. Our perception is that there are differences in the way scholars consider the behavior of online shoppers and the effects of Switching Costs in the online environment. Some researchers (for example Chang & Chen, 2008, p. 2932/2940; Balabanis et al., 2006, p. 217; Reichheld &Schefter, 2000, p. 110) consider the online customers to be convenient in their ways, searching less information than the more traditional way of shopping in "offline" stores and that there is inherent cognitive Switching Costs in the online environment. As mentioned above however, other scholars (for example Porter, 2001, p. 67-69) argue that Switching Costs are very low and that once a customer becomes familiar with the technology they will realize the low Switching Costs which will result in reduced loyalty. From our point of view these differences illuminates the significance of our study; whether or not Switching Costs are high or low in an online environment these differences illustrates that Switching Costs are an important factor to keep in mind when strategizing for the future of an organisation.
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3.10 Conclusion of the Theoretical Framework
To summarize the theoretical framework so as to give the reader an overview of what we consider as the relevant theories, relating to how companies based on the internet use Psychological Switching Costs as a strategy to Lock In the customers, we have produced a model (Figure 3). Further to this, the model will be used as a platform to develop the analysis and conclusions of this research and hence redefine the model according to the respondents.
Dynamic Capabilities
Switching Costs
Procedural, Social, Lost Benefit (PSL)
Trust
First Mover Advantage
Design
Value Chain
Support Primary
Lock In
Competitive Advantage
Figure 3. Psychological Strategies in locking in customers Dynamic capabilities are seen as how organisations deal with different occurrences in a market, and as such the ability to adapt. Thus we see the underlying factor in companies having an ability to develop Switching Costs in a technologically advanced environment as an imperative step in achieving a Competitive Advantage. Therefore it is seen as a starting point for our model. The connection to Switching Costs is consequentially made by the important role that it plays in traditional approaches to influencing customers as Michael Porter (2008, p. 83; 1979, p.140) describes in his Five Forces Framework where Switching Costs are seen as influences to 'buyer power'. We argue that Dynamic Capabilities as a concept is seen as the grounding by which companies form strategy to know and understand the environment in which they operate so as to be able to make informed decisions; specifically in this case when it comes to influencing Psychological Switching Costs. Therefore we make the connection with double headed arrows to reflect the influence of Dynamic Capabilities and Switching Costs as the grounding for developing a relationship with customers and influencing the Locking in effect.
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We then develop Switching Costs into five areas that are the main focus of this research. These five areas of Switching Costs; PSL, Trust, First Mover Advantage, Design and Value Chain; discussed previously in this chapter. These five areas we interpret as areas that have a psychological influence on customers and that companies that are able to utilise these factors will stand in a good position to Lock In the customers. Thus arrows pointing from the five areas of Switching Costs; PSL, Trust, First Mover Advantage, Design and Value Chain towards Lock In. PSL is a development of the differing types of Switching Costs which is concerned with positive and negative type Costs to buyers. For the purposes of this study they are considered from the perspective of managers and what types of Switching Costs are attempted by these managers to Lock In customers; thus the arrow towards Lock In. Trust is seen as an important aspect in developing relationships, therefore an arrow towards Lock In, as once trust is gained a customer is more likely to cement the relationship. First Mover Advantage can also be seen to have an arrow towards Lock In, due to the fact that customers become used to a service and therefore are less likely to switch. Design of web pages have also been considered as the significance of a simple structure verses a highly developed one that can influence the users comfort and thus their willingness to continue using the specific company, therefore having a Locking in effect, thus the arrow. Finally the Value Chain is considered as it can be seen as a tool that can influence relationships and therefore an arrow towards Lock In. The final piece of the puzzle of Lock In to Competitive Advantage is significant because we argue that if a customer is locked into a company then the company has achieved a Competitive Advantage over their competitors, not relying on Price, Product, Promotion or Placement.
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4. Empirical Data & Analysis
In this chapter we have compiled a detailed account of what the respondents felt about the issues relating to the theoretical chapter previous to this. We then match the empirical data with the theoretical section of this thesis to see the similarities and differences of what influences managers have on Switching Costs and the ability to create a Competitive Advantage in Locking in customers. This chapter will therefore highlight the significant attributes that the respondents found important in relation to this area in conjunction with the theoretical framework. At the end we take a brief look back of the relevant theory and continue with our revised model to show where the respondents and theory deviate, going on to analysis these differences and similarities. To increase the level of transparency in our research and to give the reader a better understanding of what the respondents actually have discussed, the quotes used in this thesis are found in its original language in Appendix 2.
4.1 Strategy and Dynamic Capabilities
4.1.1 Discshop
In response to questions based on Strategy and Dynamic Capabilities, Henrik from Discshop described a business model that he felt relevant as to why they have been so successful. The model itself is from the company and is known as "the three S's, which have built Discshop's success" (1). Accordingly it comes from the understanding that Discshop saw that to purchase on the internet "is nothing more that post-order, but with a digital catalogue" (2). Discshop therefore focused not on technology but the three S's, "the first and most important being S for Service" (3) where the customer is the central focus with their wants and need catered for. The second S being the website (Sajten) as the next important factor in serving the customer saying that it should be "sophisticatedly simple" (4). One such example that Henrik takes up is that "you do not need a user name" (5). "The third S is the Selection of goods that they offer" (6) and this large selection is a reason that Henrik feels that Discshop can compete so well compared to other business that operate in the physical world (7). So, from Henrik and Discshop's perspective the strategies revolve around these three S's and as such "service is one of the best ways to create loyalty" (8). Through this business strategy it is important to make a positive experience for the customer so that they want to come back; "it is incredibly important" (9). Henrik goes on to discuss the significance of service and how, if a customer has to exert themselves in the buying process it is easy for customers to go somewhere else when discussing the internet and therefore, through "good service you create the absolute strongest loyalty that one can think of" (10). In order for Discshop to develop its strategies Henrik sees there is a need to be careful, and accurate and to see the big perspective when deciding strategies to be implemented. Concerning specific Dynamic Capabilities Henrik sees it as imperative to be "quick and agile" in their branch as things can change very quickly (11). So in order to hold on to customers it is important to create loyalty and according to this respondent it is achieved by Discshop through its three S's and most important is service. "If one can Lock In, in some-way the customer, then you have won!" (12).
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So when asked why it is difficult to operate on the internet Henrik responded that the internet is so transparent, so if mistakes are made it can have a tremendous influence on the customer experience compared to someone who goes in to a 'physical shop'. As everything they do is so transparent and the flow of information on the internet is so fast that it is "very important to have clear guidelines, templates and process for how to run the business" (13). Furthermore that the strategies of the company should focus both on long-term and short-term service orientated goals as the product demand itself may well change over time, "one should focus somewhat on success-criteria around the service and protect the customers one has" (14). When considering these concepts we see that Henrik from Discshop is well aware of the importance of forming strategy and the central focus for them is the customer. Their strategy is called the 3 S's, which stands for Service, Site (website) and assortment (Sortiment in Swedish), in relation to operating successfully on the internet. As "service is one of the best ways to create loyalty" we can see that by establishing this relationship they can then influence buyer behaviour (Louviers et al, 2003, p. 167) which is relevant to Henrik's way of thinking when regarding the 3 S's. He goes on to say that in an internet environment it is necessary to be "quick and agile" as things can change in an instant, this is in line with Barreto (2010, p. 256) where it is considered to be significant in having the ability to adapt to the market. However Henrik also sees the advantages of locking in the customer that reduces the need to be as dynamic, but one of the main issues is the transparency of the internet, that you have to do things right the first time otherwise customers will go somewhere else. Thus in order to create this effect Discshop still need clear strategic guidelines as to how to operate, and that company strategies focus on service orientated goals as product demand and products themselves change over time, so what is important is gaining the relationship
4.1.2 Katshing
In response to these questions based on Strategy and Dynamic Capabilities, Anders from Katshing believes that there is an incredible difference between running a business through the internet compared to a physical shop. Saying that the internet is "brutal [...] and if one does not accept the rules one will be run-over" (1). Anders also agrees with Henrik that the internet is very transparent, saying that, "there are no secrets...one's strategy must endure to be open (2). Anders goes on to explain that communication is also an important demand for customer so that the customer knows who they are dealing with and can trust them (3). So in relation to what is important when considering how Katshing develops strategy on the internet they consider, how brutal the internet is, being transparent and having good lines of communication. However the processes by which they attempt to develop strategy and keep their customer base is "not to stick to long processes, but fast ones" (4). In that it can depend on the situation and so from that point strategies can develop according to the reality of the situation and how it may change; "?from how reality changes so does the need for where we align our strategies" (5). The reasons behind this are according to Anders that to over-complicate strategies can make it "difficult to use" (6). Thus by having their core-values as the base for the strategic processes he sees that they eliminate this need for over complicating such things. However, to a certain extent their inability to have long-term strategies in place is seen as a weakness as they are "living in the here and now, which is not as good as thinking 1,2 or 3 years ahead" (7).
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Anders also sees that to retain customers is of the upmost importance and is "central to everything they do" (8), the "focus being on delivering customer satisfaction and that customer's are always happy with what we do" (9). Mentioning similarly to Discshop that it is important to a have a customer-service that the customer can phone if they have queries, which is unlike their major competitor (10). Thus, when considering the importance of retaining customers Anders believes it to be a primary activity (11), and very important not to lose customers (12). Sound reasoning is a significant parameter when considering the importance of understanding the business environment; "without a good understanding of the business environment wrong decisions can easily be made" (13). He sees this as important because there are a lot of competitors and so it is easy for customers to choose someone else (14). In order to keep customers valuing Katshing and their product offering it is necessary for them to "want to be the absolute best suited for customers all the time" (15). Anders sees that there are many differences in running a business that operates on the internet, similarly to Henrik in that because it is transparent, strategies must be open ended so they can be adaptable. Also that lines of communication are a serious concern for an internet company and that it is a two way communication; firstly so the customer knows who they are dealing with and secondly because this helps develop trust (also noted by other respondents). From the business side it gives the company an opportunity to see what is wrong so they can quickly rectify issues (Barreto 2010) and develop the relationship. The significance of this is that if they do not do anything the market performance of the business can be influenced dramatically (Audia et al, 2000, p. 839) as the company will be out of touch from the customers. However Anders differs from Henrik's development of strategy in so far as Katshing see it as something that develops and should always come from something simple otherwise it can be difficult to follow. But he does agree with the importance of servicing the customer and their needs as of the up most importance in retaining them as customers, as in an online environment it is so easy to choose someone else. This is in line with Porter (2001, p. 67-9) who argues on a general level, Switching Costs are lower on the internet compared to bricks and mortar ways of doing business as it is just a couple of clicks on the mouse .
4.1.3 RebelBetting
In response to these questions based on Strategy and Dynamic Capabilities, Simon from RebelBetting indicated strongly that operating on the internet and how to approach business is a lot different to the normal physical shopping approach. One aspect being that the internet "is a lot more impersonal" (1) and as other respondents have stated, Simon also sees it is "very important how one communicates with the customers" (2). Simon goes further to mention that "the speed of the web" (3) has a strong influence on the customer, even mentioning something called a "bounce rate" (4) which shows how long an individual spends at a website before clicking off somewhere else. So "as soon as someone comes to 'a site' one must catch their interest" (5) "So it is very important how one communicates, that one has good marketing material, good outlook to the site so they want to read more" (6). Thus through communication and being open and honest with customers and not hiding things is important (7). Simon goes on to discuss the advantages of being a web-based business in that they can "create customer loyalty" (8) and that if a customer signs up for a
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newsletter, RebelBetting can keep contact with the individual where 'physical shops' cannot (9). The processes for developing strategy is something that RebelBetting consider as they are a relatively new company, for Simon it is important to put himself in the position of the customer and try to understand what is important for them, "to think like a customer is important" (10). He also considers, "building customer loyalty in the long-term ?as well as creating faith in the company" (11) when considering how to develop strategy "functionality is also of value to the customer" (12). Further to this they plan a subscribing service which according to Simon is "very important for return purchases and keeping the customer" (13). He goes on to say that they as a company are putting as much effort in to "marketing and customer loyalty as they do on development" (14). In attempting to develop relationships and "educate customers in how RebelBetting's service works, they have produced an E-book which is "of course designed specifically for their product" (15) along with "fast (software) development" and an attempt to "point out" to their customers this fast development (16). Further to this Simon mentions technical functions such as "auto surf" which he also sees as a "unique selling point which nobody else has." (17). According to Simon as they offer such a "complex product it draws in computer knowledgeable people," (18), "but it is important to widen the market place by making their service more user friendly" (19). So through these solutions Simon sees that this will help to Lock-in customers in the future and "when they are used to the site with its user-friendliness, nice interface they will not want to change to one of our competitors, even if they have a larger quantity on offer" (20) Simon from RebelBetting also sees business on the internet as different to the traditional method because it is a lot more impersonal and as Anders, Simon sees it as very important to communicate with customers. He goes on to say that the internet is a medium where customers discuss between themselves how companies are doing and how they are treated as well as the different offers. The speed of which the web works has a strong influence on customers according to Simon because, as mentioned by Porter (2001) it is only a couple of clicks to the next site. For this reason it is incredibly important to catch the interest of the visitor to the site immediately and how one communicates to the web-visitor is very important. Simon discusses the significance of being open and honest and as such they can develop a much more solid relationship; and to leave a good impression so that the customer remembers and sees RebelBetting as a "nicer company". Simon also sees that price is an important factor in giving them a competitive advantage, but it is worth noting that the company is less than two years old, which we interpret to mean in order to break into the market they must be competitive on price. Further to this, Simon puts some strong emphasis on the 'functionality' of the site as being of value to the customer. Thus we can see the significance of developing strategies that serve the customer without bringing specific monetary value to the business but helps in developing the relationship by offering a more user-friendly service. He also mentions different functions and their fast software development as "unique selling points which nobody else has". Thus we can see the evidence of RebelBetting becoming more efficient and effective compared to their competitors (Teece et al, 1997, p. 510) according to the advances Simon says RebelBetting are making.
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4.1.4 Prisjakt
In response to these questions based on Strategy and Dynamic Capabilities, Magnus sees that it is most important to "start from the perspective of what the customer really wants" (1). From here one has the ability to let the customer influence the strategy and influence the communication between the respective parties. (2) The processes by which strategy development occurs are developed from listening and communicating; and that customers have the opportunity to voice their opinion. "And in this way, one can influence the customer before they change to another supplier" (3). However according to Magnus suggestions come from all directions but the decisions are made by the board of directors (4). Such that strategy formation when concerning customers changing to another supplier, according to Magnus will be analyzed and questions asked as to why the switch, if it is found to be relevant it can lead to changes (in strategy) from (Prisjakt) (5). Magnus sees that customer retention strategies are of a very important nature in developing the service that they sell, this is due to the fact that the company itself "is built because 'someone' wants the services and that's why (they) are dependent on the customers appreciation [?] (Prisjakt) are dependent on their existing customers opinions in the process of developing strategies to keep their customers" (6). And from these they develop the service, as if they did not, they may well be developing services "that nobody wants" (7). Further to this, Magnus sees that customer retention is a primary activity and that it influences technological solutions as well as other departments in the strategic decision making within the company (8). When considering support activities that Lock In customers, Magnus saw that they did not attempt this (9), "but to create an environment in which they (customers) earn money, and in this way they become tied to us" (10) as a significant attempt to retain customers. Magnus feels that when forming strategy on the internet they have to start from what the customer really wants and let them influence the process through two-way communication. This communication gives Prisjakt according to Magnus the ability to influence the customer before they change to another. Therefore the realisation that the company that interacts between its strategy and environment posses the ability to alter strategies or the market itself (D'Aveni 1999, p128). Further to this Magnus sees it as very important in developing the 'service' that they offer so as to retain customers, and as such customer retentions is a primary activity which influences technological solution to issues relating to strategy. So again we can see the distinction of having capabilities that are adaptable, specifically for companies operating on the internet, and it can be seen as necessary to communicate between company and customers in order to develop the company in gaining competences and a competitive edge. Where creating an environment where the customer reaps benefits from this interaction has a positive influence in developing a Competitive Advantage for Prisjakt as the customers have evolved the company making the appeal intangible and very difficult to copy.
4.1.5 Company X
In response to these questions based on Strategy and Dynamic Capabilities, Respondent X sees the development of strategy on the internet can be advantageous because "one can find a business model that can be very good, while only having to invest a small amount and yet
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reach many people" (1). So according to respondent X "the most important thing to do when running an internet site is to make sure there is a lot of human traffic visiting the site and that different services are offered so that those people stay longer and look at many pages". It is also important to have a clear idea about the contents of what should be on the site so that one can steer traffic (2) and thus how to convert this traffic in to "paying traffic" (3). It is also important to reach a dominant place in the market, by finding "a balance between both traffic and advertising, so it is difficult for others to come in and take that position" (4). This is achieved, "partly by having good products that work and that are fast" (5) and as such through this (customers) gain a good experience (6) so there "is a lot of thought behind the scenes toachieve this" (7). In relation to what information is used to develop strategy Respondent X sees that the internet has an advantage in that you can gain "a lot of statistical information...and how customers move around the site"(8). Also that over time you can see how people's behaviour changes (9), as well as conducting market research (10) When considering customer retention Respondent X also sees this as a "decisive point" (11) in the decision making process when developing their products and services. And as such it is "the base decision in everything (they) do" (12). Respondent X says that they try to get people to stay on the site by giving them a good user-experience so that they will want to come back (13). Respondent X believes that by making customers satisfied they will keep coming back, (14) so according to them it is important to work on what can be done so customers will come back and what can be done to stop them from going somewhere else (15). Respondent X sees that the development of strategy on the internet is advantageous because it does not need huge resources to start up when compared to a bricks and mortar business and that one can reach a large amount of people. When running the site it is important to make sure there is a lot of 'human traffic', however Respondent X does not really go in to detail as to how this is achieved. Other than saying that the website itself should be simple to use and that there is a clear idea for what should be on the site so that they can steer the 'traffic'. They are of the opinion that just because they are a company that operates on the internet strategy should not and does not differ from any other business. This thought is seen in relation to the fact that the most important factors are a balance between 'human traffic' and 'advertising' so as to reach a dominant position in the market. This, they feel makes it difficult for the competitors to take the position and that it is achieved with a product/service that works and works fast. Although communications is not mentioned by this respondent, they do discuss collecting information on the customer and how the customer moves around their website so that they can develop it as they can see how people's behaviour changes, and by doing this they can give the 'user' a 'good experience' so the customer will want to return.
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4.1.6 Combined Analysis of Strategy & Dynamic Capabilities Rebel? Betting
How one Communic? ates Catching i nterest immediately Price Functionality Fast software develop? ment is a unique selling point
Discshop
Locking in customers reduces the need to be dynamic Importance in gaining relationship Ability to be agile
Katshing
Lines of Communic? ation 2 way relation? ship Relation? ship develop? ment Ability to be agile
Prisjakt
2 way Communica tion Customers influence strategic decision through 2 way communic? ation Interaction develops the intangible compe?t ences
Company X
Strategy is e asier than tr aditional business Ability to reach more c ustomers Information c ollection to help form strategy Dominant position makes it difficult for competitors
Strategy & Dynamic Capabilitie s
Communication
Figure 4. Strategy & Dynamic Capabilities All companies interviewed at some point made it known that the importance of transparency on the internet is a significant factor when developing strategy for their respective businesses. Although not all saw communication between customer and business as significant in forming strategy, but all did see that knowing the customer either through collecting statistical information (RebelBetting 'Bounce Rate' or Company X, how visitors moved through the site) or communicating between each other (customer and business) as very relevant in giving an advantage to the company and how they form strategy to influence the customer. We see this as attempts to help retain the customer and create a Lock In effect through these strategies or gain more traffic to the site. These factors also help companies in being able to be more responsive to change and the demands of the customers which can therefore influence the Locking In of customers to the company. We also saw that the respondents already started to discuss the theoretical concepts that we as researchers had seen as relevant in order to Lock In customers on the internet. As examples, Katshing mention trust and RebelBetting discussing functionality (interface design), these will be further addressed in the subsequent chapter.
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4.2 Switching Costs
When discussing Switching Costs and how the respondents consider Switching Costs and how they are affected by them we can see many similarities between the respondents but also several differences. Due to the fact that the different types of Switching Costs and the two types of Commitment, Affective and Calculative Commitment, are so closely interconnected and consequently dependant on each other; we have chosen not to separate them into several sections, but to analyze them all together in one segment.
4.2.1 Discshop
Regarding Switching Costs Henrik at Discshop states that "of course you want barriers that are as high as possible; however, it is difficult in our world to create real Switching Costs if we wish to live up to our motto to keep things simple and have good service."(1) According to Henrik it has been a natural part of the strategy process to consider Switching Costs. One example of this that Henrik highlights is where Discshop creates barriers is through their loyalty program saying that "it is such a clear example of where we create Switching Costs for our customers. They get points when purchasing and when you collect points you can achieve a better customer category and in turn get better prices, shipping terms and conditions so it has definitely been an element." (2) What Henrik emphasizes is that Switching Costs are important when creating customer loyalty stating that "Once again, it is important to create loyalty. It is cheaper to keep one loyal customer than to attract new, so if you can Lock In the customers you have a lot to gain."(3) Furthermore, Henrik emphasizes that it is "through good service that you create the strongest possible loyalty" (4). He points out that "first of all, we want to create a positive experience for the customer [?] so they want to come back. It is incredibly important" (5). This can also be seen from a relationship perspective where Henrik argues that the goal of building relationships to the customer is to create loyalty and that the best means of doing so "once again is to deliver the best possible service, to live up to their expectations" (6). However, when discussing how Switching Costs give the company an advantage compared to its competitors Henrik said that "Once again on the internet, the Switching Costs that you refer to are normally not that big. It is more of a psychological Switching Cost [?] there are no real costs, rather it is an alternative cost that you give up" (7) When considering psychological and financial barriers Henrik pointed to the importance of psychological barriers saying that "it creates much deeper roots with psychological barriers than financial. Financial barriers can change; you can have more or less salary and because of that your behavior may change. Consequently, I believe the psychological barriers are much harder to tear down" (8). As Henrik argues that the Switching Costs are normally not that big, we see the connection to Porter's (2001, p. 67-69) line of thought when discussing that Switching Costs are probably lower in the internet environment. However, this goes against the beliefs of several other researchers who argue that online customers are searching less information and are more convenient in their ways compared to the offline environment (Chang & Chen, 2008, p. 2932/2940; Balabanis et al., 2006, p. 217; Reicheld & Schelter, 2000, p. 110). Furthermore, when Henrik highlights that Discshop creates barriers through their loyalty program and that it is through good service that strong customer loyalty is created. In view of the fact that Social Switching Costs, Lost Benefits Costs, Relational benefits and Relational Switching Costs are focused on the relationships and other benefits and aspects that customers find valuable; the connection to the positive aspects of Switching Costs such as the Lost
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Benefits Costs and Social Switching Costs that Jones et al. (2007, p. 336-337) & Burnham et al. (2003, p. 111-112) discuss as well as the Relational Benefits that Vázquez-Carrasco & Foxall (2006, p. 368) is realized. This connection is even more clear when Henrik argue that first of all Discshop want to create a positive experience for the customer so that they want to come back and when he discusses the deep roots of psychological barriers.
4.2.2 Katshing
Anders at Katshing discusses along the same principles as Henrik arguing that "whatever we think about it, there are no big barriers. It is pretty easy to switch and if we do not do our job well the customer is gone." (1). As with Henrik, here we can see Anders making the connection to Porter's (2001, p. 67-69) view of the low barriers on the internet as well as contradicting Chang & Chen (2008, p. 2932/2940), Balabanis et al. (2006, p. 217) & Reicheld & Schelter (2000, p. 110). Similar to Henriks view on the advantage of having Switching Costs for the organisation; Anders states that Switching Costs gives you "not that big of an advantage I can say." (2) However, Anders recognized some historical Switching Costs that previously had been affecting Katshing. One thing that he mentioned as previously being a barrier was the first time a customer would make a purchase using a credit card. Nevertheless, he says that "we do not perceive this as a resistance anymore because there are so many other payment options, however, it has been an advantage but it is not a barrier no more" (3). Furthermore, he declares that Switching Costs is not a part of the strategy process today, however on an industry level it has previously been considered. The reason for this is according to Anders that when they started Katshing they decided that this was "not a route that they wanted to take" and that they instead "must deliver a transparent solution to all parties involved to deserve our relationship to the customer all the time. And in that sense you can say that we continuously talk about it; never to Lock In a customer." (4). According to Anders; trying to Lock In customers is a "reprehensible way of doing business" (5); he believes that the new generation is smarter and will not accept being locked in to a specific supplier. Although Anders argues that there are no big barriers he states that they are able to create barriers, when explaining their strategy, saying that "We are able to create higher barriers for the customer, however, that is not something that we wish to do. On the opposite, we try to have a strategy that includes putting all weapons in the customers hands and then deliver the highest possible customer value to get the customer to choose us every time." (6) This again reiterates the positive aspects of Switching Costs in form of Social Switching Costs, Lost Benefits Costs and Relational Benefits that Jones et al. (2007, p. 336-337) & VázquezCarrasco & Foxall (2006, p. 368) discusses. Furthermore, this points to Affective Commitment which stems from a sense of affiliation, loyalty and that it motivates the customer to stay in the relationship (Jones et al., 2007, p 338340). This we can also see that both Henrik and Anders touches upon when saying that Discshop would like to make the customer want to stay with the organisation and that Anders argue that they put all weapons in the customers' hands. Additionally, Affective Commitment is of course also based in positive aspects of a relationship and also is connected to Social Switching Costs and Benefit Loss Costs (Jones et al., 2007, p. 338-340).
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4.2.3 RebelBetting
Simon at RebelBetting has an equivalent line of thought when discussing how they consider Switching Costs in the strategy process saying that consider them "not that much right now actually [?] We have a few points that we try to work with to achieve a greater Lock-in such as recurring payments. However, on a more long-term basis we try to create trust and loyalty; that the customers perceives it to be a joyful experience when we release new versions and become better and better and will soon pass the best competitors in the business."(1) Furthermore Simon, similarly to the other respondents, do not feel that Switching Costs give them a great advantage over their customers arguing that "it does not give us much of an advantage right now, the different services are fairly similar; really it is the price and quantity that is valuable."(2) According to Simon the use of Switching Costs is important to them, however, it has not been a deliberate strategy on their part, saying that "it is not something that we have had as an articulated thing; however, unconsciously it has probably been discussed here and there.[?] We have never used the term Switching Costs or Lock-in because our customers are a quite disloyal group. When they have built up their skills and know that there are several competitors it is pretty easy to switch."(3) In regard to RebelBetting's strategy Simon also emphasizes the relationship, support and communication with the customer stating that "we get a lot of mail and we also have a live chat where we try to continuously think about giving an as good impression as possible. Because we know that if it is a customer or just someone who emails us with a question; if we treat this person as if it was a customer where we answer within the hour, then they for one will be surprised that they get an answer. They will be surprised that they get the answer so quickly and that they get a real answer, not some auto generated mail. Then they will remember us as a considerably more pleasant company compared to 99% of the companies that they have mailed in to."(4) Further to the strategy of having a good communication and relationship with the customer Simon identifies several aspects that they have been working on and that are affecting the psychological barriers. One example that Simon emphasizes is that "we released an E-book where we educate the customers how our service works and it is of course concentrated mainly on our service."(6) Another example that Simon emphasizes with regard to creating psychological barriers is that they try to keep a fast pace in the development of the service saying that "another thing is that our aim is to keep a rapid development pace on our service. We also try to point out to the customers that we have a fast development pace.[?] what we say in reality, without saying it is, look at our slow competitors that haven't even updated their website in six months."(7) One last thing that Simon emphasizes is the importance of usability saying that "One of our unique functions that we try to be best at is usability. [?] It should not be that hard to do this. If you are used to buying stocks on the internet you should be able to this. So usability is one thing that we think will contribute to lock-in in the future because once they are used to our nice and easy to use interface, they will not want to change to our competitors even though they have more quantity for example."(8) The emphasis that Simon puts on the importance of such factors such as customer service, support and communication with the customers again shows the significance of the positive aspects of Switching Costs and Affective Commitment previously discussed by Jones et al. (2007, p. 336-341) & Vázquez-Carrasco & Foxall (2006, p. 368). This is further shown when
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Simon argues that they try to create trust and loyalty and to make the customer have a joyful experience when using their service. However, Simon also states that they are trying to affect Switching Costs and trying to achieve a greater Lock In through for example recurring payments which means that money is automatically withdrawn from the customer's account each month. We see this as an example of an activity that can both relate to the positive as well as negative aspects of Switching Costs. On the positive side it can be seen as a service that makes it a hassle free experience to use RebelBetting's service in the sense that the customer do not have to pay any attention to the payment procedure every month, thus increasing the customers want to stay. Furthermore, it can give the customer a greater freedom choice and perceived control, thus increasing the positive emotions due to the Affective Commitment. However, in regard to the negative constraints the customer may also perceive a greater Lock-in effect in the sense that the contracts are more inflexible and it becomes more difficult to switch since they have to contact RebelBetting to ask them to cancel the subscription, thus reducing the perceived control and freedom of choice and consequently attracts negative emotions and reactions in the customer (Jonas et al., 2007, p. 341).
4.2.4 Prisjakt
Prisjakt has a more complex relationship to Switching Costs as they have two aspects or perspectives of the customers that are important to distinguish between. On one side they have the consumer that uses their site and on the other side are the companies that have their products listed on Prisjakt. As Magnus says "we live on a service that is free for the consumer. Without that service this company will not exist. However, our revenues come from the business to business segment but we get the traffic, volume and quality in our service from the consumer."(1) When considering in what ways Prisjakt consider Switching Costs in their strategies concerning the organisations (B2B) that have their products listed at Prisjakt; Magnus says that "in reality Switching Costs are not considered at all, however, we consider it in the sense that we have a strategy that makes it easy to try us, easy to join and easy to terminate our service."(2) This once more indicates a focus on the positive constraints of Switching Costs and Affective Commitment to increase the perceived freedom of choice and control while reducing Procedural Switching Costs such as Economic Risk (Burnham et al. 2003, p. 112) & Jones et al. (2007, p. 336-340). Furthermore, Magnus explained that due to the nature of the service that Prisjakt provides to their business customers Switching Costs does not work saying that "the problem in our business is that[?] you can be a customer at several suppliers at the same time. When you register with us you can at the same time register with Pricerunner or Kelkoo without it being an issue.[?] So Switching Costs does not work in our business."(3) As mentioned in the section above; from the business to business (B2B) perspective it has not been a natural thing for Prisjakt to develop strategies regarding Switching Costs and Magnus emphasizes that their strategy is based on simplicity saying that "it shall be easy to try how the service works and to start up as well as easy to terminate"(4). Furthermore, Magnus emphasizes that "the most important thing is to create a service that allows the B2B customer to still make money; benefits for the customer. If these benefits do not exist; it does not matter how good a relationship we have and since we do not have that type of Switching Cost they will not change supplier, they will stop using our service."(5) Again, we see the focus on the positive aspects of Switching Costs in Prisjakt's strategy.
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From the Business to Consumer (B2C) perspective Prisjakt has a different strategy. As Magnus discusses, "we wish to Lock In the consumer to use our services in different ways. Among other things, make sure that they, that there are possibilities to affect the service and that they for example can use the price watching service.[?] It is services like these that are important to Lock In the consumer, however we do not Lock In the organisations in the same manner. On a consumer level we have psychological barriers and try to create Switching Costs in the sense that we try to affect what price-comparison site they use."(6) The focus of Prisjakt's strategy towards their B2C customers is in line with the other respondents in the sense that they focus on the customer being able to affect their service, thus communicating with the customer and consequently build strong relationships and to provide services that give the customer an added value such as the price watching service. We see this as a way of strengthening the positive Relational and Social Switching Costs as well as increasing the Benefits Loss Costs while at the same time reducing the Calculative Commitment through the communication and increased perception of control for the customers (Jones et al., 2007, p. 338-341 & Vázquez-Carrasco & Foxall (2006, p. 368-369 & Burnham et al., 2003, p. 111112).
4.2.5 Company X
Respondent X has a comparable approach when he discusses how they consider Switching Costs in their strategy which he describes as to "not put temporary focus on activities that do not promote buying and selling"(1) meaning that they focus on activities that "make it easier and make life more simple for they buyers and sellers, otherwise we would not do it"(2). In regard to how Switching Costs affect them and how Switching Costs gives the organisation an advantage Respondent X takes a similar position as the other respondents when describing that "On the internet you always have an active choice and there are services that on the outside almost look like us and that are free. However, the most important barrier for people is that they want to be on the place where there exist a functioning market place where you actually get things sold and where you can find what you want to buy[?] it is not so much the cost for our users to switch, but it is more the experience that everything works."(3) According to respondent X with regard to Switching Costs it has not been that they have "sat down to plan a strategy about this; it is something that has come naturally. It is in everything we do, however, we haven't had any strategy work concerning this."(4) Furthermore Respondent X argue that for them, switching costs have not been important to develop saying that "for us it isn't important, however, we do not see it as barriers or Switching Costs; we want to make our customers satisfied so that they will come back. That is the most important thing. It is important to think about what we can do to get people to come back and what we should avoid to risk that people choose someone else."(5) We see that Respondent X's discussion on many levels is similar to the other respondents and it further shows the clear focus on the positive aspects of Switching Costs when discussing that they wish to make the customer satisfied so that they want to come back as well as make the life more easy and simple for the buyers and sellers. The focus of Respondent X is, as we have discussed with the other respondents, connected to aspects of Affective Commitment, Social Switching Costs, Loss Benefits Cost and Relational Benefits that Jones et al., (2007, p 336-340) & Vázquez-Carrasco & Foxall (2006, p. 368) discusses.
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4.2.6 Combined Analysis of Switching Costs
We can see there are different opinions among the respondents whether or not it is important to develop Switching Costs. Henrik argues that it is important to develop to create customer loyalty, while Anders stated that it was not a route they wanted to take and instead they have to create a transparent solution for all parties. Simon argued that it is very important to develop Switching Costs due to the fact that when the customer becomes more experienced they will know the pros and cons of every service and then it is important that the customer perceives it to be inconvenient to switch. Magnus argued that it is not important for the B2B customer because it does not work in their business. However, in the B2C filed they wish to create barriers. Respondent X said that it is not important and that they do not view it as Switching Costs or barriers and instead wants to make the customer satisfied. In the end all respondents agree on the fact that the internet has very few or low barriers All interviewed had a clear focus on the positive aspects of Switching Costs where they emphasized factors such as communication with the customer, the possibility to affect the services and to deserve the relationship to the customer every time. This focus is strongly connected, not only to the attention on Social Switching Costs, Benefits Loss Costs and Affective Commitment, but also on the reduction of the negative sides of Switching Costs such as Procedural Switching Costs and Calculative Commitment (Jones et al., 2007, p. 336341 & Vázquez-Carrasco & Foxall (2006, p. 368-369 & Burnham et al., 2003, p. 111-112).
Rebel? Discshop
Switching Costs are normally not that big Natural part of the strategy process Create a positive experience Switching Costs through loyalty
Katshing
No big barriers Not a road they wanted to take Deserve the relationship with the customer All weapons in the customers hands It is the price and quantity that is valuable Create a joyful experience Customer Service, Support, Communi? cation Recurring payments
Company Prisjakt Betting X
Does not work in their business (B2B) Try to Lock In B2C customers Possibility to affect the service and price watching for the customers It is not so much the cost for users to switch Has come naturally Satisfaction, make the customer want to come back Avoid risk of losing a customer
Switching Costs
Focus on Positive Switching Costs
Figure 5. Switching Costs
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4.3 Trust
4.3.1Discshop
When considering the issue relating to trust Henrik feels that it is incredibly important in developing relationships with customers, is so far as it is the "A to Z" (1) with "security and safety as one of the most important parameters" (2) This is supported by Reichheld &Schefter (2000, p. 106) in that to be able to gain loyal customers it is vital to first gain their trust. The ways in which they try to do this is by marketing themselves as a trustworthy company as they "try to market that they are a safe option for secure e-commerce" (3) and the importance of first impressions; as a positive experience means that the trust will grow. He also stresses once again the significance of their 3 S strategy and that service also helps build trust. "a positive experience then of course the trust increases, and it starts and ends with the 3 S's, if you give good service you build trust" (4).
4.3.2 Katshing
Anders from Katshing had a very different opinion to trust feeling that it has only now over the last couple of years become an issue, as he saw it in order to gain trust it was just a matter of the customer being satisfied with the product/service. He goes on to discuss the importance of just being satisfied with the purchase made on the internet is not enough (1). It is not just about gaining trust from customers wanting to pay online, but they need to have faith that the company is well established and is not going to be bankrupt. Saying "that there needs to be faith that companies will still be there tomorrow and there are some form of guarantees or similar" (2). Anders sees trust as a process (3) and that a "lifecycle is planned for each customer" (4) and if it works they have a very loyal customer who is Locked In to their company. So through this process they develop a relationship and then Katshing can form product offering suited to the customer, which in turn develops the trust between customer and company and hence the customer becomes very loyal (Reichheld & Schefter, 2000, p.107/8). And as such this process if it succeeds, Anders sees that they have a "very very high loyalty" (5) to the company. This he sees as very significant because "if you are on the internet a customer is only one click away from (our) worst enemy, if the customer is even the slightest bit unsure about (our) information, (our) prices (our) brand they will change to another" (6)
4.3.3 RebelBetting
Simon sees trust as a very important issue saying, "it is very important to get trust and loyalty already from the outset" (1) and he is very much of the opinion that it is necessary to be very transparent(2) about the company; who works there, their individual background. Even going so far as putting pictures of employees and physical address so that the customer can 'get to know' the actual people, and this is essential in order to form trust and it comes from the realisation that the internet is so anonymous. Therefore it is "critical to always be open" with the customer. To develop this trust, "support is a very determining factor" (3) and as such RebelBetting "always tries to help the customer and have good contact with them" (4). This is in line with Reichheld & Schefter (2000, p.106) where there is an uncertainty in shopping over the internet because of the lack of physical contact between parties. And as mentioned by Simon when concerning strategy, functionality is important when it comes to developing trust, which Belicove (2009, p. 35) agrees.
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Further to this Simon feels that as an organisation on the internet, trust is significant because the internet is "so much more anonymous" (5) and as such people are a lot more careful with new ways of doing things (6).
4.3.4 Prisjakt
Trust for Prisjakt is also important and as such their site and the information contained within it needs to be trustworthy and credible to develop trust, saying that it "means a lot, as there must be credible and trustworthy information on (their) site" (1). This is partly achieved through the two way communication that has been discussed earlier. Further to this, Magnus considers 'building' a degree of trust over time and through these efforts the integrity of the website and the readiness to purchase is improved (Gefen et al, 2008, p. 276/7). If the information given on the site is incorrect, for example the customer has the possibility to go in and say that the information is incorrect (2); as also mentioned by Simon where the negative effects are more noticeable through the internet than physical shopping. According to Magnus it is about "building up a degree of trustworthiness on the information that is presented" (3) and so long as this is done correctly (4) trust can develop.
4.3.5 Company X
Company X sees trust as very important and that the company works hard to develop it by improving the website to a high quality where it is simple to use, even though the software is elaborate. Respondent X also feels that it is a crucial factor in showing the consumer what they do by communicating 'outwards', this again is in line with Belicove (2009, p. 35) where functionality and design go a long way in developing trust between customer and business. When considering issues relating to trust Respondent X states that, "if one can feel trust" (1) when operating over the internet and that they "work very hard to keep the site of the highest quality" (2) when it comes to being able to trust them. Going on to say that "even if it is difficult to take out the unserious on our webpage, we always strive for it" (3), and the reasons that it is so decisive is because; "if someone has a bad experience (using their site) and then do not get the help they need, (the customer) will not have the same (positive) view when they use the website in the future." (4). Therefore Respondent X recognises the importance of trying to earn the customers trust to develop a relationship (Reichheld & Schefter 2000, p. 106). They also see as do other respondents that it is necessary to "show what we do" (5) and as such "communicate outwards" (6) with respect to showing how they develop trust in the organisation.
4.3.6 Combined Analysis of Trust
All companies interviewed at some point made it known the importance that 'first impressions count' as a significant factor when developing trust with the customers. And again communication between customer and businesses was seen as an influence by most to influence trust. Company X discussing outward communication and RebelBetting being transparent and giving physical information so the customer can see who they are dealing with and thus earn the customers trust (Reichheld & Schefter 2000, p. 106). The ability to gain the trust of the customer is seen as a vital part of a relationship and once it is achieved the respondents saw that the loyalty was very significant and to that extent a development of a two way relationship created a strong bond.
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Dischop
Vital to gain Trust
Katshing
Not just about being satisfied Faith in the company being around in the future Trust is a Process
Rebel? Betting
Company needs to be Transparent Essential to get to know the actual people to form trust Reduce uncertainty
Prisjakt
Trustworthy and Credible to develop trust achieved partly by 2 way communic? ation Building trust (a process)
Company X
The site should be of high quality t o develop trust Transparent Outward communic? ation
Trust
First Impressions count Positive Experience
Transparency
Figure 6. Trust
4.4 First Mover Advantage
4.4.1 Discshop
When considering First Mover Advantages, Henrik argues that "in itself, there is no value in being a first mover."(1) This goes against Perira (2004, p. 304/306) who argue that First Mover Advantages promotes customer loyalty. However, he also argues that when it is appropriate, it is of course a positive thing to be a first mover. On the topic of First Mover Advantages connected to customer retention and loyalty Henrik argues that there is a connection. There are customers who always want to be at the forefront and take part in the latest and based on this discussion he elaborates that "I don't believe it hurts"(2) meaning that it is probably a good thing to be a first mover. On the other hand, Henrik also recognises that it can be a disadvantage because, as he says "furthermore, there are those customers that are a bit conservative, that want everything to be as it always have been, so it is not just to the positive"(3) aspects of being a first mover. However, in general Henrik does not view First Mover Advantages as an important issue saying that "I don't see it as a really big deal."(4) At the same time as Discshop does not view First Mover Advantages as a big deal, they are for example focusing a lot in new technology. One example that Henrik emphasizes is mobile shopping or "M-commerce" as Henrik calls it. They realized that M-commerce sooner or later will be a big thing and therefore developed a platform for this, and as Henrik states "we saw an opportunity and we are at the forefront. I believe that we are one of the few retailers in Scandinavia that have this type of solution."(5) Furthermore, he goes on discussing that today
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they do not make a lot of money on this service, however, "we believe that in 2-5 years a substantial amount of our sales will come from M-commerce, and then we will have a good position."(6) This discussion goes along the same line as Perrott (2006, p. 303) who argues that it is imperative to be a First Mover because of the constantly evolving technology.
4.4.2 Katshing
Anders argues that it is very important for Katshing to be a first mover. According to Anders their goal is to build the "world's coolest mobile site" which puts a lot of pressure on the entire organisation. Furthermore, Anders argues that being a first mover is important for them because it is a part of the position as a market leader. Additionally, he says that "if we had been a challenger we could copy with pride those that are the best. However, that is not our strategy, so it puts a lot of tension on innovation, speed, flexibility and of course excellence." (1) This again corresponds to Perrott's (2006, p. 303) argument that it is important to be a First Mover due to the ever changing technology. Furthermore, Anders sees no connection between customer retention and loyalty compared to being a first mover. However, when discussing the customers strive to change supplier connected to First Mover Advantages, he explains that if you have a very narrow view of your customer base you can build loyalty through being a First Mover in the sense that your customer base is the "Early adopters, internet users that are well prepared and very interested"(2). However, he says, "if you have the goal, as we do, to become the biggest. Not just on the internet but also in the physical store, we need to win over the 'cool guy' in the big city, as well as the father with small children and the senior citizen [?] Then you need to strive outside this category."(3) When considering customer retention and First Mover Advantages, Anders and Henrik have similar viewpoints, where Anders does not see a connection between customer retention and being a First Mover. However, Anders goes on discussing that if you have a narrow view of who your customer is; you can build loyalty through being a First Mover, which is in support of Perira (2004, p. 304/306). As with Henrik, Anders brings up the example of early adopters and internet users that are well prepared and very interested where he argues that by being a First Mover you can keep that customer category loyal.
4.4.3 Prisjakt
From the perspective of Prisjakt, Magnus argues that being a First Mover is essential saying that "it is very important. There is an interest to try new solutions and there are many people on the internet who really enjoy keeping up with what is considered new and exciting."(1) Magnus furthermore argues that if you are second into this kind of situation it is no longer new and exciting and then you lose the group who enjoy trying new things. According to Magnus Prisjakt has not been First Movers in the sense of entering new markets, however, when considering technical solutions he argues that they are in the forefront. Once more, Magnus brings up AJAX search functionality as an example and also their new Android application for mobile phones where you can scan barcodes of products to see what a product costs in another store while you at the same time are looking at the product in the physical store. Magnus again emphasizes the importance of being a First Mover saying that "within technical areas it is incredibly important that we are first."(2) Magnus furthermore elaborates that "if a technical solution exists that we do not use, then we have been criticized for that."(3) In regard to the connection between being a First Mover and customer retention and loyalty Magnus argues that "we believe that it exists, however it is nothing that we have measured directly."(4) This again is gives some support to Perira's (2004, p. 304/306) discussion
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regarding First Mover Advantages and the building of customer loyalty. Furthermore, Magnus discusses that by using a service that is in the forefront technologically the customer creates an identity of being at the forefront of technology. Magnus says that "there is a special feeling of using a service where they are at the forefront technically and in that way you create an identity connected to the customer that he or she also are technically at the forefront merely by the fact that they use a site or service that is technically far ahead."(5) This again shows the significance of being a technological First Mover (Perrott, 2006, p. 303). Based on Magnus's discussion we can also see the connection First Mover Advantages and Switching Costs. Particularly for the more experienced internet user who wants to be in the forefront and consequently does not want to switch to another service that is not perceived to be as technologically advanced. Being a First Mover on the technological field we therefore see as a Switching Cost in the sense that it creates benefits that the customer will lose if deciding to switch. Consequently, a Benefits Loss Costs (Jones et al., 2007, p. 337-338).
4.4.4 Company X
Respondent X argues that for them "it was a huge advantage to be the first on the market."(1) Further to this, Respondent X argues that one important factor that influenced their early success was that the already established actors in the offline market were slow to react and realize the importance of the internet. However, Respondent X also points out that "we have also entered many markets where other actors already exists and it has worked just fine as well.(2) As we see it Respondent X has a quite nuanced relationship to First Mover Advantages. This is due to the fact that Respondent X says that it has been a big advantage for them while at the same time discussing their successes in markets where they have not been a First Mover. Respondent X also emphasizes that being a First Mover is all about continuous development. He says that they have "received criticism because the site looks the same as it has always done, however, that is a conscious strategy. The changes we make are small but we develop all the time to continuously be at the forefront and become even more efficient."(3) The importance of continuous development that Respondent X highlights in regard to being a First Mover, we consider to give additional support to Perrott (2006, p. 303) in the discussion regarding the ever evolving technology. On the basis of this continuous development, we can also see a connection to Barney (1991, p. 104) who argue such Competitive Advantages are short lived. Respondent X does not see a clear connection between customer retention and loyalty and being a First Mover, however, he says "those that have purchased services for several years and had a good experience are bit loyal I suppose."(4) When discussing customers strive to change suppliers in connection to First Mover Advantages Respondent X does not think that it has a great influence. In contrast, Respondent X argues that what is determining the customer's choice is based in functionality saying that "it is where you find what you are looking for and where you can sell what you want to get rid of that is crucial."(5)
4.4.5 RebelBetting
Simon discusses that they try to be a First Mover. On the technological side he says "we have been a First Mover in some aspects. For example we went over to the Cloud Server technique as fast as we possibly could. [ ?] Because we are a small organisation we cannot waste money on an enormous server park that collects odds. Instead we need to be innovative and find creative solutions."(1)
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Because it is such a small industry, Simon argues that it has not affected them so much in being a First Mover. Furthermore, he says that "right now it isn't that important as in other types of industries because it is a fairly unknown phenomenon."(2) At the same time Simon believes, similarly to several other respondents, that the advantages of being a First Mover is that you get customers just because people perceive them as being at the forefront which again supports Perrot (2006, p. 303). Simon feels that a First mover Advantage affects different types of customers differently. According to him, the customers that have a large experience in this phenomenon also have a good overview of the different services that exists on the market and they know what service offer them the most quantity and what services that have the best technical solution. Consequently, Simon argues that a First Mover advantage among this type of customer is very important. However, he says "the professional players are a fairly small part of our customers. The largest part of our customers are beginners and in this segment a First Mover Advantages has no importance because they do not know that other services exits so to them we are the first mover, the only mover."(3) Here we can also see the connection to Switching Costs, both for the inexperienced user and the professional user. We can connect the First Mover Advantage in this area to Switching Costs through the strategy that RebelBetting utilize. For example in the sense that the customers that they have and that at the beginning are not aware of any competitors get familiar and accustomed to their user friendly interface, which according to Simon, is a unique feature for them. Consequently, the customers will be reluctant to switch since they will lose the benefits of usability hence we see the connection to Lost Benefits Costs (Jones et al., 2007, p. 336-337).
4.4.6 Combined Analysis of First Mover Advantage Rebel? Betting
Try to be a Firs Mover Being a First Mover has not affected them that much.
Discshop
Katshing
Prisjakt
Company X
Has been a huge advantage Continuous develop? ment
In itself no value
First Mover Advantag e
If an opportunity arises it is a positive thing
Very important to be a First Mover A natural aspect of being a m arket lead er
Being a First Mover is essential. A connection between customer retention and First Mover Advantages exist.
Figure 7. First Mover Advantage
The respondents have different opinions regarding the importance of being a First Mover. For some it has been a big advantage, while others say that it has no value in itself to be a First Mover. There seems, however, to be a consensus among the respondents regarding First
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Mover Advantages that they attract the customers that are eager to try new things and that are early adopters. In regard to this customer segment we can see a connection to Switching Costs and particularly Benefits Loss Costs as these types of customers are not interested in changing from using a service that is in the technological forefront.
4.5 Interface Design
4.5.1 Discshop
When discussing the interface design Henrik at Discshop relates back to their strategy and the three S's and the term sophisticated simplicity. Sophisticated simplicity is a part of the second S, the Site, meaning that they "would like to have the broadest and deepest site, however, it must still be simple. I believe that simplicity is the number one watchword. Don't go in the Boo.com trap and make it complicated. As I said, if you take the car to K-rauta you might be able to live with the fact that it isn't exactly like you want it. However, on the internet it is just one click away to go to a competitor so it has to be simple, lucid and as few barriers aspossible."(1) Here we see the connection to Chang & Chen (2008, p. 2932/2941) & Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) who discusses the importance of not wasting the customer's time by creating a simple and clear design for the reason that it reduces the perceived frustration, risk of wasting time and deception but also increases the perceived trustworthiness of the site. Henrik elaborates this discussion stating that "we all know the difference between coming in to a well organized physical shop, for example H&M or to come in to 'Pelle on the corner' where it really looks like shit. Of course you are much more inspired to come in to the well organized store where it is nice and tidy, all prices and campaign products are clearly labelled. It is therefore super-important that the customer embrace the site."(2) When discussing in which ways the design affects the customer and their choice of returning to the site Henrik once again refers to simplicity saying that "because they think it is smooth and easy and I mean, we know that even our competitors steal a lot of information from us because they know that we have reliable information. It is the same way with the customers, if they come here and find what they are looking for and it is fast; then they will return."(3)
4.5.2 Katshing
Anders discusses the interface design more from a brand and marketing perspective where he referred to a previous Master thesis he participated in. The conclusion in that thesis was according to Anders that almost all big E-businesses do not care about the layout, design and the brand. Instead, the only thing they strive for is to become known and then process everything from point A to B as cheaply as possible. Anders believes that a strategy like that is completely incorrect stating that "I think that, that kind of reasoning is totally wrong. If you listen to a "know it all" such as Alexander Bard they say that the brand on the internet and what the values that the brand is loaded with are more important over time compared to the physical store and I think that is true."(1) Furthermore, Anders emphasizes the importance of loading the values of the brand saying that "number one, the brand had to draw attention to it and be very visible because as a new player you usually don't have a big wallet. We cannot do it like Mediamarkt and lose hundreds of millions, close to a billion in losses before it turns around. We do not have that kind of money. Therefore we need to reach out much faster and you need to break through the huge amounts of noise because that is number 1, break through. Number two was to mediate the values that the organisation shall stand for; and we have spent copious amounts of time
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discussing this. [...] we want our site to signal the values that our brand stands for. Trust is a part of that but there are many parts, so I would say that it has a very significant role."(2) Here we can see the connection to Wang & Emurian (2005, p. 116-118) & Chang & Chen (2008, p. 2940) when discussing the importance of trust and trustworthiness. When considering how the design affects customer retention Anders states that "Yes it can affect, absolutely. The choice to come back or the choice to not come back, however you would like to put it. It goes both ways."(3)
4.5.3 Prisjakt
Magnus had a similar point of view as Henrik with regard to simplicity saying that "a good design is a design that makes it easy to find and easy to use the service, It has to be pretty straightforward to understand what to choose to get where you want to go and to present new features. So how the customer uses our site affects the way we design it."(1) In regard to how the interface design affects customer retention, Magnus has a similar position as Henrik saying that "I don't believe that the design is crucial, instead I believe that it is the functionality on the site that in the end determine whether or not the customers decide to come back or not."(2) One thing that Magnus takes as an example in regard to functionality is their AJAX search function which makes searching for products and prices faster and easier because the user do not have to type in the entire word and the press enter. According to Magnus you just have to "type in two letters and then the search results starts to show up."(3) Here we can once again see the connection to Chang & Chen (2008, p. 2932/2941) & Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) when discussing the importance of not wasting the customers time and frustration etc. When considering what Balabanis et al. (2006, p. 217) & Chang & Chen (2008, p. 2932/2940) argue that internet users make less comparison shopping compared to what they do with bricks and mortar suppliers and that this phenomenon can be explained by the fact that there is a correlation between the number of viable alternatives and the physical search costs; meaning that when the viable alternatives increases, so does the search costs. From this perspective it is also interesting to keep in mind that Prisjakt's entire service for the B2C customer is intended to reduce the physical search costs and to make it easier to find relevant information on prices and so forth.
4.5.4 Company X
With regard to interface design Respondent X, as with other respondents argue the importance of simplicity saying that "Simplicity is the most important thing. It cannot be too much things going on around the users that make them confused in how to use the service."(1) As Respondent X argues that simplicity is the most important thing this reiterates the connection to Chang & Chen (2008, p. 2932/2941) & Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) regarding not wasting the customers time and so forth. Furthermore, Respondent X elaborates that it is better to have fewer features than too many to be able to keep it simple. Respondent X also emphasizes that it is "hard to make things simple" (2) and that they have a challenge in having to appeal to everyone. As respondent X says, "even a 75 year old lady shall be able to use our service" (3) meaning that they cannot develop advanced features for the experienced internet user because the everyone should be able to use it. Here we realize the significance of simplicity connected to the user's internet experience as Chang & Chen (2008, p. 2933) discusses that users with a higher internet experience have a greater understanding in dealing with this type of interface and as a consequence are better suited to make use of offerings on the internet compared to users with low internet experience.
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4.5.5 RebelBetting
Simon emphasizes clarity with regard to interface design and that clarity is something that they really have been trying to work with. According to Simon they have a pedagogical problem to try and explain their product to beginners since it is a rather complex service. Therefore, RebelBetting has a motto that states "Clarity beats persuasion"(1) and that they try to actively to follow. This means that it is better to be clear about what the service is all about and to explain it in a god way rather than have a large purchase button. As Simon argues "first, explain the concept, then will the ones who understand the concept and are interested enough like the idea and want to buy."(2) As with respondent X, we can clearly see the connection to the aspect of user experience that Chang & Chen (2008, p. 2933) discusses when Simon argue that they first explain the concept to the beginner customer and then those who really understand the concept and are interested enough will purchase. When considering the pure design of the site, Simon has a similar view as the other respondents saying that they "try to keep a clean and simple design and focus on what is important on each page."(3) Here we can once again see the connection to Chang & Chen (2008, p. 2932/2941) & Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) when they discuss about not wasting the customers time and to reduce frustration and deception as well as increasing the trustworthiness through a simple and clear design. However, when discussing how the design affects customer retention Simon believes that it has not that big of an effect, saying that "it is probably very few who come back because of that."(4) According to Simon this is because they do not have that much useful information on the site once the customer know the service and are up and running. However, it is when the customer is "new to the service and is trying to get started or when the customer has encountered a problem"(5) that they need to consult the webpage.
4.5.6 Combined Analysis of Interface Design
All five respondents emphasize simplicity and that it must be easy to navigate and to quickly find what you as a customer are looking. Here we see the connection to Chang & Chen (2008, p. 2932/2941); Louvieris et al. (2002, p. 169) & Wang & Emurian (2005, p. 117) when they talk about increasing the trustworthiness through a simple and clear design as well as not wasting the customers time and to reduce frustration and deception. Simon from RebelBetting and Respondent X also discusses the internet experience of the customer (Chan & Chen, 2008, p. 2940) where Respondent X says that their strategy builds upon that everyone should be able to use their service. At the same time Simon brings up their pedagogical problem to educate the customers.
Discshop
Katshing
Rebel? Betting
Internet experience
Prisjakt
Company X
Internet experience
Interfac eDesign
Smooth and easy
Brand Values
AJAX search functionality
Simplicity
Figure 8. Interface Design
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4.6 Value Chain
4.6.1 Discshop
Henrik is well aware of the support activities that are involved in operating on the internet and as such sees "service" (1) as the answer to how they develop relations and attempt to Lock In their customers. Further to this Henrik explains that in order to develop this service "clear guidelines and what the (customer) expects is done," (2) and "how one expects to be taken care of when contact with customers is made, as well as the level of service" (3) are all part of what Henrik sees as the support activities. Henrik is very much aware of the importance of these activities that they engage in, namely the 3 S's. Again the emphasis is on Service and influencing the customer relationship which is considered by Day et al, (2008, p. 40) as a significant part of the Value Chain. Part of the reason for why Discshop have service is in order to be transparent in what they do which influences the customer and makes them more loyal (4).
4.6.2 Katshing
Anders is of quiet a different opinion, saying that mainly because they have so many competitors that the customer experience is not that dissimilar between actors in the market(1). This contradicts the other respondents, but again, Anders does take up the issue of delivering transparent solutions (2) which he feels improves the relationships they have with their customers. This in itself seems to be a contradiction of what he originally said about 'Support Activities'. We feel this may be a misunderstanding in the terminology used by us during the interview and therefore Anders may not have understood specifically what we meant by Support Activities, thus in this instance no specific activities were mentioned.
4.6.3 RebelBetting
Simon was aware of the activities that they do which are supporting the business; even going so far as saying that their website is a support activity in that it is a marketing tool by which they communicate with the outside world. As an example of the support activities that his company try Lock In the customers he mentions "the E-book" (1) and their "fast technological progression" (2) as ways in which they attempt this. However this and other activities that generate value to the firm have been an unconscious development in how they do business. Other activities that Simon sees as supporting the business include the giving the customer an understanding of the products that they offer and how they work. This we can see as very good use of market intelligent where they are utilising the internet environment to develop relations with prospective customers (Zablah et al, 2004, p. 481). Furthermore Simon sees that the website itself should also be user friendly (3) and effective and these we see as support activities that create more value in their company as addressed by Porter (1985, p. 36), which is similar to Company X's belief in being simple to use, and therefore these activities according to Simon "generate value, customer loyalty and trust" (5) in his organisation.
4.6.4 Prisjakt
Magnus from Prisjakt says that they do not at all "try to form Psychological barriers because he knows what can happen if they do" (1) and he does not want to experience this. When considering the activities that generate value for the company. Magnus discusses certain functions of their webpage as the support activities that give them the most value (2) This function he sees as an important solution, and to that extent "binds the consumer" (3) to them,
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further to this that it also enables the company to be more transparent,. This is in agreement with Sawhney et al, (2002, p. 304) understanding that support activities help in creating a Competitive Advantage for companies, such as Locking In the customer. An important point that Magnus makes although to a certain extent specific to his market is that "they are a service which is free to the consumer?but they get money from the business using the site, but without the traffic of the consumer and quality of service that (they) offer" (4) they would not be able to operate.
4.6.5 Company X
Respondent X sees that the strategy formation is a natural process and as such there are no specific support activities that Lock In the customers. The process for forming strategy "comes naturally" and "it lays in everything they do" (1), however there are no concrete support activities that they do which attempts to Lock In their customers (2), not even a "loyalty program" (3). But they do believe in offering a service that is simple to use and yet technologically advanced to add value to the customer so they will want to come back (4).
4.6.6 Combined Analysis of the Value Chain
Again the significant factor for the majority of respondent was the importance of being transparent in the activities that they do as having an influence on Locking In customers to their specific business. Further to this most respondent's companies attempt to offer a technologically advanced site that is still simple to use, this is also in line with the importance of Interface Design and Customer Experience. However some respondents felt that it has been a natural process of forming strategies and the use of the Support Activities while others have been aware of it importance in Locking In customers.
Rebel? Betting
Website is a support activity Tool by which they communicate User?friendly functions
Discshop
Katshing
Not a big deal as so many actors in the market but important to offer transparent solutions
Prisjakt
Website functions Enabling them to be more transparent
Company X
Natural process Making website simple to use even if technologi? cally advanced
The Value Chain
Service is a support Transparent
Transparency
Figure 9. The Value Chain
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4.7 Competitive Advantage
4.7.1 Discshop
In response to these questions based on Competitive Advantage Henrik discusses the three S's and "as long as they do them better than their competitors he believes they can maintain their advantage" (1) He also goes onto say that although price is important it is the three S's that give them a "very very strong edge compared to their competitors" (2). So within their organisation "everybody understands what is important" (3) and "that is that the customer is the most important" (4) when considering strategies to influence Competitive Advantage. Barney (1991, p. 102) discusses implementing value creating strategies before other firms to gain a Competitive Advantage, and again Henrik is aware of this in the decisions that are made at Discshop in that they are looking at new trends in the market. According to Henrik they are working towards using different mediums of communication to sell the products/services, namely M-commerce2 (5). Which he says is an emerging future marketplace in which he feels that are at the forefront and as such gives them an advantage over their competitors. And as such this is one way that technology can give them an advantage in
the future.
When asked what he thought made customers return to Discshop he answered "by offering a good service they come back" (6) and this is all part of the three S strategy. He goes on to state that if you want to buy cheap you can go to another shop, "but if you want to be comfortable, and you want it delivered the next day with a flexible and easy purchase process, then they are the right place." (7). When considering the advantages gained by forming Psychological Switching Costs Henrik sees that they must be best in the areas of the 3 S's in order to maintain the advantage in the market. And price while important is not what stops customers going to their competitors but rather their 3 S strategy. So as Reichheld & Schefter (2000, p. 110) argue, customers value convenience more than price as reasons for why customer return to a familiar website and Henrik follows this line of argument when considering what he sees as important to gain a Competitive Advantage. Thus the significance of creating, at the very least, strategies that keep customers loyal (if not locking in) to Discshop are at the forefront of Henrik's decision making processes.
4.7.2 Katshing
In response to these questions based on Competitive Advantage Anders believes that they have the best value today and as such "customers experience the best player, whilst not the biggest, (we) are best" (1). Thus when considering internet-shopping what has contributed to Katshing being best is "good delivery prices, price-quality, price-quality-trademark and security" also that "customer needs have increased a lot faster that physical shopping has" (2) This has meant that Katshing have been more focused on "giving a good experience in customer quality in all its forms" (3). Thus the reasons that customers return to Katching is "that (customers) are satisfied with their order" (4). Accordingly, "rich or poor (people) want to shop at a good price" (5). However Anders sees that price is just a "given" (6) and as mentioned previously it is other factors such as customer
2
M?commerce stands for purchases being made from mobile phones.
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satisfaction and customer quality experience that count. This has been made possible according to Anders, partly because of the size of the company in that they now have the resources to offer better customer service through, for example employing more staff, so there are "shorter waiting times, better opening times and higher availability" (7) for customers. Anders believes that they do not have a high threshold in stopping customers changing to another company, and in order to be the "customer's best friend" he feels that it is in their interest not to have such barriers (8). The strategy that leads to Katshing being successful is that they want to "deliver the highest possible customer-value so Katshing are chosen every time" (9). Katshing also feels that there advantages come from the experience that the customer has from using the website, and this has developed because the customer's needs have increased dramatically. So again Reichheld & Schefter (2000, p. 110) argument of convenience over price is a significant factor when considering what Anders thinks about how they gain their Competitive Advantage. Even stating that price is just a 'given' and that customer satisfaction is more highly valued.
4.7.3 RebelBetting
In response to these questions based on Competitive Advantage Simon finds it difficult to see where customer retention can give his company a Competitive Advantage when the competitors and the customers are relatively secretive (1). He does however say that there are online forums that discuss RebelBetting's products and their competitors and "there (we) have seen that (we) are getting good reviews" (2). Simon discusses to some extent that he sees the functionality of the product giving value and this may give an extra boost through loyalty and support, that is what they are hoping for (3) in so far as strategies contributing to giving them a competitive advantage over their competitors. This is in line with Barney (1991, p. 102) where they are trying to implement value creating strategies that will give them a competitive advantage. In regard to changes in the business climate and how they adapt their strategies to fit changes Simon sees the importance of communication with customers as a good way in discovering changes. From this they can priorities (flexible) in the short-term what needs to be done and go from there, he therefore feels that they "adjust quite quickly compared to larger companies" (4). Thus, when asked about the reasons why customers return to their home page, Simon noted that "the site is seen as a marketing channel and possibly as support" (5) rather than where they perform their business. But in relation to where Competitive Advantage comes from he sees this as price being the main factor as "the products themselves are very similar to their competitors and it is easy to change" (6). However he goes on to say that the functions that are unique to them he hopes will make the customer return to them as customers will value these functions so highly that they will not want to change (7). Further to this is RebelBetting's desire to be the biggest actor in their field because as Simon sees it, the ones that are seen most, gain a very large percentage of the customers (8). Also as stated by Katshing, Simon also feels that size matters, so that with more staff they could "specialise in a specific area of the business, because as it stands now everyone does a bit of everything...if (we) were a bigger company we would have more resources, both, financially and in terms of time to market ourselves even more" (9). Simon therefore believes strongly in
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marketing as it is that, that sets them apart from the competitors (10) as well as a "good development tempo" (11). We can see here the significance of Balabanis et al., (2006, p. 215-217) understanding of the cognitive search costs that are considered higher in an online environment and the time and effort required by a customer to change company. Therefore the customer is more likely to go with the most recognisable and biggest, which can lead to a higher level of customer loyalty and thus a Competitive Advantage in simply trying to be the biggest, as stated by Simon.
4.7.4 Prisjakt
In response to these questions based on Competitive Advantage Magnus sees that they and the competitors work in a similar fashion with regard to fitting products and services, thus he does not see any strategic differences between them (1). He does go on to say however that in order to adjust to changes in the market and give them an advantage over their competitors "that it demands flexibility in the internet-world, and that there is no long term planning, but a base philosophy to work from" (2). From this perspective we see the significance of what Perrott (2005, p. 82) discusses in regard to the rapid growth of the online environment making it difficult to form concrete strategy. Thus when it comes to Prisjakt they do not change the basic strategies but their base philosophies "and it has a more practical effect on strategies, it's more a way of working and finding technological solutions" (3) says Magnus. In relation to repeat customers Magnus sees it as a "clear mathematical calculation" (4), in finding the right product for the right price. So when it comes to what strategies/activities are involved in gaining an advantage over their competitors Magnus sees that for Prisjakt "they show all shops selling a product as a competitive advantage for them" (5). Further to this it is also important for Prisjakt to be the biggest and most welknown, but for them it means being more recognised and accepted as a source for finding reliable information, and in this way (they) gain more credibility from the information they give out (6). So again we recognise Balabanis et al., (2006, p. 215-217) point of being a big actor in the market or well recognised that customers can become more loyal, and as such a Competitive Advantage is gained. As with other respondent, Magnus feels that their "technological solution lay at the front" (7) of them keeping the position ahead of the competitors, and part of this is that they "update the price 3 to 4 time a day" (8) thus the customer gets faster information compared to the competition.
4.7.5 Company X
In response to these questions based on Competitive Advantage, Respondent X sees that it is important to talk a lot about the product/service within the organisation and that the "user experience" (1) should be easy. This can be achieved according to Respondent X by having the "right competences" (2) when considering technology and being aware about "what is happening around you," (3) both internally and externally. This we see as their attempt to reduce the cognitive search costs discussed by Balabanis et al., (2006, p. 215-217) so that inexperienced internet users find it easy to use and not over inundated with unnecessary information. So when it comes to customers returning to Company X the respondent feels that if they do come back it is because the customer has succeeded with a business transaction (4) and that it worked well (5). Going on to say that from "a bad meeting experience from customer-service or similar, means the risk of the customer not coming back is greater , so it is important to always focus on the user (customer)" (6).
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When considering Reichheld & Schefter (2000, p. 110) understanding of customers seeking convenience above price company X sees that a very simple exterior internet site, and yet very advanced under the surface, as well as how they run the website, gives the user a good experience (7) compared to the competitors. Going on to say that they "think a lot about the quality and contents of their webpages" as well as the years of experience in knowing how things work (8). Respondent X also speaks of the attributes that keep them ahead of the competitors as being the abilities in their technological competences, and the marketing format as well as the business progression and the people that work for the company (9) giving them the edge.
4.7.6 Combined Analysis of Competitive Advantage
Although it was difficult to understand from such short interviews we argue that these can all be competences that give these companies the ability to manage the Switching Cost so that they have a strong Competitive Advantage over their competitors. And according to Chen &Hitt (2002, p. 256) means that they do not necessarily need to compete on price, as mentioned by at least two of the respondents. Another important factor considered by the majority of respondents when considering how they develop a Competitive Advantage over their competitors is to be flexible. This factor seems to be a common feature throughout this research not just when concerning Competitive Advantages, and as such we see this as something that can be very relevant to companies operating on the internet. Further to this we see that the majority of respondents also considered that the size of the business and the resources that they have available to them can have an effect on how competitive they are.
Rebel? Discshop
3 S's better than anyone else New trends in the market Comfortable in purchasing Flexible Price is not what stops customers from switching
Katshing
Customer quality experience Meet customer needs more than bricks and mortar shopping Resources Price is just a 'given'
Betting
Functionality Flexibility Size matters so one has the resources Marketing &Technology Being the biggest Communic? ation Price is important but functions are unique
Prisjakt
Flexibility Biggest & most Well? known develops loyalty Unbiased and reliable information gives them c redibility Technological solution lay at the front of gaining Competitive Advantage
Company X
User experience should be easy Technologic ally advanced Having the right compe? tences Marketing Being the biggest helps
Figure 10. Competitive Advantage
Competitiv eAdvantag e
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4.8 Theoretical Recap
In the theory chapter we considered the relevant theories relating to Switching Costs and how top level managers can influence them through differing strategies. These are accomplished through the Dynamic Capabilities of a firm in developing strategies that influence these Switching Costs. Where Dynamic Capabilities are seen as being able to identify and seize opportunities in order to stay on the competitive edge (Augier & Teece, 2009, p. 410). And Switching Costs are the perceived economic and psychological costs associated with changing from one alternative to another (Jones et al, 2002, p. 441). Examples of strategies that we have taken up are 'Trust Development' on the internet as according to Belicove (2009, p. 35) is a valuable asset when developing a relationship with a prospective customer over the internet. And 'Interface Design and Customer Experience' as website design is very important for customers, so that they can evaluate and explore the information available to them in a way that is comprehensible (Louviers et al, 2003, p. 169).
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4.9 Revised Model
Communication
Dynamic Capabilities
Flexibility Agility
Positive Switching Costs
Trust Transparency
Design Simplicity
Value Chain Transparency
Competitive Advantage
Lock In
Figure 11. Revised Model; Psychological Strategies in locking in customers We have now developed our theoretical model from its original form to represent the factors that are relevant to respondents and thus show the adjustments which influence the strategic processes of developing a Lock In effect by companies that operate on the internet. As stated in the previous model (Figure 3) Dynamic Capabilities are a significant influence in gaining advantages within a market. What was noted by the respondents was that two way communication between the company and the customer in an online environment influencing the capabilities by listening to the customers as it makes them more responsive to the customer's wants and needs, thus creating a valuable relationship. The respondents believed therefore that in able to develop Switching Costs, it is important to be flexible and agile in their actions, as stated by one respondent, to let the customer develop the strategy and the ability to respond created a more loyal customer. Where flexibility means the speed at which they can change their strategy, and agility the actual ability to change. When considering the ways in which the companies influence the different aspects of Switching Costs, we have firstly removed First Mover Advantage, as none of the respondents felt that it was of any large significance. One respondent discussed that they have moved in to 11 other markets without being the first mover and it has not influenced customers in changing to their website service. We have also incorporated the PSL into the Switching Costs box as we have found that it was a very large conceptual area and still very difficult to separate, this is reflected upon in Chapter 4.2. From this point on we have preserved Trust, Design and the Value Chain as having an influence, the development has come from the respondents recognising certain factors that
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have a significant influence. When considering Trust and the Value Chain, the respondents say that they are transparent in what they do in order for the customer to be more willing to use them. When considering Trust it means to Simon at RebelBetting that they give physical information about themselves so that the customer can feel more connected to them. And when considering the Value Chain, Henrik sees that by offering services over and above just their product offerings Discshop gain more loyal customers. Design has also been developed in to incorporating simplicity as the most important factor for making customers more loyal to the business, Company X going so far as saying it must be simple enough for a 75 year old to use. Thus the realisation of the influence on customers that simple design can make customers more loyal. Finally we have switched the positions of Lock In and Competitive Advantage as the aforementioned factors of flexibility, agility, transparency and simplicity are seen by the respondents as giving them a Competitive Advantage and it is that which locks in the customer. Therefore the arrows from flexibility, agility transparency and simplicity go directly to Competitive Advantage. The understanding of the respondents was that it was these factors that gave them a Competitive Advantage and from this a Lock In effect occurs. Furthermore that there are arrows going from flexibility and agility to Switching Costs showing the importance of companies being able to change strategy in relation to influencing Switching Costs factors.
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5. Discussions & Conclusions
In this chapter we will show the significance of our research and where we have tried to develop a deeper understanding of the research we have undertook. The aim of this study has been to asses if companies consider the effects of Psychological Switching Costs and from the companies interviewed, how this influences the strategic processes of the company We will first attempt to answer the sub-purpose questions presented in Section 1.4 and from here we will endeavour to incorporate the theories discussed and the respondent data and our own understanding in order to develop the modify, adjust and hopefully build upon theory.
5.1 Sub?purpose Questions answered
If senior managers are using Psychological Switching Costs, do they see it as important? From the respondents that were interviewed we found that on a general level strategies to influence Psychological Switching Costs are not what is seen as important per se. More that they try to develop relations with customers so that customers will not want to change to another supplier, and as such all respondents felt this to be very important. Do they see the difference between Positive and Negative Switching Costs? The respondents most definitely saw a difference, where it was important for prospective customer to feel as though they do have a choice. This was seen as very important in creating a good relationship to use positive Switching Cost experiences. How important for the managers are, Trust, First Mover Advantage, Design and The Value Chain in developing Psychological Switching Costs? We found that the respondents valued Trust, Design and the Value Chain when developing Psychological Switching Costs. But the majority of respondents did not see First Mover Advantage as being influential in developing barriers for customers. Do senior managers see Psychological Switching Costs as giving them a Competitive Advantage? From the respondents interviewed we saw that from their understanding of Switching Costs that they did not see a direct effect of Psychological Switching Costs on Competitive Advantage. However through the interviews we got the impression that there are certain activities that each company does to develop relationships which will give them a Competitive Advantage when considering Psychological Switching Costs.
5.2 Strategy and Dynamic Capabilities
From the theory relating to Dynamic Capabilities where organisations need to adapt in order to be competitive (Barreto, 2010, p. 256) we can immediately see the significance of adding flexibility and agility as stated by most respondents as having a major influence on how strategy is formed. As taken up by Katshing, where long term strategies are sacrificed so that they can be more adaptive to the customers desires, alternatively Prisjakt say they have no long term planning, but basic strategies that they follow in order to be adaptive. Further to this is the consideration of communicating between customers and business, this was discussed by all respondents as a very significant point in deciding strategy. We got the impression that this was not just from the perspective of forming a Lock In effect, but a
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general understanding of their strategy formation. However the emphasis being on creating a service/product that the customer would want and chose above the competitors, thus we could see the relevance to two way communication, this was also seen in the example of eBay taken up in Section 1.1. Interestingly enough Henrik from Discshop brought up a very interesting point in that if the customer is Locked in to the business then the company does not have to be so dynamic. That is to say that even if they sell the same product/service as others in the same way, that by creating the relationship they do not have to be so adaptive. Although not explicitly stated by the other respondents, other statements were made in which this was stipulated. Another point raised by some of the respondents was the significance of giving a good first impression from the site as it is so simple to move to another site with just one click. Both Company X and RebelBetting made comments as to this physical ease to find another company and that they use statistical information, such as the bounce rate to understand the customer and how they work. So not only first impressions, but catching the interest of the prospective customer immediately is important, thus a balance of service and adverts as stated by Respondent X. Finally we noted that in order to be flexible, size can play an important role in the companies' ability to be flexible, we argue that this is due to the bureaucracy that grows when a company grows. RebelBetting, which is a very small business describe how they can priorities differing things on a daily basis, whereas Company X had difficulty going in to the details of how they can be adaptive.
5.3 Switching Costs
When considering Switching Costs and especially what Switching Costs are, we argue that the respondents in general had a perception that Switching Costs are negative. This is perhaps most visible when Anders from Katshing argues that it is an 'appalling' way of doing business. However, when discussing their strategies it soon became clear that the respondents focus, perhaps unconsciously, lies in the positive aspects of Switching Costs. This may also stem from the fact that the respondents perceive that Switching Costs are very low on the internet and that it is very difficult to create barriers. All the respondents argued that the internet is brutal and that the competition is fierce and, as a consequence, they are forced to focus on the customer and giving the customer the best service and the best value possible. From this point of view we recognize the importance of utilizing these positive aspects and to promote Affective Commitment as well as Social Switching Costs and Benefits Loss Costs to make the customer want to stay with the organisation. With regard to the different types of Switching Costs it was fascinating to see the relationship between the negative Switching Costs such as Procedural Switching Costs in relation to the positive Switching Costs where the respondents sometimes argued that they try to lower the negative sources of constraint, thus increasing the positive sources of constraint and commitment. As mentioned previously this relationship was one of the reasons for us to not separate the different types of Switching Costs in the analysis. Furthermore, it was interesting to see the differences in strategies regarding Switching Costs in different types of business areas. For example the service that Prisjakt provides which is built exclusively on the B2C customers and their traffic volume. The B2C customers Prisjakt try to Lock In and create barriers to make them continue to use their service. At this point it is
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very interesting to see the difference between the B2B and the B2C customers as Magnus at the same time argues that Switching Costs does not work in the B2B environment. According to Magnus they do not try to Lock In the B2B customer in the same manner as the B2C customer because it does not work in the B2B environment.
5.4 Trust
When we consider the issues relating to trust all respondents see it as a very important factor on the internet, however as we are not doing a comparative study we cannot say if this is more specific to companies operating on the internet rather than bricks and mortar businesses. But we have seen that in order to gain trust it must be developed from the outset and that the company itself must be transparent. Further to this it has been seen as more than just trust, but a faith that the company is not a whimsical operation, but a solid company that will be around for some time, thus size can also play a part in developing trust. According to the respondents, trust is not just about having 'trust', but in order to develop trust certain criteria influence how it develops. For example Henrik from Discshop discusses the benefits to trust when a customer has a positive experience, Anders goes so far as saying that it is not just about the customer being satisfied anymore. Therefore we see that trust transcends its simple meaning when considering this aspect of influencing strategies in forming Psychological Switching Costs on the internet. Thus the companies interviewed see a distinctive need to develop trust in order to form long lasting relationships and this is in line with Reichheld & Schefter (2000).
5.5 First Mover Advantage
With regard to First Mover Advantages we saw differences between the respondents where most of them argued that it had little significance in relation to customer retention and that it is no value in itself to be a First Mover. The consensus was however, that if you have a rather narrow view of your customer base in the sense that you focus on Early Adopters and people who are at the forefront of technology, being a First Mover might be a good strategy where you are able to Lock In your customers. However, when having a broader view of who the customer is, the respondent had differing opinions on the actual advantages of being a First Mover. Simon touches upon one interesting aspect of First Mover Advantages while arguing that they are the only mover for the inexperienced users that do not know of any competitors. This we see is a good example of where an organisation has been able to enter an unexploited market segment. Furthermore, we find it interesting that Simon does not feel that this is giving them much of a First Mover Advantage. This is especially interesting when Simon discusses their E-book and their pedagogical problem to educate the customers as this education is focused mainly on RebelBettings own service rather than the phenomenon of arbitrage betting as a whole.
5.6 Interface Design
When considering Interface Design it was apparent that all respondents perceived simplicity to be the most important aspect of the interface design. According to the respondents it is extremely important that the site is simple and easy to use. The information that the customers are looking for must be easy to find and even the most inexperienced internet user must be able to use the service. Furthermore, it was interesting to see the connection between simple design and the positive sides of Switching Costs and Commitment where the customer get an
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increased perceived control and freedom of choice thus increasing Affective Commitment and the customer's desire to stay with the relationship to the organisation. Furthermore, the influence of the internet as a market place on both the interface design as well on the organisations strategies are realised as the respondents describe the internet as a difficult environment to do business that requires transparency and simplicity for the business to survive in the long run.
5.7 The Value Chain
When looking at the issues relating to the Value Chain the respondents find that it is important to be transparent in what they do. As the Value Chain can influence the relationship with the customer (Day et al., 2008, p. 40) by being transparent this relationship can develop. Simon for example describes their internet website as a tool by which they communicate with the customers, this we argue shows that even the website can be seen as a support activity that gives transparency to what it is that they actually sell. Respondent X describes the importance of having a site that is technologically advanced but simple to use, this we also see as a support activities that develops the relationship between customer and business because by making the site simple to use the customer may become at ease with the service of the site and thus be more willing to be a purchasing customer.
5.8 Competitive Advantage
We argue that Competitive Advantages are gained by these companies through other factors than price and these include developing the relationship between customer and business. Thus when considering these aspects, Psychological Switching Costs play an important part in Locking in the customer. Henrik is fixated on the 3 S's of his company and how this is what gives them a very strong edge over their competitors, implying that through the 3 S's customers are more loyal. Henrik is not the only one that recognises the significance of other factors than price, this we see is in line with Reichheld & Schefter (2000, p. 110) where customers value convenience more. In regard to developing a Competitive Advantage, it also pays to be flexible in being able to adapt strategies that can influence the customers that use the website. This flexibility can help develop a relationship with the customer by being able to offer a better service because the company can adapt to the wants of the customer. Here we see the connection between Dynamic Capabilities, Flexibility and Agility as describe in Figure 11. An example may be RebelBetting's user friendly auto-surf function which they have seen is a unique function which helps to Lock In the customer because of the extra service that they provide. Another aspect that has been discussed by the respondents is that size can play an important role in Locking in customers to a company. This is in line with Balabanis et al., (2006, p. 217) where it is quite often easier to stick with what is known so customers become loyal to the biggest or most prominent (through marketing, given as an example by Simon).
5.9 Contribution to Theory
As stated in Section 2.5 the idea of this study has been to develop, modify or adjust existing theory, thus from the qualitative data that we have collected we have been able to develop the following outcomes.
5.9.1 Communication Influences Dynamic Capabilities
When concerning the ability for companies on the internet to Lock In customers we established that the companies found that through communicating with customers helps them
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to develop strategies in Locking in the customer because the companies develop according to the demands of the customer which inevitably makes the customer more loyal. This ability to communicate with the customer we argue is important as it is a lot more specific to companies on the internet where information is a lot more readily available. By this we mean that a bricks and mortar business has to collect information by possibly doing surveys on customers as they enter the store, whereas the company operating on the internet has the ability to watch the behaviour of the customers through the internet site. Also as stated by other respondents they have the ability to communicate directly through forums and such to discuss what customers' value and thus change things that influence customer loyalty.
5.9.2 Flexibility and Agility
From the data collected from the respondents we recognised a significant influence of the company's ability to be flexible (speed at which the company changes their strategy) and agile (the actual ability to change). And if the companies can respond to customers' wants quickly they gain a Competitive Advantage over the competitors in relation to influencing Psychological Switching Costs.
5.9.3 Transparency
Another factor that was seen by the respondents to influence how they may develop relationships with customer was the importance of being transparent in all that they do as this creates a level of trust. When considering the Value Chain we interpret transparency from the respondents that the activities that are involved throughout the business are visible to customers and by doing this they develop a relationship.
5.9.4 Are Companies based on the internet using Psychological Switching Costs as a Strategy to Lock In the customers, and if so how?
From this study we have been able to see that companies that operate on the internet do attempt to Lock In Customers. The realisation has come from the issues relating to these companies forming Positive Psychological Switching Costs to influence customers: Communication between customer and business is a lot more viable on the internet as it is a communication medium itself, and from this the businesses can develop the relationship between the two parties thus cementing the relationship, thus a Lock In effect. Transparency in what the companies do helps to develop trust, and transparency in the support activities, where the website can be seen as such an activity. These actions help in binding the customer to the company and thus a Lock In effect. Flexibility in the ability to change strategies. This is seen as a direct Competitive Advantage. But also having an influence on developing the Switching Costs barriers by expanding the competences of the individual company partly through the ability to communicate Agility in actually changing those strategies. This is seen as a direct Competitive Advantage. But also having an influence on developing the Switching Costs barriersby expanding the competences of the individual company partly through the ability to communicate We argue that we have found a significant number of examples where this is the case. The influence of online business operating in such a rapid growth environment means that the strategic decisions that are made can greatly influence the effectiveness of the business (Perrott, 2005, p. 82). We have seen different approaches to how this effect can be dampened,
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either by Locking in customers through a better service or developing services (such as RebelBetting's E-book) in order to negate the need to be that dynamic. However we do not say that the companies that were interviewed are not dynamic, as one of the most important points raised was the need to be communicative with customers and being able to develop strategy either to meet the needs of the customers or developing strategies on a daily basis as the customers' needs change (Company X watching the behaviour over time of customers using their site). And as Dynamic Capabilities are seen as being able to identify and seize opportunities in order to stay on the competitive edge (Augier & Teece, 2009, p. 410) we see that these companies do attempt this. We argue that these companies Core Competences are distinctive in contributing to the firms' value (Coman & Ronen (2009, p. 5678) to a significant extent through the ability to communicate with their customers and develop strategies and adapt them, that makes the customer become more loyal to the company, in a positive manner. Thus Companies based on the internet using Psychological Switching Costs are using strategies to Lock In their customers. However in light of this information we do not attempt to generalise for all companies that operate on the internet. Further to this it is on the words of the respondents that they say what gives them a Competitive Advantage; as we make no attempt to define if these companies do actually have a Competitive Advantage. But we do see that from this qualitative study a quantitative study may be conducted to cement these findings and see if they may be more generalisable.
5.10 Further studies
From our qualitative study we have gained a significant understanding within the social context of strategies influencing Psychological Switching Costs on the internet. However, there is room to develop the understanding of the research question by completing a quantitative study showing how customers may perceive Psychological Switching Costs on the internet. Further to this, because of the way our research was performed, we see that a deeper study of a specific market within businesses that operate on the internet can contribute to a deeper understanding of the influences of Psychological Switching Costs. Another issue when considering qualitative study, is that a deeper level of interview with one of the respondents to gain a better understanding of the core competences that make the company competitive with regard to Psychological Switching Costs could be beneficial.
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6. Quality Criteria
In this final chapter we will discuss the quality of this study as well as give the reader the criteria from which they may judge the credibility of this thesis.
6.1 Limitations
From the outset, we as authors spent a lot of time discussing this research and the purpose of this research so that we could have a clear understanding of what it was we were attempting to achieve. This has meant however that in order to complete this study we have had to focus our research on companies that have been willing to give us the time for interviews. While all companies do operate on the internet we were unable to concentrate on one specific business 'branch' but rather a mix. The underlying factor however being that these businesses are internet based and we are not attempting to generalize this study, but gain an understanding of what or how strategies are used to influence Psychological Switching Costs by companies that operate on the internet. Another influence being that while we have attempted a mixed method approach to this study we have used the term 'Switching Costs' and 'Lock In' as positive terms in how companies create relationships with customers and how the keep long term relationships. However it was felt that these terms have confused our respondents when the interviews were held, we did try to give a clear picture of these terms (sending a cover letter with explanations of Switching Costs, See Appendix 1), but found that respondents responded negatively to them. Often saying that they do not attempt to 'create barriers' for their customers, however this gave way to some contradiction to our understanding of these factors when the respondents would discuss how they form relationships. We felt that only one respondent had grasped our meaning of 'Lock In' as they were not afraid to use the term in discussing how they created these relationships. Therefore in an attempt to clarify such details we added Section 1.5 in the Introduction of this thesis. We have also attempted to discuss where the companies involved in this study have discussed creating relationships rather than having a 'Lock In' or high 'Switching Costs'. Another point that we must raise is that again because we have attempted a mixed method study we may not have covered all areas of theory that are relevant to completing this study more effectively. An example being that since completing the study we have been made aware of, by the respondents, the importance of being 'agile' in the business world and that this is an important concept that we did not discuss in great detail. However we see that the literature that was collected is of substantial size and is of good quality so as to represent a good base in which we could evaluate our findings compared to the theoretical framework. The way in which we selected our sample of companies, as discussed in Section 2.6 was done from a subjective approach in which we discussed what companies operate on the internet and may try to influence the customer relationship through strategies that do not revolve around price. We are aware that a more objective approach could have been done in choosing companies, but due to the nature of the study and the responses we got from the companies from the initial contact we felt that these five were acceptable. Going on from this were are aware that price is a significant factor when purchasing goods or services in any environment, but we felt that there are other influences that keep a customer going back to the same establishment time after time. Nonetheless it is we who develop this as an important factor on the internet and therefore this can bring into question the usefulness
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of this study as they may well be other factors that may have an influence. We argue however that our thesis represents a good grounding for why Psychological Switching Costs are of value to companies operating on the internet. Another issue pertained to our study is that we cannot clearly state that any of our respondents companies were market leaders. Even though some of the respondents said they were, we cannot back this up with unbiased evidence as we only have the words of the respondents. In this sense the respondents may not be able to give a completely truthful account as they can be biased towards their own company. However, we see that it does not reflect significantly on this research and through the transparent nature of our study were we have provided quotes to allow the reader to judge for themselves. Finally we would like to raise the issue of language, where the meaning of what has been said in Swedish may have been lost in translation, we have tried to counter this by making available the quotes and remarks in Swedish. They are to be found in Appendix 2 where each section corresponds to a specific section in the Empirics and numbered so that the reader can judge for themselves the meaning of the respondents (if they can speak Swedish).
6.2 Validity equals Credibility
When completing a qualitative study, credibility is seen as taking the place of validity because in a qualitative study the information collected is about understanding a social reality at a specific time thus it cannot be proven to be valid as respondents' understandings may have changed. Therefore credibility allows for a belief in us the researchers to follow good practice guidelines (Bryman, 2008, p. 377). We have therefore provided our respondents with a copy of their transcribed interview and given them a week to respond to any misgiving in misinterpretation of what they have said so as to validate what they have said. Further to this we have included the quotes used in this study so that the reader may judge if the empirical data matches that, that the respondent's have said, we can also make available on request the full transcribe interviews. Another aspects of validity includes transferability, which is where, in qualitative research, it refers to small contextual grouping, and the ability to make judgments about the possible transferability of findings. Accordingly, it is therefore important to produce a rich account of the details (Bryman, 2008, p. 378). In order to do this we have included in Section 2.7 a detailed description of the businesses and respondents that were interviewed, so that the reader of this thesis can judge for themselves where and how this study can be transferred to a different social setting.
6.3 Reliability equals Dependability
Reliability is the idea that a study once completed by one person (or group) can be repeated when considering a quantitative study. However in a Qualitative such as ours, dependability comes from the openness of the information that has been collected. Thus included in this thesis are the Interview guides, correspondence from us to companies interviewed and the quotes taken from the respondents and if requested the full transcription of all respondents except one which wishes to be anonymous are available. This is in line with Bryman (2008, p. 378/9) allowing all who read this thesis with the opportunity to audit the study. This will be completed by the opposition that is to take place where this thesis will be reviewed by our peers, therefore determining the dependability of this study.
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6.4 Confirmability
In order to give this thesis a degree of objectivity we argue that it is the responsibility of our opponents to see that this is done properly. We as the authors have completed this research in good faith and tried to be as objective as possible, however we must recognise that as we have completed a qualitative study our subjective understanding of the social world has been some influence (Bryman, 2008, p. 379). To combat this we have both been present in all five interviews and discussed thoroughly the data and the meaning of the data so as to add a distinct element of objectivity. Further to this we will have the opportunity for our thesis to be audited by our peers to confirm the fair objectivity of this study.
6.5 Authenticity
When considering the fairness of whether we have a viewpoint that gives a fair representation of the social setting that we have studied. We argue that this has been done from the perspective that all respondents come from companies that operate on the internet and that they do not all compete for the same market segment. Furthermore that all respondents are in positions of high responsibility when forming strategy that may influence Switching Costs and Locking in the customers, and therefore a fair representation of the social setting in which their understanding of the social world is valid. We therefore feel that our research offers a fair view of reality (Bryman, 2008, p. 379) by interviewing prominently placed respondents with regard to the social setting that we are investigating. Also that this will help the reader of this thesis gain a better understanding of what it means to consider Psychological Switching Costs when forming strategy to Lock In the customer to a company that operates on the internet.
6.6 Grounded Analysis
In order to give this thesis further value, we see it as necessary to describe further the development of how we analysed the data that was collected. As discussed in Chapter 2.4 grounded theory was the approach we saw as getting the most out of the data we collected. In order to do this we first familiarised ourselves with the companies themselves as well as going through the collected data repeatedly. The next step was to reflect over the data between ourselves to see if we came to a common understanding of what was being said. After this we categorised the different concepts into the collected theory, in part due to the set-up of the interview questions as well as our understanding of the data. We have also attempted to link the data from each respondent by showing a model of the commonalities between respondent after each section (see figures 4, 5, 6, 7, 8, 9 and 10) as well as an overall analytical conclusion of the particular theoretical concept being analysed. In light of this we were then able develop a holistic understanding of the subject matter at hand which is in line with grounded approach according to Easterby-Smith et al., (2002, p. 122-124). This approach we argue shows that we have analysed the data correctly so as to give a true picture of the respondent's position and what it means to develop strategies that relate to Locking in customers to the respective businesses. Furthermore, as stated previously in this chapter, we offer the interviews that have been transcribed for scrutiny by readers of this thesis. This we argue offers a transparent and valid thesis from which to base future studies within this area.
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7. References
7.1 Scientific Journals
Audia, G. P., Locke, A.E. & Smith G.K. (2000) "The Paradox of Success: an Archival and a Laboratory study of Strategic Persistence following Radical Environmental Change", Academy of Management Journal; Vol. 43; No. 5; 837-853 Augier, M. & Teece, D.J. (2009) "Dynamic Capabilities and the Role of Managers in Business Strategy and Economic Performance", Organisation Science; Vol. 20; No. 2; 410421 Bakos, Y.J. (1997). Reducing Buyer Search Costs: Implications for Electronic Marketplaces. Management Science, 43(12), 1676-1692. Balabanis, G. & Reynolds, N., & Simintiras, A. (2005). Bases of e-store loyalty: Perceived switching barriers and satisfaction. Journal of Business Research, 59, 214-224. Barney, J. (1991) "Firms Resources and Sustained Competitive Advantage", Journal of Management, Vol. 17 No. 1, 99-120 Barreto, I. (2010) "Dynamic Capabilities: A Review of Past Research and an Agenda for the Future", Journal of Management; 36; 256-280 Belicove, E.M. (2009) "A matter of online trust", Entrepreneur, Vol. 37, 8, 35-35 Burnham, T.A., & Frels, J.K., & Mahajan, V. (2003). Consumer Switching Costs: A Typology, Antecedents, and Consequences. Journal of the Academy of Marketing Science, 31(2), 109-126. Chang, H.H., & Chen, S.W. (2008). The impact of customer interface quality, satisfaction and switching costs on e-loyalty: Internet experience as a moderator. Computers in Human Behavior, 24, 2927-2944. Chakravorti, S. (2009) "Extending Customer Relationship Management to the Value Chain Partners for Competitive Advantage", Journal of Relationship Marketing; 8; 299-312 Chen, P.Y, & Hitt, L.M. (2002). Measuring Switching Costs and the Determinants of Customer Retention in Internet-Enabled Businesses: A Study of the Online Brokerage Industry. Information Systems Research, 13(3), 255-274. Coman, A., & Ronen, B. (2009) "Focused SWOT: diagnosing critical strengths and weaknesses", International Journal of Production Research, Vol. 47, No. 20, 5677-5689. D'Aveni, A. Richard. (1995) "Coping with hypercompetition: Utilizing the new 7S's framework", Academy of Management Executive; Vol.9; No. 3; 45-57 D'Aveni, A.R. (1999) "Strategic Supermacy through Disruption and Dominance", Sloan Management Review, Spring; 127-135 Day, M., Magnan, G., Webb, M., & Hughes, J. (2008) "Strategic Supplier Relationship Management", Supply Chain Management Review, Vol.12; No. 3; 40-48
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DeMark, E.F., & Harcourt, R.R. (2004) Companies Must Adopt to the Internet to Survive. The CPA Journal, 74(4), 9. Dolan, S. L., Garcia, S. & Auerbach, A. (2003) "Understanding and Managing Chaos in Organisations", International Journal of Management; Vol. 20 No.1, 23-35 Gefen, D., Benbasat, I., & Pavlou, A. P. (2008) "A Research Agenda for Trust in Online Environments", Journal of Management Information Systems; Vol. 24, No.4, 275-286 Harris, L.C., & Goode, M.M.H. (2004). The four levels of loyalty and the pivotal role of trust: a study of online service dynamics. Journal of Retailing, 80, 139-158. Hayes, J., & Finnegan, P. (2003) "Assessing the of Potential of e-business models: towards a framework for assisting decision-makers", European Journal of Operations Research; 160, 365-379 Ives, B., & Learnmont, P.G. (1984) "The Information System as a Competitive Weapon", Communications of the ACM, Vol.27; Issue 12; p. 1193-1201 Jones, M.A., & Mothersbaugh, D.L., & Beatty, S.E. (2002). Why customers stay: measuring the underlying dimensions of services switching costs and managing their differential strategic outcomes. Journal of Business Research, 55, 441-450. Jones, M.A, & Reynolds, K.E., & Mothersbaugh, D.L., & Beatty, S.E. (2007). The Positive and Negative Effects of Switching Costs on Relational Outcomes. Journal of Service Research, 9(4), 335-355. Kuttner, R. (1998), "The net: a market too perfect for profits", BusinessWeek, Vol. 35 No.77, pp.20 Louvieris, P., Driver, J., & Powell-Perry, J. (2003) "Managing customer behaviour dynamics in the multi-channel e-business environment: Enhancing customer relationships capital in the global hotel industry", Journal of Vacation Marketing; 9; 164; Sage Publication Maddox, K. "CRM to outpace other IT spending" B to B; 3/11/2002, Vol. 87 Issue 3, p2 Perrott, B. (2005) "Towards a manager's model for e-business strategy decision", Journal of General Management; Vol. 30 No. 4, 73-89 Perrott, B. (2006) "Efficiency and effectiveness considerations in determining strategic and operational paths to ebusiness enablement", Data Base Marketing & Customer Strategy Management; Vol. 13, 4, 300-308 Porter, E.M. (1979). "How competitive forces shape strategy", Harvard Business Review; March, Vol. 57 Issue 2, p137-145 Porter, E.M. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. First Free Press Edition 1980. New York: The Free Press Porter, E.M. (2001). Strategy and the Internet. Harvard Business Review, March, 63-78. Porter, E.M. (2008) "The Five Competitive Forces That Shape Strategy", Harvard Business Review; January, Vol. 86 Issue 1, p78-93
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Prahalad, C.K.; Hamel, G. (1990) "The core competence of the corporation", Harvard Business Review, May-June, pp. 79-91 Reichheld, F.F., & Schefter, P. (2000). E-loyalty Your Secret Weapon on the Web. Harvard Business Review, July-August, 105-113. Rolland, E., Patterson, A.R., & Ward, F.K. (2009) "Dynamic Capabilities and e-Service", Canadian Journal of Administrative Sciences, 26(4), 301-315 Sawhney, M., & Zabin, J. (2002) "Managing and Measuring Relational Equity in the Network Economy", Journal of the Academy of Marketing Science; 30; 313-332 Sawhney, M. "Don't just relate - Collaborate" MIT Sloan Management Review; Spring 2002, Vol. 43 Issue 3, p96-96, 1p Teece, J.D. Pisano, G., & Shuen, A. (1997) "Dynamic Capabilities and Strategic Management", Strategic Management Journal; Vol. 18:7; 509-533 Vasudevan, H., & Gaur, S.S., & Shinde, R.K. (2006). Relational Switching Costs, Satisfaction and Commitment A study in the Indian manufacturing context. Asia Pacific Journal of Marketing and Logistics, 18(4), 342-353. Vázquez-Carrasco, R., & Foxall G.R. (2006). Positive vs. negative switching barriers: the influence of service consumers' need for variety. Journal of Consumer Behavior, 5, 367-379. Wang, Y.D., & Emurian, H.H. (2005). An overview of online trust: Concepts, elements, and implications. Computers in Human Behavior, 21, 105-125. Zablah, R.A., Bellenger, N.D., & Johnston, J.W. (2004) "An Evaluation of divergent perspectives on customer relationship management: Towards a common understanding of an emerging phrnomenon", Industrial Marketing Management; 33; 475-489 Zwass, V. (2003) "Electronic Commerce and Organisational Innovation: Aspects and Opportunities", International Journal of Electronic Commerce; Vol.7 No. 3 7-37
7.1 Book References
Bengtsson, M., Eriksson, J., Wåhlin, N. (2009). Ledarskap och strategisk förändring. I S. Jönsson, red. & L. Strannegård, red. Ledarskapsboken. Upplaga 1:1. Malmö: Liber AB. ss. 123-154 Bryman, A. (2008). Social Research Methods. 3rd edition, Oxford University Press, Oxford Bryman, A., & Bell, E. (2003). Business Research Methods. Press
1st
edition, Oxford University
Bryman, A., & Bell, E. (2007). Business Research Methods. 2nd edition, Oxford University Press Creswell, W.J. (2009). Research Design. 7th edition, Sage Publications, Inc. Thousand Oaks, California Easterby-Smith, Mark., Thorpe, Richard., Lowe, Andy., (2002). Management Research. 2nd edition, Sage Publications Ltd. London
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Hair Jr, F.J., Money, H.A., Samouel, P. & Page. M. (2007). Research Methods for Business. West Sussex: John Wiley & Sons Ltd. Johansson-Lindfors, M. (1993). Att Utveckla kunskap, om metodologiska och andra vägval vid samhällsvetenskaplig kunskapsbildning. Studentlitteratur, Lund, Sweden Johnson, G., Scholes, K., & Whittington R. (2008). Exploring Coporate Strategy: 8th edition. Harlow: Prentice Hall Kotler, P., Wong, V., Saunders, J., & Armstrong, G. (2005). Principles of Marketing: 4 th edition. Harlow: Prentice Hall Okin, J.R. (2005). The Internet revolution: the not-for-dummies guide to the history, technology, and use of the Internet. Ironbound Press, Winter Harbor Olivier, P. (2004). Writing your Thesis. Sage Publications, London Saunders, M., Lewis, P., & Thornhill, A. (2007). Research methods for business students. 4th edition, Peason Education Limited, Essex Saunders, M., Lewis, P., & Thornhill, A. (2008). Research methods for business students. 5th edition, Peason Education Limited, Essex
7.2 Other References
Affärsdata [Retrieved 2010-04-29] Discshop [Retrieved 2010-04-29] Discshop (2009). Annual report 2008 [electronic] Available via Affärsdata: [Retrieved 2010-04-29] eBay (2009). Annual report 2008. [electronic] Available via: [Retrieved 2010-02-09] IFPI Digital Music Report (2010) [electronic] Available via: [Retrieved 2010-03-20] Katshing [Retrieved 2010-04-29] Katshing (2009). Annual report 2008. [electronic] Available via Affärsdata: [Retrieved 2010-04-29]
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PayPal [Retrieved 2010-0209] PayPal [Retrieved 2010-02-09] Prisjakt [Retrieved 2010-04-29] Prisjakt (2009). Annual report 2008. [electronic] Available via Affärsdata: [Retrieved 2010-04-29] RebelBetting [Retrieved 2010-04-29] SF Bio AB [Retrieved 2010-03-16] Statistiska Centralbyrån (SCB) [Hämtad 2010-01-21]
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Appendix 1 - Cover letter and interview guide
Cover Letter
The idea of this study is to gain an understanding of how strategically important it is for companies to consider Psychological Switching Costs as opposed to Financial Switching Costs when operating mainly in a virtual world. We are completing our D-Thesis within the area of Management and we are therefore concentrating on the strategic perspective of companies, rather than the Marketing influence. We as students have completed our Bachelor studies in Marketing and Accounting, and now we wish to develop our understanding of the business world from a more strategic perspective. Our interest for this specific area stems from our discussion on what topic that would best represent an interesting and relevant area of study within this field. Through our conversations we noted a difference in thought processes to how we use the internet when going to purchase goods or services. One author is more reluctant and the other is more willing, both in the sense to change supplier and purchase goods. These differences between us brought forth our decision to investigate how Psychological barriers that people experience when considering companies based on the internet are influenced from the strategic perspective of the company. The interview will take between 30 minutes and an hour, and will be held in Swedish. In the final form the material will be translated into English for the purpose of completing the study and we will send you a copy of the transcribe interview, where you will have a week to respond if there are anything you do not agree with. Explanation Competitive Advantage - Companies that implement value creating strategies before other firms or in a more productive manner, to have an advantage. First Mover Advantage - The building of customer loyalty through being the first to develop relationships online Switching Costs- The Psychological and Financial costs of a individual to change from one supplier to another Primary activities- The activities involved in producing the product or service Secondary activities- The activities that are seen as helping in the production process
Introduktionsbrev
Syftet med vår studie är att få en ökad förståelse för hur internetbaserade företag kan använda sin strategiska kapacitet för att behålla sina kunder genom att påverka dess relation och känslomässiga band mellan kund och företag.
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Vi slutför nu vår Magisteruppsats inom Management och fokuserar därmed på organisationen utifrån ett strategiskt perspektiv. Vårt intresse för detta område har sin grund i en diskussion om vad som skulle kunna vara ett relevant och lämpligt ämne att skriva om. Under våra diskussioner insåg vi att det är en markant skillnad mellan oss och våra tankeprocesser när det gäller hur vi använder och konsumerar olika produkter och tjänster på internet. En av oss är mer villig att byta leverantör och köpa saker på internet, medan en av oss är väldigt lojal och motvillig till att byta leverantör och köpa produkter och tjänster på internet. Denna skillnad mellan oss som individer resulterade i att vi beslutade oss för att undersöka hur de psykologiska hinder som människor upplever vid situationer av förändring används av företag baserade på internet ur ett strategiskt perspektiv. Intervjun kommer att ta mellan 30 minuter och en timme samt genomföras på svenska. I sin slutgiltiga form kommer materialet däremot att översättas till engelska. Vi kommer även att skicka de transkriberade intervjuerna till er där ni har en vecka att svara om det är något som inte stämmer överens. Begreppsförklaringar Competitive Advantage - Företag som implementerar värdeskapande strategier före, alternativt på ett mer produktivt sätt, för att få en fördel gentemot sina konkurrenter. First Mover Advantage - Byggandet av kundlojalitet som baseras på att organisationen är först med att utveckla relationer på internet. Switching Costs - De psykologiska och finansiella kostnader som en individ upplever när denne funderar på att byta från en leverantör till en annan. Primary Activities - Aktiviteter som rör själva produktionen av en produkt eller tjänst. Support Activities - Aktiviteter som syftar till att underlätta produktionsprocessen.
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Questions
1. What is (in your opinion) important when developing strategies for doing business on the internet? 1. Vad är i din mening viktigt att ta hänsyn till när man utvecklar strategier för att göra affärer på internet? 2. What is the process of developing strategies for customer retention? ?To what extent are strategies considered? ?How influential are the strategies? ?At what level are the decisions made? ?What type of information do you base your decisions and strategies upon? 2. Hur ser processen ut för att utveckla strategier för att undvika att kunder byter till en annan leverantör? ? I vilken utsträckning beaktas dessa strategier? ?Hur inflytelserika är dessa strategier? ?På vilken nivå fattas beslut om dessa strategier? ?Vilken typ av information ligger till grund för utformningen av dessa strategier och beslut? 3. To what extent is customer retention strategies considered as a part of the decision making process in developing the products and services that you sell? 3. I vilken utsträckning beaktas frågan om hur ni ska kunna behålla befintliga kunder i besluts processen rörande utvecklingen av de produkter och tjänster som ni erbjuder? 4. When considering customer retention/loyalty/locking in of the customer, is it seen as a primary activity (production of the products and services) or support activity (support activities such as HRM) within the organisation? 4. Om vi tänker på att förmå kunderna att stanna kvar hos er och inte byta leverantör. Kan det ses om en Primary Activity (i nivå med produktion av produkter/tjänster) eller kan det ses som en Support Activity (liknar mer stödfunktioner som tex. HRM) inom organisationen? 5. To what extent are these strategies giving your company a competitive advantage over your competitors? ?In what sense has these strategies contributed to the competitive advantage? 5. I vilken utsträckning ger dessa strategier för att behålla kunder er en fördel gentemot era konkurrenter? ? På vilket sätt har dessa strategier bidragit till detta försprång gentemot era konkurrenter? 6. In what ways have these strategies affected the organisation? 6. På vilket sätt har dessa strategier påverkat er organisation? 7. When considering changes in the business environment, how do you implement strategies to discover and adapt the organisation to these changes? ? To what extent are they considered? ? How influential are they? ? At what level are the decisions made? ? If this is done, does the company see this as giving them a competitive advantage?
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7. Om vi ser till förändingar i företagsklimatet och dess omgivning, hur använder ni strategier för att upptäcka och anpassa er till förändingar i organisationens omgivning? ?I vilken utsträckning beaktas dessa strategier? ?Hur inflytelserika är strategierna? ?På vilken nivå fattas denna typ av beslut? ?Om dessa strategier att upptäcka och anpassa sig till förändringar existerar, ser ni det som att det ger er en fördel över era konkurrenter och i så fall på vilket sätt? 8. Why do customers return to your website? 8. Varför tror ni kunder återvänder till er hemsida? 9. Do you see a competitive advantage more so in the support activities of your offerings that make it more convenient or in price? 9. Upplever du att den fördel ni besitter gentemot era konkurrenter har sin grund i de aktiviteter som gör det mer bekvämt för kunden att handla hos er eller att det har sin grund i priset ni erbjuder? 10. Is it important for your company to be the biggest and most well known in your field? ?From this perspective, do you try and influence customer loyalty? 10. Är det viktigt för ert företag att vara det största och mest välkända företaget i er bransch? ?Från detta storleksperspektiv, försöker ni aktivt påverka kundlojaliteten och på vilket sätt påverkar organisationens storlek lojaliteten hos era kunder? 11. Can you point out the distinctive attributes of your firm which keep you one step ahead of your competitors? 11. Har ni några konkreta attribut som gör att er organisation kan behålla dess position framför sina konkurrenter? 12. To what extent does Switching Costs give your company competitive advantage? ? are these switching costs that you consider on a financial level or a psychological level? ?In what ways do you consider Switching Costs in the process of strategy making? 12. I vilken utsträckning ger Switching Costs er organisation en fördel gentemot era konkurrenter? ?Är dessa Switching Costs som ni beaktar av ett finansiellt eller psykologiskt slag? ?På vilka sätt beaktas Switching Costs i strategiskapandeprocessen? 13. What is the effect for the organisation in being a first mover? Is it important to be a first mover? Why? ?do you see any advantages or disadvantages of being a first mover? 13. På vilket sätt påverkar det organisationen att vara en First Mover? Är det viktigt att vara en First Mover och varför? ? Ser du några fördelar respektive nackdelar med att vara First Mover? 14. Do you attempt to be a first mover? What are the advantages? Do you see any effects on customer loyalty as a consequence of this? 14. Försöker ni vara en First Mover? ?Ser du något samband mellan kundlojalitet och att vara First Mover? 15. How do technological advancements influence your ability to attract customers? 15. På vilket sätt påverkar teknologiska framsteg er förmåga att attrahera kunder? 85
16. How do you experience a First Mover Advantage affect customers willingness to change supplier from a psychological perspective? 16. Hur upplever du att ett First Mover Advantage påverkar kundernas strävan att byta leverantör ur ett psykologiskt perspektiv? 17. Is there a natural evolution of your company when concerning changes in the environment in which you act? 17. Upplever du att organisationen utvecklats på ett naturligt sätt när man tänker på förändingar i den miljö som organisationen agerar? 18. What role does trust play for your organisation and your strategies when developing relationships with clients on the internet? 18. Vilken roll spelar tillit och förtroende för er organisation och dess strategier vid utveckling av relationer till era kunder på internet? 19. How is trust developed from a strategic perspective? 19. Hur utvecklas kundens tillit/förtroende till organisationen från ett strategiskt perspektiv? 20. From your perspective, how important is trust between customer and organisation and why? 20. Utifrån ert perspektiv, hur viktigt är tillit/förtroende mellan kunden och organisationen på internet och varför? 21. What role does the interface design play in your organisation (strategy wise) and what aspects are important in a good design? ?In what ways does the interface design affect customer retention? 21. Vilken roll spelar utformning och design av er sidas interface från ett strategiskt perspektiv och vilka aspekter är viktiga i en bra design? ? På vilket sätt påverkar designen kunderna och dess val att komma tillbaka till er sida? 22. In your view, is it more important to form financial barriers or psychological barriers to achieve customer retention? Why? 23. Från ditt perspektiv, är det viktigare att forma finansiella eller psykologiska barriärer för att kunna behålla kunder? Varför?
23. How do you develop relationships with your customers? How important is this relationship? ?What is the goal with building relationships to the customers? 23. Hur utvecklas relationen till kunden på bästa sätt? Hur viktig är denna relation? ? Vad är målsättningen med att bygga dessa relationer till kunden? 24. When developing strategies for Switching Costs, do you consider as more important 1. Added value (gains or losses for the customer if they were to switch from your company) and relationships or 2. Locking in (influencing the perceived ability for the customer to switch from your company) the customers?
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24. När ni utvecklar strategier som rör Switching Costs, vad anser ni vara viktigast? 1. Att skapa mervärde (Fördelar eller nackdelar för kunden om han/hon bestämde sig för att byta leverantör) och relationer eller 2. "Locking in" (påverka hur kunden uppfattar dess möjlighet att byta leverantör)? 25. Has it been a natural part of the process for you to develop strategies on the internet concerning Switching Costs? 25. Har det varit en naturlig del i processen för er organisation att utveckla strategier på internet som rör Switching Costs? 26. Can you point out any support activities that develop your relationship and Lock In the customer through forming psychological barriers? 26. Kan du beskriva några Support Activities som utvecklar relationen samt "låser in" kunden till er organisation genom att skapa psykologiska hinder? 27. In what sense is it important for management to understand the environment in which they operate? 27. På vilket sätt är det viktigt för ledningen att förstå den affärsmässiga miljön som omsluter organisationen? 28. To what extent is it important to develop emotional switching costs? 28. I vilken utsträckning är det viktigt att utveckla psykologiska Switching Costs? 29. In what ways do the activities that create value to your products/services have the ability to influence customer relationships? 29. På vilket sätt påverkar de aktiviteter som genererar värde till era produkter och tjänster er relation till kunden?
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Appendix 2 - Quotes in original language
Strategy and Dynamic Capabilities Discshop 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. "3 S som har byggt Discshops framgång" "det är ingenting annat än postorder. Men med en digital catalog". "Det första S:et och det är också det viktigaste S:et, och det handlar om kunden och det handlar om service" "sofistikerad enkelhet" "Hos oss så behöver du inte tex. ett användarnamn som du måste komma ihåg" "tredje S:et är ju då sortiment" Därför har vi 17000 filmer i vårt sortiment, vi har 3-4000 spel, etcetera etcetera. Så att kunden verkligen kan mätta sitt lystmäte. Och det är också där vi ser att vi har en otrolig konkurrensfördel "Alltså service är ju ett av dom bästa sätten för att skapa lojalitet" "för det första vill vi ju skapa en positiv upplevelse för kunden, från A till Ö som egentligen omfattar alla dom tre S:en som jag nämnde där, att dom vill komma tillbaka. Det är ju otroligt viktigt" "På internet, om du får för mycket barriärer tidigt i köpprocessen, då går du lätt vidare någon annanstans för det är ju bara ett knapptryck bort. Och genom att ha bra service då skapar du den absolut starkaste lojalitet man kan tänka sig" "Det är A och O. Alltså, jag menar det är ju så otroligt snabbrörlig bransch och lutar du dig tillbaka och inte är med noterna då går det väldigt väldigt fort. Så att nä du det är superviktigt". så att kan man på något sätt då så att säga låsa in kunderna så har du mycket vunnet". "Så att viktigt med tydliga riktlinjer, och mallar och processer för hur man sköter verksamheten" "man får nog fokusera lite på framgångskriterierna kring service och värna om dom kunderna man har" Katshing 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. "?internet är brutalt, det är oerhört brutalt och om man inte fattar och accepterar dom spelreglerna så kommer man bli överkörd" "det finns inga hemligheter som du kan dölja utan din affärside måste tåla att synas och dina strategier måste tåla att vara öppna" "Att man måste acceptera att kunden har ett annat krav på kommunikation ? så måste du verkligen lita på motparten. Och då måste du veta vad som finns på andra sidan" "inte fastna i långa processer, utan ha väldig snabbhet i dom" "utefter hur verkligheten förändras så är kravet där vi sätter en strategi" "som aldrig kan nyttjas" "Lever man mycket här i nuet så är man inte lika bra på att tänka 1, 2, och 3 år framåt. Det är jäkligt svårt alltså" "central i allt vi gör" "fokus för oss var att leverera kundnytta och att hela tiden no matter what se till att kunderna trivs med det vi gör" "Sveriges bästa näthandlare och dom har en kundtjänst som du inte ens kan ringa till. Så det är inte, det var ett annat val" "Jaja, den är helt primär" "viktigt det är att inte tappa en kund" "utan den så fattar man fel beslut rätt igenom" "därmed är det lätt för kunden att välja bort den som inte har tex. en bra kundtjänst eller tex. hög tillgänglighet eller vad det kan nu vara" "vi vill vara den absolut bästa friaren till kunden hela tiden" 88
11. 12. 13. 14.
RebelBetting 1. 2. 3. 4. 5. 6. 7. 8. 9. "Det som skiljer är väl mycket att man har ett mycket mer opersonligt bemötande man har med kunden" "väldigt viktigt hur man kommunicerar med kunderna" "snabbhet är väldigt viktigt på webben" "bounce rate" "Man måste direkt dom kommer till sidan måste man få in dom, få dom intresserade" "Så att det är väldigt viktigt hur man kommunicerar, att man liksom har bra marknadsföringsmaterial, bra copy på sidan så att dom lockas att läsa mer" "Där är det ju då ännu viktigare att vara öppen och ärlig och verkligen, inte liksom försöka dölja någonting som väldigt många gör" "skapa kundlojalitet" "dom signar upp för ett nyhetsbrev, man får deras email så kan man ju då fortsätta att bearbeta den här kunden långt efter, han kanske bara kommer till sidan, signar upp på nyhetsbrevet och glömmer bort det. Då kan man ju skicka ett mail om en månad och påminna han eller berätta någon nyhet eller göra någonting som gör att han kanske kommer tillbaka då. Det är en möjlighet som är svårare när man har en fysisk butik då. Så det gäller ju att, ja det är ju sådana saker som man tänker på hela tiden" "Så att tänka som kunden är viktigt" "Att bygga lojalitet långsiktigt?att skapa förtroende också" "priset en viktig konkurrensfördel såklart som gör att vi kan behålla kunderna. Men sen är det ju också funktionaliteten, då alltså värdet som kunden får" "men vi har lite grejjer planerade. Till exempel att man kan, det är ju en prenumerationstjänst vi har så det är väldigt viktigt med återköp då, att behålla kunderna" "För att just nu försöker vi lägga ungefär lika mycket på marknadsföring och kundlojalitet som vi gör i utveckling" "släppt en E-book tex där vi utbildar kunderna hur tjänsten fungerar som är såklart då inriktad mot just vår product." "En annan sån sak är att vi försöker hålla en snabb utvecklingstakt. Och vi försöker även peka på att vi har en snabb utvecklingstakt så att kunderna blir medvetna om det." "Och sen finns det vissa tekniska funktioner som det här autosurf som är lite grann av vår unika selling point liksom som ingen annan har" Just eftersom det är en komplex produkt så har det dragit till sig en målgrupp som är ganska datakunniga" "Men för att bredda den marknaden så försöker vi vara ganska användarvänliga" "Så det är också en sån, som säkert kommer att bidra till lock-in i framtiden. När dom har vant sig med att sitta vid det här användarvänliga, trevliga gränssnittet så kommer dom inte att vilja byta till konkurrenten även om den har mer kvantitet då till exempel." Prisjakt 1. "det är att utgå från vad konsumenten eller kunden verkligen önskar" 2. "påverkas alltså att den är kommunikativ. Att du låter kunden förändra strategin under tiden som du jobbar" 3. "Och på så sätt så kan du påverka före kunden väljer att byta till en annan leverantör" 4. "från alla typer och sen så finns där ju en styrelse och en VD och det är ju VD-nivå som dom flesta strategiska beslut tas" 5. "Ja då väljer vi ju att analysera, alltid när en kund slutar så frågar vi ju varför kunden väljer att sluta och så får vi då den informationen. Och sen så väljer vi om den information som butiken då ger i samband med att dom slutar är så relevant så att den leder till en förändring hos oss" 6. "Ja alltså alla tjänster som vi erbjuder bygger ju på att någon vill ha dom. Eller att butiken vill ha dom, så därför så är vi ju helt beroende av att dom uppskattas. Så därför så är vi helt beroende befintliga kunders åsikter i processen" 7. "Utvecklar vi tjänster som ingen vill ha" 89
10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.
8. "Och den påverkar ju inte bara dom som sitter på support och säljer och det. Utan det påverkar också dom tekniska lösningarna och dom strategiska besluten i företaget." 9. "Nej. Vi försöker väl undvika att låsa in kunden helt enkelt" 10. "Därför så binder, så försöker vi inte låsa in dom på något sätt utan att skapa en miljö där dom tjänar pengar. På så sätt binda dom till oss" Company X 1. "det som är fördelen med internet är väl egentligen att man kan hitta affärsmodeller som kan väldigt bra,alltså att det är till ganska en låg investering så kan du nå ut till mycket folk" 2. "klar idé om vilket innehåll man ska ha på sidan för att kunna driva mycket trafik" 3. "konvertera till någon form av betalande trafik." 4. "Och sedan tror jag att när man väl har nått en position som en dominerande marknadsplatta, man har hittat den här balansen och med höga volymer både på trafik och annonser, så blir det svårt för någon annan att komma in och ta den positionen." 5. "dels gäller det att ha en bra produkt som funkar, som är snabb, som alltid fungerar" 6. "som rent tekniskt är en snabb och bra produkt, som av andra upplevs bra," 7. "så ligger det väldigt mycket tanke och arbete bakom det, just att det faktiskt ska funka" 8. "fördelen med internet är ju att du har väldigt mycket statistik. Du kan se hur folk rör sig ute på sajten" 9. "tid, se förändringar i beteenden och vad folk är intresserade av och inte intresserade av" 10. "även mer marknadsundersökningar" 11. "Det är ett avgörande egentligen" 12. "det är liksom grundbestämningen i allt vi gör." 13. "Vi försöker få folk att stanna på sajten genom att ge dem en bra anvandarupplevelse när man hamnar i sajten så att de ska komma tillbaka," 14. "vi ser på att vi gör våra kunder nöjda så att dom ska komma tillbaka." "Det är viktigt såklart att fundera på vad kan vi göra för att få folk att komma tillbaka och vad ska vi undvika att göra för att riskera att folk går någon annan stan. " Switching Costs Discshop 1. "Ja men självklart så vill man ju att dom ska vara så höga som möjligt, men det är svårt att I vår värld skapa reella Switching Costs om vi då ska leva upp till vår devis att det ska vara enkelt och service och det ena med det andra." 1. "Det är ju ett sånt tydligt exempel på där vi skapar Switching Costs för kunderna. Dom har poäng hos oss, och samlar man på sig poäng då kan man få en kundkategori, och då i sin tur få bättre priser, bättre fraktvillkor och det ena med det andra så absolut har det varit en del." 2. "Ja men än en gång, det är vitkigt för att skapa lojaliteten. Det är billigare att behålla en lojal kund än att ragga nya, så att kan man på något sätt då så att säga låsa in kunderna så har du mycket vunnet." 3. "genom att ha bra service då skapar du den absolute starkaste lojalitet man kan tänka sig." 4. "för det första vill vi ju skapa en positive upplevelse för kunden [...], att dom vill komma tillbaka. Det är ju otroligt viktigt." 5. "än en gång leverera bästa möjliga service, att dom får leva upp till deras så att säga förväntningar." 6. "Alltså än en gang internet, Switching Costs som du refererar till här är normalt sett inte jättestora. Så att det är snarare en psykologisk Switching Cost [...] men det finns ju inga reella kostnader, det är snarare en alternativ kostnad som man ger upp så att säga." 7. "det skapar mycket djupare rötter med psykologiska barriärer än finansiella. Finansiella kan ändras, du kan få mer eller mindre i lön och då kan ditt beteende förändras. Men jag tror de psykologiska barriärerna är mycket svårare att riva ner."
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Katshing 1. "det är inga stora trösklar, vad vi än tycker om det så är det inte det. Det är ganska enkelt att skifta och sköter vi inte oss så är kunden borta." 2. "Inte så stor fördel kan jag säga" 3. "Vi upplever inte alls att det är ett motstånd längre för det finns så många andra betalningsalternativ, men det har varit en fördel. Men det är ingen hög tröskel längre." 4. "vi vill aldrig hamna I det spåret för det kommer inte tillhöra framtiden, utan vi måste leverera en transparent lösning för alla inblandade parter och förtjäna vår relation till kunden hela tiden. Så på så vis kan man säga att vi pratar om det hela tiden för vi pratar aldrig någonsin om att låsa in en kund." 5. "fullständigt förkastligt sätt att göra affärer på." 6. "Vi skulle kunna lägga store trösklar för kunden men det gör vi absolut inte, utan vi försöker precis tvärt om att ha en strategi som innebär att vi lägger egentligen alla vapen i kundens händer och sen så vill vi leverera högsta möjliga kundvärde för att bli valda varje gång." RebelBetting 1. "Ganska lite just nu faktiskt [?] vi har några punkter som vi försöker jobba med nu för att få mer Lock-in då till exempel recurring payments. Men sen är det väl egentligen det här mer långsiktiga, det här med att skapa förtroende ich lojalitet och att dom tycker det är trevligt att veta att vi kommer med nya versioner hela tiden, vi blir bättre och bättre och kommer snart att gå om dom bästa i branschen." 2. "inte så mycket just nu, just för att, som sagt, tjänsterna är ganska lika än så länge och det är egentligen priset och kvantiteten som är värdefull" 3. "det är ingenting som vi har haft, liksom som en uttalad grej. Däremot så har det väl omedvetet kanske kommit med här och var. [...] vi har ladrig använt termen Switching Costs eller lock-in egentligen för att våra kunder är en ganska illojal målgrupp kan man säga, när dom blivit duktiga och vet att det finns flera konkurrenter, då är det ganska enkelt att byta." 4. "vi får ju mycket mail och vi har även så här livechat och grejjer och där försöker vi också tänka på att hela tiden ge ett så bra intryck som möjligt. För vi vet att även om det här är en kund en kund, eller det kanske inte ens är en kund, det kanske bara är nån som mailar in och frågar. Men vi vet att om vi liksom behandlar den personen som om det var en kund som verkligen, vi svarar inom en timme, då blir domdels förvånade att dom får ett svar. Dom blir förvånade att dom får svar inom en timme, och dom får liksom ett vettigt svar och inte liksom bara ett automatiskt. Då kommer dom att komma ihåg oss och se oss osm ett klart trevligare företag än 99% av dom som dom mailat in till." 5. "Även om priset ör högre så handlar det mycket om att skapa, alltså kundens upplevda värde är ju det som är viktigt, inte vad det står på prislappen. Om han upplever att våran produkt är värd 5000 i månaden, då är den ju värd det för honom. Och då spelar det ingen roll vad den kostar sen." 6. "vi har släppt en E-bok där vi utbildar kunderna hur tjänsten fungerar som är såklart inriktad mot just vår produkt." 7. "En annan sån sak är att vi försöker hålla en snabb utvecklingstakt. Och vi försöker även peka på att vi har en snabb utvecklingstakt så att kunderna blir medvetna om det. [...]Och utan att säga nåt liksom, det vi egentligen säger är att kolla på dom här mossiga konkurrenterna som inte har uppdaterat sin hemsida på ett halvt år." 8. "En av våra unika funktioner lite grann som vi försöker vara bäst på är det här med användarvänlighet. [...] Det ska inte vara så jävla svårt att hålla på med det här. Sitter man med internetbanken och köper aktier så kan man hålla på med det här ungefär. Så det är också en sån, som säkert kommer bidra till lock-in i framtiden." Prisjakt 1. "vi lever ju på att vi har en tjänst som är gratis för konsumenterna. Utan den tjänsten så hade inte företaget existerat. Men vi får ju pengarna via business to business, men vi får trafiken och volymen och kvaliteten i tjänsten via konsumenter." 91
2. "egentligen så beaktas det inte alls. Men vi beaktar det på så sätt att vi har en strategi som gör att det är, det ska vara lätt att testa oss, lätt att gå med och lätt att avsluta hos oss. 3. "Ja problemet I vår bransch är ju att [?] du kan ju ligga hos många samtidigt. När du registrerar dig hos oss så kan du samtidigt registrera dig hos Pricerunner eller hos Kelkoo utan att det är något problem. [...] Så Switching Costs funkar inte i vår bransch." 4. "det ska vara enkelt att testa hur det fungerar så att det ska vara lätt att starta upp och det ska vara lätt att avsluta hos oss." 5. "det viktigaste, det absolute viktigaste är ju att skapa en tjänst så att dom fortfarande kan tjäna pengar. Alltså fördelar då för kunden. Finns inte dom fördelarna så spelar det ingen roll hur bra relation och hur bra det är och vi har ju inte den Switching Costen så att dom byter leverantör utan dom avslutar hos oss." 6. "konsumenten önskar vi ju att binda upp till att använda våra tjänster på olika sätt. Bland annat genom att se till att dom, att det finns möjligheter att påverka tjänsten och att det finns möjlighet att till exempel använda prisbekningsfunktionen [...] sådana funktioner, sådan lösningar är viktiga då för att binda konsumenten, men vi binder inte butiken på samma vis. Så det skiljer sig där. Så på konsumentnivå har vi psykologiska hinder och försöker skapa Switching Costs på det sättet vilken prisjämförelsesajt dom använder." Company X 1. "Det är ju att inte lägga tillgälligt focus på sådant som inte främjar köp och sälj" 2. "underlättar och gör livet enklare för våra köpare och säljare, då skulle vi inte göra det. 3. "På nätet finns alltid ett aktivt val och det finns tjänster som på utsidan ser nästan ut som oss, som är gratis, men den viktigaste barriären för folk det är ju att man vill vara på det stället där det finns en fungerande marknadsplats, där man faktiskt får saker och ting salt och där man hittar det man vill köpa [...] Det är inte det att det kostar våra användare någonting att byta utan det är mer att man upplever att allting fungerar." 4. "Nej det är inte så att vi suttit ner och tänkt att nu ska vi lägga upp en strategi för det här, utan det är sånt som kommit, fallit sig naturligt. Det ligger ju liksom i allt vi gör, men det är inte så att vi har haft så att säga strategiarbete kring det, nej." 5. "för oss är det ju inte viktigt, men som sagt det är ju en, vi ser ju inte på det som barriärer eller Switching Costs. Utan vi ser op att vi gör våra kunder nöjda så att dom ska komma tillbaka. Så att det är ju som sagt det viktigaste. Det är viktigt såklart att fundera på vad kan vi göra för att få folk att komma tillbaka och vad ska vi undvika att göra för att riskera att folk går någon annanstans."
Trust Discshop 1. 2. 3. 4. "Det är A och O" "men trygghet för kunden är en av dom viktigaste parametrarna" "vi försöker marknadsföra att vi är med i trygg e-handel" "lojalitet, alltså om du handlar hos oss och du får en positiv erfarenhet så självklart kommer ditt förtroende och din tillit att öka. Det börjar och slutar med dom 3 S:en liksom, ger du god service så kommer du bygga ett förtroende" Katshing "jag menar när jag var och köpte mina första prylar p internet så var ju tanken från min sida att kommer dom fram så är jag ju nöjd" 2. " att firman finns kvar imorn och att det finns en garantimöjlighet och liknande" 3. "det är ju lite av en process" 4. "kundlivscykeln på så vis att vi har ju en plan hur vi bearbetar varje kund." 1. 92
5. 6.
"ett personligt plan. Och i dom fallen vi lyckas med det så har vi ju en väldigt, väldigt hög lojalitet" "Men idag då har du ju, går du på nätet så brukar vi säga det att kunden är en klick bort från din värsta fiende hela tiden. Är kunde minsta, minsta, osäker på våra uppgifter, våra priser, vårt varumärke så byter dom."
RebelBetting "det är väldigt viktigt att få förtroende och lojalitet redan från början." "att hela tiden då vara öppna" "supporten är ju en sån här viktig grej" "Att man hela tiden hjälper kunderna och har bra kommunikation med dom." "så mycket mer anonym på internet som företag. Så är det nog viktigare än utanför internet för man vet inte vem man pratar med" 6. "Sen är det ju också, folk är ju alltid lite försiktiga med nya sätt." 1. 2. 3. 4. 5. Prisjakt 1. "Mycket stor betydelse, för det måste finnas trovärdighet i den information som står på vår sajt" 2. "har vi en felaktig engenskap på en produkt till exempel så kan kunden själv gå in och säga till att det här, den här information är fel." 3. "Det handlar ju om att man bygger upp en pålitlighet på den datan som vi presenterar" 4. "vi gör det på ett korrekt sätt rent tekniskt så att dom får känna att när dom har skickat in sin information till oss så kommer också informationen visas korrekt utåt. Det är mycket viktigt." Company X 1. "Det tror jag är helt avgörande att man känner tillit" 2. "att vi jobbar väldigt hårt med att hålla hög kvalitet på sajten" 3. även om det är svårt eller omöjligt att plocka bort allt oseriöst på sidan så är det vår strävan," 4. "det är någon som har en dålig upplevelse och inte får den hjälp eller stöd som man behöver, så har man inte samma syn på företaget eller tjänsten framöver," 5. "det gäller att visa på vad vi gör också" 6. "något som vi kommunicerar utåt också"
Interface Design Discshop "vill gärna ha den bredaste och djupaste sidan, men det måste fortfarande vara enkelt. Jag tror enkelhet är ledordet nummer ett. Och inte gå i Boo.com-fällan och göra det komplicerat. Kunden i och med att, som jag sa, åka till K-rauta då kanske du kan leva med att det kanske inte är hundra för du har åkt dit med bilen och det ena med det andra. På internet, det är en knapptryckning bort att gå till en konkurrent så att det måste vara enkelt, överskådligt, ja så få barriärer som möjligt." 2. "Vi vet alla skillnaden mellan att komma in I en välorganiserad fysisk butik till exempel, ja ved det nu kan vara H&M eller komma in på Pelle på hornet där det ser ut som fan helt enkelt. Självklart blir man mycket mer inspirerad av att komma in i en välordnad där det det är snyggt och prydligt, det är prismärkt, kampanjvaror är tydligt uppmärkta etc. Så att sajten, hur kunden tar till sig sajten är superviktigt". 3. "För att dom tycker det är enkelt och smidigt och jag menar att vi vet att våra konkurrenter till och med själ ju väldigt mycket information från oss för dom vet ju att vi har tillförlitlig information och rätt information etc. Det ör ju på samma sätt kunderna, kommer dom hit och dom hittar vad dom söker och det går fort, då är det klart att dom kommer tillbaka."
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Katshing 1. "Jag tror att det är totalt felakigt att resonera på det viset. Lyssnar man på förståsigpåare som Alexander Bard och liknande så säger dom att varumärket på internet och laddningen på varumärket är än viktigare över tid än i den fysiska butiken eller den fysiska verksamheten och jag tror det stämmer." 2. "nummer 1 var det att det skulle sticka ut och synas för att som ny actor har man ofta en liten börs och vi kan inte göra som Mediamarkt, gå med hundratals miljonr eller närmare miljarder I förlust innan det vänder. Dom pengarna har inte vi. Vi måste nå fram mycket snabbare och det måste sticka ut och bryta igen det enorma bruset för det var nummer 1, bryta igenom. Och nummer 2 sen var att förmedla dom värdena som ditt bolag ska stå för. Och det har vi lagt kopiöst mycket tid på att diskutera. [...] vi ska signalera dom värden vårt varumärke ska stå för. Trygghet är en del av det men det finns många delar. Så jag skulle säga att det har en mycket väsentlig del." 3. "Ja det kan påverka, absolut. Valet att komma tillbaka eller valet att inte komma tillbaka hur man nu vänder på det. Det går åt bägge håll." Prisjakt 1. "En bra design är ju en design som gör att det är lätt att hitta, och lätt att använda tjänsten. Lätt att förstå vad man ska välja för att komma in dit man vill och presentera nya funktioner. Så den påverkar ju valet, eller hur kunden går in in på sajten påverkar ju hur vi designar." 2. "Jag tror inte designen I sig är avgörande utan jag tror det är funktionaliteten på sidan som avgör om dom kommer tillbaka eller inte." 3. "efter två bokstäver så kommer allt sökresultatet" Company X 1. "Enkelhet är det viktigaste, att det inte finns för mycket, ja för mycket saker runtomkring som gör användarna förvirrade I hur man ska använda den." 2. "Det svåra är att göra saker enkelt" 3. "även en 75-årig dam ska kunna använda våran tjänst." RebelBetting 1. "Clarity beats persuasion" 2. "Förklara först vad det går ut på, och sen kommer då dom som förstår conceptet att vilja köpa. För att dom som förstår konceptet och är tillräckligt intresserade kommer att gilla idén tillräckligt mycket" 3. "vi försöker hålla en ren och enkel design, fokusera på det som är viktigast på varje sida." 4. "det är nog väldigt få som kommer tillbaka på grund av det tror jag." 5. "förutom när dom stöter på problem eller när dom just håller på att komma igång" First Mover Advantage Discshop 1. "det finns inget egenvärde I att vara first mover" 2. "så jag tror inte det skadar" 3. "det finns ju dom kunderna som också är lite bakåtsträvande och vill att allting ska vara som det har varit, så att det är inte bara till det positiva." 4. "jag ser inte det som en jätte-big deal." 5. "vi såg en möjlighet här och vi är på framkant, jag tror vi är den enda, en av dom få enda återförsäljarna I norden som har en sån lösning." 6. "vi tror att om 2-5 år så kommer det vara en betydande del av vår försäljning och då ligger vi väl så att säga positionerade."
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Katshing 1. "hade vi varit en säker utmanare så hade vi kunnat kopiera med stolthet dom som är bäst, men det är ju inte våran strategi. Så det är oerhört stora krav, både på innovation, på snabbhet och på flexibilitet, och på excellence såklart." 2. "Early adopters, internet användare, pålästa, väldigt intresserade" 3. "har du som oss målet att bli störst, inte bara på nätet utan vi vill bli större i den fysiska butiken så måste vi vinna coola snubben i storstockholm, småbarnspappan i Sveg, eller pensionären. [...] Och det är klart att då måste du sträva utanför den kategorin." Prisjakt 1. "det är mycket viktigt, det finns ett intresse för att testa nya lösningar och det är många på nätet som tycker det är jätteroligt att följa med på det som är nytt och spännande." 2. "Så inom tekniska områden så är det otroligt viktigt att vi är först." 3. "om en teknisk lösning finns som vi inte använder så har vi fått kritik för det." 4. "Inte som vi har mätt, alltså vi tror ju att den finns där, men vi har inte matt det direct. Men vi tror ju att det finns." 5. "det finns ju en känsla av att använda en tjänst där dom ligger långt frame rent tekniskt så att man själv ligger långt frame rent tekniskt och på så sätt skapar man en identitet med kunden på att, at than/hon är också tekniskt långt fram genom att dom använder en sajt eller tjänst som är tekniskt långt frame." Company X 1. "det var en väldig fördel för "företag X" att vara först" 2. "vi har kommit in på väldigt många marknader där det redan finns aktörer och det visar sig att det funkar där också." 3. "vi kan ju ibland kanske få kritik för att utsidan ser väldigt lik ut och det är en medveten strategi, att det är väldigt små förändringar som görs men att vi hela tiden utvecklas, att hela tiden ligga i framkant och bli ännu mer effektiva." 4. "De som handlar tjänster på internet under många år och som haft en bra upplevelse är väl lite lojala skulle jag tro." 5. "Det är där man hittar det man söker eller där man kan sälja det man kan bli av med som är avgörande." RebelBetting 1. "Teknologiskt har vi varit en First Mover I några aspekter då. Vi har som exempel, gick vi över till Cloud Server-tekniken så fort vi kunde egentligen. [...] Alltså som en liten organisation som inte har så mycket pengar så kan man inte ha en enorm serverpark som sitter och hämtar odds, utan vi har fått lösa det där, liksom hitta på kreativa lösningar då." 2. "Just nu så är det nog inte så viktigt som i andra branscher just för att det är en ganska okänd företeelse än så länge." 3. "den här proffsdelen är en ganska liten del av våra kunder, dom flesta av våra kunder är liksom nybörjare. Och där har det nästan ingen betydelse för att dom känner inte till att det finns flera movers, utan vi är the first mover, den enda liksom." Value Chain Discshop 1. 2. 3. "Ja men då service då har du svaret på frågan" "tydliga riktlinjer, vad dom förväntas göra," "hur man förväntas ta hand om kundkontakten, servicenivån. Nyckeltalsuppföljning vad gäller lager, kundtjänst." 95
4. "Ja, i och med att internet är ju så otroligt transparent så måste man ju hela tiden göra allting till punkt och pricka med kvaliteten," Katshing 1. "Näe utan dom har vi ingen roll kan jag säga. Det är en ganska betydande del milt uttryckt, alltså man måste komma ihåg att vi har kanske en 250 konkurrenter idag. Och skillnaden av kunderna upplevs inte alltid stora" 2. "utan vi måste leverera en transparent lösning för alla inblandade parter och förtjäna vår relation till kunden hela tiden." RebelBetting 1. "släppt en E-book" 2. "snabb utvecklingstakt" 3. "försöker vara bäst på är det här med användarvänlighet" 4. "en av dom här aktiviteterna som genererar värde det är ju liksom kundlojalitet och förtroende" Prisjakt 1. "Vi försöker undvika psykologiska hinder för att sen så är det ju så att jag vet så kan det ju hända att kunden eller butikerna känner att det finns psykologiska hinder som inte vi ser eller upplever." 2. "det finns möjligheter att påverka tjänsten och att det finns möjlighet att, prisbevaknings funktionen som gör att dom får information om oss." 3. "Prisbevaking är att du lägger, säg att du vill köpa en viss produkt till ett visst pris så ger vi information när den produkten finns att köpa till det priset. Och sådana funktioner, sådana lösningar är viktiga då för att binda konsumenten," 4. "Men vi lever ju på att vi har en tjänst som är gratis för kosnumenterna. Utan den tjänsten så hade inte det här företaget existerat. Men vi får ju pengarna via B2B, men vi får trafiken och volymen och kvaliteten i tjänsten via konsumenter." Company X 1. "Nej det är inte så att vi suttit ner och tänkt att nu ska vi lägga upp en strategi för det här, utan det är sånt som kommit, fallit sig naturligt. Det ligger ju liksom i allt vi gör, men det är inte så att vi har haft så att säga strategiarbete kring det," 2. "Inte några konkreta aktiviteter som jag kan komma på faktiskt." 3. "inga sådana lojalitetsprogram" 4. "men om vi strävar efter enkelhet så påverkar det förhoppningsvis användarna att dom tycker att det är enkelt att använda tjänsten också. Competitive Advantage Discshop 1. 2. 3. 4. 5. "vi tror ju väldigt mycket på dom här 3 S:en och så länge vi gör dom bättre än våra konkurrenter så tror jag att vi kommer att kunna hävda oss" Men vi tror ju att det här ger oss en väldigt, väldigt stark edge gentemot våra konkurrenter." "alla har förståelse här för vad som är viktigt" "Så att allting ska ju ha kunden i centrum "nya trender som vi bör hoppa på eller några nya trender som vi förväntar oss kommer bli stora. Jag menar vi ett sånt lysande exempel är ju mobilen tex. När vi förra året insåg att mobil, alltså M-commerce istället för E-commerce, kommer ju någon gång förr eller senare att slå. Och då vill vi ju vara på framkant rent teknologiskt så att vi tog ju fram en fullskalig mobil plattform så att man kan handla via mobilen." 96
6. "det är att erbjuda bra service för då kommer kunderna tillbaka" 7. "för att jag tror inte att pris är i dagsläget hos oss är vår prioritet nummer 1. vill du handla billigare då kan du göra det på Elgiganten eller liknande, men vill du få det bekvämt, vill du ha det i din brevlåda nästa dag, smidig köpprocess. Då är vi i rätt butik." Katshing 1. "genererar bäst värde för er idag vilken som ni upplever är den bästa aktören, kanske inte den största men den bästa. Då skulle 100% svara Katshing," 2. "Alltså om vi tar näthandeln så har den gått från att bara leverera pris till pris-kvalitet, pris-kvalitetvarumärke och trygghet. Så kundkraven har ökat mycket, mycket snabbare än i fysisk handel" 3. "Det har att göra med vad vi fokuserar på. För oss kan man väl säga då att ha en god upplevd kundkvalitet i alla dess former" 4. "det främsta skälet är ju såklart att man är nöjd med sin leverans." 5. "Rik eller fattig vill ju handla till ett bra pris". 6. "Så jag skulle säga att pris är bara en hygienfaktor, det är inte mer än så" 7. "kundtjänst tidigare. Hennes enda uppgift är att arbeta mot befintliga kunder och att ha relevant och strukturerad kommunikation med varje enskild individ. För det hade vi aldrig haft muskler till för ett år sedan, men det har vi nu. Vi är fler personer på våran kundtjänst, det gör att vi kan ha kortare svarstider, bättre öppettider, högre tillgänglighet." 8. "har ingen jättehög tröskel i det avseendet, det tycker jag inte att vi har. Vi skulle gärna haft en högre tröskel såklart, men samtidigt så vill vi vara kundens bästa vän hela tiden och i det ligger ju det bästa för kunden och därmed sänker vi tröskeln också." 9. "strategi som innebär att vi lägger egentligen alla vapen i kundens händer och sen så vill vi leverera högsta möjliga kundvärde för att bli valda varje gång." RebelBetting 1. "Ja det är lite svårt att veta för våra konkurrenter är så jävla hemliga." 2. "det finns ju Communitys där det diskuteras då våra produkter och våra konkurrenters produkter och där har vi ju märkt att vi har börjat få ganska bra rykte där" 3. "Men samtidigt som vi bygger på funktionaliteten och bygger på värdet så har ju vi kanske då, kan få en extra boost genom lojaliteten och supporten och liksom, så att det är ju det vi hoppas på." 4. "Men eftersom vi försöker hålla liksom så bra kommunikation med kunderna som möjligt så brukar vi upptäcka det här ganska fort. Och då göra prioriteringar på kort sikt för att anpassa oss efter det här. Så jag misstänker att vi anpassar oss ganska fort jämfört med större företag." 5. "Alltså hemsidan i sig är ju inte, hemsidan används ju som en marknadsföringskanal och kanske lite grann som support sen också då." 6. "Just nu tror jag det är mer priset faktiskt. För just nu, eller produkterna är ganska lika dom som finns på marknaden då så att det är ganska lätt att byta," 7. "Vi har ju några funktioner som är unika som vi hoppas att kunderna kommer att vänja sig med och värdera så pass högt att dom inte vill byta bort dom då" 8. "det är ju väldigt viktigt för man vet ju att den som syns mest får ju en väldigt stor procent av kunderna." 9. "Det hade varit bättre om vi hade varit 5 till så att man hade kunnat fokusera på en specialområde, nu sitter alla och gör lite allt möjligt och man måste prioritera om väldigt ofta och så där. Så det är klart, hade vi varit ett större företag hade vi ju haft mer resurser, både finansiellt och tidsmässigt att marknadsföra oss ännu mer." 10. "Ja just nu är det ju det är med marknadsföringen som är den stora skillnaden" 11. "alltså bra utvecklingstempo" Prisjakt 1 "Jag tror att våra konkurrenter jobbar också jobbar på liknande sätt med att dom anpassar sina produkter och tjänster efter butikerna så jag tror inte det är någon strategisk skillnad på oss mot våra konkurrenter." 97
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"jobbar rätt flexibelt. Inom internetvärlden och inom den branschen vi är i så krävs det ju en flexibilitet, alltså en strategi. Det finns inga 5-årsplaner om man säger så, på exakt vad man ska göra, utan det är en grundläggande filosofi att vi ska" "Så vi skiljer på en grundstrategi och grundfilosofi och det hära mer praktiska strategierna, mer arbetssätt och tekniska lösningar och den biten." "Och det är ju en ren matematisk uträkning som dom gör så att säga" "Och Prisjakt har valt en strategi där man visar alla butiker som säljer en vara och där har vi en konkurrensfördel" " då går det ju ett rykte om oss att det är mer känt och accepterat och används som källa för att hämta hem priser eller hämta hem prisinformation. Och på det sättet så blir det en trovärdighet på den informationen vi lämnar utåt sett." "Dom tekniska lösningarna ligger vi i framkanten av." vi uppdaterar våra priser 3-4 gånger per dag" Company X
"vi talar väldigt mycket om produkten och användarupplevelsen även om det är en väldigt enkel och avskalad sajt så handlar det om att vi alltid ska utveckla saker för någon annan." 2. "Men om det var kopplat till själva organisationsutvecklingen så handlar det ju om att ha rätt kompetens" 3. "ja det handlar ju om att vara vaken på vad som händer runt omkring, utanför också." 4. "dom har använt den och lyckats med en affär" 5. "att den funkar på ett bra sätt" 6. "ett dåligt bemötande i kundtjänst eller liknande, så finns det en risk att man inte kommer tillbaka, och därför är det viktigt atr jobba hela tiden med användaren i fokus." 7. "hur den funkar, som sagt även om den är väldigt enkel på utsidan så är det väldigt mycket som är väldigt avancerat under huden, hur man driver sajten på bästa sätt och hur man får en bra, kan ge en bra användarupplevelse till användarna" 8. "vi tänker väldigt mycket på kvalitet, sidan och innehållet och sedan så har vi hållit på med det här länge så vi vet hur saker och ting funkar." 9. "det är väl både vad gäller teknisk kompetens, men även marknadsmässigt, affärsutvecklingsmässigt så försöker vi rekrytera de bästa personerna" 1.
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Appendix 3 - Introductory email
Hej, Vi är just nu i processen att skriva vår D-uppsats inom företagsekonomi med inriktning mot Management. För närvarande studerar vi Masterprogrammet inom Management på Umeå Universitet och vi ämnar undersöka hur internetbaserade företag kan använda sin strategiska kapabilitet för att behålla sina kunder genom att påverka dess relation och känslomässiga band mellan kund och företag. Vi tror därför att ert företag passar väldigt bra för vår undersökning och vi hoppas även att vår uppsats kan vara till stort värde för ert framtida arbete. Vi vet inte riktigt vem vi ska kontakta, men vi undrar om det finns möjlighet att få göra en intervju med någon i ert företag som är inblandad i ert strategiarbete? Upplägget för vår intervju är tänkt att i ett första steg ske skriftligen via email någon gång februari. Vi skickar då ut en intervjuguide som berörd person får svara på och skicka tillbaka till oss. Vid behov ser vi också möjligheten att att genomföra en eventuell telefonintervju för att förtydliga vad som framkommit i det skriftliga första steget.
Mvh Jonas Liedgren & Laurence Butler
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