Effect of Personalization on the Perceived Usefulness of Online Customer Services: A Dual-Core Theory

Abstract

ABSTRACTE-tailers provide a variety of customer services, many of which are personalized in an attempt to improve customer satisfaction. Several studies indicate that customers perceive these services to be useful, but it is inconclusive whether this effect is created by economic or emotional factors. This paper proposes a dual core theory that takes into account both economic factors (measured by perceived reduction in transaction costs) and emotional factors (referred to as the perceived care) in their effect on the perceived usefulness of providing personalized customer services.A survey of 387 online bookstore users in Taiwan revealed that different customer services have different perceived usefulness. The study also found that both economic and emotional factors come into play. However, the perceived care has a stronger effect than transaction cost reduction on the perceived usefulness of e-services. This implies that the effect of personalized services is due to both economic and emotional factors, and that e-tailers may use personalized customer services strategically to increase customer care, rather than just focusing on providing economic benefits.Keywords: Customer Services, Website Personalization, Transaction Cost, Customer Care, Perceived Usefulness of Services1. IntroductionThe rapid growth of online businesses has created a large amount of innovative customer services to provide better customer services. These services have been found to be very useful in increasing customer satisfaction and have become a key component in making an online business successful [e.g., Levenburg & Klein 2006; Liang et al. 2006]. Sample services, can be seen at Netflix video rental recommendations and the one-click check out service at Amazon.com.Online customer services can be standard for all or individually personalized. The importance of personalized services is evidenced by the recent development of service science, management and engineering (SSME) proposed by IBM and other major vendors. A primary goal of service science is to develop solid theories and best practices in order to take advantage of information technology (IT) for improving customer service processes and enhancing service effectiveness. A major feature there is that IT can contribute toward better service by analyzing customer preferences and tailoring the service process and content to the customer's needs. These individually tailored services (e.g., recommending relevant books to a customer) are personalized, as opposed to standard services (e.g., sending discount coupons to all customers), which are non-personalized.Recent empirical evidence indicates that about 80% of Internet users are interested in personalized services [Kobsa 2007]. According to Freedman [2007, p. 2], 56% of frequent online shoppers were more likely to make a purchase on a website that offered personalization features, than on websites that did not offer them. However, not all personalized services are the same. Previous research indicates that different personalized services tend to have different effects on customer satisfaction [e.g., Alpert et al. 2003], but not much research has been done on which factors contribute to the effect of personalization in customer service and why personalization of certain services are perceived to be more useful than othersA personalized service is an interactive process in which a vendor provides relevant customized content based on clients' preferences [Miceli et al. 2007]. Probably the most well-known industry sector that uses online customer service features is online retailers (or called e-tailers). Online retailers can choose from about 20 different services (including those for mobile users) and innovative ideas that result in new services. Thus, deciding about an appropriate offering and delivery strategy of services (after assessing their effects) becomes an important managerial activity. …

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