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Personalization of E-Commerce Applicaiions in SMEs 121

Chapter VIPerson alization oft-CommerceApplications in SMEs:

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Conclusions froman Empirical Studyrn SwitzerlandPetra Schubert,University of Applied Sciences, Basel (FHBB), SwitzerlandUwe Leimstoll,University of Applied Sciences, Basel (FHBB), Switzerland

AbstractPersonali;ation o.l' e-cotttmerce upplicatiort.s i.r iln i.s.stre thal is gainingincreusittg impot'tun(e with the udvunc'itrg ,rrulut'it1' qf' .such .t:l:.$tenr.r. Thereis alreudt' e-cotnnterce soliv'are on tha murkel o.flbring integruted e-.shopund personuli:atiotr .litttt'tions. Hotrever, the uvailahle so.fin,nre is too time-


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122 Schubert & Leimstollin Strl.s.r c'ompctnies. The conc'lusions .riotr that SME.s ureIttrru rds e-u)tn m erce upp I i t'u t i ons v'h i c h use persanu I izct t i on.hecomes c'lear thut the heterogeneitv nl' organi:utittnulconclitiotr.r impedes the developntent o.l' standarclized tools.

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Personalization of E-Commerce Applications in SMEs 123commerce applications increases with the number of transactions completed andthc volumc ofturnovcrgencratcd. SMEs offcr specialized. qualitativc high valucproducts in their small market segment which are tailored to customers' nccds(product differentiation). It is precisely for this reason that elements of person-alization should also be applied in c-commcrcc.At the beginning of the project, we had to examine if the essential technicalprcconditions arc fulfillcd in SMEs and how nruch dcrnand thcre is for pcrson-alization. The potential for personalized e-commerce applications in SMEs aswell as the requirements lbr the developrnent of a personalization tool. resultfrom thcse aspccts.The paper starts with thc'description of the research design and a short literaturercvicw on p{,'rsonalization. Thc following sections prcsent thc findings of anempirical study. We summarize tlre findings and draw some conclusions lbr thecurrently emerging potential for the imple mentation of personalization softwarein SMEs in Switzcrland.

Research DesignThe research findings presented in this paper stenr from a project which has bee ncarricd out sincc 1999 togcthcr with diffcrcnt SMEs in Switzcrland. Thc reasonto start this proiect was a perceived disadvantage regarding personalizationpossibilities in e-business applications suitable for SMEs. as compared to thepossibilities ofbig companics. As mcntioncd carlier therc are softwarc packagesfor personalization available on the market but those systems are ol:ten tooexpensive for SMEs. The situation is comparable to the adoption of SAP in bigcompanies and "light-weight ERP solutions" like Abacus in SMEs. SMEs nccd"easy" solutions - prel'erably standarcl soflware - which are cost-effectiveand can be customized according to the company's special purposes.As shown in Figure I, the project started with an empirical survey in thc'region.The result encouraged the authors to proceed with the proiect. On the one hand.SM Es attribute a high valuc to thcir re lationship rvith the customcr and rccognizcthe potential of the electronic relationship which comes with an e-shop. On theother hand, thc' survey showed that the situation for the irnplementation ofpersonalization (statc of know-how, cxisting hard- and software, willingncss toinvesl. etc.) is not very favorable in most SMEs. One important result rvas thcneed for setting a focus on the further developrnent of existing ERP systems.which wcre already in usc by SMEs (ERP ll).ln order to illustrate the potentials of personalization we created a "handbookpersonalization" rvhich shows thc possibilitics from a pcrspectivc wc thought

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124 Schubert & LeimstollFigure l. Steps und results of' the longituclinnl re.seurch pro.iec't

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adequate tbr SMEs (Schubert & Leirnstoll. 2002). Additionally. rve built a "softwaredemonstrator" that is publicly accessible on the lnternet. lt displays the possibilitiesin a graphical lorm. Thc following dcvelopmenl of thc pcrsonalization frameworkwas the basis for thc'current development of pnrtotypes of ERP extensions with fburindustry partners. The last objective was the developrnent of a generic projectmcthod tbr thc introduction of pcrsonalization of e-conrmcrcc applications on thcbasis of ERP Il systems which is still going on. ERP Il is a terrn coined by GartnerGroup which they detine as an application and deploynrent strategy to integrate allthings cntcrprisc centric. lt is basically the furthcr dcvclopmcnt of thc inhercntlyintemal ERP system into a boundary-spanning system. wltich integrates into its peersystems run by business partners and customers. Figure I shorvs the steps of theproject with its premises (01-04) and its milestones.This article does not rcflect PhD ressarch. lt is an experience rcport flrom a jointproject with different small- and medium-sized companies in Switzerland. Thecnrpirical study presentcd in this report rvas not intcndc'd to bc statistically sound. butrvas uscd as a guidancc refi'rencc fbr the further orientation of the project. Wcintended to test some of our assumptions about the current state of development ofERP-based e-business applications at thc beginning of the projcct. Thc study wasmeant to eithcrconfimr orrefutc ourassumptions. Since most SMEs in Switzcrlandare not yet sophisticated Web users, most of the questions were phrased indirectlypointing at different aspects of personalization rather than naming the conceptspecifically. Thc outcomc of the study was uscd for the sctling of projcct objectives(which resulted in the development of a project method). Although the survey wasbased on a questionnaire and we gathered data, we did not perform a rigorousstatistical tcsting. Thc project would not havc bcncfitcd from a statistical analysis, butwe were in need of getting some answers to our assumptions. We were especiallyinterested in the state oftechnologicalequiprnent. the starting point for personaliza-tion. and a major pre-rcquisitc for our future projcct.We are aware that the following analysis is focuscd more on the relevance ofourrcscarch objcctivcs than on academic rigor. Thc analysis of thc survcy data is

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Personalization ol E-Commerce Applications in SMEs 125sirnplistic. Only descriptive statistics are given and conclusions are drawn fromthcsc. This choice was made delibcratcly. In past projects wc lcarned thatdealing with SMEs requires a pragmatic rather than a theorctical approach.Otherwise the results cannot be made accessible because SMEs reject them asbcing "too academic." Given thcse linritations wc arc still convinced thatacadcmia can profit from our lindings.

Literature Review on PersonalizationPersonalization is about sclecting or filtcring information objccts or products foran individual by using information about the individual(his cttstomerprot-rle). Theinformation displayed on the screen is specifically tailored for the user. From atcchnical point of view, mcta intbrrnation of products or information objects ismatched against meta infonnation of users (stored in the customer prot-rte).Personalization can be tailored to a group of people or to a specific individual. Inthc lattcr casc, whcrc the infornration or products arc only customizcd for oncsingle individual. rve speak of individualization as a special form ofpersonaliza-tion. Personalization uses information about customers. The general term tbrstorcd customcr infornration is "usL'r profilc" or in thc conte'xt of clr"'ctronicslropping "customer protilc." Thcre are various ways how e-shop operators cancultivatc customcr profilcs c.g.. "historically" by storing ( | ) intcraction rvith thcWeb site (click strcam) or (2) purchasc transactions or "cxplicitly" by (3 ) askingfor preferences or (4) ratings or by recording (5) contextual information (e.g.,time. date. place). What formerly seemed to be possible only for the corner shopwhosc storekeepe r kne.w all her clients personally. reaches a new potential in theonlinc medium wherc cvcry client lcavcs traces and thus "teachcs" thc systcmhow to treat hinr clift'erently fiorn the other custotners. This form of masscustomization becomes feasible with the use of predefined rules, rvhich can bcbuilt into c-commercc cnvironments. Thcsc automatically personalized Wcbsites do not achieve the high quality of corner shops, but they help to establisha personal dialogue with the customer. tying him or her closer to the electronicoffcr. Additionally, thc timc spent by thc clicnt to "tcach" thc system lcads toincreased srvitching cost. The underlying prerequisite is that the customer reallywants to be addressed personallY.Whlt Makes Personaliza!!-oq Possible? ,The ability to de liver personalization rcsts upon ( I ) the acquisition of a "virtualimagc" of the user. (2) the availability of product meta information. and t3) the

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126 Schubert & LeimstollFigure 2. A multi'clisc'iplinar.t' t'iett' o/' .st'stenl.rperxmuli:ctliott plu.t's ttrr imporlutrl role

uncl c'otrc'epts irt v'hirlt

Sociology

Marketlng

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ComputerSciencesOlreldh Socltl eld hfiorn$on $Yrbmr Conc.gt lor Ur

availability of methods to combine the datasets in order to derive recommenda-tions for thc customcr.In this section we will give an overvierv of the nain concepts and systems thatmake (automatic) personalization possible in today's trusinesses. These drivingforces can be catcgorizcd by disciplines. which are involved in personalization.Thc considcration of personalization rangcs from a tcchnical vicw in computcrsciences, to the economic principles of intbrmation management and marketing.as far as to the global pcrspcctive of sociology. Figure 2 displays a rnatrix ofdisciplincs in which pcrsonalization plays an important rolc.ltirtuul Communitie.r are groups of peoplc who come togethcr on Internct-bascdplatforms lbr communication and collaboration around a common topic ofinterest. These community platforms gather community knowledge (stored incustomcr profiles). which according to Peppers and Rogcrs is thc following:"('ommunitt, knov'ledge come.\ .fi'om lhe accumulutitttt ol'infbrmulitttt uhout ax,lutle crtmmunil' ol'c'u.ttomer lusle.r und prelbt'ences. It is the hotly ol'knotvledgethut u I: I enferprise ucquire"s v'ilh respec't to c'ttslttrtters who huve similur tastes undneecls, enuhling thc.linn ucfirulb' to untic'iptrte v'hil utr inttiviclrrul custotner neecls,eyen helitre the c,u.stonrcr irrorrs he neetls it." (Pepper:s d Rogers, 1997, p.23/')This way. knowledge about thc community can help to custon'lize and cvenpersonalize the service for an individual rnember.

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Personalization of E-Commerce Applications in SMEs 127Social Capitalwas defined by Pennar ( I 997) a$ "the rveb of social relationshipsthat influc'nccs individual bchavior and thercby affccts ccononric growth". Thecxistcnce of socialcapital is thc basis of many virtualcommunitics. An examplefor this is the lnternet Chess Club (lCC). The ICC is a virtual gaming platformon thc lntsrnct. whcrc a largc part of thc lc'ading chess nrastcrs and more than45,000 paying members arc interacting (Ginsburg & Weisband. 2002). A largenumberof volunteers is contributing to the smooth operation ofthis cornmunity.The infornration of all mc'mbers of thc community-*-rnoderators. chess mastersand othcr active nrembcrs-forms thc social capital of the community. Anothcrexample is the Internet auction platform eBay (Schonfeld. 2002). Social capitalenablc's eBay to rnake usc' of the crc'ativity of millions of entrepreneurs (thcscllcrs and buycrs) on their Wcb site. Ily adding information thcrnselvcs and bypublishing their own marketing the users take on the rnain work on the platlbrrn.Social capital additionally leads to the subjective feeling of objectivity, whichPcppcrs and Rogcrs call "agcnt objectivity":"Ever)'c'ustomet'lr'orrt.r genuinel.t' olTiec'live, unhia.recl ctdvice in u co,nmerciullrunsuc'litttt, ctnd ever.r' c'tt.tlrtmet'*norls lhut stttttelines this udvic'e v'ill runcrtttnler to the seller'.s ox'rr inlerests." (Peppcrs & Roger, 1997, p.244)lfthe recommcndations of a scller are only based on the comparison of customcrl'cedback, thcn this information is objc'ctive and without bias - it reprcscnts thesubjective attitudes of other customers. Anrazon.com also uses this idea in theircustomer reviews. Thc result is the devclopnrent of an "objcctive agent." anintermcdiary. that just providcs opinions of others on its platlbrm.Perfitrmculc'e Sr'.s/ern.$ wcre dc'vclopc'd by product vcndors in thc 1990s as asolution tbrdifferentiating their orvn products l'rom the competition (Bclz et al..l99l). Performance systems bundle the core product or service with differentadditional products or scrviccs in order to proposc a spccific solution forindividual customcrs or specific target groups. Thcy thus rcprcsenl a "pcrson-alization" of the standard set of products which a company oft'ers. Peppers andRogers ( 1997) call these combinations "product-service bundles." The additionalscrviccs makc thc product uniquc and attractivc for thc customcr. To dcsignthese product bundles an inlbrmation basis is needed that allows the anticipationof the customers needs. An electronic offer could additionally enable bundlesthat includc complementary products ofother manufacturcrs. delivcry, installa-tion and training. service and an emotional customer experience. Ratings orexperience reports supplied by the virtual community can e.g. be seen as suchadditional scrviccs.Cu.rtttmer Relutionship Munugetrrerrl systems are enterprise infornration sys-tcms which support the relationship with thc customcr. Thcy arc used to

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128 Schubert & Leimstollcommunicate with the customer or to assist communication rvith the custotner.CRM systems storc all kinds of information about thc customer. ranging frombasic information such as name and address to the full history of c:ompany-customer interaction (e.g., inquiries, purchase transactions, clairns). The data-bases contained in CRM systcms arc a valuablc information sourcc which canbe harnesscd tbr personalization. Most CRM systems are built upon existingsotlware for Enterprise Resource Planning (ERP).ERP systems comprise a whole class of software products that are geared at theautomatization and controlof business process throughout the whole company.Thcy supply softwarc modulcs which support almost all critical busincssprocesses and departments (e.g., accounting. procurement, human rcsourcss,sales, production. logistics). ERP systems can be found as core systems forSupply Chain Managcment. Customcr Relationship Management and c-businessapplications. Thesc more specialized information systems often sourcc their datatiom the ERP databases which contain the critical company infonnation" namelyproduct catalogs. customer database. salcs figures, accounting and the like . lnrcccnt ycars. ERP systems have bcen further dcveloped to meet thc require-ments of the lnternet. In the last three years. traditional ERP firnctionality hasbeen extended into the lnternet environmr;'nt. Customers can directly accc'ssdata in thc ERP systcm using specially dcveloped e-business interfaccs. ERPsystems whiclr have been equipped with these new e-business interfaces (tbr e-shops) have been labeled "ERP ll" by Gartner Croup. Within the scope of ourSME project we are striving to further develop SME-suitable ERP systems intoERP ll systems.An Inlbrtnution Warehouse as a rcsult of a data mining proccss is an additional- extended, improved and optirnized - representation of sales and customerdata. Warchouses are usually used to store raw data for later use in exl'cutivcinformation or dccision support systcms (EIS or DSS). ln thc contcxt ofour studyof e-commerce applications, these databases are an important source fbrpersonal ization and digita I market ing.

Where is Personalization Used?After having looked at different information systcms. with their respcctivedatabases serving as "enablers of pcrsonalization" we rvill now look at differcntconcepts for the "application of personaIization."In electr


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Personalization ol E-Commerce Applications in SMEs 129underlying idea is to serve and address every customer according to his or herspecific necds. Cu.stomer. Relutiotrship Munagernent has already been implicitlydescribcd in the section about CRM systems. lt airns at supplying evcry cmploycc(or even the client himself, e.g., in an e-shop) with the relevant information about acustomcr at thc right timc to bc able to offer him an individualizcd scrvicc.Pennis.sion Murketirrg is the idca ol giving thc customer thc chance to select thekind of marketing message he or she wants to receive (Godin, 1999). The customergrants a company "thc right to supply hinr with marketing information" in a prcferredcategory. Regarding electronic cornmunication. it is a mcans to prcvent spamming.l/irul Murketirrg uses thc customcr's netrvork of (social and busincss) rclation-ships. A marketing rnessage is sent to one custorner with an incentive to forwardthis message to his friends and/or business contacts. Every time the message isforwarde'd to morc than one person it is rnultiplied*-a proccss which rcntinds ofthe outbreak of a tlisease (thus the word "viral"). The idea is similar to what wcknow as "chain letters." Dutu rrtittirtg is tlre process of storing and interpretingdata recorded in busincss processes. e.g.. POS transactions. Cotnpanies arcintercsted in generating inlbrrnation warehouses which flre sources for exccu-tive infbrmation systems. Whereas data mining addresses all kind of real-worldbusiness processes. Weh mining focuses especially on data accrued tiom theWcb. Data mining is thc cxtraction of interesting and potcntially usclul informa-tion from user activity on the Internet (Kirnball & ML'rz, 1996; Spiliopoulou.2000lAdornavicius & Tuzhilin. 2001 ).

Research Instrument andDesign of the StudyThe survey was driven by the l'uture objectives ofthe research project. In severalinterviews with our SM E project partners. we identified possible problems whichwerc likcly to be encountL-rcd in ourquest ofdcvr""loping personalization functionst-or e-business applications. Based on these assumptions. a set of questions rvasdeveloped and sent to companies.The interests of SMEs are in the fbretiont of the survey. which was cartied outin the sumnrer of 2001 . On the one hand. the study was meant to give informationabout whether thcrc is a dcmand on thc part of SMEs for personalizcd e-colnmerce solutions and how their exploitation can be evaluated. On the otlrerhand. the study was interrded to show which technical and organizationalpreconditions are alrcady mct by thc companics survcycd. For the rccording ofthe primary data. a standardized questionnaire was developed and repeatedlytested in pretest interviews. The regional chamber of commerce sent the printed

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('ollcction ncriod Aupust / Sentcmber ?tX)lCollcction arca Bascl-Citv and Bascl-CountryCollection method Writtcn sun'cv with standardized queslionnairr'Size of conrnanics SMEs with l'rom I to 250 cmrrloyccsTargct group Mainly managcrs and thosc responsible for lT inSMEs in addition to indcpr.'ndent lT scrvicr.'nroviders and manaucmcntReturns 271 questionnaircs.2l6 from SMEs and 55 from

exnr.'rts: ratc l6Yn

130 Schubert & Leimstoll

qucstionnaircs to 1.250 randomly chosen SMEs in the region. Excluded lionr thesurvey were several freelance professions such as doclors and other companieswhosc main function is construction and utilitics. Thc qucstionnairc was dircctedto mentbers of managcment and those responsible for lT in SMEs.Bcsidcs SMEs, thc survcy was also mcant to rcach providcrs of IT scrviccs andmanagement consultants with the aim of including additional expert opinions. Forthe group ofexperts, the questionnaire was slightly rnodified and provided online.Thc cxperts wcrc askcd to answcr the qucstions from thc point ol vicw ol acompany well-known to thcm (one of their customcrs). The table abovesummarizes the most important details about the design of the survey.Thc explanations that follow are an exccrpt from thc'study - primarily prescntingthe answcrs given by thc rcprcscntativcs from SMEs. The "expcrl" opinions rvillonly be listed explicitly if they diff'er significantly from those of the SMEs.

Findings of the StudyWe start by describing the characteristics of the conrpanies $urveyed. This isfollowed by an analysis of the significancc of marketing and sales processl's tbrSMEs. Thc- third paragraph discusscs Internct usc and thc exploitation olpersonalized e-commerce applications. Finally. the technical and financialprerequisites for the development and operation of e-shops will be discussed.Characteristics of the _Companies SurveyedThe survey reached primarily r)lr'rrer'.r' er munu{:ing clirec:lors (53%) andpeople respon.sihle.lbr IT (25%l in SMEs. The rcmaining qucstionnaires were

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Personalization of E-Commerce Applications in SMEs 131Figure 3. Nuntber al' emplo.t,ees (.lilll-time equiwtlent)

1 lo 10 lt lo 20 21 to 50 51 to 200 more lhan200lSilEs tn = 2161 trE:perts (n = 55)

completed by people who firlfilled hoth.fittrc'tiotrs (6%\ and from people who hadother leatler.rhilt .fhnrtinr.r. In the group of experts. providers o.l' IT servicesor moncrgement cortsultanls (45%\ wers addresscd. Othcr cxperts wcrc{ru'rrr'.r or mqnuging tlirec'tors of the company (29%\.In thc sanrple. almost all sectors arc reprcsentcd. thc majority being from thcindustrial(22%land services (20%) sector. Trading companies account for l2%and IT/telecommunications finns for 8% of the sample . Grouping the conrpaniesaccording to size categorics illustrates that these SMEs arc mainly reprcscntcdby companics employing bctwcen 2l and 200 cmployecs (Figure 3). Thcyaccount for 57"/o of all SMEs surveyed. A lbrthcr 37o/o are small lirms withbetween one and 20 ernployees. Only very few larger firms with more than 200cmployces are represented.In the expert group the size distribution looks different: here there are a lot ofsmall hnns with bctwccn onc and l0 cmployecs. Thcy account for 35% of thccompanies evaluated by the experts. The share of firms with more than 200ernployees (20%) is noticeably high. The high proportion ofsmall as well as largecompanies in thc sample of expcrts can be e'xplained by thc fact that thc lT andtelecommunications field is strongly represented in this samplc. Firms in thissector are oflen very small (e.g.. lT service providers) or very large (e.9..telccommunications corporations), This rclationship is also cxpresscd in thcnumber of customers. The SME group shows a l-ar morc balanced distributionof customer numbers.The sample cannot be secn as representativc rcgarding distribution ol'com-pany size. We can also assume that there is a dominance of those companieswhich are already tackling the' e-conlmercc issue, or at lcast intcnd to in thcncar future.

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132 Schubert & LeimstollSignificance of Marketing andSMEs Sales Processes forThe. r'-commcrcc activitics of SMEs are the focus topic of the survcy. ln ordcrto cvaluatc the future role of e-commerce in the companies, wc first tried toclarify the general significance attached to sales activities. Figure 4 shows a fbwsclcctcd factors rvhich wcrc evaluatcd in view of thcir significancc fcrr thccompanics' future competitivcness.Thc conrpanics are' in agreement that the quulitt o.l'the produc:ts will play animportant role in the future. The salcs-related factors. which are of spccialinterest here - c'ustomer stlvisot'l .seruice, clelivery relishilit.t', and c'lo.re(,tt.\temat' relutionr - follow in placcs two to four. They arc cvaluatcd highcrthan the e//ic'ien('y ol'internsl business proce.\se.s. the upplicatiotr ol'lT ingeneral and procluction c'o.r/,s. lt is somehow surprising that mctrketing unduclvertising rank at tltc bottom (Figurc 4).There are only slight diff'erences between the appraisal of the SME representa-tivcs and thc opinion of thc cxpcrts. Thc importancc of marketing untlutlt'ertisirrg ( 1.07) lbr cxample ranks higher. On the other hand, in the eyes ofthe experts, elfic'ienc'.t, o.l'inlernul husittess proce.s.rei.$ and produc'litttt co.sl.Twcrc least important ( last two placcs).

Figure 4. .Sttcce.r.s ,fctrlors o.l' SMEs, hased on the sldlements o.l',SMf.r

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n = al least 207lssimportanl

2espocaallyrmportant

! Atihmelic maan (lower scale) I Standard devration (uppor scale)

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ruritlcn


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Personalization of E-Commerce Applications in SMEs 133From this result it fbllows that sales-related activities are of high significance fbrthe compctitivcncss of, thc companies. Thc support granted by informationtechnology also plays an incrcasingly important rolc.Current E-Commerce Activities of Swiss SMEsEmpirical studies shorv that the intensity of lnternet usc'in Switzerland is steadilyincreasing. However. the concept of Internet u.se is seldom considered in adiffcrcntiated way.Thc following graphic shows thc ways in which the lntcrnetis used by the responding companies. The kind of use indicates to sonte extentthe stage of maturity of the e-business applications implemented in the compa-nics. Figure 5 shows thc rcsults of thc question on lntcrnct usc'. Whcrcas thcdcgree of extensiveness ("ycs" answers) dcclines from top to bottonr. the degrceof planning ("planned" answers) tirst increases, and then declines again in thearca of morc sophisticatcd applications ("no" ansrvcrs).The results regarding e-mail use show higher figures than presented by sinrilarstudics; c-mail is uscd by almost all of thc companics survcyc'd. and thcrc is nocompany that does not at least plan to use c-mail for conrmunication. ('otnpurt-r,uncl pt'ocluct presentution is also widely realized. If we include the figures onplanncd usc. then soon 98% ofthc companics will presL'nl information about thccompany on the ir Web site and 92% will prcsent information about their productson the Internet. The evaluation of the experts hardly deviates from this.Internet applications that go beyond the lunctions of e-rnail and honrepage arerarely encountered (Figure 51. Orclering./itc'ilities viu the Internet (offered by32'th of cornpanics survcycd) as wr.'ll as use o.l' lhe Inlernet .for onlinenturketing and adverti.sirtg are also includcd among the tunctions carried outto a considerable extent. Taking into account planned use. these two forms of usewill" in thc futurc, rcach a dcgrcc of 56 and 60%. Thcy are considcrably morcwidesprcad in the companic's of the cxpcrts; therc. onlering via the Internel ispossible in 44Vo of the companies. and 53% use the Internet for onlinemurketing and uclvertising. Togethcr with companics planning to apply thcscuses. thc degree of usc' re'aches 771'h.ln addition, thcrc is a group of Internct functions which havc hitherto becn put intopractice in very few SMEs. These are tirnctions which take up a special positionwith particular relevance to the personalization of e-conrmerce applications (inparenthcscs: carried outiplanned): personul rcgistrution ol'lhe custome,' on thelVch :;ite ( I li l4ohl, tustomet'(c('e.r.r to previetus orclers (6/l l7o). and customeril(cess to inventon'of the supplier (6/8Vo). Among the expert companies.22o/oalready offer personul regi.;trution. Planned usc is significantly higher thanreported by the SMEs: in the future. about a quarter to almost a half of the cxpertcompanies will offer these otherwise rarely irnplemented t'unctions.Copvright r' l0fl-5. Idr'u Gnrup lnc. Copying or distributing in print or cle',ctnrnic lirrms u'ilhout Nrittcnpcmrission of klca (iroup lnc. is prohibitcd.


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134 Schubert & LeimstollFigure 5. Di.flerent uses t1l' the lntet'net. hased on stetements a.l' SMEs

Oorrrunicalbn vn FralRessntatitn ol ths

conpany h the inlernelFlesenlalpn ot lhprodrcls h lh nl'arnel

ofderuq faclilies vra lhehlernl

tbe ol lh idrnel loronhe rnrketirg andadverlisrgThe custonar regblers

with anaccounUgassw ord

Th custo(IEr hasacceag lo prwixjgqders

The cusioner has odhsaccoss lo iwentory

}{mberdlnrwert (n=216]El),es lplanned Ino onoslalemenl

Basic Functions in Personalized E-CommerceAfter the first block of more general questions about marketing and e-comtnerceactivitics, thc qucstionnairc prescnted a block of qucstions targeted at spccifictunctions of personalized e-commerce applications. When developing the ques-tionnaire, w were aware that there is an abundance of functions related topcrsonalization, but wc had to limit thc qucstionnairc to thc oncs that sccmcdmost relevant to our project t Figure 6).Out of the functions prescnted in Figurc 6" only a few are considc'red trulysignificant. On the flve-point scale (from -2 = less significant to + 2 = verysigniticant) . only three tirnctions score over zero. starting with acldressing lhet'tt.;torter personullv uncl intliriduul/r'. In this case almost thrcc-quarters of thcSMEs responded to thc answer rvith "l" or "2." The signil'icance of onlineorclering.fitc'ilitie,s is 0.30, which means that online ortlering.fitc'ililie'.s are in

('opyright r' l(X15. ltlca Croup lnc. ('opfing or distritruting in print or clcctronic fonns rvithoul u'rillcnpcrnrission of ldca (iroup lnc, is prohihitcd.


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Personalization of E-Commerce Apptications in SMEs 135Figure 6. Signi.licanc.e o.l' the .lilttctiutts a.l' u personnli:ed e-co,nmerc'eappliccttion (SMEs untl experl.; in contpttrisctn)

reFo", t.16i-rel-.o.fs,rePoo, 020-2lesssignificanl

-r012 lerysignifrcanlArlthmcth neen

thc group gf functions which arc considercd "significant." Thc samc is truc forpuri.lrrrrc re('ontntendutions tuilor-nrade to lhe c'ttslotner (0.03), for thettltlxtrluttit.t, to qffer spec.iul prices/discount.s to inclit'iduttl customets (-0.04)'and for thc eryportunitv to rnuke spec'ial ollers lo indivitluul ctrslomer g,'o,tps(-0.0e).Rankccl among the functions cvaluated rathcr "'less significant" wc find pric'c.sancl clisc,ounts .fbr intlivitluul ('ustomet' groups (-0.20), acce.s.T to previottsortlers (-0.62) and online rrc'c'e.r.rr to ittventorr (-0.85). Note that the lastfunction. (r('(,e.r,T tct int,entnn'. is not applicablc in ccrtain scctors (c.9., scrviccs'which compriscd 14.4% of the sample).ln contrast to thc sMEs, thc experts attributed highcr scorcs to the functions olpersonalized e-commerce applications (Figure 6). We could Ineasure the highestdifference in the evaluations fbr online orclering (D = 0.86). previttrts orders(D : 0.S2) and for thc opportutrit.r' to muke spec'iul el{lbrs to individuulctt.trome,- groyps (D = 0.73).Thcse findings illustrate that SMES arc'cautiousin the assessment of personalization effbrts - tnore cautious than the group ofexpcrts.

Copl.righr r' 20{}5, Ideu Cnrup lnc. Copying or tlistrihuting in print or clcr.'trtmic ftrms rvithrtul lYrittcnpcmrissiun ol'ldcl (iroup lttc. is prohibitcd'

Addrassing ilro customst personally andindi\idually , ,Giving customers the opportunilyto orderonline

lndicating lailor'm ada Purchasorecomrnendabons to indavidual cuslornersOfiering special pricesidiscounts to indi$duat EEE[racustomers I

illaking special ollers lo individual cualomsrgroupsCIle rin g s pecial prices/discou nts to individual

customer groupsGrving cusbmers lhe opportunilyb look altheir Prer,ious orders online

Giving customers the opporbnity to check thecunent invenbryonlins

I Stvs (n * at leasl 208)" Eperts (n = 55)


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136 Schubert & LeimstollFigure 7. Adtlitiortul .lfunc'tions o.l'e-c'otnmer(e upplic'atians lo sttTtltortnturketing unil .ra/e.s Pt'eres.se.r /SMf.s uncl experts in c'ompurixtn)

Sending a regular newsleltor by E'mailRecording and analping customers' surling

and Purchasing behariourTools lor eralualing he data recorded

Cross-selling functonsEnabling inlorm ation erhange betweencuslomers

lndividual creation ol tha E-shop structure bycustomers

luhking arailable rankings ol larcurite productsNo slalmenl

ISMEs (n ;216)EE)eerts (n * 55)

Irfumhrollntwerg(mutlph Nntrert poarlbfcl

Additional Functions of Personalized E-CommerceE-commerce solutions support and offer a number of further functions relatedto pcrsonalization. Figurc 7 comparcs thc opinions of SMEs and cxpcrtsregarding the usefulness of the application of these additional tunctions. Thequestions were phrased abstractly (not in the language of int'ormation systems)in ordc-r to analyze which additional functions future t:-commercc solutionsshoulcl offer. This was evaluatcd indirectly with the help of questions regardingmarketing and sales processes.In the comparison both groups named the following functions most frequently:nev,slelter yia e-muil, analysis of' t'ttstttmers' sut'l'ittg ttncl trtttt'chasinghehuviot., evuluulion tools and


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Personalization of E-Commerce Applications in SMEs 137Figure tl. Outsaurcing of' Weh server opet'crlion. hu.sed on stutements o.l'SMEs

Websrvar withtho provlder640.6

Thc comparison betwccn SMEs and cxperts indicatcs that thc SMEs arc morcskeptical towards the opportunities of personalized e-commerce solutions.Possibly they cannot yet irnagine how a personalization tool could look like inpractice. Thc purposc of a ncwslettcr is ccrtainly thc casiest concept. and mostof the rcspondents are familiar with this marketing tool. The expcrts' statementsshow that this group estirnates that the personalization of e-comnrerce will havea thoroughly positivc effcct on thc marketing and salcs proccsscs of SMEs.Devglopment and Operation of E-lhops

_Sixty-four percent ofthe SMEs and 690/o of expert companies responded that theWcb sL'rver is run by a provider ( Wehsen'Ier v'ith tlte pntvitlerl (Figure 8). Thismsans that the majority of companies has outsourced this service. lt wassurprising fbr us to see that however almost a third of SMEs operate their orlrrserver.For the support of certain functions of an e-shop. such as online access toinvcntory or dircct ordcr processing, thc seamlcss intcgration with an cxistingERP system is necessary. For this reason we included a question on the currcntuse of ERP systems. The findings show a very heterogeneous distribution ofERP systcms. Thc high rate of responses in thc category 'olher provitler'(64%l ref'lccts this situation. ERP systcms are olien specialized for certainsectors. ABACUS, SAP (R/2 or R/3) and Nl VISON are the only systems whichsltowcd a certain dominance in use by SMEs. ln ths- cxpcrt companics S.4P andABACL|S dominated, resulting in l5 and l3% of rcsponses. Thc hcterogcneityof the systems show that the development of a personalization tool tbr SMEs (anoriginal objective of our project) had to be independcnt from a specilic ERPvcndor.

Copy'right (' lfi)s. ldca Group lnc- Copying or distrihuting in print or ck'ctnrnic lirrms *'ilhrul rvrittenpcnttissiort of ldca Group lnc. is prohihitcd.

l{o ltrtcrnant


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138 Schubert & LeamstollFigure 9. Stundarcl sofiw'are vs. ittclividuttl so.fiu'ure in the e-.shap .lield

lndivitlually-programmadsoftwara5Sc

n = 51 SMEs; n = 27 Experts

The study confinned that online shops have not been broadly introduced by SrvissSMEs. Sixty-four percent of SMEs and 47o/o of thc experts state that thcy doNOT use any e-commerce software for the communication with their customers(on the sell side). The results sltow that there is no market leadr.'r for e-shopsoftware. From the companies that alrcady havc an e-shop,59Vo use irtliuidualsolhrnre and 4lo/o slandurcl so.lix'ctrz (Figure 9).Wc assumc that some of the rr'spondcnts did not distinguish between "individuallyprogrammed software" and "individually customized standard shop solutions," sothe figure of 59% might bc a bit rnisleading. Since around the time of our surveymost ERP vcndors wcrc deve loping thcir e-business solutions rvith selccted pilotcustomers and thcn adding thc e-busincss module to thcir standard product suite.we estimate that the actual numbc'r of individually programmed c-shops is a bitlower.In the future. only 43%of the SMEs and only 3l%of the expert companies intc'ndto remain without an e-shop (Figure l0). All other companies plan to investsubstantially in thcir c-shop in the ncxt two ycars: most ofthcsc companics ( l5?oof SMEs and24o/oofexperts) have opted lbr an investment sum ranging betweenU5$7"800 and 39,000 per year (6.400 to 32.000 EUR).At first sight. the study design may appear as if very little ol'the survey acluallydealt with personalization. This has the following reason: tnost SMEs inSwitzcrland are not yet sophisticatcd lnternet uscrs. so wc dccided to phrascmost of the questions indirectly. rather hinting at personalization potentials thanexplicitly naming them. Without using the actual word "personalization," theanswcrs to the qucstions ncvertheless help us in deciding the futurc stcps ofthe project.

(irpy,right r' 2il15. ldca Oroup lnc. Copf ing or tlistributing in print or elcctronic tbms rvitltoul s'rittc'npr.rmission of ldca (iroup lttc, is prohibitcd.


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F'igure I 0. lnve.stmentsPersonalization ol E-Commeree Applications in SMEs 139itt ov'tt anline .shop in the nexl ltt'o J:eurs

. 401;al! 3o'"to5 aoqotEtI I ooro

oo; noE- 0loshop 5000plannodISMEs ln - et6lflExperts rrr = 55)

5'()00 lor 0'000

10'000 50{100 ! 00'000 250'000 m ors noto to lo lo lha n s tale -50'000 100'000 250'000 500'000 500'000 menllnvcrlltt.nt. an CHF p.r yrrl

Interpretation of Findings andFuture ResearchSome interesting statenrents about the need tbr personaliz-ation tools in SMEs canbe deduced from the findings of the survey. SMEs value very highly -indcpendcntly of c.-commcrce -*- tnarketing and salc-s-re latcd succcss factors:customer advisory service, dclivery reliability and close customcr relationshipsare. according to their statements. of high irrrportance for the success of thecompany. In the marketing and sales area. the strengthening of custonrerrclationships and the quality ofcustomcr information arc crucial. Altogcther thcresults shorv that for SMEs, addressing the customer personally is a pivotalaspect for their company's success. WherevL'r e-cotnmerce applications can beuscd at thc intcrfacc to thc customcr, pcrsonalization can play an important rolc.The findings of the study have encouragcd us to proceed with our project todcvclop personalization tools for SMEs. An ovcrwhelming numbcrof SMEs arcplanning to invest considerable sums in their e-commerce solutions in the ncxtfew years. Many small conrpanics havc already established their orvn Web sites.The study shows that the development of personalization sofiware is no easyundertaking. Re.ality shows. however. that a rvorld of widcly diffcring systemsis bcing used in intcrnal systems (ERP) on the one hand. and in e-commerccapplications (e-shop software) already in use on the other hand. The operatingsystents usr,rd also differ greatly. Furthcnnore, the nrajority of SMEs do notopcrate thcir own Wcb servcrs, but have outsourccd this task to an lnternct

C'opyright r' l(ilS. Idca Group lnc. Cop,ving or tlistributing in print or cL'ctronic lirrms u'ithout tvritlr''npr'rnris$ion uf ldcu (iroup lnc. is prohibitcd.


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140 Schubert & Leamstollservice provider. The only possible approach is that we involve ERP solutionprovidcrs who dcvelop standard modulcs to extend the ir cxisting systcms. In aninitial project we are developing a project method for the dcfinition of require-ments for personalization of ERP-based e-commerce solutions. The projectmethod combincs a sct of uscful crcativity tools. clcments of classical projcctmanagement togcthcrwith a method lorrapid screen design. The most importantissue is to make sure that people in SMEs and ERP vendors undersland eachothcr and rnanagc to jointly de'vclop a new generation of SME-suitable HRP Ilsystems which include custonrizable. casy-to-usc personalization features.Continuing with our research. we have initiated turther projects u'ith SMEs andtheir respective ERP vendors wherc we constantly apply and refine the rnethod.The difficulty in the development of a soflware lies in the fact that SMEs aretoday cautious about the use ofsuch systcrns. and the tcchnical preconditions arcfar fronr optimal due to thc rvidc difference in the systems employed. Neverthe-less. many companies are planning substantial investments in this field over thenc'xt few years. All in all, the study findings have confirnred our assumption thata need for standardized, incxpensive pcrsonalization soflwarc for SMEs exists,based on existing ERP systems. or will arise rvithin the next few years.

ReferencesAdomavicius. G. & Tuzhilin, A. (2001 ). Using data mining me'thods to build customcrprofiles. I EEE Computer, 34(2), 7 4-82.Belz. C.. Bircher.8.. Biisser. M., Hillen. H.. Schlegel. H. J.. & Wille, C. (1991).

Su


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Personalization of E-Commerce Applications in sMEs 141Peppers. D. & Rogers. M. ( 19971. Enlerytri.se one to one: Tools.lbr co,npeling in

the interct

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