E-commerce may be here to stay, but a transaction can never begin and end on the Internet. The virtual relationships of electronic commerce usually ends in a phone call or e-mail message to an actual person. This puts web-based call centers at the heart of online customer service. But how can old-line phone call centers be revved up for the e-commerce age? How can companies make their call centers an advantage rather than a aggravation?

A meeting of the Wharton Forum on Electronic Commerce discussed these questions last month. The session drew together leading researchers on call centers and managers developing and running them to explore the new frontiers of customer service.

The internet is raising customer expectations for rapid solutions to their demands, says Patrick Harker, Wharton’s interim dean and one of the leaders of a major Wharton project on call centers in financial services. "It is raising the standards of customer satisfaction," he says. Since customers have the power to seek out answers on their own, companies face the challenge of "developing an integrated system for delivery of service better, cheaper and faster than customers themselves."

Harker noted that studies of customer service show that when something goes right, the individual employee dealing with the problem gets the credit. When something goes wrong, customers usually blame the firm itself. The key, he says, is to make sure things don’t go wrong. "We have to have less heroism and more good systems," he says. "We need to develop systems so employees can provide consistently good service so customers keep coming back."

Chris Martin, a senior manager at Dell Computer, says that Dell’s online customer support has taken significant chunks of service off the telephone lines. The company receives a quarter of a million hits a week on its web site to check on the status of orders, for example, which would have been handled by phone in the past. This is just one aspect of electronic service. "The goal is to connect customers to knowledge, customers to customers and customers to technicians," Martin says. The company also provides support to the help desks that support individual users in corporations.

The next level of development is to anticipate customer problems through its Web PC resolution assistant software. The system warns users if they try to install software that might create problems, and it analyzes problems through the web and sends a fix back. If customers need to talk to a technician, they can use a chat window. "Dell is moving to a model of prevention, proactive self healing and automated assistance," Martin says. "The goal is to maximize first-time resolution and minimize total cost of ownership."

The web is the latest stage in the evolution of the call center from personal branch service to telephone support to voice response units, says Peter Burns, managing director of the Wharton Financial Institutions Center. Moving to the internet raises particular challenges for financial institutions because of increased security concerns, credit risks, regulatory and traditional impediments to fulfillment, technology constraints from legacy systems and an increasingly complex set of delivery channels.

The web is beginning to allow segmentation that was not possible in the past. For example, banks are experimenting with intelligent routing that directs calls from their best customers to particular representatives. They also are developing systems for customized delivery, using the web to reduce the costs of routine transactions. But they still want to offer resources to keep their best customers from getting stuck, through strategies such as escorted browsing and interactive messaging.

Among the key challenges are managing the new supplier chain, dealing with rising customer expectations, redefining the role of the customer service representative and managing for customer efficiency. Burns also noted that these new web channels cannot be considered in isolation. They must be part of an integrated customer support system.

Tom Chapin, principal of individual marketing at the Vanguard Group, a mutual fund firm in Valley Forge, Pa., says his company has always been a virtual organization, serving more than 5 million individuals and 2 million institutional investors without any branches. Most communication is handled by mail and 24-7 call service, but more is migrating online. "The Internet is not an alternative channel; it is complementary," Chapin says.

Vanguard’s goal is to reduce costs by sending routine account information and transactions through the web. The web also offers savings by providing downloadable fund reports and marketing kits, saving on mailing out paper copies. Traffic has grown to more than 2 million page views per day on Vanguard’s site. Still, it doesn’t mean the company will be hanging up its phones any time soon. "People are multichannel," Chapin says. "They enjoy the web site, but they also like talking to a representative."

One of the major impacts of the new technology is that it is raising the bar for personal customer service. "If routine issues are handled on the web, the call centers need to handle the more sophisticated client calls," Chapin says. "This is going to change the long-term role of client service representatives." Companies need to give these representatives more training and support systems to be able to respond to the trickier questions or better customers.

Does all this added expense actually save companies money? Harker points out that that is the wrong question. Banks originally thought they would be able to cut back on branches and tellers by introducing ATM machines. "They save the banks no money," Harker says. "All you’ve done is reduce the friction of transaction, so people transact more. We’ve unleashed these things and can’t put them back into the bottle. The real question is: What’s the cost of not doing it? The reality is it doesn’t take out any cost. But if you don’t do it, there are even bigger costs – your best clients walk."

While most banks justified the move to PC banking by projecting cost savings and new revenues, for the most part, these never actually materialized, Burns says. The far greater value has been to identify and build relationships with best customers as well as learn about the electronic market. "The value of that learning experience should have paid for the relatively modest investment," he adds.