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Science, Maths & Technology

The Online Gamble

Updated Thursday 8th December 2005

What are the rules that apply for a gambling business when it moves online?

Casino sign Copyrighted image Icon Copyright: BBC

Daniel Amor, a leading e-business consultant, says that although there are moral issues about gambling, it is one of the most profitable businesses on the Internet. In the real-world gambling is restricted by many laws, making it difficult to access the casinos. On the Internet, this has changed dramatically. Gambling is still not legal in some US states and taxes are still high in others, but the business has moved to places where gambling is legal and only low taxes need to be paid. Many gambling web sites have moved to the Caribbean or South America, where no laws on gambling have been implemented.

The emerging society is coming to be dominated by service industries, of which gambling is only one example, and even before the advent of e-commerce, service industries were demanding very new approaches from economic and management theory and from marketing.

The crucial distinctions between services and products can be summarized as: intangibility, people, place, promotion, branding, inseparability, ownership, variability and perishability. Some of these apply even more forcefully to e-commerce.

Intangibility
Customers for many services have to buy them "on trust", since they cannot be inspected before use. This also means that service customers are often loyal to the service which they have found justifies their trust.

Competitive suppliers' investment to overcome that loyalty may be correspondingly higher than in product markets, where trial use is easier. The result is often that the few "tangible" elements that are associated with the service become especially important. It should be evident that intangibility is an especially important factor in the case of e-commerce, which is even more remote from the customer

People
It might seem that in e-commerce the people content will be negligible, and present only in a simulated form, with a computer pretending to be a human and reacting to the questions posed by customers. The reality may be very different, for the human interface is likely to be just as important, even though access to it will often be mediated by computers. Services on the internet, just as much as on the high street, will be judged by how well problems – and especially complaints – are handled.

This almost certainly will require human intervention, both to resolve the unexpected and to offer the warmth of personal contact. Those vendors who have already decided that this human element is an expensive luxury they cannot afford, will soon be made aware of their error of judgement. This is not just a problem for the peripheral players.

Place
Perhaps surprisingly, place may be just as important for e-commerce but place here is rather different. It is an electronic website, or even the PC screen where the content of the site is displayed, rather than a physical presence on the high street. But its impact on the customer will be just as important to success, which is why so much emphasis is put on website design.

Promotion
The image of a service that is carried by all the promotional material may well be the main ingredient after people. In e-commerce, however, paralleling the impact of place, promotion may primarily come through an organization's site design rather than media advertising.

Branding
Clearly, branding is even more important for e-commerce but, as with effective branding in general, it is not sufficient to choose a cute website address and plaster this over hundreds of poster sites. Branding is nothing if not a long-term investment.

Ownership
In general, transitory web experiences may have less impact, although the artificial "memory" offered by referring back to history-based customer profiles on some websites can help customers to remember their good experiences. This means that there is a need for marketing activities throughout the whole purchase process and especially beyond it; otherwise customers may be lost at a number of stages.

Variability
Variability is sometimes referred to in this context as "heterogeneity". Many services are much more variable than physical products, largely as a result of the people content but also because the service is usually produced and consumed at the same time.

This is yet another advantage for e-commerce. Computers may not show a human face but they are consistent. Set the quality standards and they will maintain them for ever. The most important implication, however, is that services require much higher levels and standards of management to ensure that the service being provided matches the specification. Many service-based industries have a higher ratio of managers to employees.

Perishability
Most services are produced and consumed at the same point; they are therefore totally perishable. The service may be available over time, but if the time-slot is not available, or is not sold, the lost revenue can never be recouped, whereas a product held in stock can always be sold later.

Surprisingly, then, "stock" control becomes even more important for a traditional service provider.

This is one problem which does not affect much of e-commerce. If computing power is available, normally so is the service.

We can see that of the traditional factors of service, only four genuinely apply to e-commerce:

  1. intangibility - where the offering becomes even more remote
  2. people - surprisingly, in that the human touch is by no means negligible and, related to this, customer profiling may become essential
  3. promotion combined with place - in that the website itself becomes the prime vehicle
  4. branding - which is even more important here than for physical products

For on-line gambling, promotion and branding are particularly important as gambling sites are coming to the investment market for money, and need to be highly ‘visible’ to potential investors.

 

About this article

This article has been specially prepared for OpenLearn by the Open University Business School.

 

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