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‘Disruption’ has become a highly accepted concept in business and management, an event one can only expect to happen at some point in time, whether in production, marketing, distribution and retail, or in other functions of business. Disruptive innovation, mostly technological and digital, can be helpful in fixing market weaknesses due to lack of progress in methods and processes applied by ‘legacy’ companies; operational inefficiencies; and insufficient competition in a market. A disruptive innovator may also succeed by capturing consumer needs hidden or left ignored by existing complacent competitors. But disruptive innovation is not a magical cure; actually, it tends to be quite a radical form of cure. Innovations of this kind have the potential to destabilise a market, create disorder and confusion, and cause dysfunction if the transformation is spiralling out of control, a matter of real concern to all parties involved.

Disruptive innovations have been introduced in various industries or categories of products and services. It often occurs when a technological company imports a method or a tool developed in the hi-tech community into a specific product or service category, whose agents (e.g., providers, customers) are mostly unaccustomed and unready for. Yet the innovation can hit roots if it meets a large enough group of innovative or tech-orientated consumers who welcome the new solution (e.g., a way of acquiring or using a service). Thereafter, incumbent competitors find themselves obligated to adopt, if capable, similar or comparable methods or tools in their own operations. High-profile examples include: (a) Uber that expanded the concept of taxi-rides and ridesharing; (b) Airbnb that disrupted the field of hospitality and short-term lodging (‘home-sharing’ vs. hotels and guest houses); (c) Netflix that altered the habits of television viewing. Also, companies in a new sector of financial technology (‘fintech’) offer digital tools (mobile app-based) for consumers to manage their banking accounts, budgets and investments, challenging ‘legacy’ banks and financial service providers.

Certain technological innovations turn out, however, to be disruptive across-the-board. For instance, online social media networks and digital marketing methods (reliant on Big Data and analytic techniques) have been influencing dramatically how companies approach customers and interact with them in many product and service categories (beyond technological goods or information and communication technology services). Furthermore, developments in artificial intelligence (AI) and robotics promise to introduce even more significant changes, from manufacturing to marketing and retail, and in the functioning of various products (e.g., smart home appliances and devices, the ‘upcoming’ driverless car).

Much damage may be caused if the innovative alternative solution is incomplete or the planning of its implementation is flawed. Overall, everyone should be prepared for a turbulent period of resistance, adjustment and adaptation that may extend until the ‘new-way-of-doing-things’ is assimilated in the market, or rejected. The story of an episode regarding taxi transportation at the international airport near Tel-Aviv exposes how wrongful introduction of a disruptive innovation in this service domain can lead to blunder and service failure. Mistakes made because of flawed planning in a highly sensitive process of market transformation may turn the disruption into a mess-up instead of improvement of the service.

The management of the Israel Airport Authority (IAA) launched earlier this year (2017) a new bid for taxi service operators to ride passengers into and from Tel-Aviv (Ben-Gurion) International Airport. In the end of May the 10-year permit of the primary taxi company licensed to provide service in terminals at the airport expired; the IAA wanted to open the service to competition in expectation that it will lead to fare reduction and perhaps other improvements (e.g., availability, time keeping of taxi journeys).

  • The competition is concentrated in fact on picking-up passengers from the airport; if prohibited, taxi cars will have to return empty after dropping off their former passengers at the flight departure terminal. A primary taxi company was given the advantage.
  • Note: Shuttle or minibus service providers are allowed in addition to take passengers  to more distant cities like Jerusalem and Haifa.

Only two companies responded and participated in the bid: the incumbent service provider (“Hadar-Lod”) and the mobile app company Gett that mediates taxi service. The veteran taxi company has been riding passengers to and from the airport for 40 years. It has definitely developed proficiency in riding air travellers over the years but there were also misgivings about its practices, linked to its status as mostly an exclusive taxi service for individual passengers (alone, family and friends). A few years ago the Ministry of Transport intervened by publishing and issuing a calculator of recommended fares to help passengers ensure they pay fair prices.

Gett (originally GetTaxi, founded in 2010) is managing a network connecting subscribed taxi drivers with passengers through its mobile app. The company is now operating in over 100 cities in four countries (Israel, United States, United Kingdom, Russia). The location-based app facilitates matching between a passenger and a driver, from service ordering, through journey planning and pricing, and concluding with payment via Gett. Unlike Uber, Gett is working only with professional licensed taxi drivers and is not involved in supporting informal ridesharing journeys by unauthorised drivers (e.g., UberPop). The app of Gett is focused on benefits of convenience of ordering (no street hailing, no phone call), efficiency of matching through the network, and of course promising a lower journey cost.

Still, the company hires its subscribed taxi drivers but is not their employer — they divide the fare income between them to the will of Gett. The company is commending itself on its website for higher pay to drivers, in-app tips and 24/7 live support, motivated by the idea that if Gett treats drivers better, they will reciprocate by treating their riders better. However, the arrangement has repeatedly emerged as a source of friction. Gett has changed its name, removing ‘Taxi’ from the title, to allow for extending its brand into a variety of delivery services (e.g., food, parcels) to domestic and business clients.

  • Taxi cars of member drivers in Gett’s network are marked by a label with its logo on the car’s side. Taxi drivers that belong also to a traditional local taxi company (‘station’) may carry its small flag on top of the taxi. However, in recent months taxi cars can been seen more frequently in Tel-Aviv area carrying only a flag of Gett.

The absence of more traditional taxi companies from the bid could be the first sign of a problem. Those companies may have found it not worthwhile for them to commit to provide regular service at the airport. But as a replacement, Gett is not truly a ‘physical’ taxi company and has unique characteristics. It leaves the operation of taxi service by Gett open to much ambiguity. Drivers subscribed with Gett can ‘double’ by riding passengers either via Gett’s app or with a standard taxi meter installed in the car. Are traditional taxi companies ‘hiding’ behind drivers also associated with Gett? But if Gett had the permit, would it allow drivers in its network to take passengers also without its app? (i.e., leave money on the table from such journeys.) Yet, Gett’s drivers have to choose in advance in what periods they act as standard taxi drivers or as taxi drivers riding passengers on call from Gett’s app. This situation could lead to confusion: under what ‘hat’ are the drivers allowed to get in and out of the airport and at what time are they allowed to choose what type of passenger-customer to ride.

Furthermore, the service could be binding and unfairly restrictive for passengers who are not subscribed customers of Gett, especially when arriving from abroad. There could be several reasons for passengers to find themselves in an inferior position: Passengers may not have a mobile phone that supports software applications; they may not feel comfortable and skilled in using mobile apps; or passengers may not be confident in paying through a mobile app (e.g., prefer to pay taxis in cash). It may be hard to believe but such people do exist in our societies in different walks of life. It is also known that smartphone users are selective in the number and sources of apps they are willing to upload to their devices. It could be futile to try to force consumers to upload a particular app, but it would be especially unfair to require users to upload an app of Gett so they can be driven away from the airport. The IAA should have not allowed from start an outcome in which a company of the type of Gett becomes a single provider of taxi service at the airport, primarily for riding returning residents or visiting tourists (the latter may not even be aware of Gett beforehand). The ‘disruption’ would have actually become a distortion of service, leaving customers either with no substitute or with confusion and frustration.

But something else, awkward enough, happened. The two companies reached an agreement to bid a joint offer in which they committed to lower fares by 31% on average from the current price level. It is unclear who initiated the move, yet it is reasonable that Gett was about to offer a much lower price for taxi rides affordable by its model and platform, and probably the management of the Hadar-Lod taxi company was alerted and in order to secure its stay in business felt compelled to match such an offer or simply join hands with Gett. The drivers belonging to Hadar-Lod thought otherwise and started at the end of May a spontaneous strike. The two bidders tried to reach a new agreement but eventually the veteran company had to retreat. One cannot be certain that drivers with Gett would have co-operated — the new price level may have been affordable for Gett but not necessarily worth the ride for the drivers. Apparently, the recommended official price was already or about to go down 7%, and with the further reduction committed in the bid offer, the taxi fare would drop on average by 38%. One would have to work many more hours to fill the gap. The cut was too deep — it may have worked well for the companies and their management but could never work for the drivers. (Note: An explanation from a taxi driver with Gett helped to describe the situation above.)

  • Having taxis from both companies in service would have provided some remedy with a transportation solution for every type of customer-passenger. But a certain mechanism and a person to supervise would be needed to keep order on the taxi platform. For instance, travellers subscribed with Gett may schedule their ride while in the luggage hall, and there would be Gett taxis waiting ready to pick them up. One would have to make sure there are enough taxi cars available for the other passengers.

That bid is now cancelled. The IAA declared that it would soon publish a new bid, and until its results are known, any licensed taxi driver can arrive and leave the airport with passengers as long as they register with the IAA. Are the official recommended prices still in place? Who will regulate the operation and watch that taxi drivers respect consumer rights of their passengers? Who will supervise in particular the allocation of passengers to authorised taxis at the arrival terminal (i.e., dispatching)? Answers will have to be found on ground. It is no surprise that the new situation has been received with apprehension by consumers-travellers and taxi drivers alike.

Consumers will have to learn from experience or relatives and friends what are acceptable price ranges for rides into and from the airport, and form anew their references for a fair price and the highest (reservation) price they are willing to pay. They may also set a low price level under which the reduced price may be suspected as “too good to be true”. A discounted price by a single driver to attract passengers, which deviates too much from a ‘normal’ price, should alarm the customer-passenger that something could be wrong with the service, or else there is a logical reason for the reduction. For example, the taxi driver may suggest ridesharing a few arriving passengers to a common destination area in Tel-Aviv — some passengers may be happy to accept, but the terms must be stated in advance. It is unclear how long the interim period will last, but the notions about pricing described above may remain valid even afterwards in a new service regime.

Making changes like adding competition, and especially by involving a disruptive innovation in the service domain, can improve matters. However, the process must be handled with care and watched over to avoid the system from derailing during the transformation. In this case, the IAA could and should have planned and managed the bid and implementation of its plausible outcomes more wisely. At this time, there must be at least one traditional taxi service operator allowed in addition to an innovative service mediated by a company like Gett at the airport, and rules have to be set and respected. Rushing into any drastic and innovative transformation of service will not do good for its chances of success, just invoke confusion and resentment — sufficient time and support must be given for the customers-passengers and taxi drivers to accommodate and adapt to the new service settings at the international airport.

Ron Ventura, Ph.D. (Marketing)

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The digital transformation of customer service in retail banking is changing the depth and form of relationships of banks with their customers. The increasing shift to direct digital self-service channels re-shapes how consumers interact with retail banks. As explained in the first part of this article, the effects of this transformation can be seen and felt at physical bank branches and away from the branches through remote online channels (including web-based service platforms and mobile apps). Furthermore, ‘customer service’ practically entails the customers’ operations of regular account maintenance but also their acquisition of various banking services and financial products (e.g., deposits, loans, equity and bonds). Hence the digital transformation is affecting broadly and simultaneously retail banking service as well as marketing to customers.

The focus of the first part of the article was a review of the ways in which the five main banks in Israel approach the digital transformation in the domain of retail banking, and especially how the banks choose to balance between the digital and human modes of interaction and service in their relations with customers. It considered the observed forms and methods of implementing their approaches and discussed their implications regarding the digital-human balance. Particular attention was awarded nonetheless to the effects that digital channels of interaction may have on the premises of retail bank branches — their organisation, interior design, and functions.

The approach taken by Bank Mizrahi-Tefahot may be seen as surprising to digital advocates because it is ‘going against the stream’, yet it is tapping on some sensitive nerves of  consumers. The advertising campaign of the bank — carrying the title “On the things really important, there is no substitute to humanity” — commits not to sacrifice contact with human bank representatives in the sake of digital self-service. This is a promise of reassurance for many bank customers who still do not feel comfortable and confident with over reliance on supposedly self-sufficient digital channels. But a question remains to address: Does the campaign stand on a solid strategic ground? One would want to know if there is substantive managerial commitment behind the campaign and a plan to execute it.

A declaration of the bank on its latest strategic plan offers an affirmative answer. According to a press release published by Bank Mizrahi-Tefahot in November 2016, the strategic plan for the years  2017-2021 stands on three legs: (a) intensifying the focus on business sectors and expanding activities directed to them; (b) sustaining and solidifying the bank’s stature as a leader in the retail domain; and (c) being a central operator of financial assets in banking (22 Nov. ’16, origin in Hebrew). Regarding the second goal on retail that is of our interest here, the bank specifically qualifies its goal as “providing personal and human service supported by innovative technology”. In this statement the bank emphasises the order of priority between ‘personal and human service’ and technology, whereof the role of the latter is to facilitate and enhance customer service. As explained by Bank Mizrahi-Tefahot, the strategy is on the one hand service-driven and on the other hand aimed at reducing prices by applying a unique and advanced technological platform (i.e., the platform’s purpose is increasing efficiency in operating and delivering customer service).

The strategic statement clarifies that the bank is not about to put its technologies ahead of its customers, how it treats and serves them. It maintains that the role of the digital technologies is to increase efficiencies (e.g., saving time, facilitating processes) and not to replace human service. Bank Mizrahi-Tefahot is not shy on utilising customer-facing digital tools and facilities for interface and information processing, but it does so as a supplement to human service. Already six years ago the bank initiated a ‘hybrid banking’ programme designed to smooth communication between a customer and his or her ‘personal banker’ at the branch via phone, e-mail or SMS services (they called it ‘an ideal combination between personal and digital’). Lately the bank has recognized a need to highlight the connection between ‘personal’ and ‘human’ as contra to the increasing reliance on digital service channels in other banks. The intention declared by the bank to increase its number of branches also asserts that it does not intend to make itself more distant from customers and less physically accessible to them. It is perhaps not a ground-breaking attitude yet it offers stability, credibility, and confidence in bankers to be there in person for the customers.

However, there are still certain aspects the bank can further develop: For instance, applying digital technology is not just about efficiencies and prices, especially when utilised in direct customer-facing services; how customers experience the digital service is highly important (e.g., it should be visually fluent, easy-to-use, effective). Digital self-service should not claim to improve customer service overall by replacing human service, but it can contribute to improved customer service as a whole. The strategy statement is not clear about the experience of customers when applying digital technologies. Bank Mizrahi-Tefahot should also clarify how web-based and mobile app elements of its platform are integrated in its overall view of personal-human and digital customer service (e.g., enabling chats with human bank assistants and not with virtual assistants [chatbots]). Additionally, as suggested in Part 1, the bank can develop its own service model for combining digital self-service stations with human assistance and guidance within a branch.

Let us now take a brief look at the strategy in other Israeli banks:

Bank HaPoalim is seeking to reflect flexibility in its balance between human and digital banking. The bank’s Head of Retail Division said in October 2016: “we are not requiring the customers to choose between human and technological, instead providing them with a right combination between the two” (press release, 26 Oct. ’16, origin in Hebrew). The declared strategy of the bank is offering human, personal and technological banking. However, other expressions used by the bank suggest that the balance is weighed more heavily to the side of technology. For example, the bank uses  ambiguous terminology such as “more advanced and human technology“; its real priority or emphasis is revealed in the impressive expression “digital empowerment of the customers”. The new services the bank is taking special pride in, as presented in the press release, are a ‘virtual branch’ in a mobile app and human guidance in its new ‘Poalim Digital’ branches on how to use an iPad for banking services.

The senior bank executive is not insensitive to consumer concerns about the use of advanced technologies — he recognises that some customers perceive them as threatening, creating an emotional distance, and lacking in personal touch. Yet the bank appears to be pushing too hard to impose technologies that many customers may not be ready for yet, and implicitly pushes its human bankers to the sideline. Bank HaPoalim is trying to strike a difficult balance between the technological (digital) and human factors by attempting to be ‘human as well as personal as well as technological’ altogether.

In Bank Leumi digital banking (‘Leumi Digital’) is put at the centre, as manifest in its website-based platform, information ‘kiosks’ in physical branches, and its mobile app. More recently the bank added its ‘virtual assistant’ chat utility for customers to seek assistance in using the online and mobile account applications. In its strategy statement, Bank Leumi refers to “organizational and technological capabilities, efficient and innovative” (origin in Hebrew). It also commits to upgrading its service model and value propositions as part of a customer-centered culture. However. the bank does not make specific reference to integration between ‘technological’ and ‘human’ in its relations with (domestic) customers. As commented in Part 1, the mix between digital and human modes of service seems to be incomplete, as if working in separate compartments (‘silos’) of service.

The vision of Bank Leumi is accordingly to “lead initiating and innovative banking for the customer”. Overall, the key words most salient in the vision and strategy statements of the bank are technology, efficiency and innovation. There is no specific mentioning of the human factor. Bank Leumi must be credited for its consistent and prolonged support for providing banking services through direct channels that free customers from arriving to the branches. In the late 1990s this bank was a pioneer in Israel in establishing a ‘direct bank’ based on its telephony call centre. Later on a website was added. Whereas the initial entity was cancelled, the foundation was laid out, tried and proven for further development and assimilation in the main service operations of the bank. Advanced digital technologies, as they are better known these days, could come only natural to this bank. The next challenge of Bank Leumi would be to streamline its connections between human and digital modes of interaction and service to customers both in physical and virtual/remote domains. Admittedly, the suggestion made here may be contrary to the leading view at the bank; however, customer service should feel seamless and unified, not  like living in two different worlds of ‘digital banking’ and ‘human banking’.

Bank Discount is actually delivering a very clear message about the place it reserves for ‘humanity’ in its approach to customer service. Its actions on transition to digital banking seem to be more mild compared with the two leading banks. The strategic plan of the bank for 2015-2019 states: “We at Bank Discount have set before our eyes the experience of personal, human and professional service for all our customers. We believe that we should integrate humanity with professionalism, and to that aim we direct our actions every day” (launched in 2014, origin in Hebrew). The words are very positive: the bank is truly seeing the customer at the centre, not the technology, and the way to serve customers better is to do it professionally (possibly the bank’s sought competitive advantage).

Bank Discount is doing whatever is necessary to utilise up-to-date technologies in banking but not as proactively and forcefully as in Bank HaPoalim or Bank Leumi. Its direct banking operations include the TeleBank call centre, a web-based platform and a mobile app for account management; it also offers a personalised information app My Finance (providing market data etc.) and has recently introduced a ‘virtual assistant’ utility. Bank Discount may still be required to be more explicit about its view on the digital front, but foremost it can further clarify its approach to integrating digital and human modes of service and balancing between them.

Bank Benleumi is going along, combining traditional and digital banking facilities and utilities. Unfortunately, however, the bank does not disclose much information about its strategic plans, views or priorities. Hence it is difficult to tell where the bank is heading in implementing digital banking services nor how they would be balanced vis-à-vis human banking modes of interaction and service.

In its profile (Hebrew) Bank Benleumi states that it is “acting to increase its hold in the retail sector” with reference to its acquisitions of two smaller banks (and their branch networks) aimed at particular segments, and completing the merger of an upscale private banking business as a division within the bank. It also lists the general types of banking services and advanced digital channels that are seen as vital to strengthening its hold in the retail sector. As other banks it delivers direct digital banking services through a web-based platform and a mobile app, information ‘kiosks’ and a SMS update service; Bank Benleumi was early to launch a ‘virtual assistant’ utility (named ‘Fibi’ after the ‘mother’ holding company). Yet the bank remains vague about the nature of customer experience one can expect in future at the bank in its branches and in virtual digital domains, and specifically what place a digital-human balance will take in customer relationships.

Banks need to plan and configure carefully how to tie together the different advisory and operational (transactional) services they provide to their customers in human and digital modes of interaction, especially so when performed in the premises of a physical branch. These modes should not be just combined but integrated and complementary. It should be done both cleverly and sensitively.

A digital-reliant branch should prove what advantages it avails customers to patron such a branch as opposed to conducting their operations on the website or a mobile app: for example, it could be more convenient to work on devices and screens at the digital branch, offer value-added functionalities, be easier to find information or to complete successfully the required banking tasks. Nevertheless, a mixed human-digital branch can provide an important additional advantage: a customer who has just finished to search independently for product information on a work-station or watch an instructional video at the branch, can right away turn to one of the professional (human) advisors to clarify remaining issues and perform relevant actions with the help of the banker-advisor. That is an essential implication of a ‘digical’ (digital + physical) approach to retail banking (Baxter and Rigby, 2014).

It is not suggested in any way that branches of the future in every bank should look and function all alike. However, each retail bank can use a core model of a ‘mixed’ digital-and-human branch and adjust its design in every aspect according to a degree of balance its management sees fit and desirable between the digital and human modes of interaction and service, assigning more weight to the digital factor or the human factor. Moreover, a bank may choose its preferred balance in a typical branch, balance the human and digital factors across a few branch formats, and not least co-ordinate between services provided in a branch and away from the branch. Banks will undoubtedly find they have a lot of flexibility and room for creativity in setting the appropriate and differentiated strategy for each of them.

Ron Ventura, Ph.D. (Marketing)

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The digital transformation of retail banking is clearly apparent by now. The way consumers manage their banking accounts (e.g., deposits, savings, investments) and run their finances keeps changing by relying on digital channels and tools to perform more and more account operations.  Most dramatically in recent years, the organisation, design and function of retail bank branches is going through re-conception and change.

Two fundamental dimensions of this transformation may be detected:

(A) Away from a branch: Account operations are shifted to digital channels of direct banking detached from bank branches. That is, banking operations are performed more frequently without requiring customers to visit a branch (e.g., using an online web-based account-management platform or a mobile app), and furthermore without interacting with human bank representatives (e.g.,  talking by phone with a representative at a bank’s call centre).

(B) At a branch: The physical environment of a bank’s retail branch is transforming by re-allocating space, facilities and human versus digital resources at the branch between banking activities. This means distinguishing between banking activities that are performed in self-service by the customers using digital working-stations or ‘kiosks’, and activities that involve human bank professionals. The transformation is affecting the site of a branch all around, within the branch and areas next to it. A salient implication of this process is the elimination of human tellers within a branch; many of the ordinary account operations will be performed with minimal or no interaction with a bank representative within a branch or in adjacent areas. Interaction with human bank professionals will be mostly reserved to consultation and for purchasing more complicated bank services (e.g., loans) or financial products (e.g., investments).

Obviously those changes are not wholly new — customers are familiar with and use various self-service, direct digital channels, as they add-up, for different lengths of time (e.g., ATMs, enhanced digital information kiosks , websites, mobile apps). The current change is in acceleration and extent of utilisation of digital technologies: the frequency in which customers are using them; the degree of customers’ freedom in choosing between digital and human modes of service for any particular activity; the types of services or products that will be diverted to digital platforms (e.g., certain loans will be arranged without meeting a bank advisor in person, perhaps by video conference); and re-shaping the environment and activity in banks’ branches.

The article explores the digital transformation by reference to the five main banks in Israel. It will especially discuss how banks balance between the human and digital factors in serving their customers. Some additional aspects of the transformation will be explained in the course of this review.

To remove any doubt, it must be emphasised that all five banks are engaged in implementing digital self-service platforms and facilities in serving their customers and offering them financial products (in addition to the now ‘classic’ direct banking by call centres). They differ, however, in how they propose and plan to balance between their digital and human channels and modes of service.

The two leading banks in Israel (Bank HaPoalim [‘workers’] and Bank Leumi [‘national’]) seem to take the transition to digital banking the most seriously and most extensively. These banks compete neck and neck for many years, swapping between them the first and second market positions occasionally, yet both are distinctively greater in scale and market dominance than the three other main banks. Both banks appear to follow more closely on the vision of digital banking transformation conveyed last year by Dr. Hedva Ber, Banking Supervisor at the central Bank of Israel, and her projection of how this ‘digital revolution’ should proceed. Nonetheless, these two banks differ on some issues in their approach to implementing the transformation.

Bank HaPoalim is advancing an initiative to establish digital-reliant branches — five branches already exist, two of them in the Tel-Aviv area. Customers utilise tablets (iPads) or larger screens on table-tops to perform their needed operations in self-service in principle; they may ask, however, for assistance from a bank representative in the branch. There are no visible desks for personal meetings with banking advisors for consultation. The branch in northern Tel-Aviv, for example, is one large open space with long white desks in the centre, a large screen on the wall, and a sitting area with personal ‘working stations’ on the left side of the branch. It has a look resembling an Apple store, elegant and flashy. One cannot find in this space the traditional partitions where customers can sit for more private and intimate consultations with banking professional advisors. This digital branch is built on site of the old-model branch.

This is a rather radical move that may precede too early the formation of mixed branches recommended and applied in other countries as the core model. Indeed most of the bank’s branches (more than 260 in total) are still more traditional; the bank plans to reduce the number of its branches and replace some of those traditional branches with new digital ones. Yet by doing so the bank could miss an important stage of preparing the public for the change.

Bank Leumi is going in a somewhat different direction, encouraging its customers to utilise mostly its direct channels that do not involve coming to one of its branches. At the branches, the bank is in major progress to eliminate all its counters of human tellers; customers are referred to enhanced information kiosks (‘Leumi Digital’) that also allow for some account operations, and to ATM machines. These stations are located in a separate interim lobby area before entering the main hall of the branch, which is dedicated only to personal sittings with banking advisors. The bank is working overall to reduce the number of its branches (currently about 250).

The bank is taking a positive move in the right direction, and yet it is not complete because the bank does not truly mix digital with human service resources in the branch. What Bank Leumi is doing is more of a re-arrangement than genuine re-modelling. Indeed it eliminates the function of human tellers, but it does not integrate the digital and human modes of service in a hybrid model and design.

Many bank branches in the country have three ‘service areas’: (a) A couple of ATMs and digital kiosks outside the branch (i.e., on street front); (b) A few ATMs and digital kiosks in a protected lobby area that customers may enter and use also outside working hours of the branch; (c) A main hall of the branch where customers can receive service or consult more privately with bank representatives and professional advisors. Some branches may have a ground floor for assistance usually with the more basic functions and a second floor for consulting on more complex issues. Bank HaPoalim created a new branch version primarily reliant on advanced digital facilities; Bank Leumi eliminated human service for basic teller functions but keeps the digital facilities outside the branch per se — it does not welcome customers using those stations to enter inside the branch.

However, the intention of a new model being developed for bank branches is to entail a combination of digital and human modes of service working next to each other. In a common hall customers can use one of the digital working stations or sit with an advisor on any specific issue more complex and financially significant. A customer may use the digital station while standing or sitting on a couch, read materials on products and perform operations. He or she may also watch instructive videos on a large screen. It should be a much more convenient and pleasant setting than using the information kiosk machine. A bank representative should be available for guidance and assistance with the digital self-service stations. But when more serious consultation becomes necessary the customer can approach one of the expert advisors sitting in partitioned meeting corners. Digital and human channels are thus in immediate access close to each other.

  • Best examples of layout, design and organisation of the new form of bank branches around the world can be found in the website of The Financial Brand: Branch Design (also see their latest Design Showcase from Fall 2016). Give special notice to the mixture of self-service stations and private zones for consultation with bank experts-advisors within the branch.

Banks may build in addition to mixed primary branches also secondary smaller digital branches (e.g., in shopping malls) to provide a convenient, quiet and pleasant place for customers to work on their bank accounts vis-à-vis using a bank’s app on their smartphones. Being similar to the model of the new “Poalim Digital” branches, they are not supposed to come in place of a cross-mode primary branch. Likewise, offering working stations in a lobby, to be used almost any hour, adjacent to the branch is not supposed to be in place of a self-service digital zone within the branch with a human assistant  (formerly a teller) ready to guide if needed. Bank Leumi should not confuse the two types of self-service by digital means. Moreover, the bank must have a digital zone integrated in the overall design of the branch that will be welcoming, visually pleasant, convenient and friendly.

Two of the smaller main banks (Bank Discount and Bank Benleumi [‘international’]) maintain at large the traditional branch format and offer in parallel a variety of digital channels with their facilities (e.g., information  kiosks) and applications (e.g., website, mobile app). They do not make yet any clear or particular stand on the balance they see fit between the digital and human modes of service. Hence, while they make sure to be up-to-date on the technological front of digital direct banking services, there is no apparent major move beyond that which would reflect a more strategic approach to a desirable human-digital balance.

But then there is Bank Mizrahi-Tefahot that has chosen to take a more distinct approach to the digital-human balance by assigning greater weight to the human factor — more precisely, committing not to sacrifice human interaction in favour of digital channels. The bank may have thus found an important dimension to differentiate its brand from the competing banks.

The bank is aiming to solidify its position as the third largest bank in Israel, climbing one position up by pushing back Bank Discount. Bank Mizrahi-Tefahot currently operates about 150 branches, and contrary to the leading banks it plans to increase this number towards 200 branches. In September 2016 the bank launched an advertising campaign, emphasising human touch, with a tagline (translated from Hebrew):

  • “On the things really important, there is no substitute to humanity.”

It purports to persuade prospect banking customers (as well as its own current customers), who still seek and prefer human interaction, that at this bank customers will continue to be able to find a human representative to talk to. Billboard ad posters, displayed until recently, proposed that the bank will cater to consumers’ concerns as they complain to their banks as follows (exemplar statements translated from Hebrew):

  • “Is it no longer possible to talk with a human in this bank?”
  • “Enough with apps, give me a human” [to talk to] — the ad “answers” that if you want to talk to a human, call a specific number.
  • “You closed the branch on [X] street. Is only the ATM left now? What is happening with you?” (the original Hebrew phrase plays on dual meaning in using the word ‘closed’)

The bank implicitly commits to maintain human reference for customers on banking issues that matter more or less. Indeed the bank does not fall behind in offering a variety of digital facilities, applications and tools for customers to manage their accounts. Yet the bank steps forward to assure customers that addressing a human representative at the bank will not be sacrificed in favour of the digital direct channels. For instance, the bank offers customers the possibility to talk by phone not only with a human representative at the call centre but also with one’s personal banker (account manager) or advisor at the branch where the account is held, reached through a direct (seamless) phone extension.

Without undermining their commitment for human reference, Bank Mizrahi-Tefahot may still modify the way it delivers certain services (e.g., teller-type) with human assistance at a branch. A new model may involve a zone equipped with digital self-service stations but supported with stronger human presence or qualifications of bank assistants for customers than what may be offered in other banks. The human resources dedicated to fulfill these positions and the tasks assigned to them should be planned anew.

Of course promises have to be tested in the reality of customer service at the bank. The bank has to prove it can deliver on its commitment to make human representatives available to customers when necessary. A critical reason banking customers turn to direct digital channels is being dissatisfied with either the long time customers feel they have to wait to reach a human representative or the level of assistance they get (e.g., professional, efficient, courteous). Nevertheless, there always remain the more complex and significant issues in which customers may need more serious consultation and human guidance in making a decision and completing a procedure (and sometimes being able to negotiate terms), help they cannot receive adequately through a self-service digital channel. Trust in customer-bank relationships is also dependent on that.

With regard to the advertising campaign of Bank Mizrahi-Tefahot, an imminent question arises: Is the message delivered in this campaign backed by a more profound vision and strategic plan? In other words, one would want to know that the campaign stands on solid ground and is not only a marketing communication idea hanging-in-the-air. A second part of this article, soon to come, will address this question, and will also examine what strategic position and attitude take the other four banks on balancing between digital and human resources and modes of service.

Ron Ventura, Ph.D. (Marketing)

 

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Every once in a while air passengers are bound to suffer from disruptions to their travel plans because of strikes in airlines due to work disputes, primarily with their pilots. Disruptions mean they may get as bad as complete cancellation of planned and paid-for flights whereof passengers are left stranded in their home airport or in some foreign country (strikes mostly affect international flights). The painful outcome of those disputes and strikes is that everybody ends up bruised to some extent — the airlines and their management, employees, and obviously the passengers-customers — whether in the short-term or long-term, monetarily and non-monetarily.

The highest-profile strike of recent times relates most apparently to the German major airline Lufthansa. It is actually a dispute lingering since 2014, causing repeated waves of strikes by its pilots. But this blog article will focus more closely on another dispute and chain of strikes at the Israeli airline El Al because it has brought the airline too close to the brink of business collapse.  Incidentally, as in Lufthansa, this dispute is also going on-and-off since 2014.

Of course there have been strikes in other airlines (e.g., Air France, Korean Air, China Airlines [Taiwan]) but the disruptions at Lufthansa seem to surpass them all in scale. Most strikes, as in the cases listed above, are triggered by the pilots, and that is crucial because the whole operation of an airline depends on them, giving them a lot of power over the management and owners of the respective company. Moreover, the lives of so many people (passengers) are in the hands of the pilots, relying on their professional skills and resourcefulness. The hot public debate surrounding those strikes is usually whether the pilots are abusing that power or are they making justified claims towards their employers.

There are, nevertheless, other types of strikes, as in the case, for example, of British Airways where the latest dispute was called by cabin crew members, specifically those hired after 2010 in apparently worse terms than for their more veteran colleagues. The ensuing strike was particularly disturbing because it was declared on last Christmas and the following days running to New Year (a continued strike occurred in January 2017). But the strikes by pilots tend to differ from strikes by other airline employees in impact on the regular flight schedule and implications of the demands made.

  • Unfortunately for some passengers in Britain, that holidays strike at British Airways coincided with other sanctions by airport workers of a Swiss contractor. The article will refer later on to other sources of disruption to air travel versus strikes originated within the airlines.

The primary demand of the pilots of Lufthansa is for a pay rise at an annual average rate of 3.7% to be paid retroactively to 5,400 pilots over a period of five years since 2012. The pilots’ union claimed that their compensation has eroded with inflation due to a wage freeze, causing them “a significant loss of purchasing power”. Lufthansa offered a rise of 4.4% from now on to be paid in two installments and another one-off payment. Drastic disruptions to the airline’s flight schedule occurred most recently in November 2016 as no agreement was reached by that time.

On a single day starting the latest ‘wave’ on 23rd November Lufthansa had to cancel according to media reports around 900 flights, affecting about 100,000 passengers. That leg of the strike extended for four days, causing overall cancellation of nearly 2,800 flights, affecting 350,000 passengers. The strike resumed on 28th November for two more days, forcing the cancellation of 1,700 flights with around 180,000 passengers in total affected. It was planned to start with short-haul flights and then expand to include also long-haul ones. (Note: Only flights under the banner of Lufthansa were implicated, excluding  Brussels Airlines, Austrian Airlines and Swiss Airlines also owned by the  group). [Sources: The Guardian 23rd Nov.; Reuters 28th Nov. 2016.]

It is hard to put an exact figure on the financial damages from those strikes. Reports suggest that the airline’s cost accrued from each striking day runs in millions of euros; total cost to Lufthansa since 2014 is estimated at €500m. It is hoped the dispute is now coming to a close following arbitration; the airline agreed to a four-stage wage increase of 8.7% plus a one-off payment, awaiting final approval and confirmation.

The pilots in El Al have demands for pay rise and improvement of working conditions. The dispute over working conditions may tell even better how deep and bitter is the conflict between the pilots and the company’s management and owners. Two issues are most striking. First, the pilots complain of an unreasonable workload because the airline is adding too many flights to its schedule, including to new destinations, and which they cannot sustain — the pilots argue they risk arriving to flights too tired and unfit to perform them. The second issue concerns the terms of employment of pilots ages 65-67: Retirement age in Israel for men is currently 67 but recent global regulation (2014) determines that pilots of age 65 and above cannot fly passenger aircrafts. The last strike over the dispute as a whole took place in mid-November 2016. An initial agreement was almost signed when the second issue triggered an additional strike in the past month. To resolve the age gap El Al suggested the senior pilots will work as instructors and examiners and in other managerial jobs but their income will be reduced considerably. The pilots did not agree to this condition. Last week a draft agreement was signed that will hopefully put an end to the dispute and the annoying disruptions of flights — but no one yet is ready to assure passengers of no more surprises.

El Al’s passengers had to suffer from flight delays and cancellations during several strikes. Although there were not too many cancellations that El Al had to announce (certainly not anywhere near as many as for Lufthansa), the ‘surprise’ nature of disruption of normal schedule was hard to tolerate and resolve — pilots would simply inform El Al at the last minute that they are sick and cannot attend their flights. El Al would then struggle to find replacing pilots from within and outside the company, leading in the ‘fortunate’ cases to delays of up to 12 hours in flight departures and in worse cases to flight cancellations. This mode of action by the pilots threatens to destroy customer confidence in the service provider as disruption comes completely with no warning and no preparation — the passenger arrives to the gate for his or her flight, yet the pilot does not. El Al tried to hire other airlines to execute the flights in jeopardy, a reasonable reaction that angered pilots even more (they argued it was more of a routine by management to deliver flights added to the already-busy schedule). All this wrangling was fought on the back of passengers.

The pilots and the airline’s leadership were so embroiled in their dispute, publicly attacking each other with all sorts of allegations, that they may have not been able to see anymore how this conflict appears especially to customers, nor how it affects them. Of course each side apologised and claimed they cared dearly about the customers, but it became increasingly difficult to believe them. Some of the details that were revealed were rather bizarre and difficult to accept. For instance, the allegation that pilots are extending long-haul flights by up to an hour to exceed 12 hours (e.g., to North America) to gain a bonus. Or, the pilots’ requirement that they would return from long-haul flights in Business Class and be paid as if they carried out the return flight to Israel. These claims made it harder to support the pilots’ struggle.

The pilots were not doing too well in gaining the support of the consumer public. They have let their grudge with the employer to be targeted at passengers. For example, during a flight in last November from a European city to Tel-Aviv they refrained from talking to the passengers and giving them customary updates about flight progress, weather conditions and other information. The captain indeed gave a welcome message at the beginning of the flight but not at half-time or towards the end of the journey as in the normal conduct of rapport on El Al’s flights. Before landing there was only a standard recorded message. It has to be understood that the Israeli public holds the pilots at high esteem and credits them with making El Al one of the safest airlines globally. Hearing the voice of the captain or first officer giving their messages to passengers is an important part of the relationship — it goes beyond the information conveyed in carrying a voice of authority, reassuring and friendly. At the end of the flight, while passengers disembarked, the pilots also remained seated in their cockpit cabin, another irregular conduct. It is a sad mistake, just like a statement made on TV by the union’s representative in the last strike that El Al’s pilots “could not find the motivation” to attend their flights, an agitating statement and a poor display of disrespect.

However, the owners and senior management of El Al should not feel comfortable and content either about their performance.  It seems they were not listening close enough to warnings from pilots for months about the course of the company. El Al’s leadership has chosen an aggressive strategy of expansion at all cost in an effort to hold on in an open competition on airway routes. This expansion included addition of destinations, increasing the frequency of flights, and the launch of a low-cost subsidiary (“Up”). El Al is trying to do something it simply cannot — it cannot become Lufthansa and it cannot beat airlines like Ryanair or EasyJet. The airline’s leadership must re-consider  the range and number of its destinations with respect to its resources.

The alternative cost of the expansion is negligence of the quality of service on board its flights — over recent years the airline omitted benefits to passengers in Economy/Tourist Class such as drinks served (including personal servings of wine or beer), free Israeli newspapers on flights home, and failing to upgrade their entertainment systems on airplanes in medium-range flights (3+ hours). Creating tourist sub-classes nowadays from standard to premium may start to correct the existing deficiencies. El Al must re-instate a realistic focus on quality of service and regain a competitive advantage on assets it can support — service onboard in addition to security and safety.

Flight disruptions may result from events other than a strike at the airline: take for example terrorist attacks or threats, strikes of airport workers, and phenomena of nature such as heavy snow or the event of volcanic ash clouds created by the eruption in Iceland in 2010. Yet, on these occasions an airline can justifiably claim to be upset by a “superior force” not in its control. It does not have that kind of protection when the disruption originates within its organization. Travel customers purchase their flight tickets from the airline and hence they least expect the airline to be the source of disruption. Besides the legal terms, there is a contract of the airline’s brand with its customers to be consistent and reliable in serving them and providing them value for their money. That is also the essence of keeping a brand’s promise.

Passengers endure different types of cost due to a flight disruption, foremost in the case of outright cancellation: financial losses (e.g., flight fare itself if cancelled, continued flights missed, ground services in the destination country such as lodging and transportation, and business-related damages when applicable), inconvenience of making new travel arrangements or cancellations, and the anguish of going through the ordeal. In some cases being stranded in a foreign country may cause greater costs than if being still in the home country. Beyond the bad experience of dealing with the disruption itself, one should not underestimate additional less direct costs: (a) putting off the excitement of anticipation before leaving on a vacation or for a special event, causing deep disappointment and frustration; (b) spoiling the enjoyment of a trip at its end on return home, causing anger and sadness (happy or unhappy memories of an experience are affected by its peak-moment, up or down, and its ending).

The disruptions in El Al because of the pilots’ strikes may have not been as severe as in other large airlines, particularly in Lufthansa, but the dispute threatened to have  much more severe consequences for the airline:

  • First, because something basic in the trust and confidence of Israeli consumers in El Al, which is essential for its survival, was in critical danger of being broken.
  • Second, El Al does not have the financial backing of a company like Lufthansa and probably other “big players” and cannot tolerate the same level of losses and damages to its brand stature.
  • Third, El Al allowed the dispute to build-up with increasing animosity and disruptions until it was very close to a tipping-point of collapse — pilots in charge of divisions of its aircraft fleet have officially resigned and the final trigger would have been resignation of El Al’s chief pilot. Was it necessary to threaten to fire the last fatal bullet?

The Israeli public still perceives El Al as its national airline although it is now in private ownership.  All stakeholders within the organization should bear that responsibility and share the interest to act carefully and cleverly to maintain that position. It is highly important for preserving the loyalty of their core target segment of Israeli consumers, but no less vital, remaining a preferred airline for Jews around the world. This strength, and further measures of improved business focus, can also increase its attractiveness to any tourists visiting Israel for flying El Al.

Ron Ventura, Ph.D. (Marketing)

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Department stores are competing hard for more than thirty years to overcome the challenges posed to them by shopping centres and malls. They keep refreshing their interior designs, merchandising and marketing methods to remain relevant, up-to-date, and especially reinvigorated for the younger generations of shoppers. Department stores and shopping centres are two different models in retailing for offering a wide array of product categories, and accompanying services, within enclosed built environments — different in requirements and responsibilities of managing them, in their structures, and most importantly with respect to the shopping experiences they create. There is enough room in consumers’ lives for shopping both ways.

Shopping centres may be found in the central areas of cities and on their outskirts, on main roads at city-gates and in suburban neighbourhoods. A shopping mall, according to the American genuine model, is a shopping centre characterised by location outside the city centre, housed in a single- or two-floor building spread over a large area and a large-space parking lot, free of charge. But shopping centres or malls exhibit nowadays such a variety of architectural structures and styles of interior design, at different sizes and locations, that the distinction in terms has become quite vague and less important.

Department stores belong traditionally in city centres. They also are typically housed inPartial back closed windows allows a glimpse into the Coop store their dedicated buildings (e.g., 5 to 7 floors, including one or two underground floors). Each floor in a contemporary store is hosting one or more departments (e.g., cosmetics, accessories, menswear, furniture, electric goods and electronics/digital) or amenities (e.g., restaurants). That was not the case in the early days (1850s-1920s) when the retail space open to the public included only up to three floors and the rest of the building was used for production, staff accommodation, and other administrative functions; the range of products was much smaller. So the department store as we better know it today follows the format redeveloped in the 1930s and further progressed soon after World War II. The styles of interior design and visual merchandising, nevertheless, have certainly changed several times over the years.

There is however another recent format of a department store which resides within a shopping centre. It is a reduced and condensed exemplar of the ‘classic’ department store, probably not how consumers more often perceive and think of such stores. But having a reduced store version is perhaps not a problem inasmuch as its location. Shopping centres invite retail chains of department stores to open a branch as an anchor store in their premises, and it seems as a necessary action by the retailers to maintain visibility and presence amid the threat of the shopping centres posed to them. This venture also allows the retailer to extend and reach shoppers away from city centres. Yet, one may question if it helps and serves the interests of the department store retailer as much as of the proprietor of the shopping centre. Being more limited in space and scope of products, while surrounded by a few hundred other shops and stores under the same roof, the department store could get more easily lost and vanish from shopper attention in the crowded space. It should be much more difficult for the store to remain conspicuous in this kind of environment, especially when shoppers can refer to a selection of specialist shops in any category they are interested almost next door.

When a shopper enters a respectable department store he or she tends to get absorbed within it. The variety of products on display, lights and colours, brand signs, and furnishing and fixtures in different shapes and styles pull you in, making you forget of the outer world. The shopper may find almost anything one needs and seeks, whether it is for wearing, decorating the living room, or working in the kitchen, enough to forget there is a street and other shops and stores out there. Think of stores — just for illustration — such as  KaDeWe in Berlin, Selfridges in London, La Rinascente in Milano, or Printemps in Paris: that is the magic of a department store. Of course there are many other stores of this type from different chains, in different styles and atmospherics (which may vary between departments within the same store), and in some of the main cities in each country. For instance, Marks & Spencer opened its modern flag store in a glass building at the turn of the century in Manchester, not in London. Not long afterwards Selfridges also opened a store in Manchester, and then in Birmingham. Printemps and Galeries Lafayette sit next to each other on Boulevard Hausmann in Paris — both are very elegant though the latter  looks more glittering and artistic,  appearing even more upscale and luxurious than the former. Now Galeries Lafayette is planning its yet most modern concept of a department store to open on Champs Élysées.

That is not the impression and feeling one gets in a shopping centre. Although a centre can be absorbing and entertaining in its own way, usually it would be the centre’s environment that is absorbing as a whole and much less any single shop or store. Even in larger stores the shopper is never too far from being exposed again to other retail outlets that can be quickly accessed. In the shopping centre or mall, a shopper moves around between shops and stores, reviews and compares their brand and product selections, and at any point in time he or she can easily return to “feel free” walking in the public pathways of the centre, eye-scanning other stores. It is a different manner and form of shopping experience for a consumer than visiting a department store.

The rise of branding and consumer brands since the 1980s has also had an important impact on trade, organisation and visual merchandising in department stores, as in other types of stores in general. There is a much stronger emphasis in the layout of floors on organisation by brand, particularly in fashion (clothing and accessories) departments. The course of the shopping trip is affected as a result. Shoppers are driven to search first by brand rather than by attribute of the product type they seek. That is, a shopper would search and examine a variety of articles (e.g., shirts, trousers, sweaters, jackets) displayed in a section dedicated to a particular brand before seeing similar articles from other brands. It can make the trip more tiresome if one is looking for a type of clothing by fabric, cut or fit, colour and visual pattern. But not everything on a floor is always sorted in brand sections, like a shop-in-shop; often a shopper may find concentrated displays of items like shirts or rain coats of different models from several brands. Furthermore, there is still continuity on a floor so that one can move around, take along articles from different brands to compare and fit together, and then pay for everything at the same cashier.

In some cases, especially for more renowned and luxury brands, the shop-in-shop arrangement is formal where a brand is given more autonomy to run its dedicated “shop” (known as a concession), making their own merchandising decisions and employing their own personnel for serving and selling to customers. The flexibility of shoppers may be somewhat more restricted when buying from brand concessions. However, even when some “brand shops” are more formal, much of the merchandising is already segregated into brand sections, and shoppers frequently cannot easily tell between formal and less formal business arrangements for brand displays. The sections assigned toView over terraces in a multi-storey department store specific brands are usually not physically fully enclosed and separated from other areas: some look more like “booths”, others are more widely open at the front facing a pathway. Significantly, shoppers can still feel they are walking in the same space of a department or floor, and then move smoothly to another type of department (e.g., from men or women fashion to home goods). That kind of continuity and flexibility while shopping is not affordable when wandering between individual shops and stores in a shopping centre or mall. The segregation of floor layout into dominant brand sections or “shops” within a department store (and some architectural elements) can blur the lines and make the department store seem more similar to a shopping centre, but not quite. The shopping experiences remain distinct in nature and flavour.

  • “With so many counters rented out to other retailers, it is as though the modern department store has returned to the format of the early nineteenth-century bazaar.” (English Shops and Shopping, Kathryn A. Morrison, 2003, Yale University Press/English Heritage.)

Department stores have gone through salient changes, even transformations, over the years. In as early as the 1930s stores started a transition to an open space layout, removing partitions between old-time rooms to allow for larger halls on each floor. Other changes were more pronounced after World War II and into the 1950s, such as  permitting self-service while reducing the need of shoppers to rely on sellers, and accordingly displaying merchandise more openly visible and accessible to the shoppers at arm’s reach. These developments have altered the dynamics of shopping and paved the way for creative advances in visual merchandising.

Department stores have also introduced more supporting services (e.g., repairs of various kinds, photo processing, orders & deliveries,  gift lists, cafeterias and restaurants). In the new millennium department stores joined the digital scene, added online shopping and expanded other services and interactions with consumers through the online and mobile channels. In more recent years we also witness a resurgence of emphasis on food, particularly high quality food or delicatessen. Department stores have opened food halls that include merchandise for sale (fresh and packaged) and bars where shoppers can eat from freshly made dishes of different types of food and cuisines (e.g., KaDeWe, La Rinascente, Jelmoli in Zürich).

Department stores in Israel have always been in a smaller scale than their counterparts  overseas, a modest version. But they suffered greatly with the emergence of shopping centres. The only chain that still exists today (“HaMashbir”) was originally established in 1947 by the largest labour union organisation in the country. Since the first American-style mall was opened near Tel-Aviv in 1985 the chain has started to decline; as more shopping centres opened their gates the stores became outdated and lost the interest of consumers. By the end of the 1990s the chain had come near collapse until it was salvaged in 2003 by a private businessman (Shavit) who took upon himself to rebuild and revive it.

The chain now has 39 branches across the country, but they are mostly far from the scale of those abroad and about a half are located in shopping centres. Yet in 2011 HaMashbir opened its first large multi-category store in the centre of Jerusalem, occupying 5000sqm in seven floors. It seems the stores have gone through a few rounds of remodelling until settling upon their current look and style. They are overall elegant but not fancy, less luxurious and brand-laden, intended to better accommodate consumers of the middle class and to attract families.

It is rather surprising that Tel-Aviv is still awaiting a full-scale department store. The chain has stores in two shopping centres in Tel-Aviv but none left on main streets. At least in two leading shopping centres the stores have shrunk over the years, and one of them is gone. The latter in particular, located once in a lucrative and most popular shopping mall in a northern suburb, was reduced from two floors to a single floor and gave up its fashion department amid the plentiful of competing fashion stores in the mall, until eventually it closed down. Another store remains near Tel-Aviv in “Ayalon Mall”, the first mall of Israel.

Tel-Aviv has the population size (400,000) and flow of visitors on weekdays (more than a million) to justify a world-class store on a main street. Such a store has also the potential of increasing the city’s attraction to tourists. The detriments for the retail chain are likely to be the high real estate prices, difficulty to find a building suitable for housing the store, and the competition from existing shopping centres as well as from stores in high-street shopping districts. Yet especially in a city like Tel-Aviv a properly designed and planned department store is most likely to be a shopping and leisure institution and centre of activity to many who live, work or tour the city.

Shopping centres and department stores can exist side by side because they are essentially different models and concepts of an enriched retail complex in enclosed environments. Unlike the shopping centre, the department store is a world in itself of retail and not an assortment of individual retail establishments. The department store engages shoppers through  its structure, design and function given the powers the retailer has to plan and manage the large store as an integrated retailing space. Consequently, a department store engenders customer experiences that are different from a shopping centre regarding the customers’ shopping trips or journeys and how they spend their time for leisure in the store. One just has to look at the flows of people who flock through the doors of department stores in major cities, most of all as weekends get nearer.

Ron Ventura, Ph.D. (Marketing)

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The decision of the British people in a referendum on 23 June (2016) to leave the European Union (EU) — known as ‘Brexit’ — promises to emerge as a most profound event in the nation’s recent history. The result of the referendum in favour of Brexit, by a majority of 52% against 48%, was decisive yet not by a large margin; moreover, the striking differences in voting patterns between England and Scotland, and even within England, between London and other parts of the country, invoke deep tensions (In Scotland and London the Remain camp had a clear majority).

The effects of Brexit are still very early to call and are hard to predict because a departure of a member country, let alone the United Kingdom, from the EU has never been experienced so far. The effects also are expected to impact multiple areas, including politics, economics, business, social welfare and standard-of-living. This article focuses on the area of retailing; it reviews and contemplates early assessments of the plausible effects that leaving the EU can have on retailers and consumers in Britain. However, due to the early stage of the process, the ambiguity that surrounds the implications of leaving the EU, and the fact that the new British government is not enacting yet an exit from the EU (i.e., Article 50 of the EU Lisbon Treaty), one should be cautious in taking these assessments as concrete predictions about the (probable) outcomes of Brexit.

Uncertainty mixed with pessimism has claimed an immediate toll on the value of the pound sterling (particularly its exchange rate against the US dollar); stock prices have also moderately declined in London Stock Exchange, but further declines are foreseen as the process unfolds. The devaluation of the British pound is a critical factor whose effect is expected to roll for several more years. Retailers are concerned that rising prices of imported goods (e.g., food, clothing) will deter consumers. In addition, increased cost of imported raw materials and components used in production is likely to contribute to rising prices of local goods, further exerting an inflationary pressure. Positive effects that may arise from this devaluation on exports will be discussed later. The sense of “bad news” is not escaping consumers either, manifested in a quick and rather sharp decline in consumer confidence as reported by GfK marketing research firm. This could mean that consumers become hesitant and more inclined to “wait and see”, thus postponing their more costly purchases, particularly of discretionary and leisure products and services.

The Centre for Retail Research (CRR) considers multiple aspects wherein retailers and consumers are likely to be affected while entering a post-Brexit era. It is suggested that a decline of 5% in the value of the pound against the euro would be enough to compensate for new tariff barriers imposed by the EU, and the steeper decline that already occurred is a very good thing — it would help exports (e.g., e-commerce), transitioning from imports to local production, and tourism. The CRR argues that the pound was already over-priced and needed correction (note that  right after the referendum the pound declined 8% against the dollar and euro, but a slide down occurred earlier, at the beginning of this year, so against values of late 2015 the pound declined by as much as 15%). But there are additional important factors with structural implications that are noteworthy: need to fulfill changing jobs and a drive for automation; need for new worker and consumer protection laws and regulations; re-settling (digital) data protection regulation and mechanisms.

There is broad agreement that in order for Britain to retain relations with the European Single Market, it will have to continue and abide to product and data protection standards of the EU. Britain will also not be able to completely restrict worker migration from the EU. The difference will be, however, that Britain will have to work by those rules but will not have a say about them — a warning the Remain campaigners continue to critically voice. Different models are contemplated for the relations of Britain with the EU in the post-Brexit era, notably by joining Norway in the European Economic Area (EEA) or replicating the special relations of Switzerland with the EU. But the EU council nervously hurried to warn Britain, or any other country that contemplates to follow, that it should not allude itself of receiving an advantageous status as of Switzerland’s.

  • Another avenue for resolution may consider the trade arrangements of Israel as a non-member country with the EU, and its participation in Horizon 2020, a programme for science and technology research and development.

References made in the media to changes in retail sales in June seem too soon and hardly indicative of a real effect of the Brexit decision, primarily given that only ten days remained to the end of the month after the referendum (some sources suggest waiting for July’s figures). Figures also vary, depending on the basis of comparison (e.g., volume or value, last month or same month last year, all or like-for-like [same stores]). For example, sales by volume decreased 0.9% in June compared with May (2016), yet compared with June of last year (2015) they increased 4.3% (by value, sales increased just 1.5% [Britain’s Office for National Statistics (ONS): Retail Industry-Sales Index]). Different figures were published by KPMG consulting firm together with the British Retail Consortium (BRC): Their Retail Sales Monitor shows that sales grew just 0.2% in June year-on-year, but when compared on a like-for-like basis they dropped 0.5%. The BRC-KPMG monitor furthermore indicates that non-food sectors, especially fashion, were hit harder than the food or grocery sector.

Recent observed changes may be attributed at most to so-called ‘Brexit-sentiment’ . If we were to look already for a more reliable indication of an immediate post-referendum shock, the KPMG’s press release reports that sales fell particularly in the last week of June. The Financial Times (13 July ’16) indicates that according to its Brexit Barometer, day-to-day spending “may have bounced back to just slightly below what it was immediately before the June 23 referendum”. The number of visits to stores (‘footfall’) declined in the week immediately after the referendum (10% year-on-year for weekdays – especially on High Street), recovered a little in early July, followed by another a drop in visits. The fluctuations are not consistent and it is hard to conclude a trend at this time. The picture for Saturdays is even less bright: “high-street footfall on Saturdays, the most important shopping day, has now fallen year-on-year for three consecutive weeks”.

The Economist Intelligence Unit published just before the referendum a special, rather negative, report on Brexit (“Out and Down: Mapping the Impact of Brexit”). It relates to key implications of Brexit in regard to retailing: a fall of the pound, inflation in line with rise of import prices, consumer purchasing hesitation, and more complex supply chains for retailers. According to their projection, the year 2017 will be the worst for retailing; recovery will be felt during 2018-2020 as growth of retail sales volume resumes, but it will happen intermittently and sales will not return to the pre-Brexit level.

In order to better grasp how Brexit may change the direction for British economy, and for the well-being of consumers and retailers in particular, it would help to take a little longer look backwards (i.e., as far as 2007) at retail sales and some additional  indicators.

The ONS Retail Sales Index by volume (seasonally adjusted, excluding fuel): After a long period, from 2006 (shortly before the financial crisis) until late 2013, when sales volume (index) was almost stagnant at just about 100, it started lifting since early 2014 and until June this year (2016) to a level of 112.5. It has been a positive sign for return to the expansion years of a previous decade (~1996-2006). But the implementation of Brexit (i.e., at least while negotiating new trade agreements) threatens to halt the climb and impede a continued recovery of the sector from the lingering effects of the financial and economic crisis of 2007-2008 (including a ‘second spell’ in 2011-2013).

Growth in pay compared with inflation (ONS: UK Perspectives 2016 Personal & Househod Finances [Section 4]): This is an indicator of the cost of living (or the purchasing power of income from work). We may notice three distinct periods: (a) A ‘shock’ response to the financial crisis ~2008-2009 included a steep rise in consumer prices while growth in regular pay dissipated, and then a ‘correction’ of slowing price increases; (b) Inflation rate higher than growth in pay ~2010-2013 — during this period of the hardest burden on consumers, growth in pay remained at a bottom level of 1-2% while inflation climbed as high as 5% (2011) and subsequently “cooled” to 2-3%; (c) Renewal of real rise in pay ~2014-2016 as inflation starts to subdue, falling to near 0%, and pay growth reaches 2-3%. Worsening market conditions due to Brexit could lead to erosion once again of  regular (weekly) pay and suppressed consumer spending.

Household spending (ONS: UK Perspectives 2016 as above [Section 5]): The average household expenditure, inflation-adjusted, decreased from 2006 through 2012 from ~£550 to about £510 per week; then spending started to recuperate in 2013 and 2014, reaching £530. Improvement may have continued up to this year: On the one hand, regular pay increased in real terms in the past two years; on the other hand, the real disposable household income in Britain has been hovering just above £17,000 since 2006 (after a climb in previous years), though lifting its head a little in 2015. Now there is higher risk that such improvement in spending will not be possible to continue.

Consumer Confidence Index (GfK): The research firm GfK conducted a one-off special survey in the week following the referendum to measure its Consumer Confidence Barometer (CCB) (normally updated on a monthly basis). It provides a sharp demonstration of the impact of ‘Brexit-sentiment’: The (net) index value dropped from -1 in the previous survey to -9 after learning of the referendum result. The last time a similar decline (8 points) in a single month was measured occurred in 2011, and only in 1994 had a larger single drop been measured. Those belonging in the Remain camp are more negative (-13) than those in the Leave camp (-5). Respondents to the barometer are asked about the current state of the economy and their expectations over the next twelve (12) months — 60% expect the economic situation to worsen (an increase of 14% from pre-referendum). Also, 33% expect prices to rise sharply.

The Financial Times presents in its Brexit follow-up a chart of the history of GfK’s Confidence Index from 2007 to 2016: The chart shows how CCB dropped from just below 0 to -40 during the 2007-2008 crisis, recovered to -20, declined again to around -30 during the ‘second-spell’ of the economic crisis in 2011-2013, and then climbed back to a little above 0 before the referendum. A decline of CCB actually already started earlier this year, and then came the steep single drop following the Brexit referendum. Consumer confidence was already at lower (net) levels and has experienced continuous descents in the past ten years; it may likewise continue to deteriorate below -20 again after the recent drop in CCB.

A map by GfK shows variation across regions and demographic segments. Interestingly, the strongest ‘demoralising’ effect was found among the young group of ages 18-29 (decline of 13 points) compared with older groups (6-8 points off), yet the younger remain overall more positive and optimistic about the economy (index +6), especially compared with those of 50-64 of age (index -21).

  • After three years of decline in the number of retail companies in the UK running into financial difficulties, since the last peak of 2012 (54), it seems to be rising again in the first half of 2016, according to data gathered and reviewed by the Centre for Retail Research (note that not all companies going into legal administration necessarily go bankrupt and cease to operate). Growing pressure on retailers during the process of leaving the EU may put even more medium and large retailers (in number and size of stores) at risk of failure.

After a significant drop last year, number of retailers in trouble looks to be rising again in 2016

The depriciation of the British pound is expected to facilitate selling and increase exports to foreign consumers in other countries through e-commerce (i.e., retailing or shopping websites) by retailers residing in the UK. Especially during the period that existing trade agreements are still valid, it would be the best time for British retailers operating online to fill their coffers with cash. They will need to refrain from updating pound-nominated prices upwards as long as possible. When new trade agreements are reached, the terms for purchasing abroad online from British retailers may also change and new adjustments will be required.

  • Ido Ariel of Econsultancy recommends three supporting marketing methods for encouraging international customers to purchase online at the interim period on UK retail websites: inducing a sense of urgency and initiating pro-active targeted prompting messages; offering targeted promotions to increase personalization (e.g., geo-targeting); and enacting limited-time discounts.

However, the condition in which the British Economy arrives to this historic junction is concerning, having reduced its manufacturing sector too much over the years and relying too heavily on a services economy. This situation may mitigate the country’s ability to exploit its currency advantage in the short- to medium-term by increasing exports of goods, and may also put it in a less advantageous position as a strong producing economy in negotiations for future trade deals. The condition of the British economy could become even weaker if, as projected by the Economist Intelligence Unit, service companies — financial and banking of most — will lose their “passport” to act from the UK in the other EU member-countries (e.g., France, Germany), and thus they will choose to cut their operations in the country or leave altogether.

  • The contribution of the production sector to the economic output (Generated Value Added [GVA]) decreased in the UK from 41% in 1948, through 25% in 1990, and down to 14% in 2013 (‘production’ includes manufacturing, oil and gas extraction, and water and energy utilities);
  • The relative contribution of the services sector grew during that period from 46% to 79% (67% in 1990);
  • The growth of the sub-sector of business and financial services is most noticeable, expanding from 13% in 1978, through 22% in 1990, and reaching 32% in 2013.
  • A World Bank comparison referring specifically to manufacturing shows that its contribution to output in Britain is 10% versus 22% in Germany (UK’s is the lowest [with France] and Germany’s the highest among all G7 countries, 2012).
  • (Source: ONS review, April 2014: “International Perspective on the UK — Gross Domestic Product”. For main points see The Guardian’s Economics blog.)

In the long-term Britain may well succeed in re-establishing a strong position in business and trade. But it will come at a high cost in the short- and medium-term (next three to five years) for the economy overall, businesses and consumers, and this process is not free of risks. Is it that much necessary? Another contentious question is: How much has the EU really held the UK back? Answers to these questions remain in deep dispute. Having stayed in the EU, the UK might have been able to help stabilise the European economy while resolving its existing failures, and then grow faster with the EU. But too many Britons stopped believing this will ever be possible, or simply lost their patience. The EU leadership in Brussels bears much responsibility for arriving to this predicament. But that matters little now.

It is now a time for taking an opportunity to resolve weaknesses in the British economy — industry and trade. It will have to prove itself as an independent viable economy, less reliant directly on the EU but more like many other countries trading with the EU. Retailers may have to make changes to their mixtures between imported and locally manufactured products; to form trading ties with different and additional countries; and more vigorously refresh and update their trading, merchandising and pricing techniques and tactics to be competitive on the local stage, and where relevant on an international stage. The Centre for Retail Research has expressed most pointedly what is expected of retailers: “Retail post-Brexit will have to be more agile, more digital, capital-intensive and more responsive to change”. Retailers and consumers will have to adjust to new market conditions and adapt to new game rules.

Ron Ventura, Ph.D. (Marketing)

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For the past two years the Internet company Yahoo is under immense pressure: The management led by CEO Marissa Mayer, in office since 2012, is working hard to reinvigorate the core online business of the company with new up-to-date technologies; and furthermore, creating more value, mainly from advertising. The board of directors is seeking to give management more time to find a way out of the difficult times, however it is struggling to fend off pressures from activist investors who demand a break-up of the company in order to salvage the real value they see captured in Yahoo through its stakes in external companies — Alibaba of China and Yahoo Japan. Yahoo is in a delicate and complex situation, carrying a danger that consumers-users will be left behind in the final business outcome.

The key criticism of Yahoo concerns the poor performance of its online advertising system, lagging behind other platforms such as Google (search) and Facebook (social media). The core business of the company entails its search engine and media (news in various domains), acting as sources of income from advertising (e.g., display ads, sponsored results). Display advertising is now active also in Yahoo’s Mail (e-mail service).

Underlying the poor financial performance of the advertising system are mainly two problems: (a) inconvenient and technologically outdated utilities and tools for advertisers when placing their orders for online ads (1); (b) a relatively low volume of search queries by Internet users, particularly far behind Google, and insufficient returns by visitors to the different sections of Yahoo websites. For example, according to figures revealed by the New-York Times, only ten percent (10%) out of one billion monthly visitors of Yahoo websites return every day, suggesting weak brand attachment; the reported figure for Facebook is 65% (2). It may start from failing to persuade more Internet users to make Yahoo a start homepage on their browsers.

Yahoo may be suffering, nevertheless, from a  broader problem of generating income from its online services. That is, the company should not rely only on income from advertising but create additional schemes that can generate income from use of its online services. Yahoo could monetise services, for instance, by charging users on premium plans (e.g., allowing extended storage capacity, more advanced tools or features, increased customisation, access to extended content). Yahoo may further not have a wide enough range of services on which it can charge premiums from registered (logged-in) users. Rightfully, companies are reluctant to ask customers to pay for online services, but that may be an unaffordable privilege, as in the case of Yahoo. Moreover, charging price premiums for enhanced services is legitimate and can contribute to higher perceived quality or value to consumers.

The complexity of the situation can partly be explained by the claim of investors that a greater portion of market value of Yahoo arises from its stakes in Alibaba and Yahoo Japan than from its own activity. Yahoo originally (2005) had a stake of ~24% in the Chinese e-commerce company Alibaba. Shortly before an initial public offering (IPO) of Alibaba in September 2014, that stake was valued $40 billion. During the IPO, Yahoo sold 40% of that stake as agreed with Alibaba to the latter’s requirement. Yahoo eventually collected more than $9bn, available to award shareholders or re-invest in the company (how funds were actually used is unpublished). The remaining stake of Yahoo in Alibaba (~15%) was worth some $30bn in December 2015. Investors thought that not enough value stemmed from Yahoo’s genuine activity before Alibaba’s IPO, and some seem to believe that is nonetheless apparent after the IPO.

The first two years of Mayer as CEO enjoyed a sense of improvement and optimism. Until the IPO of Alibaba, Yahoo acquired more than forty technology companies to bring fresh methods, tools and skills to the company. The share price of Yahoo climbed from a low of under $20 to above $30 by the end of 2013 and reached $50 in late 2014. But after Alibaba’s IPO, tensions with investors, especially the activist ones, escalated as patience with Mayer as well as the board was running thin. The share price also started to decline back to $30 during 2015 (it recovered to ~$36 since January 2016).

It must be noted that the board of directors together with Mayer did try to find solutions that would satisfy the investors while saving the core business of Yahoo. One plan considered was to sell the remaining stake of Yahoo in Alibaba but that solution was abandoned due to concerns about a looming large tax liability. Another solution, championed by Mayer, was to put the core media and search business of Yahoo on sale in one piece, but that plan was also just recently suspended as the process failed to mature. The most serious prospective buyer was the US telecom company Verizon; they were thinking of merging the activity of Yahoo with that of AOL, acquired last year, but executives were worried about the company’s ability to pull together such an integration effort in a short time (3).

  • Update note (July 2016): After all, a deal was done with Verizon to buy Yahoo for $4.8bn (excluding its stakes in Alibaba and Yahoo Japan.)

In the second part of this article I examine the display and organization of Yahoo’s websites with a user-consumer viewpoint in mind — visual layout, sections and services on the website, composition of content, links, menus and other objects. The examination is focused more on the content and services Yahoo provides to its users rather than its advertising.

Yahoo runs multiple versions of its website in different countries and languages. The major part of the review is centered on the website of Yahoo in the United Kingdom as a pivot exemplar. References will be subsequently made to other versions. Nevertheless, all of the additional websites visited (8) highly resemble the UK website in appearance and composition. Through the examination I intend to argue that Yahoo has not organized and designed the homepages of its website versions appropriately to expose users to, and give them the necessary inducement to access, some of its core services that would also be important sources of income. However, beyond the homepages, I also relate to the ‘portfolio’ of media topical sections and services that comprise the websites.

Some of the graphics on the page were not captured (the title name Yahoo and news bar were supplemented)

Two services of Yahoo are primary assets: the search engine (Yahoo! Search) and the e-mail service (Yahoo! Mail). Both follow the company’s website in substance from its early days. They are essential components of Yahoo’s brand. The search facility is the gate to the enormous content on the Internet. The e-mail service with its mailbox management utilities is at the foundations of the company’s invaluable customer base. Both have advanced over the years and added features, although there is argument over the nature of progress particularly with regard to the search engine. A third additional asset of Yahoo is the media content of news stories and videos in various domains delivered on the website. On the left-hand of the homepage appears a sidebar with links to services and news topics on the website; a ‘global’ heading bar appears on top of any webpage on Yahoo’s site.

As important and interesting as the news media content may be, its preview takes grossly too much space of the homepage. Conversely, the search window for initial queries, while on top, is marginalised on the page, nearly “drowning” in the news content. It sends a message to visitors that this feature is secondary or less to media content. It is little wonder that on-face Internet users perceive Google as the universal search engine (Yahoo has been relying on the powers of search engines of Google and previously Microsoft’s Bing in recent years). The icon-link to the e-mail service is not in a much better position at the top right corner. Even though three links for Mail appear on the homepage — the icon right to the search window, on top of the vertical sidebar, and on left side of the heading bar — none of these positions is central. The allocation of space on the homepage is not reasonably proportional between these three assets. It suggests that Yahoo has become a media company and has practically discounted its two other assets.

The sidebar added to the website in the past two years is a welcome contribution as it helps to quickly familiarise with or easily find some key services and news topics on Yahoo’s site. Nevertheless, icons-links for those services and topics could receive better attention and salience in users’ eyes and minds if they were arranged in a central area of the page adjacent to the Search window and Mail icon (e.g., beneath them). It would give Yahoo an opportunity to promote services or topics with a greater income potential vis-à-vis visitors’ interests and utility in using particular services. For example, the online cloud-based service Flickr for storing, editing and showcasing photos is hardly noticed on the head-bar, and if at all on the sidebar (Flickr was acquired by Yahoo in 2005). If site users could also see more instantly and clearly what functional services (non-news) are offered by Yahoo, it might be better understood why there is a Sign-In option separate from Mail.

  • Extra feature-services such as Contacts, Calendar, Notepad and Messenger (chat) are already included in Mail.

Yahoo highlights on its homepage general news, sport, entertainment and finance. On the ‘homepage’ of the news section one can find more categories such as UK,  World, Science & Tech, Motoring and Celebrity. Links to some of them appear on the sidebar of the UK homepage (e.g., Cars [Motoring], Celebrity). Interestingly, some news/media sections do behave as more autonomous sites and some have a different layout with a visual graphic display of tiles — Parenting, Style and Movies. (In the Italian version, Beauty and Celebrity sections also exhibit a tile ‘art’ display.)

The news headlines with the snippets (briefs) are useful but those do not necessarily belong on the homepage in that long a list. The ‘ribbon’ of images for selected stories would most appropriately fit on the homepage with a focal story changing on top — that is all that needs to remain on the homepage (with some enhancements such as choice of category) while the additional headlines are delegated to the News ‘homepage’. In the final display of the homepage, a concise and elegant arrangement should include the Search window and Mail/ Sign-In icons, surrounded by a News showcase and a palette of selected services or media topics.

  • A visitor has to look deeper into the website to trace additional services that may be  interesting and useful. A few examples: (1) The Finance (news and more) section includes a personalised utility ‘My Portfolios’ for managing investments; (2) On a page enlisting more services one can find Groups (discussion forums) and Shopping. Other features or services on a sidebar or head-bar refer to Weather, Mobile (downloading Yahoo apps), and Answers (subdivision of Search — peer-to-peer Q&A exchanges).

When the homepage of UK website is compared with other country and language websites of Yahoo, it is mostly noticeable that some of the links on the sidebar and head-bar may vary, apparently accounting for regional and cultural differences in public interests. Countries may also be affiliated or in co-operation with different local content and service providers. For instance: Italy assigns more importance to Style, Beauty and Celebrity, also having more invested topical sections; France has a section on real-estate (Immobilier) in affiliation with BFM TV); Australia has a TV section affiliated with PLUS7); and in Germany the Weather and Flickr services are represented on both sidebar and head-bar. It is further observed that the sidebar in Yahoo Australia includes many more links than in other site versions.

Regarding the US website, some differences can be marked. First, subject titles of appear above each news headline. Second, a reference to the social blogspace site Tumblr appears on the head-bar (in addition to Flickr) — it appears also on the site of Australia but not on the other sites visited (Tumblr was acquired by Yahoo in 2013). Third, the US site chose to mention on its sidebar Shopping and Politics.

  • The Yahoo websites exhibit anomalies implying that the company refrains from promoting some of its own in-house or subsidiary services. For instance, Flickr and Tumblr are sidelined, and the latter is exclusive to just a couple of countries. The ‘Shopping’ product search for attractive retailer offers (powered by Nextag) is more often hidden, and Yahoo homepages provide links to eBay and Amazon.

In order to design in practice the most appropriate and effective composition and layout of the homepage, Yahoo may apply usability tests, eye tracking, and possibly also tracking of mouse movements and clicks. These three methodological approaches can be used in parallel or even simultaneously to derive findings that can support and complement each other in guiding the design process. Attention obviously should be paid to visual appeal of the page appearance in the final design. As suggested above, however, emphasis should be directed to the content and services provided by Yahoo as opposed to the advertising space.

Notwithstanding, the homepage is just the start of the journey of a visitor on the website. Of course much depends on the quality of services and content in determining how long a visitor will stay on the site. For example, how the mail, e-commerce (shopping), or photo service platform compare with competition. Particularly with respect to the search engine, continued utilisation relies on relevance, credibility and timeliness (historical to up-to-date) of results generated.

Yahoo provides specialised searches of websites and pages, images, videos, answers, products and more. Yet the company acquired in the past the Altavista engine that was advantageous in retrieving higher-quality and academic-level information sources and materials but it was apparently submerged without leaving a trace; and as indicated earlier, Yahoo has turned to stronger capabilities of competitors at the expense of developing more of their own. Marissa Mayer aims alternately to create a leverage by developing a powerful intelligent search engine for mobile devices in a mobile-friendly site/app. Even though the mobile-driven approach can be a move in the right direction for Yahoo, it may not resolve the suggested problems inherent in the online website, and skeptics doubt that the company has the skills and resources in its current state to accomplish those goals.

Yahoo has a lot at stake. It should not rely on users to know how to get to its services independently or to search for their Internet addresses. The site, online or mobile, has to give a hand and show users the way to the services it wants them most to visit and apply, and there is no better place to start than on the site’s homepage. The solutions needed are not just about technology but in the domain of marketing strategy and user-consumer online and mobile behaviour. Yet, looking at how events roll at Yahoo, the decisions made could be driven by business and financial considerations above the heads of users-consumers.

  • The lessons for Yahoo should now be learnt by Verizon as it intends to merge between functions and capabilities of Yahoo and AOL, and probably rebrand them.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “Marissa’s Moment of Truth”, Jess Hempel, Fortune Europe Edition, 14 May 2014  pp. 38-44.

(2) “Yahoo’s Suitors Are in the Dark About its Financial Details”, International New-York Times, 16-17 April 2016.

 

 

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