Labor costs money. The price of a product always factors in the labor costs associated with designing and manufacturing that product. The price of a service includes the labor costs associated with delivering that service. The higher the labor cost, the higher the price of the product or service. That’s pretty much a universal truth.

As markets become saturated and differentiation becomes increasingly difficult, companies are forced to compete on price. The cost of raw materials used to produce a product can only be controlled so much. Thus, companies concentrate on reducing the amount of manual labor required to produce their products. The trend towards automation has become so dominant that “handmade” products are now rare and often prohibitively expensive.

Well, what about services? Better service generally involves either more labor or higher-skilled labor (or both). Because the cost of labor has only been increasing over time, service is becoming increasingly expensive. Once again, businesses are forced to compete on price and, as a result, services are either reduced or eliminated altogether. The key thing to remember is that businesses are able to reduce the service they offer only because consumers are willing to sacrifice service for reduced cost. Given the option to pump their own gas or pay a bit extra, most people chose to pump their own gas so full-service gasoline pumps are all but extinct.

Let’s say you need to buy a new oven for your kitchen. You could go to the local mom & pop appliance store and receive a personalized shopping experience OR you could goto your local electronics mega-retailer like BestBuy, get minimal service but save a few bucks. Most people opt for BestBuy. Of course, the ultimate form of sacrificing service for price is on the Web. Web merchants can generally offer rock-bottom pricing because no physical presence means no inventory cost and no labor costs. Continuing the trend of preferring self-service and lower prices, consumers are increasingly hopping on the Web to shop.

When you pay for a service, you are paying someone to do something that you either lack the necessary skill or knowledge to do or simply don’t want to do. With the advent of the Internet, the barrier to acquire knowledge and skill has been shattered. Accordingly, the demand for services is diminishing. Why pay a plumber to fix my faucet when I can follow one of many DIY guides on the Web? Why pay a few hundred bucks to an auto broker to buy a car for me when I can now find model information, reviews, dealer invoices and submit quote requests to several dealers for free on the Web?

I think it’s time to analyze what the terms ’self-service’ and ‘full-service’ really mean. Self-service means that your request will only be fulfilled with further input of your time and energy. Full-service means that you make a request and it is fulfilled without any further input of time or energy by you. Nowhere in the definition of full-service does it say that your request is to be fulfilled by a human. Traditionally, people think that if you’re going on the Web to do something, it’s self-service. After all, it takes your time and energy. However, because there is often not much in the way of price differentiation between Web-based companies, these companies are forced to provide a higher level of service. Since employing humans to provide this service would kill their business models, technology is used to deliver higher levels of service.

One example is search engines. The search engine is technology’s replacement for the human librarian. Imagine that you’re planning a vacation to Australia. You could walk into your local library, tell the librarian “Hi, I’m planning a trip to Australia. Can you help me find some information on that”, and for a few minutes you’ll have your own personal research assistant. Unfortunately, having a personal research assistant at our disposal full-time is too expensive. Search engines like Google attempt to do the same thing. Instead of randomly poking around on the Web trying to find Australia travel information, we can use these technology-based services to help us locate the information we seek.

Dontbuyjunk was created to, in a sense, be a full-service shopping experience. You state what you want e.g. “I want a digital camera with good battery life and low-light shooting” and the system told you what to buy and where to buy it. To accomplish that, we developed a technology called TotalRank which essentially replaces a knowledgable salesman that you might find at a store.

Everyone likes good service. We all want the best experience with the least effort. Traditionally, good service meant extra cost and as a result good service is hard to find. But through technology, companies are once again able to differentiate themselves by offering better service. Long-term, I think we’ll see the return of full-service experiences. The difference will be that instead of people providing service, technology will. The result will be great service with minimal additional cost. Finally, consumers will get to have their cake and eat it too.