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Managing Customer Expectations and Priorities in Service Systems

Author

Listed:
  • Qiuping Yu

    (Kelley School of Business, Indiana University, Bloomington, Indiana 47405)

  • Gad Allon

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Achal Bassamboo

    (Kellogg School of Management, Northwestern University, Evanston, Illinois 60208)

  • Seyed Iravani

    (Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208)

Abstract

We study how to use delay announcements to manage customer expectations while allowing a firm to prioritize among customers with different sensitivities to time and value. We examine this problem by developing a framework that characterizes the strategic interaction between the firm and heterogeneous customers. When the firm has information about the state of the system, yet lacks information on customer types, delay announcements play a dual role: they inform customers about the state of the system, while they also have the potential to elicit information on customer types based on their response to the announcements. The tension between these two goals has implications for the type of information that can be shared credibly. To explore the value of the information on customer types, we also study a model where the firm can observe customer types. We show that having information on the customer type may improve or hurt the credibility of the firm. While the creation of credibility increases the firm’s profit, the loss of credibility does not necessarily hurt its profit.

Suggested Citation

  • Qiuping Yu & Gad Allon & Achal Bassamboo & Seyed Iravani, 2018. "Managing Customer Expectations and Priorities in Service Systems," Management Science, INFORMS, vol. 64(8), pages 3942-3970, August.
    • Handle: RePEc:inm:ormnsc:v:64:y:2018:i:8:p:3942-3970
    DOI: 10.1287/mnsc.2017.2785
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    References listed on IDEAS

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    7. Qiuping Yu & Gad Allon & Achal Bassamboo, 2021. "The Reference Effect of Delay Announcements: A Field Experiment," Management Science, INFORMS, vol. 67(12), pages 7417-7437, December.
    8. Brett A. Hathaway & Seyed M. Emadi & Vinayak Deshpande, 2021. "Don’t Call Us, We’ll Call You: An Empirical Study of Caller Behavior Under a Callback Option," Management Science, INFORMS, vol. 67(3), pages 1508-1526, March.
    9. Liu, Jian & Chen, Jian & Bo, Rui & Meng, Fanlin & Xu, Yong & Li, Peng, 2023. "Increases or discounts: Price strategies based on customers’ patience times," European Journal of Operational Research, Elsevier, vol. 305(2), pages 722-737.

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