Today we identify service articles published in Marketing, Management, Operations, Productions, Information Systems & Practioner-oriented Journals in February 2017.
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Chen, B. and J. Chen (2017): Compete in Price or Service?—A Study of Personalized Pricing and Money Back Guarantees, Journal of Retailing, 93(2), pp.154-171
Retailers use both pricing and service strategies to respond to intensified competition. Here we develop a duopoly model to investigate the impact of the increasingly popular personalized pricing strategy (PPS) and the widely used Money Back Guarantee (MBG) customer returns policy. We consider two retailers who differ in customer satisfaction rates. Each retailer chooses a pricing strategy, PPS or uniform pricing, and a product return strategy, MBG or ‘no returns.’ We show that both PPS and MBG are dominant strategies, but their impact on retailers’ prices and profits are different; while PPS intensifies price competition and may lead to a prisoner’s dilemma in which both retailers may lose profit, MBG mitigates price competition and may result in a Pareto improvement in both retailers’ profits. Both PPS and MBG increase the size of the overall market, but not the total duopoly profit. The total customer surplus and social welfare may increase under either strategy. In addition, we obtain some interesting observations as to how our results may change if the product quality/customer satisfaction rate is endogenously chosen in the duopoly. Some of our findings are in contrast to related results reported in the literature.
Worm, S., S. Bharadwaj, W. Ulaga and W. Reinartz (2017): When and why do customer solutions pay off in business markets?, Journal of the Academy of Marketing Science, 45(4), pp.490-512
Manufacturers invest in customer solutions to differentiate their offerings and sustain profitability despite declining margins from goods sales. Notwithstanding strong managerial and academic interest, an examination of whether and explanations for when and why solutions translate into superior performance are lacking. We test hypotheses developed from the resource-based theory and transaction cost economics, supplemented with in-depth theory-in-use interviews, on primary and secondary data collected from 175 manufacturers. From a model that corrects for endogeneity, the findings suggest that, compared with other service offerings, solutions are associated with increased return on sales. This positive profitability effect is enhanced in firms with greater sales capabilities; it is stronger in industries with greater buyer power but weaker in technology-intensive industries. These results caution against the simplistic view of solutions as a universal route to gaining competitive advantage and aid in better identifying the role of solutions in a manufacturer’s offering portfolio.
Bodur, M. and J. R. Luedtke (2017): Mixed-Integer Rounding Enhanced Benders Decomposition for Multiclass Service-System Staffing and Scheduling with Arrival Rate Uncertainty, Management Science, 63(7), pp.2073-2091
We study server scheduling in multiclass service systems under uncertainty in the customer arrival volumes. Common practice in such systems is to first identify staffing levels and then determine schedules for the servers that cover these levels. We propose a new stochastic integer programming (SIP) model that integrates these two decisions, which can yield lower scheduling costs by exploiting the presence of alternative server configurations that yield similar quality of service. We find that a branch-and-cut algorithm based on Benders decomposition may fail due to the weakness of the relaxation bound. We propose a novel application of mixed-integer rounding to improve the Benders cuts used in this algorithm, a technique that is applicable to any SIP with integer first-stage decision variables. Numerical examples illustrate the computational efficiency of the proposed approach and the potential benefit of solving the integrated model compared to considering the staffing and scheduling problems separately. This paper was accepted by Yinyu Ye, optimization.
Chan, C. W., V. F. Farias and G. J. Escobar (2017): The Impact of Delays on Service Times in the Intensive Care Unit, Management Science, 63(7), pp.2049-2072
Mainstream queueing models are frequently employed in modeling healthcare delivery in a number of settings, and they further are used in making operational decisions for the same. The vast majority of these queueing models ignore the effects of delay experienced by a patient awaiting care. However, long delays may have adverse effects on patient outcomes and can potentially lead to a longer length of stay (LOS) when the patient ultimately does receive care. This work sets out to understand these delay issues from an operational perspective. Using data of more than 57,000 emergency department (ED) visits, we use an instrumental variable approach to empirically measure the impact of delays in intensive care unit (ICU) admission, i.e., ED boarding, on the patient’s ICU LOS for multiple patient types. Capturing these empirically observed effects in a queueing model is challenging because the effect introduces potentially long-range correlations in service and interarrival times. We propose a queueing model that incorporates these measured delay effects and characterizes approximations to the expected work in the system when the service time of a job is adversely impacted by the delay experienced by that job. Our approximation demonstrates an effect of system load on work that grows much faster than the traditional 1/(1 − ρ) relationship seen in most queueing systems. As such, it is imperative that the relationship of delays and LOS be better understood by hospital managers so that they can make capacity decisions that prevent even seemingly moderate delays from causing dire operational consequences. This paper was accepted by Yossi Aviv, operations management.
Lin, S. (2017): Add-on Policies Under Vertical Differentiation: Why Do Luxury Hotels Charge for Internet While Economy Hotels Do Not?, Marketing Science, 36(4), pp.610-625
This paper examines firms’ product policies when they sell an add-on (e.g., Internet service) in addition to a base product (e.g., hotel rooms) under vertical differentiation (e.g., four- versus three-star hotels). I show that the role of an add-on differs; higher-quality firms prefer to sell it as optional to discriminate consumers, and lower-quality firms trade off discrimination and differentiation, trying to lure consumers from higher-quality rivals with a lower-price add-on. Equilibrium policies of lower-quality firms are more sensitive to the cost-to-value ratio of an add-on. If the ratio is sufficiently small, then they sell it to all consumers, potentially explaining why lower-end hotels are more likely than higher-end ones to offer free Internet service. Contrary to consensus in the literature, optional add-ons can intensify price competition over consumers who trade off a higher-quality base product versus a lower-quality base including an add-on. Hence, higher-quality firms are incentivized to commit to bundling, while lower-quality firms prefer to commit to not selling it. Add-ons can further reduce lower-quality firms’ profits if consumers cannot observe the prices, because holding up consumers ex post encourages them to switch to higher-quality rivals, which then become better off. Therefore, lower-quality firms are incentivized to advertise add-on prices, and higher-quality firms are not. The online appendix is available at .
Baumann, J., K. Le Meunier-Fitzhugh and H. N. Wilson (2017): The challenge of communicating reciprocal value promises: Buyer-seller value proposition disparity in professional services, Industrial Marketing Management, 64(), pp.107-121
This study explores the communication of reciprocal value propositions in buyer-seller interaction and examines whether each party’s value proposition is congruent with the value sought by their respective counterpart. Through 31 in-depth interviews with customers and salespeople from six professional service organizations, it was found that while both parties deliberately articulate value propositions, thereby initiating the co-creation process, there are some surprising disparities in the value dimensions offered by the salesperson. Although the customer’s value proposition is largely consistent with the value sought by the seller, a marked discrepancy was encountered in the reverse case (i.e. between the seller’s value proposition and the buyer’s desired value). These findings indicate a significant misalignment between the seller’s value proposition and actual co-creative behavior that can impede the subsequent collaboration and resource integration between the two parties, which could lead to customer dissatisfaction and potentially even service failure.
Karatzas, A., M. Johnson and M. Bastl (2017): Manufacturer-supplier relationships and service performance in service triads, International Journal of Operations & Production Management, 37(7), pp.950-969
Purpose The purpose of this paper is to explore the role of the manufacturer-supplier relationship in service performance within service triads.Design/methodology/approach An abductive case-research approach was adopted, using three embedded cases and 26 interviews in complex, multilevel manufacturer-supplier relationships within the same service network. Cannon and Perreault’s (1999) multidimensional relationship framework was deployed to achieve granular and nuanced insight.Findings This study corroborates the idea that relational relationships within service triads and servitization improve performance. The role of each relationship dimension in service performance is discerned and their interplay is captured in an analytic model. Information exchange, supplier relationship-specific adaptations, and the degree of formalization of the relationship directly influence performance, while cooperative norms and operational linkages are further back in the causal ordering. The study also highlights the importance of contingent factors (the size of the service site, the proportion of its revenues coming from service contract activities) and how they affect the relationship dimensions.Research limitations/implications The work was conducted in one network and the findings were generalized to theory rather than additional empirical settings.Originality/value This study is the first to derive a contextualized causal ordering of the Cannon and Perreault (1999) framework of relationship connectors and link it with service performance.
Srivastava, P., K. N. S. Iyer and M. Y. A. Rawwas (2017): Performance impact of supply chain partnership strategy-environment co-alignment, International Journal of Operations & Production Management, 37(7), pp.927-949
Purpose The purpose of this paper is to enhance understanding on supply chain partnership strategy-environment context co-alignment and its relationship with performance. Using the environment-strategy-performance view framework and the supporting relational perspective, the study develops a model and hypotheses to understand how supply chain partnership strategy as a response to co-align with operating context elements may impact operational and overall firm performance. Additionally, the study investigates the interrelationships among partnership strategy elements.Design/methodology/approach Data for testing the hypothesized relationships in the conceptual model was collected through a survey of managers in the Hoover’s database of US manufacturing firms. The survey sample included 115 responses from a wide variety of manufacturing forms.Findings Findings support the conventional wisdom relating collaboration to operational and financial performance. While product complexity associates with the “building block” resources, resource complementarity and resource specificity, technological turbulence relates significantly with only resource specificity. Interestingly, competitive intensity associates differentially with the resources – positive with resource specificity and negatively with resource complementarity. The results also reveal mediating influences of resource specificity and collaboration.Research limitations/implications The research findings have to be considered in context. The moderate size, wide industry/firm diversity and robust research design notwithstanding, and the cross-firm nature can potentially obscure causal linkages. Besides, more comprehensive insights could be obtained by modeling the co-alignment of strategy with other factors in the operating context such as industry munificence, and market unpredictability.Practical implications Firms derive operational and financial performance benefits from close collaboration with partners since the operational enhancements from such relationships have customer service implications. Besides, the synergistic interrelationships among strategic partnership resources and their eventual impact on operational and financial performance is highlighted suggesting that firms develop a proper mix of unique and complementing set of resources and leverage them through collaborative behaviors. Importantly, the results provide a framework for managers to understand the criticality of aligning their resources with contextual elements to realize enhanced operational efficiencies, customer service, and financial benefits.Originality/value Much of the evidence on the rent generation capabilities in supply chain partnerships is still anecdotal and extant empirical research lacks adequate explanation. Thus this study offers an initial strategic response framework for an appropriate co-alignment of partnership resources with environmental context factors to realize operational benefits and overall financial performance. The framework answers the critical question: does a supply chain partnership strategy that matches “fit” or co-aligns with its critical operating environment context realize better performance? Additionally, it unravels the interrelationships among strategic partnership resources.
Chatterjee, P., B. Chollet and O. Trendel (2017): From conformity to reactance: Contingent role of network centrality in consumer-to-consumer influence, Journal of Business Research, 75(), pp.86-94
Central consumers in a group often are influential, because their social prominence commands conformity from other members. Yet, there can be another contradictory effect of centrality, such that other members regard it as a threat to their attitudinal freedom and express reactance instead of conformity. Whether a group member conforms or reacts to the evaluation of a more central member might depend on the strength of their relationship, which determines the social cost of disagreeing. We provide evidence of such an interaction between centrality and relational strength with an experiment where participants with preexisting affective ties of varying strengths taste a snack in groups (Study 1) and a field study where participants connected by instrumental ties consume a complex service (Study 2). A scenario-based experiment manipulating centrality and strength of ties provides further evidence that reactance underlies the observed effects (Study 3).
Park, E., K. J. Kim and S. J. Kwon (2017): Corporate social responsibility as a determinant of consumer loyalty: An examination of ethical standard, satisfaction, and trust, Journal of Business Research, 76(), pp.8-13
Factors promoting loyalty are of great interest to both academics and practitioners because consumer loyalty is a notable predictor of business success. This study identifies the congruency between consumer values and the goals of corporate social responsibility (CSR) activities and corporate ethical standards as the two main determinants of CSR quality and commitment. It further investigates how consumer perceptions of CSR shaped by these two factors increase loyalty. The results of structural equation modeling analysis ( N = 931) reveal that higher ethical standards leads consumers to perceive that the company is committed to its CSR activities. The company’s CSR commitment induces greater satisfaction with and trust in the company and its services, which then ultimately encourages consumers to remain loyal.