Today we identify service articles published in Marketing, Management, Operations, Productions, Information Systems & Practioner-oriented Journals in the last month.

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You, Y., X. Yang, L. Wang and X. Deng (2020): When and Why Saying “Thank You” Is Better Than Saying “Sorry” in Redressing Service Failures: The Role of Self-Esteem, Journal of Marketing, 84(2), pp.133-150

In their initial recovery efforts after a service failure, service providers need to decide what to communicate to consumers to restore their satisfaction. Prior work has primarily examined apology (saying “sorry”) as a symbolic recovery strategy; the current research suggests appreciation (saying “thank you”) as an alternative, often more effective strategy. Drawing from research on linguistic framing and self-view, the authors reason that the shift of focus in the service provider–consumer interaction, from emphasizing service providers’ fault and accountability (apology) to spotlighting consumers’ merits and contributions (appreciation), can increase consumers’ self-esteem and, in turn, postrecovery satisfaction. Across multiple service failure contexts, Studies 1a–1e establish the superiority of appreciation in redressing service failures. By measuring and manipulating self-esteem and examining the moderating role of narcissism and recovery timing, Studies 2–5 provide converging evidence for consumers’ state self-esteem as the underlying mechanism. Studies 6 and 7 go beyond examining appreciation in isolation and show that it is as effective as recovery messages that combine appreciation and apology (Study 6) and that its superiority over apology holds when service providers combine symbolic and utilitarian recovery (Study 7).

Link: http://dx.doi.org/10.1177/0022242919889894 [Google]

Sjödin, D., V. Parida, M. Jovanovic and I. Visnjic (2020): Value Creation and Value Capture Alignment in Business Model Innovation: A Process View on Outcome‐Based Business Models, Journal of Product Innovation Management, 37(2), pp.158-183

Industrial manufacturers are innovating their business models by shifting from selling products to selling outcome‐based services, where the provider (manufacturer) guarantees to deliver the performance outcomes of the products and services. This form of business model innovation requires a profound yet little understood shift in how value is created, delivered, and captured. To address this research gap, our study examines two successful and four unsuccessful cases of this shift. We find that effectiveness in business model innovation hinges on the three process phases that unfold in collaboration with the customers: value proposition definition, value provision design, and value‐in‐use delivery. We also find that that success is determined by the alignment of specific value creation and value capture activities in each phase: identifying value creation opportunities—agreeing on value distribution in value proposition definition, designing the value offering—deciding on the profit formula in the value provision design, and finally refining value creation processes—regulating incentive structures in the value‐in‐use delivery. Our process model contributes to the literature and practice on business model innovation by providing a thorough understanding of how alignment of value creation and value capture processes is ensured, whilst paying special attention to their interdependence and the interactions between provider and customer.

Link: http://dx.doi.org/10.1111/jpim.12516 [Google]

Alavi, S., J. Habel, M. Schwenke and C. Schmitz (2020): Price negotiating for services: elucidating the ambivalent effects on customers’ negotiation aspirations, Journal of the Academy of Marketing Science, 48(2), pp.165-185

Although customers frequently negotiate the prices of both goods and services, academic research has mostly examined negotiations in goods contexts, neglecting the fact that negotiations for services may be different. This study examines the consequences of customers’ price negotiation behavior relating to services as compared to goods. Using five empirical studies with field and experimental data, the authors show that services exert ambivalent effects. First, the heterogeneity intrinsic to services leads customers to aspire to better negotiation outcomes because customers perceive higher risk and regard negotiation as more legitimate, particularly if services are customized. Second, the inseparability of services leads customers to lower their negotiation aspirations because they fear negative consequences, particularly if customers are closely integrated in the service process. Building on these findings, the authors conceptualize and test communication strategies that diminish customers’ negotiation aspirations. Study results provide actionable recommendations for managers and salespeople in service industries.

Link: http://dx.doi.org/10.1007/s11747-019-00676-4 [Google]

Chun, S. Y., D. A. Iancu and N. Trichakis (2020): Loyalty Program Liabilities and Point Values, Manufacturing & Service Operations Management, 22(2), pp.257-272

Problem definition: Loyalty programs (LPs) introduce a new currency—the points—through which customers transact with firms. Such points represent a promise for future service, and their monetary value thus counts as a liability on the issuing firms’ balance sheets. Consequently, adjusting the value of points has a first-order effect on profitability and performance and emerges as a core operating decision. We study the problem of optimally setting the points’ value in view of their associated liabilities. Academic/practical relevance: Firms across numerous industries increasingly utilize LPs. The sheer magnitude of LPs coupled with recent changes in accounting rules have turned the associated liabilities into significant balance-sheet items, amounting to billions of dollars. Managers (from chief financial officers to chief marketing officers) struggle with the problem of adjusting the points’ value in view of these liabilities. Academic work is primarily aimed at understanding LPs as marketing tools, without studying the liability angle. Methodology: We develop a multiperiod model and use dynamic programming techniques and comparative statics analysis. Results: We show that the optimal policies depend on a new financial metric, given by the sum of the firm’s realized cash flows and outstanding deferred revenue, which we refer to as the profit potential. The total value of loyalty points is set to hit a particular target, which increases with the profit potential. We find that loyalty programs can act as buffers against uncertainty, with the value of points increasing (decreasing) under strong (weak) operating performance and increasing with uncertainty. Managerial implications: Setting the point values and adjusting operating decisions in view of LP liabilities should be done by tracking the firm’s profit potential. Loyalty programs can act as hedging tools against uncertainty in future operating performance, which provides a new rationale for their existence, even in the absence of competition.

Link: http://dx.doi.org/10.1287/msom.2018.0748 [Google]

Schmitt, B. (2020): Speciesism: an obstacle to AI and robot adoption, Marketing Letters, 31(1), pp.3-6

Once artificial intelligence (AI) is indistinguishable from human intelligence, and robots are highly similar in appearance and behavior to humans, there should be no reason to treat AI and robots differently from humans. However, even perfect AI and robots may still be subject to a bias (referred to as speciesism in this article), which will disadvantage them and be a barrier to their commercial adoption as chatbots, decision and recommendation systems, and staff in retail and service settings. The author calls for future research that determines causes and psychological consequences of speciesism, assesses the effect of speciesism on the adoption of new products and technologies, and identifies ways to overcome it.

Link: http://dx.doi.org/10.1007/s11002-019-09499-3 [Google]

Huang, X. and D. Zhang (2020): Service Product Design and Consumer Refund Policies, Marketing Science, 39(2), pp.366-381

This paper studies joint quality and refund policy design for service products in the presence of customer valuation uncertainty. Customers often exhibit considerable uncertainty in their service valuations. In response, firms may tailor their products and allow service cancellations. We consider the joint product customization and refund policy decisions of a monopolistic firm selling to a heterogeneous customer population with imperfect signals on their valuations. Our results shed light on how customers’ valuation uncertainty, characterized by the valuation heterogeneity and signal quality, drives the interaction between product line and refund policy designs. In particular, when the valuation heterogeneity is high, the firm may choose to offer a single quality level with a full refund, leading to a variety reduction in the product line. In contrast, when the valuation heterogeneity is low, the firm will always offer a full product line without any refund. At moderate valuation heterogeneity, both qualities and refunds are subject to more customization, and a partial refund can be optimal when the signal quality is high, even though our setup does not involve aggregate demand uncertainty, capacity limitations, competition, or channel conflicts. Interestingly, despite its appeal, generous refund terms do not increase aggregate customer surplus. Furthermore, the firm may not have incentives to reduce customers’ valuation uncertainty even if doing so is costless. We verify the robustness of our results and discuss their practical implications.

Link: http://dx.doi.org/10.1287/mksc.2019.1204 [Google]

Li, S., Q. Luo, L. Qiu and S. Bandyopadhyay (2020): Optimal Pricing Model of Digital Music: Subscription, Ownership or Mixed?, Production & Operations Management, 29(3), pp.688-704

Traditionally, consumers purchase physical music (often in the form of CDs or cassettes) from local retailers. With the development of Internet technology, the market share of digital music has grown rapidly in recent years. Unlike physical music, digital music is provided by several emerging digital music providers through the Internet to consumers. Pricing models of digital music are also drastically different from those of physical music. In this study, we identify three common schemes for selling digital music: ownership, subscription and mixed pricing models. Under the ownership model, consumers purchase and download their preferred songs and enjoy music using their local devices. Under the subscription model, music is provided through an online streaming service. The mixed pricing model is a combination of the previous two. Our paper explores and compares the three pricing models. Through a stylized model, we find that several factors, including the advertisement revenue rate and consumers’ reservation value for the music service, have crucial effects on the comparison of the three pricing models.

Link: http://dx.doi.org/10.1111/poms.13131 [Google]

Mehrotra, M. and K. V. Natarajan (2020): Value of Combining Patient and Provider Incentives in Humanitarian Health Care Service Programs, Production & Operations Management, 29(3), pp.571-594

The below‐par progress toward the Millennium Development Goals in many developing countries has been attributed to the low availability of good quality health care services and to the demand‐side barriers to access. In this study, we analyze an incentive design problem faced by a budget‐constrained humanitarian organization managing a health care service program (e.g., maternal health or HIV services) with different emphasis on the two measures of quality—structural and process. Incentives offered to the health care provider (referred to as supply‐side incentives) are aimed at improving the availability of good quality services and demand‐side incentives are used to encourage patients to seek care. In many developing country health programs, incentive schemes tend to be purely supply‐side focused or purely demand‐side focused. However, our results suggest that by offering the right combination of incentives to the patients and the provider, program performance can be increased up to 20 times, on average, depending on the service offered. Even within the current practice of using one‐sided incentives, there is significant scope for improvement (as much as 14 times, on average) by ensuring that there is better alignment between the incentive scheme and the service offered. In particular, pure supply‐side incentive schemes perform better than pure demand‐side incentive schemes in programs where there is a higher emphasis on structural quality. The opposite result holds true for programs that place a higher emphasis on process quality.

Link: http://dx.doi.org/10.1111/poms.13129 [Google]

Zhang, X. and Y. Yao (2020): How Much is Too Much? The Effect of Offline Call Intensity on Online Purchase of Digital Services, Production & Operations Management, 29(3), pp.509-525

Use a unique dataset collected from a large classified ads website, we empirically examine the effect of the offline call intensity on the online consumer purchase probability of digital services and the carryover effect of the call intensity. We find that the online consumer purchase probability is increasing in the call intensity but at a decreasing rate. We further demonstrate that the decreasing rate is sizable enough that the relationship between the online consumer purchase probability and the call intensity is an inverted U‐shaped curve. In addition, there exists a strong carryover effect where the online call intensity in the past 4 weeks does not fade away but has a positive effect on recent consumer purchases. Our estimations show that both too much and too little call intensity will result in considerably worse outcomes. As compared with the call intensity at the optimal level, too much call intensity potentially reduces the online consumer purchase probability by 29.11%, and too little call intensity potentially reduces the online consumer purchase probability by 54.90%. Furthermore, making calls every week for 4 weeks can increase consumer purchase probability by 10.69 times as compared with just initiating calls with the consumers.

Link: http://dx.doi.org/10.1111/poms.13124 [Google]

Danziger, S., E. Garbarino and S. Moran (2020): Don’t call us, we’ll call you: Considering cognitive and physical effort in designing effective response systems to manage extended in‐process wait, Psychology & Marketing, 37(3), pp.398-407

People must often wait for days or weeks to receive test results, price quotes, products, etc. Service providers may manage user experience during such in‐process waits using notification systems that inform users when a response is available or inquiry systems that require users to inquire about response availability, thereby imposing prospective memory requirements on users. Based on the prospective memory and wait time literature, we make predictions regarding how response system (notification vs. inquiry) moderates the effects of waits that are shorter or longer than the provider promised on user evaluation of the wait. We find that users of a notification system evaluate a wait more positively and are less sensitive to deviations of actual from promised wait time than are users of an inquiry system. This advantage was more pronounced for a wait that was longer (vs. shorter) than promised. These effects of system and expectation on evaluation were fully mediated by their impact on the cognitive and physical effort of navigating the system. Finally, a week after having experienced a wait, users of an inquiry system who had waited longer (vs. shorter) than promised cooperated less on a follow‐up task, highlighting another downside of using an inquiry system.

Link: http://dx.doi.org/10.1002/mar.21306 [Google]

Reitsamer, B. F., M. C. Streicher and K. Teichmann (2020): Sensorimotor experiences in servicescapes predict attitude formation through memory dynamics: A longitudinal study, Psychology & Marketing, 37(3), pp.479-487

In a longitudinal study design with three waves, we show that strong sensorimotor associations of past service experiences positively influence consumers’ attitude formation during postconsumption stages by (a) leading to more postconsumptive memories, specifically if (b) the initial experience has been perceived as moderately positive. Our study complements extant research on sensory marketing, consumer retrospection, and cognitive reinforcement by introducing memory frequency as an important mediator to explain time‐related antecedents of consumers’ word‐of‐mouth. The results provide novel insights into the dynamics of attitude formation based on prior service experiences and help marketers to create long‐lasting customer relationships during postconsumption stages.

Link: http://dx.doi.org/10.1002/mar.21314 [Google]

Vigolo, V., A. Bonfanti, R. Sallaku and J. Douglas (2020): The effect of signage and emotions on satisfaction with the servicescape: An empirical investigation in a healthcare service setting, Psychology & Marketing, 37(3), pp.408-417

Marketing and environmental psychology studies have long emphasized the importance of signage in large and dispersive service settings but have focused little on utilitarian service contexts. Previous studies have also analyzed the role of emotions in customer satisfaction with the servicescape, particularly in hedonic service environments such as malls, hotels, and restaurants, but a limited research has been conducted on the role of emotions in utilitarian service settings such as healthcare services. This study draws from the environmental psychology and service marketing literature to investigate the effects of signage and emotions on satisfaction with the servicescape in the hospital setting. In addition, it explores the moderating effect of emotions on the relationship between signage and satisfaction with the servicescape. The findings show that signage has a positive and significant effect on satisfaction with the servicescape. Negative emotions have a significant negative effect on satisfaction, while positive emotions have no significant effect. Differently from what was expected, emotions do not moderate the relationship between signage and satisfaction. Managerial implications are provided for service managers who wish to design a utilitarian service setting to effectively increase user satisfaction with the servicescape.

Link: http://dx.doi.org/10.1002/mar.21307 [Google]

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