Optimizing Service Attributes: The Seller's Utility Problem

Fred F. Easton, Madeleine E. Pullman

Research output: Contribution to journalArticle

28 Scopus citations

Abstract

Service designers predict market share and sales for their new designs by estimating consumer utilities. The service's technical features (for example, overnight parcel delivery), its price, and the nature of consumer interactions with the service delivery system influence those utilities. Price and the service's technical features are usually quite objective and readily ascertained by the consumer. However, consumer perceptions about their interactions with the service delivery system are usually far more subjective. Furthermore, service designers can only hope to influence those perceptions indirectly through their decisions about nonlinear processes such as employee recruiting, training, and scheduling policies. Like the service's technical features, these process choices affect quality perceptions, market share, revenues, costs, and profits. We propose a heuristic for the NP-hard service design problem that integrates realistic service delivery cost models with conjoint analysis. The resulting seller's utility function links expected profits to the intensity of a service's influential attributes and also reveals an ideal setting or level for each service attribute. In tests with simulated service design problems, our proposed configurations compare quite favorably with the designs suggested by other normative service design heuristics.

Original languageEnglish (US)
Pages (from-to)251-276
Number of pages26
JournalDecision Sciences
Volume32
Issue number2
DOIs
StatePublished - 2001

Keywords

  • Heuristics
  • Pricing
  • Process Design
  • Product Design
  • Service Operations

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Strategy and Management
  • Information Systems and Management
  • Management of Technology and Innovation

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