Decision Sciences Journal
Volume 32, Number 2
Spring 2001
Optimizing Service Attributes: The Seller’s Utility
Problem
Fred F. Easton
Robert H. Brethen Operations Management Institute, School of
Management,
Syracuse University, Syracuse, NY 13244-2130, email: ffeaston@syr.edu
Madeleine E. Pullman
Information Systems and Operations Management Department, Cox
School of Business, Southern Methodist University, Dallas, TX
75275-0333, email: mpullman@mail.cox.smu.edu
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.
Subject Areas: Heuristics, Pricing, Process Design,
Product Design, and Service Operations. |