Optimizing service failure and damage control

Should a provider deliver a reliable service or should it allow for occasional service failures? This paper derives conditions under which randomizing service quality can benefit the provider and society. In addition to cost considerations, heterogeneity in customer damages from service failures all...

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Bibliographic Details
Published in:International journal of research in marketing 2018-03, Vol.35 (1), p.100-115
Main Authors: Halbheer, Daniel, Gärtner, Dennis L., Gerstner, Eitan, Koenigsberg, Oded
Format: Article
Language:English
Subjects:
Damage control
Service failure
Service quality
Service reliability
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Summary:Should a provider deliver a reliable service or should it allow for occasional service failures? This paper derives conditions under which randomizing service quality can benefit the provider and society. In addition to cost considerations, heterogeneity in customer damages from service failures allows the provider to generate profit from selling damage prevention services or offering compensation to high-damage customers. This strategy is viable even when reputation counts and markets are competitive.
ISSN:0167-8116
1873-8001
DOI:10.1016/j.ijresmar.2017.11.001