For capacity-constrained service firms, efforts to balance supply and demand have been centered on the management of demand, service processes and service employees. Despite the significant role customers play in the service process, few attempts have been made to manage customer roles toward that end. Meanwhile, concerns have been expressed about the potential negative impact on customer satisfaction by the firm's effort to steer customer behaviors for the firm's benefit. Thus, it is crucial to minimize these undesirable customer effects in such an attempt. In this study, we propose a customer reward program as a possible customer approach and empirically test its effectiveness.
Further, we test the impact of customer understanding of the firm's entitlement to profit upon the degree of the customer's voluntary behavior for the firm's benefit. The effect of justice evaluations of the reward program on customer adoption of the program is also examined. Finally, effects of customer characteristic (purchase purpose) and reward attributes (type and redemption timing) on the reward program's effectiveness are evaluated. Findings of this study contribute to the extension of the service capacity management literature, and offer service managers valuable insights about using a customer program as a means to better match supply and demand.
For service firms with relatively fixed capacity but highly time-varying demand, profitability depends largely on their ability to match supply and demand (Crandall and Markland, 1996). To take an airline an example, its capacity is fixed by the number of planes it operates and the number of seats in the planes, but its demand varies considerably by time of day, day of week or week of year. Consequently, an airline's profitability depends upon its ability to select the most profitable mix of demand during high-demand periods and its ability to stimulate demand during low-demand periods. Hotels, restaurants or golf courses, to name a few, face similar challenges. Due to limited control over capacity management, these firms’ efforts have been concentrated on demand management, such as moving or stimulating demand.
Differences exist among these firms, however, in the degree of capacity flexibility. To take a restaurant as an example, its capacity is typically defined by the number of customers that can be accommodated during a given meal period. Yet, its capacity is influenced by the duration of customer seat occupation as well. For a 100-seat restaurant, for instance, when the average dining duration is 1 h, the restaurant's hourly capacity is 100 customers. When the average decreases to 30 min, however, the capacity increases to 200 customers. For this reason, more restaurants are turning their attention to managing dining duration, particularly during high demand periods (Kimes, 1999). Similar interests have emerged in other service industries such as golf-courses and theme parks, where longer consumption duration decreases service capacity but does not necessarily increase revenue.
So far, efforts to reduce consumption duration (service time) have been concentrated in areas under management's direct control such as service processes and employees (Kimes and Robson, 2004 and Sill, 1991). Efforts to manage customers have been limited to imposing dining time limits, which have triggered negative customer reactions. Therefore, it is vital that such a customer approach is designed and implemented in a way acceptable to customers. The current study intends to identify and test an approach which will benefit both service firms and customers by inducing customer's voluntary adoption of firm-friendly consumption behaviors.
Customers are more likely to perform their expected role in the service process when they are rewarded for such performance (Lovelock and Wright, 2002). Company feedback to customers in a reward format makes customers feel cared by the company and thus motivates them to behave in a manner beneficial to the company (Dowling and Uncles, 1997). Therefore, we propose a customer reward as a means to induce customers’ voluntarily reduction of consumption time and empirically examine its effectiveness.
The remainder of this paper is organized as follows. We first present the conceptual background of the current study, which is followed by the proposal of hypotheses. Research methodology and results will then be explained. The paper will be wrapped with discussions of the theoretical and practical implications of the findings.
