This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Günes, E. D. Articles by Aksin, O. Z. Search for Related Content

Value Creation in Service Delivery: Relating Market Segmentation, Incentives, and Operational Performance

Evrim D. Güne, O. Zeynep Akin

INSEAD, Boulevard de Constance, 77305 Fontainebleau, France
College of Administrative Sciences and Economics, Koç University, Rumelifeneri Yolu, 34450 Sariyer, Istanbul, Turkey
evrim-didem.gunes#x0040;insead.edu
zaksin#x0040;ku.edu.tr

This paper studies service-delivery design in settings where firms engage in value-creation activities that have the objective of generating additional revenue from customer interactions. The paper provides a general modelling framework to analyze the ties between market segmentation decisions, incentives, and process performance in such service-delivery systems. The firm is modelled as a single-server queue, in a principal-agent framework. Customers have different value-generation potentials whose realizations are observed by the server but not by the manager of the firm. The manager determines a market segmentation scheme given an overall customer value-generation profile, which divides customers into two groups (high and low), and also determines a service level for each segment. The server decides which of the two available service levels (high and low) to provide for each customer, given a compensation scheme offered by the manager. The optimal market segmentation decision, optimal service-level choice, and a set of optimal linear incentive contracts that enable their implementation are characterized. The robustness of these strategies is explored with respect to model parameters and assumptions. It is shown that a market segmentation scheme that combines revenue generation concerns with their process implications is essential for success. Characteristics of appropriate incentive schemes are identified.

Key Words: call centers; cross-selling; incentives; queueing; marketing-operations interface
History: Received: May 5, 2003; accepted: May 3, 2004.

This article has been cited by other articles:

				L. X. Lu, J. A. Van Mieghem, and R. C. Savaskan Incentives for Quality Through Endogenous Routing MSOM, April 1, 2009; 11(2): 254 - 273. [Abstract] [PDF]

				I. Gurvich, M. Armony, and C. Maglaras Cross-Selling in a Call Center with a Heterogeneous Customer Population Operations Research, March 1, 2009; 57(2): 299 - 313. [Abstract] [PDF]

				R. E. Byers and K. C. So Note--A Mathematical Model for Evaluating Cross-Sales Policies in Telephone Service Centers MSOM, January 1, 2007; 9(1): 1 - 8. [Abstract] [PDF]