Np. Archer et Go. Wesolowsky, A DYNAMIC SERVICE QUALITY COST MODEL WITH WORD-OF-MOUTH ADVERTISING, European journal of operational research, 78(3), 1994, pp. 355-366
Citations number
25
Categorie Soggetti
Management,"Operatione Research & Management Science
A dynamic cost model is developed which describes the evolution of dem
and for a service from its beginning transient phase to its long-term
equilibrium. The model includes parameters which relate to word-of-mou
th advertising; this advertising causes transitions between unaware, p
ositively aware, and negatively aware states of consumers and thus aff
ects service demand. Model simulations reveal some generally useful gu
idelines for service providers: 1) it is unwise to expand service oper
ations excessively during the early phases of the service offering in
order to handle strong demand. The model shows that the demand typical
ly peaks at this early stage before settling down to an equilibrium ra
te, 2) because of customer sensitivity to service quality, cost reduct
ions that deteriorate service quality are likely to be a poor policy,
and 3) it is a good strategy to adopt a high service quality from the
beginning, rather than to improve it later; this is because the impact
of good service on the customer base is more rapid in the startup pha
se than in the long-term equilibrium phase.