This paper uses the context of online banking to investigate the consequences of using self-service distribution channels to alter customer interactions with the firm. Using a sample of retail ...banking customers observed over a 30-month period at a large U.S. bank, we test whether changes in service consumption, cost to serve, and customer profitability are associated with the adoption of online banking. We find that customer adoption of online banking is associated with (1) substitution , primarily from incrementally more costly self-service delivery channels (automated teller machine and voice response unit); (2) augmentation of service consumption in more costly service delivery channels (branch and call center); (3) a substantial increase in total transaction volume; (4) an increase in estimated average cost to serve resulting from the combination of points (1)–(3); and (5) a reduction in short-term customer profitability. However, we find that use of the online banking channel is associated with higher customer retention rates over one-, two-, and three-year horizons. The documented relationship between the use of online banking and customer retention remains positive even after controlling for self-selection into the online channel. We also find evidence that future market shares for our sample firm are systematically higher in markets with high contemporaneous utilization rates for the online banking channel. This finding holds even after controlling for contemporaneous market share, suggesting it is not simply the result of increased market power leading to the acquisition of online banking customers.
Many service firms are pursuing electronic distribution strategies to augment existing physical infrastructure for product and service delivery. But little systematic study has been made for whether ...and how characteristics or behaviors might differ between customers who use electronic delivery systems and those who use traditional channels. We explore these differences by comparing customers who utilize personal-computer-based home banking (PC banking) to other bank customers. Case studies and detailed customer data from four institutions suggest that PC banking customers are apparently more profitable, principally due to unobservable characteristics extant before the adoption of PC banking. Demographic characteristics and changes in customer behavior following adoption of PC banking account for only a small fraction of overall differences. It also appears that retention is marginally higher for customers of the online channel.
Are Self-Service Customers Satisfied or Stuck? Buell, Ryan W.; Campbell, Dennis; Frei, Frances X.
Production and operations management,
November/December 2010, Letnik:
19, Številka:
6
Journal Article
Recenzirano
This paper investigates the impact of self‐service technology (SST) usage on customer satisfaction and retention. Specifically, we disentangle the distinct effects of satisfaction and switching costs ...as drivers of retention among self‐service customers. Our empirical analysis examines 26,924 multi‐channel customers of a nationwide retail bank. We track each customer's channel usage, overall satisfaction, and retention over a 1‐year period. We find that, relative to face‐to‐face service, customers who use self‐service channels for a greater proportion of their transactions are either no more satisfied, or less satisfied with the service they receive, depending on the channel. However, we also find that these same customers are predictably less likely to defect to a competitor if they are heavily reliant on self‐service channels characterized by high switching costs. Through a mediation model, we demonstrate that, when self‐service usage promotes retention, it does so in a way that is consistent with switching costs. As a robustness check, we examine the behavior of channel enthusiasts, who concentrate transactions among specific channels. Relative to more diversified customers, we find that self‐service enthusiasts in low switching cost channels defect with greater frequency, while self‐service enthusiasts in high switching cost channels are retained with greater frequency.
We empirically document factors that influence how local operating managers use discretion to balance the trade-off between service capacity costs and customer sensitivity to service time. Our ...findings, using data from one of the largest financial services providers in the United States, indicate that customer sensitivity to service time varies widely and predictably with observable market characteristics. In turn, we find evidence that local operating managers account for market-specific customer sensitivities to service times by deviating frequently and in predictable ways from the recommendations offered by a centralized capacity-planning model. Finally, we document that these discretionary capacity supply decisions exhibit a strong learning effect whereby experienced operating managers place more weight than their less-experienced counterparts on the market-specific trade-off between service capacity costs and customer sensitivity to service times. Overall, our results demonstrate both the importance of local knowledge as an input in service operations and the potential for incorporating richer data on customer behavior and preferences into service cost and productivity standard metrics.
Frances Frei is a professor at Harvard Business School, and was also Uber’s first Senior Vice President of Leadership and Strategy. Anne Morriss is the founder of the Leadership Consortium, which she ...describes as “a first‐of‐its‐kind leadership accelerator that works to help emerging leaders thrive.” They write about the many nuances of how employees feel safe (or otherwise) in the workplace. They include information about how inclusion is impacted by safety, partly with the use of what they call the Inclusion Dial. They write that their colleague “Tina Opie, a management professor at Babson College, challenges us in her own scholarship, it’s our collective and individual responsibility—and opportunity—to be great allies and partners to our teammates with different experiences of safety, and we must bring grace, humility, and urgency to the task.” They also cite their Harvard Business School colleague Amy Edmondson, and her groundbreaking work on psychological safety. Frei and Morriss write that “an organization that celebrates uniqueness assumes that difference is a source of creativity, innovation, and strength. It is not just something to watch out for as it may get in the way of some people’s contribution.”
When tackling urgent organizational problems, leaders usually work hard to identify underlying causes, tap a wide range of knowledge, and experiment with solutions. But once they've mapped out a ...plan, there's one more crucial step they must take: crafting a story so compelling that it will harness their organizations' energy and direct it toward change. Drawing on decades of experience helping senior executives lead large-scale transformations, Harvard professor Frei and leadership coach Morriss present an effective way to approach that challenge. They outline four key steps: (1) Understand your story so well that you can describe it in simple terms, (2) honor the past, (3) articulate a persuasive mandate for change, and (4) lay out a rigorous and optimistic path forward. Next you need to get others behind your story. Emotions can bring it to life and help drive employees' commitment to change. You also should promote your narrative aggressively. Share it wherever the opportunity arises-in speeches, interviews, town hall meetings, one-on-ones-and incorporate it into different formats, from videos to images to guidebooks.
TRUST: THE FOUNDATION OF LEADERSHIP Frei, Frances; Morriss, Anne
Leader to leader,
Winter 2021, 2021-01-00, 20210101, Letnik:
2021, Številka:
99
Journal Article
The authors contend that if leadership is about empowering others, in your presence and your absence, then trust is the emotional framework that allows that service to be freely exchanged. Based on ...their experiences advising individuals and organizations, their basic formula for building trust is: people tend to trust you when they think they are interacting with the real you (authenticity), when they have faith in your judgment and competence (logic), and when they believe that you care about them (empathy). When trust is lost, it can almost always be traced back to a breakdown in one of these core trust drivers. We don't always realize what information (or more often, misinformation) we're putting out about our own trustworthiness. And stress tends to amplify the problem. Your wobble is the driver that's most likely to get shaky in periods of low trust. Everyone has a wobble, though a small change in behavior can go a long way. Tools are provided within each area of authenticity, logic, and empathy. For instance, within the latter, if you do nothing else, put down your phone. You'll be amazed at the immediate uptick in trust—and you may even get to end meetings sooner.
This study addresses three research questions related to persistence in customer profitability. How well does current customer profitability explain future customer profitability? Does current ...customer profitability fully reflect the future customer profitability implications of demographics and other customer characteristics? How do different components of customer profitability affect its persistence over time? The authors find that a substantial amount of variation in 1-year ahead customer profitability is left unexplained by current customer profitability. They also find that different components of customer profitability have vastly different levels of persistence and that data on customer demographics and other characteristics have little incremental value relative to current profitability in explaining future profitability. Segmenting customers based on how their profitability is generated within a profit tier reveals that the efficacy of predicting future profit tier based on current profit tier varies greatly even among customers in the same current profit tier.
Data Envelopment Analysis (DEA) has been widely studied in the literature since its inception in 1978. The methodology behind the classical DEA, the oriented method, is to hold inputs (outputs) ...constant and to determine how much of an improvement in the output (input) dimensions is necessary in order to become efficient. This paper extends this methodology in two substantive ways. First, a method is developed that determines the least-norm projection from an inefficient DMU to the efficient frontier in both the input and output space simultaneously, and second, introduces the notion of the "observable" frontier and its subsequent projection. The observable frontier is the portion of the frontier that has been experienced by other DMUs (or convex combinations of such) and thus, the projection onto this portion of the frontier guarantees a recommendation that has already been demonstrated by an existing DMU or a convex combination of existing DMUs. A numerical example is used to illustrate the importance of these two methodological extensions.
When one undertakes a benchmarking study, it is quite typical to collect performance data on a set of business processes from a variety of organizations. While one can compare efficiency on a ...process-by-process level, how can one compare the overall efficiency of one organization versus another using this process-level data? This note presents a methodology that combines tournament ranking and Analytic Hierarchy Process (AHP) approaches to create a ranking scheme that deals explicitly with missing data and ties in the tournament scheme.
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