don't manage waits, manage experiences

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IESEinsight

Dont Manage Waits, Manage Experiences

WAITS AND MEASURES

By GABRIEL BITRAN, JUAN CARLOS FERRER and PAULO ROCHA e OLIVEIRA

ISSUE 1SECOND QUARTER 2009

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IESEinsight ISSUE 1 SECOND QUARTER 2009

Illus

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T ime is money, they say. To prove it, Barclaycard once calculated the cost of the time it takes an average Briton to brush his or her teeth: roughly 30 pence (43 cents). But when it comes to under-standing how customers make decisions, time and money have some critical differences. For example: How relevant to you is the previous fig-ure for brushing your teeth?

Understandably, managers fret that custom-ers will perceive waiting as an annoyance - and anyone who has spent a half-hour waiting in line to pay for a carton of milk in a noisy, overcrowded supermarket would be inclined to agree. So man-agers scramble to reduce the wait or at least to lessen its effect: thus, more lanes, broader band-width, better hold music - based on the fair as-sumption that taking up too much of the custom-ers time will ultimately hurt profits.

Yet waiting doesnt have to be a negative. It can be a neutral or, at places like Walt Disney World, a positive. Sometimes slowing things down can be the best way to ensure cost-effective service and can even make customers feel better. The key to the management of waiting is to understand how the wait affects profits.

Before devising a plan of action, however, managers first need to understand their business and their audience.

These are the main ideas behind The Waiting Profit Chain illustrated in Figure 1. In order to properly manage their customers time, manag-ers need to understand how the wait fits in the context of the entire experience, which is, after all, what will determine how customers will be-have in the future. Time is not money, but delight-ful experiences that occur over time are money.

Determine the Business ContextLets start with what is perhaps one of the best-known examples: Disney. For Disney to be suc-cessful, managers there know that the waiting has to be fun, because visitors spend more time in line than on the actual rides themselves. So how come visitors are usually all smiles exiting the park at the end of the day? Because employees cleverly orchestrate their time while in the park.

Keeping children entertained in line is a huge challenge, but Disney is chock-full of entertain-ing diversions. Mickey, Minnie and the rest of the gang pose for pictures with the kids. While children line up for the next show at Tomorrow-

Managers worry that their customers will perceive waiting as an annoyance. But simply reducing the wait time may not be the answer. Indeed, as the authors argue, thats an out-dated solution less relevant for todays new breed of customer. Using research that blends behavioral psychology and traditional market-ing principles with operations, the authors

propose a new framework to help businesses make better decisions about wait manage-ment. They offer six implementable ideas to improve the service encounter, which will greatly impact customer satisfaction and ulti-mately profitability. Stop watching the clock, they say, and start asking, How can I best manage my customers time with me?

EXECUTIVE SUMMARY

DONT MANAGE WAITS, MANAGE EXPERIENCES

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IESEinsightISSUE 1SECOND QUARTER 2009

lands Monsters, Inc. Laugh Floor comedy club, they can text jokes to be incorporated into the show. During the wait for Disneys Soarin Over California, guests can play various interactive video games or they can take a peek at the Wings of Fame, a tribute to historical aircraft.

Another thing Disney employees do is apprise visitors of the wait time, with frequent updates so guests feel more in control of their day. Once they know what to expect, families can decide for themselves if they want to wait. The estimated wait times are usually longer than the reality, so customers end up pleasantly surprised. Disney also offers limited Fastpass, which enables visi-tors to bypass wait lines and ride by appointment, which reduces uncertainty.

One of the reasons Disney works so well is that most visitors dont realize their time is be-ing managed so carefully. For much the same rea-son, airports install TV screens with a continuous news stream, hotels place mirrors in front of el-evators, phone queues offer music or promotion-al offers all to provide customers with a more pleasant experience and keep their minds off the fact theyre waiting for something else.

Managers need to realize that time, in itself, neednt be the enemy. In fact, in some cases, spending too little time will engender annoyance

Gabriel Bitran is the Sloan Fel-lows Professor of Operations Management/System Dy-namics at MIT Sloan School of Management. He is a source for information on the design of ser-vice delivery and manufacturing systems. His work addresses topics that include matching the supply and demand in service systems, capacity planning, and understanding consumer behavior in highly interactive services like the Internet. He is the former president of the Production and Operations Management Society.

Juan Carlos Ferrer has a Ph.D. in Management from the Massa-chusetts Institute of Technology and an M.Sc. in industrial engi-neering from Pontificia Universi-dad Catlica in Santiago, Chile,

where he is a professor in the School of Engineering. He has received numerous academic awards. His areas of interest include service and operations management, and information technologies.

Paulo Rocha e Oliveira is assistant professor of market-ing at IESE Business School in Barcelona. He holds an A.B. in Mathematics from Princeton University and a Ph.D. in Man-agement from the Massachu-setts Institute of Technology. His main area of expertise is the management and marketing of services. His research focuses on issues at the interface of marketing and operations, in-cluding service quality, customi-zation strategies and dynamic pricing policies.

ABOUT THE AUTHORS


or even anger. For instance, if youre going for a tennis lesson, a massage or a doctors appoint-ment, and the tennis pro, masseuse or doctor hur-ries you, youll probably feel slighted, as if youre not getting your moneys worth. Minimizing time is a manufacturing principle that doesnt always hold when people are involved, just as feelings dont factor into manufacturing: a car door, for instance, isnt going to feel slighted because it was assembled in 10 minutes as opposed to five.

Know Your AudienceBefore installing time-saving devices, managers must first make sure their customers want them. Automated check-ins at hotels, for example, cer-tainly speed up service, but the technology is a double-edged sword. After a long flight, even guests toting laptops and BlackBerries may prefer the comforting Welcome to the Hotel Majestic delivered by a friendly human face rather than yet another impersonal computer to contend with. Shopping is another instance where taking more time can be a good thing at least for those who enjoy the process as much as or even more than the actual buying. For others, however, shop-ping is about minimizing time: its the result that counts, and the faster the better.

Clearly, what one culture, age group or gen-der might embrace, another will discard. When it comes to waiting, determine whether your audi-ence is interested in the prize or the process and make the decision that most positively enhances the entire experience.

The Old Way: Reduce the WaitThe study of wait time in engineering contexts, known as queueing theory, is well documented. Most of the research to date has tackled the mat-ter as an operations problem: Reduce the wait and hope profits grow as a result. Thats been the guiding light since the Industrial Revolution.

Concentrating on efficiencies in production works so long as youre talking about stuff tangible products or goods, as marketing schol-ars Stephen L. Vargo and Robert F. Lusch noted in their 2004 paper, Evolving to a New Dominant Logic for Marketing. But as we move toward a service-dominant logic, where the primary focus of economic activity is the process of doing some-thing for someone else, the limitations of the old-fashioned manufacturing approaches begin to come to light. Out goes the idea that firms pro-duce and customers consume; in comes the idea that firms and customers create value together. Services are no longer complements to prod-ucts, nor are they special types of intangible

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products. Instead, tangible goods are but one of the many accessories firms can use to apply their knowledge and expertise in a collaborative effort with the customer.

In this context, a win-win skill set of special-ized knowledge and abilities becomes crucial in interactions with customers, as Christopher Love-lock and Evert Gummesson argue in their 2004 paper Whither Services Marketing: In Search of a New Paradigm and Fresh Perspectives. As the economic paradigm shifts from the produc-tion and consumption of goods (and the implied transfer of ownership from seller to buyer) to the co-creation of value, consumer exchanges are in-creasingly becoming focused on offering benefits

through rentals or access fees. Consumers are used to considering the tradeoff renting the car rather than buying it and are more likely to take a utilitarian approach, preferring a slice of freedom to a physical piece of the action.

Viewed from this new perspective, time begins to play a crucial role in economic exchanges. Yet, despite near-universal acknowledgement that time has become a precious commodity, few com-panies bother to examine exactly how customers perceive time and how it shapes their decisions.

This is partly due to the existence of silos in both academia and practice. Operations man-agers have been focusing on the production and delivery of goods and services. Most marketers,


Profitability

Operational Policies

Set of established decisions to manage a

service deliveryprocess

PERSONALState

PersonalityCulture

EducationExperienceKnowledge

Gender

AMBIENCE

EvaluationOF THE SERVICE BY

THE CUSTOMER

POSITIVEEXPERIENCE

Repeat purchase,word of mouth

SONNAAL

BehaviorsOF THE

CUSTOMER

NEGATIVEEXPERIENCEBalking and reneging, no

purchase

NEGATIVEEXPERIENCE

Switch provider,bad reputation

T H E WA I T T I M E

LightingTemperatureSound/ColorFunctionality/ Layout of SpaceSigns/SymbolsQueuingInstructionsTime-KeepingDevices

>A

fter th

e wait D

u r in g t h e w a it

Service Encounter Satisfaction ProfileThe memorable aspects of a service encounter fluctuate over time. Customers only remember the salient points. Ending on an upbeat determines whether theyll return.

FIGURE 2

End

TroughTrough

Peak

Rate

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IESEinsightISSUE 1SECOND QUARTER 2009

Corporation), offered its services to airlines to notify their VIP lists that a given flight would be late before passengers left for the airport. That way, patrons could wait comfortably at home or the office. Likewise, Envoy could advise bank customers that the statement theyd be receiv-ing shortly was sent in error, stemming a flood of calls from nervous customers. Notification ser-vices like this are good for the bank and good for the customer. No one likes unpleasant surprises, and there are enormous business opportunities to be had by preventing them.MANIPULATE THE ENVIRONMENT. Managers can of-ten improve customer satisfaction in wait times by manipulating the environment. Usually re-ferred to as a form of perceptions management, its the control of ambient conditions, including lighting, temperature, sound and color; signs, symbols and artifacts, from signage to queueing instructions and time-keeping devices; and spa-tial layout and functionality, such as equipment and furnishings.

This moderator can translate into plush seat-ing while you wait, or not-so-comfy seating while youre being waited on. Thats the reason those molded plastic chairs at fast-food restaurants arent particularly comfortable. McDonalds and Burger King want people in and out, not linger-ing over coffee thats why they call it fast food. Theres a famous case from Harvard Business School about the Japanese restaurant chain Beni-hana. Back in the 1960s and 70s, the restaurants sole dessert was ice cream; youd have to eat it quickly or it would melt. The beauty of the des-sert design is that the customers never realized they were being rushed. INSTILL A POSITIVE END EFFECT. If customers arent happy at the end of the transaction the end ef-fect they understandably amplify the wait time and other obstacles along the way. But custom-ers who are happy with the outcome tend to min-imize or overlook wait time or problems; a cer-tain amount of revisionist history is at work. The retrospective evaluation of a waiting experience that ends happily tends to be more positive.

In a good-news/bad-news scenario, manag-ers should carefully spill the bad news first to avoid leaving the customer unhappy at the end

of the encounter. The end effect applies to situ-ations that are goal-oriented (where customers are interested in the final outcome of the service encounter) as well as to those that are process oriented (where customers are interested in the encounter itself ). The difference is that in goal-oriented situations, the end effect will be largely, if not completely, determined by the outcome, that is, whether the goal was achieved.BE FAIR. When it comes to space control, manag-ers should enforce a first-in/first-out rule, avoid crowding, and keep idle employees and special lines out of sight.

For example, while coach customers realize first-class flyers pay more for their tickets, they nevertheless feel neglected, resentful and less-than when the well-heeled cut ahead and board first. LAN Airlines designed a brilliant fix for this: by checking in first-class patrons on the other side of the airport, coach passengers didnt see them and, therefore, didnt feel slighted. Its the perceived fairness of the thing: thats what coach customers care about, as opposed to the actual time waiting to board.

When we ask students to describe their worst waiting experience, they rarely cite the length of time. Instead theyll say, People cut in front of me, or I felt I wasnt being heard, or Employ-ees kept talking to each other instead of helping me, or The salesperson was rude. They grum-ble about the lying and lame excuses, the eye-roll-ing and incompetence, and, of course, the discon-nected calls after being on hold for a millennium. How could that possibly feel good? Except in a true emergency, as well explain shortly, the wait is usually secondary to the customers notions of fairness and decency.

Waiting and ProfitabilityConsumer behavior that takes place during and after the service encounter is one of the key de-terminants of profitability. When a transaction is not completed for example, when a customer chooses not to join a queue or leaves before be-ing served and the customer passes on making a purchase, profitability is, of course, impacted.

And its not just the profits of that one sale. Behavior that takes place afterward from re-


Customers who are happy with the outcome tend to minimize or overlook problems. The retrospective evaluation of the waiting experience tends to be more positive.

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TO KNOW MORE

Ariely, D., and Z. Carmon. Gestalt Characteristics of Experiences: The Defining Features of Summarized Events. Journal of Behavioral Decision Making 13, no. 2 (2000): 191-201.

Bitran, G., J.C. Ferrer and P. Rocha e Oliveira. Man-aging Customer Experiences: Perspectives on the Temporal Aspects of Service Encounters. Manu-facturing & Service Operations Management 10, no. 1 (Winter 2008): 61-83.

Kahneman, D., D.L. Fredrickson, C.A. Schreiber and D.A. Redelmeier. When More Pain Is Preferred to Less: Adding a Better End. Psychological Science 4, no. 6 (1993): 401405.

Lovelock, C., and E. Gummesson. Whither Services Marketing: In Search of a New Paradigm and Fresh Perspectives. Journal of Service Research 7, no. 1 (Au-gust 2004): 20-41.

Vargo, S.L., and R.F. Lusch. Evolving to a New Domi-nant Logic for Marketing. Journal of Marketing 68 (January 2004): 1-17.


peated purchases, word of mouth, length of the relationship and share of wallet can affect prof-its in a big way. Thats why its so important that the customers experience be positive.

Take, for instance, an American Airlines flight from Barcelona to New York. The outcome landing at JFK Airport is, hopefully, a given. The process is what counts. To ensure repeat business, the crew should strive to keep passen-gers happy during those eight hours in the air, in much the same way as Disney manages its visi-tors stay. At the end of trip, customers selectively recall their feelings was the trip pleasant, was the food decent, did the flight attendants treat me well and decide whether theyll fly Ameri-can Airlines again. In todays hyper-competitive economy, its not just about whether or not you deliver the core benefit. What will differentiate you from your competitor is how that benefit is delivered over time.

When Waiting Is Always NegativeIn an emergency room, installing a television or cushy chairs isnt likely to make the wait more bearable. Its a desperate, disquieting place. If youve gone to ER with a nasty cut, and a woman with a mangled arm is admitted, of course shes going to go first. And if an asthmatic boy, gasp-ing for air, is carried in by his frantic parents, hes going before her. Thats triage. Are you going to object when the physician attends to the young boy and the woman before you? No, the circum-stances are vastly different from the coach cus-tomers notions of fairness.

That said, everyone in the emergency room of a hospital wants fast service. No one feels good during the wait there. The same caveat applies when you phone the police, fire department or rescue squad. You just want help now.

B2B Interactions We tend to associate anxiety with B2C interac-tions, but it plays a big part in B2B dealings as well. In fact, its one of the main factors a firm uses to evaluate whether a supplier is easy to do business with. Managing the customers time perceptions and emotions are critical.

If the supplier can demonstrate that the buyers problem is also the suppliers problem, then the supplier can capitalize on a great op-portunity to build the relationship. Suppliers can even bank goodwill capital to cash in later on, if they occasionally fail to meet standards. After all, theyve demonstrated that theyve done well in the past and have a sincere interest in helping the firm. Whatever mea culpa strategy the sup-

plier then employs to smooth things over is more likely to succeed. An apology, for example, is much more likely to be perceived as being sincere.

A New Way of Thinking Managers need to stop using the negatively charged term waiting and instead start asking, How can I best manage my customers time with me? Or, What can I do to create more value to both of us?

The problem is, once you introduce the termwaiting, the only action that makes sense is to minimize it. And in an emergency, thats certainly the right course of action.

But in most other instances, managers need to think in terms of fashioning more satisfying encounters and become open to more creative and potentially more profitable alternatives than mere time crunching.

As our research shows, creative techniques abound to turn the wait from a negative to a neu-tral or even a positive. Companies that apprise cli-ents of delays, find creative ways to deflect them and treat people fairly will have happier custom-ers. And as we all know, happier customers spend more money.

Mindy Kitei served as editor for this article.

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don't manage waits, manage experiences

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