Why customer service frustrates consumers: Using a tiered organizational structure to exploit hassle costs

Anthony Dukes, Yi Zhu

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Many customer service organizations (CSOs) reflect a tiered, or multilevel, organizational structure, which we argue imposes hassle costs for dissatisfied customers seeking high levels of redress. The tiered structure specifies that first-level CSO agents (e.g., call center operators) be restricted in their payout authority. Only by escalating a claim to a higher level (e.g., a manager), and incurring extra hassles, can a dissatisfied customer obtain more redress from the firm. We argue that the tiered structure helps the firm to control redress costs by (1) screening less severe claims so that such customers do not escalate their claims to a manager and (2) screening illegitimate claims. Our main result is that a firm can be more profitable if it uses a tiered CSO.

Original languageEnglish (US)
Pages (from-to)500-515
Number of pages16
JournalMarketing Science
Volume38
Issue number3
DOIs
StatePublished - May 1 2019

Bibliographical note

Funding Information:
History: Ganesh Iyer served as the senior editor and Greg Shaffer served as associate editor for this article. Funding: This work was supported by the Marketing Science Institute [Grant 4000166] and by a grant to Y. Zhu from the 3M Non-tenured Faculty Grant Supplemental Material: The online appendix is available at https://doi.org/10.1287/mksc.2019.1149.

Publisher Copyright:
© 2019 INFORMS.

Keywords

  • Consumer service organization
  • Customer complaints
  • Hassle costs
  • Organizational structure
  • Sequential search model

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