| Abstract: | We study the design of transactional incentives based on simple customer satisfaction survey results and sales with consideration of a bound on total rewards and possible signal correlation in a principal-agent (PA) setting. In contrast with common beliefs that future customer values are drivers for customer satisfaction incentives, we show that the designed incentives can benefit principals who have no future customer value. More surprisingly, improvement can be achieved with agents’ effort and the total reward rate unchanged. We demonstrate that the benefit comes from the values of information and risk diversification brought by the designed customer satisfaction measures, which are overlooked in existing customer satisfaction research. These values depend on the correlation between customer satisfaction measures and sales. We provide conditions under which the designed customer satisfaction incentives are indeed beneficial. We also extend our model to other customer satisfaction measures. We find that not all customer satisfaction incentives possess the same values. Incentives based on commonly-used average customer measures may fail to motivate agents and bring benefits. Therefore, the selection of proper reward schemes and measures is very important in designing customer satisfaction incentive and deserve further research. |
| Date: | 12 April 2013 |
| Time: | 11:00am - 12:00am |
| Speaker: |
Mr Wang Tian PhD Student Department of Management Sciences City University of Hong Kong |
| Venue: | Room P7512, Knowledge Discovery Centre, Department of Management Sciences, 7/F, Academic 1 Purple Zone, City University of Hong Kong |
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