After-sales service competition in a supply chain: Optimization of customer satisfaction level or profit or both?

Abstract

For durable consumer products, after-sales services play an important role in customers’ purchase decisions. A manufacturer offers basic warranty available to all customers who buy the product, while a retailer offers optional after-sales service that is available only to customers who pay for the option. We explore the interaction of these two after-sales services assuming two customer segments. Formulating five analytical models, we found that after-sales service plans that are determined to maximize profits do not match optimal after-sales service levels that can satisfy customers the most.