The service strategy of customer-intensive services under advertising effects

Abstract

PurposeCustomer-intensive services refer to the service that a provider needs to invest in customers with high patience and experience. Within a certain rate range, the slower service rate and the longer service time, the higher customer’s utility; however, this may cause queue congestion. And the advertising of service provider will affect the revenue. The purpose of this paper is to investigate the effects of advertising on the optimal price, service rate and the optimal revenue of such service provider at different development stages.Design/methodology/approachThis paper investigates the service strategies of service provider based on advertising effects. The authors first divide service provider into insufficient customers or sufficient customers according to the development stage, then analyze the impact of advertising at different stages. The authors focus on the formulation of the optimal price, service rate and the optimal revenue of service provider at different stages.FindingsThis paper finds that in the insufficient customers stage, the service provider’s strategy of “small profits but quick turnover” is conducive to quickly accumulating customers. With the development of service provider, the advertising indirectly increases the revenue of service provider by maintaining popularity. The result also shows that with the development of service provider, the initiative of such service market has gradually been mastered by service provider, from “buyer market” to “seller market.”Originality/valueThe finding provides an alternative explanation for the impact of advertising on service provider’s optimal strategies; it also solves the settings of service price and rate of customer-intensive service provider at different development stages. This study is essential to create the optimal revenue and solve supply–demand conflicts (such as doctor–patient conflict) between service provider and customers.