Quality-Speed Conundrum: Trade-offs in Customer-Intensive Services

In many services such as primary health care, financial and legal consulting, repair services, hospitality and education, the quality or value provided by the service increases with the time spent with the customer. However, longer service times (slower service rates) result in longer waits for customers. We term such services, in which the interaction between quality and speed is critical, as customer-intensive services. In a queueing framework, we parameterize the degree of customer-intensity of the service. The service speed chosen by the service-provider affects the quality of the service through its customer-intensity. Customers queue for the service based on the quality of the service, delay costs and price. We study how a service provider can make the optimal “quality-speed tradeoff” in the face of such self-interested, rational customers. Our results demonstrate that the customer-intensity of the service is a critical driver of equilibrium price, service speed, demand, congestion in queues and service provider revenues. We also model service rate competition among multiple servers providing customer-intensive services. Customer-intensity leads to outcomes very different from those of traditional models of service rate competition. For instance, as the number of servers increases, the price increases and the servers become slower.