Optimal Decision Making for Customer-Intensive Services Based on Queuing System Considering the Heterogeneity of Customer Advertising Perception

Abstract

In customer-intensive services, advertising can increase customers’ patience and bring more utility to customers. However, customers’ different perceptions of advertising can affect their utility and indirectly affect the decision making of the service provider. Thus, this paper uses the M/M/1 queueing model to study the optimal decision making of customer-intensive service providers in different markets according to the customers’ heterogeneity. We first classify customers into two categories: high sensitivity and low sensitivity, and then we analyze the consumption behavior of these two types of customers in the service system as the potential customer arrival rate increases. Finally, the optimal decisions of the service provider with different demands are determined. We find that the service provider can benefit from making optimal decisions based on market demand as the potential customer arrival rate increases. If the potential arrival rate exceeds a certain threshold, the service provider has more dominance in the market, and relevant decision making is no longer affected by the potential customer arrival rate. Furthermore, it is not always beneficial for the service provider to serve all customers regardless of whether there are low-sensitivity customers in the service system, and advertising can tap more highly sensitive customers and help to further increase the revenue of service providers. The results also show that ignoring the heterogeneity of customers’ sensitivity to advertising very likely leads to losses in revenue.

Keywords

• advertising effect
• heterogeneous customer
• decision making
• customer-intensive services
• M/M/1 queuing system