Optimal Structure of Experiential Services: Review and Extensions

In many consumer‐intensive (B2C) services, delivering memorable customer experiences is often a source of competitive advantage. And yet, there exist few formal guidelines to design the structure of such experiences. In this chapter, the author introduces a utility‐based model of customer satisfaction when customers are subject to acclimation, satiation, and memory decay. He then reviews and extend principles for optimizing the structure of an experience to maximize customer satisfaction; specifically, we characterize the optimal sequence of activities, the optimal activity selection, and the optimal information policy about an uncertain outcome. The author finds that, in general, the optimal experience structure is non‐monotone in service levels and makes use of breaks/intermissions to create contrasts and reset satiation levels. However, in many extreme cases, he shows that a crescendo design is optimal. He then discusses the implications of our framework for quality management in services, especially as it relates to a potential gap between ex‐ante expectation and ex‐post satisfaction, and for monetizing customers’ utilities derived while anticipating or recalling the event.