1. Interacting with Customers
Santiago Gallino – Tuck School of Business
Toni Moreno – Kellogg School of Management
January 2017
July 2013 – LBS – London, UK

2. Learning Modules 1. Demand forecasting 2. Inventory Decisions
3. Assortment Planning
4. Pricing Decisions
5. The omnichannel customer
6. Fulfilling omnichannel demand
7. Omnichannel journeys
8. Supporting an omnichannel strategy

3. M5.4 Introduction 1
Interacting with customers is in the essence of retail.
Excelling in this task is crucial to a successful retailer.
However, excelling can mean different things for different retailers.
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

4. M5.4 Value Proposition 2
The retailer value proposition to customers include a portion that refers to the product (or service) that the customer wants to acquire and experience that the customer receive while acquiring that product (or service)
Product/Service
Experience
Value
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

5. M5.4 Value Proposition 2 Satisfaction Perception Expectation
The retailer value proposition to customers include a portion that refers to the product (or service) that the customer wants to acquire and experience that the customer receive while acquiring that product (or service)
Satisfaction
Perception
Expectation
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

6. M5.4 Value Proposition 2 Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

7. M5.4 Operational Behavior of Customers3
If you are a retailer, customers are not just wallets ready to be opened at the end of a line. They disrupt your operations with unpredictable behaviors, requesting service at inconvenient times, asking for the most bizarre things and changing their minds.
Customers are ready to introduce variability at every step of the way. However, they tend to complain when they don’t find consistency.
Where customers introduce variability?
Arrival. Queues.
Request and exception to the process.
Capability
Effort
Subjective Preferences
The dilemma is whether to reduce variability or to accommodate it. The answer depends on who you are or who you want to be as a retailer.
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

8. M5.4 Managing the Operational Behavior of Customers
Customers Serving themselves. ATM. Self Check Out. Self Check In.
High
Classic Accommodation
Low-Cost Accommodation
Uncompromised Reduction
Segmentation
Quality of Experience
Classic Reduction
Low
High
Cost to Serve
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

9. M5.4 Managing the Operational Behavior of Customers
Diagnose the Problem. Which type of variability is hurting the operations?
Design a mutually beneficial role for customers
Test and Improve the solution
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

10. M5.4 Managing Wait Times 5
Customers find waiting more tolerable when they can see the work being done on their behalf AND they tend to value service more.
This holds true even under the appearance of effort.
Barista at Sturbucks
Operational transparency can help and even increase customer and employee satisfaction
Customers are irrational, we are irrational. What customers remember of a visit to a retailer is the salient features not the details. And what they remember is what will determine whether they return or not.
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

11. M5.4 Managing Wait Times 5
Occupied Time Feels Shorter Than Unoccupied Time
Per process wait feels longer than in process waits
Anxiety Makes Waits Seem Longer
Uncertain Waits Are Longer than Known, Finite Waits
Unexplained Waits Are Longer than Explained Waits
Unfair Waits Are Longer than Equitable Waits
The More Valuable the Service, the Longer the Customer Will Wait
Solo Waits Feel Longer than Group Waits
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

12. M5.4 Managing Returns 6
What is the trade off between restricting returns and conversion.
We are not talking about encouraging returns
The return experience can be the high end point of our contact with the customer
Customization can help reduce returns
Generate Model to play with this assumptions and see the potential impact of different return policies
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face