Optimal service design: integrating marketing and operations perspectives

This paper develops an optimal service design model by combining a conjoint analysis‐based optimal product design model from marketing with capacity and demand management strategies from operations management to determine a profit maximizing service facility. It extends optimal product design models to services by specifically modeling the interactive relationship between potential attractiveness of a service, capacity and waiting times. Additionally it extends current capacity‐demand operations models by modeling the impacts of different capacity/demand matching strategies in a competitive market. Combining these two perspectives provides a more direct link between customer perceptions of various service attributes, including waiting time and profitability. An example is shown where the model is applied to an existing ski resort. Data are incorporated from resort management, existing customers, potential customers and industry experts to determine the profit maximizing mix of capacity and demand management strategies for an actual ski resort. The results show that important insights about profit maximization are gained from a model that captures the effects of capacity and demand management strategies.