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Why Customer Service Frustrates Consumers: Using a Tiered Organizational Structure to Exploit Hassle Costs

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  • Anthony Dukes

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089)

  • Yi Zhu

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

Abstract

Many customer service organizations (CSOs) reflect a tiered, or multilevel, organizational structure, which we argue imposes hassle costs for dissatisfied customers seeking high levels of redress. The tiered structure specifies that first-level CSO agents (e.g., call center operators) be restricted in their payout authority. Only by escalating a claim to a higher level (e.g., a manager), and incurring extra hassles, can a dissatisfied customer obtain more redress from the firm. We argue that the tiered structure helps the firm to control redress costs by (1) screening less severe claims so that such customers do not escalate their claims to a manager and (2) screening illegitimate claims. Our main result is that a firm can be more profitable if it uses a tiered CSO.

Suggested Citation

  • Anthony Dukes & Yi Zhu, 2019. "Why Customer Service Frustrates Consumers: Using a Tiered Organizational Structure to Exploit Hassle Costs," Marketing Science, INFORMS, vol. 38(3), pages 500-515, May.
    • Handle: RePEc:inm:ormksc:v:38:y:2019:i:3:p:500-515
    DOI: 10.1287/mksc.2019.1149
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    4. Asante, Daniel & Tang, Chunyong & Asante, Eric Adom & Kwamega, Michael & Opoku-Danso, Alexander, 2023. "Leveraging perceived HPWS to improve service encounter quality in high-contact service industries," Journal of Retailing and Consumer Services, Elsevier, vol. 73(C).

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