Linking Marketing and Operations: An Application at Blockbuster, Inc.
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In theory, it is a simple proposition: Make customers wait longer, and fewer of them will come back. But actual practice is complicated. Marketing develops a new product, service, affinity plan, etc. This new marketing initiative causes changes in operational processes that increase customer service times. When waiting lines form, a small increase in service times for each customer magnifies into a significant increase in waiting time for the customer at the end of the line. The increase in waiting times causes a reduction in customer loyalty, which leads to lower customer retention, and hence, repurchases. Consequently, the marketing initiative has costs, as well as benefits. Calculating those costs, though, is far from a simple matter. Blockbuster, Inc., has developed a model that combines operational process analysis, waiting line simulation, real versus perceived waiting times, a customer loyalty model, and a financial model to find the bottom-line impact from operational changes of new marketing programs.