Linking Marketing and Operations: An Application at Blockbuster, Inc.

Linking Marketing and Operations: An Application at Blockbuster, Inc.
Author(s): Metters, Richard and Shane, Evangelist and Godwin, Badger and Johnson, Joey and Conzola, Vincent and Kizer, Robert and Young-Helou, Stephanie
Year: 2002
Paper Number: GBS-DIA-2002-001
Goizueta Department: Decision and Information Analysis

Abstract

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 affects different market segments differently, but generally causes a reduction in customer satisfaction, 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 bottom-line impact from operational changes of new marketing programs.