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MANAGEMENT SCIENCE Vol MANAGEMENT SCIENCE Vol. 57, No. 9, September 2011, pp. 1564–1579 issn 0025-1909 eissn 1526-5501 11 5709 1564 http://dx.doi.org/10.1287/mnsc.1110.1376 © 2011 INFORMS The Labor Illusion: How Operational Transparency Increases Perceived Value Ryan W. Buell, Michael I. Norton Harvard Business School, Harvard University, Boston, Massachusetts 02163 {[email protected], [email protected]} ubiquitous feature of even the fastest self-service technology transactions is the wait. Conventional wisdom Aand operations theory suggest that the longer people wait, the less satisfied they become; we demonstrate that because of what we term the labor illusion, when websites engage in operational transparency by signaling that they are exerting effort, people can actually prefer websites with longer waits to those that return instan- taneous results—even when those results are identical. In five experiments that simulate service experiences in the domains of online travel and online dating, we demonstrate the impact of the labor illusion on service value perceptions, demonstrate that perceptions of service provider effort induce feelings of reciprocity that together mediate the link between operational transparency and increased valuation, and explore boundary conditions and alternative explanations. Key words: marketing; channels of distribution; queues; industries; business services; inventory–production; operating characteristics; service operations; service design History: Received February 26, 2010; accepted March 22, 2011, by Pradeep Chintagunta and Preyas Desai, special issue editors. Published online in Articles in Advance July 15, 2011. 1. Introduction testing the impact of operational transparency. Self- Rare is the modern consumer who has not found her- service technologies are capable of delivering service self staring at a computer screen as a progress bar more quickly and conveniently than face-to-face alter- advances fitfully toward loading some application or natives (Meuter et al. 2000). However, unlike cus- completing some search without wondering, “What tomers who receive service in face-to-face settings is taking so long?” and because of that frustration (such as interacting with a bank teller counting one’s decreasing her approval of the service. We suggest money), customers transacting in self-service environ- that taking a different approach—showing consumers ments (such as withdrawing money from an ATM) what is taking so long—can not only decrease frus- do not observe the effort of the service provider, tration but actually increase ratings of the service, an important cue that can signal the value of the service being delivered. As such, although an auto- such that consumers actually value services more mated solution may objectively deliver faster perfor- highly when they wait. In particular, we suggest mance, we suggest that customers may perceive that that engaging in operational transparency, by mak- service as less valuable because of the absence of ing the work that a website is purportedly doing labor. Adding that labor back in via operational trans- more salient, leads consumers to value that service parency, therefore, has the potential to increase per- more highly. Indeed, we suggest that the mere appear- ceptions of value. ance of effort—what we term the labor illusion—is sufficient to increase perceptions of value. By replac- ing the progress bar with a running tally of the 2. Waiting, Effort, and tasks being performed—the different airlines being Perceived Value searched when the consumer is looking for flights Because customers treat their time as a precious com- or the different online dating profiles being searched modity (Becker 1965), operations researchers have when the consumer is looking for dates—we show produced numerous models set in service contexts that consumers can actually choose to wait longer for based on the notion that customers are attracted to the very same search results. fast service. These models suggest that (a) delivery In five experiments, we demonstrate the role of the time competition increases buyer welfare (Li 1992), labor illusion in enhancing service value perceptions (b) firms with higher processing rates enjoy a price among self-service technologies, an ideal setting for premium and larger market shares (Li and Lee 1994), 1564 Buell and Norton: The Labor Illusion: How Operational Transparency Increases Perceived Value Management Science 57(9), pp. 1564–1579, © 2011 INFORMS 1565 and (c) the choice of an optimal delivery time com- Perceived employee effort, which has a strong pos- mitment balances service capacity and customer sen- itive effect on customer satisfaction in face-to-face sitivities to waiting (Ho and Zheng 2004). Empirical contexts (Mohr and Bitner 1995), can serve as a heuris- investigations of delivery time have similarly demon- tic for product quality as well (Kruger et al. 2004). strated that waiting adversely affects customer atti- Similarly, Kahneman et al. (1986) suggest that when tudes and the likelihood of patronage; for example, firms incur higher costs—as when exerting more long delays increase uncertainty and anger, particu- effort—customers perceive higher prices to be fair. larly when the delay seems controllable by the service Most relevant to the present investigation, firms that provider (Taylor 1994). exert more effort on behalf of customers can boost Accordingly, growing streams of the service opera- service quality perceptions via the impact of that tions and marketing literatures have sought to iden- effort on customer’s psychological feelings of grat- tify strategies for both improving the experiences itude and reciprocity; even when the quality of of waiting customers and reducing service duration the service remains unaffected, consumers can feel itself. With regard to the former, research on the that they should reciprocate the efforts of the firm psychology of queuing focuses on managing the per- (Morales 2005). ceptions of waiting customers by occupying peri- Importantly, however, when the production and ods of idle time (Carmon et al. 1995), increasing delivery of a service are separable, employee effort the feeling of progress (Soman and Shi 2003), man- may be removed from a customer’s service expe- aging anxiety and uncertainty (Osuna 1985), setting rience. In some cases, such as parcel delivery accurate expectations, bolstering perceptions of fair- and automotive repair, the bulk of employee effort ness (Maister 1985), managing sequence and duration occurs out of the customer’s view. In the cases effects, providing customers with the feeling of con- we explore—technology-mediated services—marginal trol, shaping attributions (Chase and Dasu 2001), and employee effort may be entirely absent. In particular, when service is automated, tasks that would other- shaping memories of the experience (Norman 2009). wise be performed by employees are instead divided In addition to favorably influencing the perceptions between the consumer and the technology. This omis- of waiting customers, of course, managers have also sion of employee effort is ironically exacerbated by sought to reduce actual service duration. In particular, the efforts of self-service designers to maximize the one increasingly common strategy for improving the ease of use, and minimize the complexity, of self- speed and productivity of service is the introduction service offerings (Curran and Meuter 2005, Dabholkar of self-service technologies (Napoleon and Gaimon and Bagozzi 2002), making such services appear 2004). In 2008, for example, 70% of travel reservations even more effortless. This situation poses a critical were booked online (J.D. Power and Associates 2008), trade-off for companies. Although automating ser- and more than 75% of customers used Internet bank- vice and shielding customers from the complexities ing (Higdon 2009). In general, self-service technolo- of their offerings can promote adoption, these prac- gies reduce both perceived and actual waiting time tices may also undercommunicate the value of the for customers, excepting cases when the technology services being delivered. If perceived value is dimin- is overly complicated or the customers served lack ished, then customers engaging with these shielded technical proficiency (Dabholkar 2000). Moreover, per- self-service channels may exhibit diminished willing- ceptions of self-service technology value and qual- ness to pay, satisfaction, and loyalty (McDougall and ity are driven in part by speed of service delivery Levesque 2000). (Dabholkar 1996). We suggest a solution to this trade-off. Although Although considerable emphasis has been placed self-service technologies necessarily eliminate the on increasing the service speed that customers per- opportunity for face-to-face interactions with a ser- ceive and experience, offering service that seems to vice provider in which consumers can witness an arrive too quickly or too easily can have costs. In employee sweating to get the job done, the inter- particular, customers draw inferences from their in- faces through which consumers engage with self- process experiences about the value being created. service can be modified by inserting operational If, for example, the outcome of a service is diffi- transparency into the process, to demonstrate the cult to evaluate, consumers may use service dura- “sweat” that the technology is exerting on the con- tion as a heuristic to assess its quality (Yeung and sumer’s behalf. In particular, we suggest that supple- Soman 2007).
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