Word of mouth on action: analysis of optimal shipment policy when customers are resentful

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buir.contributor.authorErkip, Nesim Kohen
buir.contributor.orcidErkip, Nesim Kohen|0000-0003-4122-6375
dc.citation.epage102865-16en_US
dc.citation.issueNumber102865
dc.citation.spage102865-1
dc.citation.volumeNumber118
dc.contributor.authorÇavdar, Bahar
dc.contributor.authorErkip, Nesim Kohen
dc.date.accessioned2024-03-25T06:57:53Z
dc.date.available2024-03-25T06:57:53Z
dc.date.issued2023-03-04
dc.departmentDepartment of Industrial Engineering
dc.description.abstractWord-of-Mouth (WoM) communication via online reviews plays a vital role in customers’ purchasing decisions. As such, retailers must consider the impact of WoM to manage customer perceptions and future demand. This paper considers an online shopping system with premium and regular customers. Building on the behavioral and operations management literature, we model customer preferences based on the perceived service quality indicated by WoM and integrate this into the retailer's operational problem to determine a shipment policy regarding the timing of consolidated shipments and the treatment of regular demand. First, we study the e-tailer's problem when they have no knowledge of WoM and only react to the changes in demand. We analyze the long-term behavior of customer demand and show that potential market size and customer sensitivity are the key parameters determining this behavior. Then, we build a model to integrate the knowledge of WoM into operational decision-making and partially characterize the optimal solution. We show that (i) underpromise-and-overdeliver can be a hurtful strategy since it creates a false sense of fast delivery for the regular service, (ii) relaxations in operational constraints may hurt profitability due to the associated difficulties of managing perceptions, and (iii) seeking a stationary policy can lead to suboptimal solutions; therefore, cyclic policies should also be considered when appropriate. © 2023
dc.embargo.release2025-03-04
dc.identifier.doi10.1016/j.omega.2023.102865
dc.identifier.issn0305-0483
dc.identifier.urihttps://hdl.handle.net/11693/115110
dc.language.isoen
dc.publisherElsevier Ltd
dc.relation.isversionofhttps://doi.org/10.1016/j.omega.2023.102865
dc.rightsCC BY 4.0 DEED (Attribution 4.0 International)
dc.rights.urihttps://creativecommons.org/licenses/by/4.0/
dc.source.titleOmega
dc.subjectE-tailing
dc.subjectEndogenous demand
dc.subjectShipment consolidation
dc.subjectWord of mouth
dc.titleWord of mouth on action: analysis of optimal shipment policy when customers are resentful
dc.typeArticle
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