Concierge Option for a Service Offering: Design, Analysis, Impact, and Adoption
32 Pages Posted: 25 Jun 2011
Date Written: June 21, 2011
Concierge Medicine is the most visible implementation of a new trend of introducing a fee-based premier option in a service offering. This is usually done for the purposes of segmenting customers based on their willingness or ability to wait for the service. Using a realistic yet representative model setup, we perform a detailed analysis to (i) determine the conditions (fees, cost structure, etc.) under which the concierge option is profitable for the service provider, (ii) quantify benefits accrued by the premier customers; and (iii) evaluate the resulting impact on the other customers. We show that, under a wide range of system parameters, introducing a concierge option benefits every one and also compute the magnitude of these benefits. These benefits are larger when the variance in the customer waiting costs is high and the system utilization is high. We complement these results with data on the adoption of MDVIP (the most popular concierge medical service in the US) service and show that the service has been adopted in areas where the median income is significantly larger and the population is older. Both income and age are good proxies for the waiting cost that a customer attributes to waiting for receiving medical service.
Keywords: Queues, Healthcare
JEL Classification: L84
Suggested Citation: Suggested Citation