Frustration-Based Promotions: Field Experiments in Ride-Sharing

52 Pages Posted: 25 Feb 2018 Last revised: 16 Oct 2019

See all articles by Maxime Cohen

Maxime Cohen

McGill University

Michael-David Fiszer

Google/ Waze

Baek Jung Kim

New York University (NYU) - Leonard N. Stern School of Business

Date Written: February 25, 2018

Abstract

The service industry has become increasingly competitive. One of the main drivers for increasing profits and market share is service quality. When a consumer encounters a bad experience, or a frustration, s/he may be tempted to stop using the service. In collaboration with the ride-sharing platform Via, our goal is to understand the benefits of proactively compensating customers who have experienced a frustration. Motivated by historical data, we consider two types of frustrations: long waiting times and long travel times. We design and run three field experiments to investigate how different types of compensation affect the engagement of riders who experienced a frustration. We find that sending proactive compensation to frustrated riders (i) is profitable and boosts their engagement behavior, (ii) works well for long waiting times but not for long travel times, (iii) seems more effective than sending the same offer to non-frustrated riders, and (iv) has an impact moderated by past usage frequency. We also observe that the best strategy is to send credit for future usage (as opposed to waiving the charge or sending an apologetic message).

Keywords: Ride-sharing, Field Experiments, Quality Management, Service Operations

Suggested Citation

Cohen, Maxime and Fiszer, Michael-David and Kim, Baek Jung, Frustration-Based Promotions: Field Experiments in Ride-Sharing (February 25, 2018). Available at SSRN: https://ssrn.com/abstract=3129717 or http://dx.doi.org/10.2139/ssrn.3129717

Maxime Cohen (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Michael-David Fiszer

Google/ Waze ( email )

Electra Tower 29th floor
Yigal Alon 98
Tel aviv, 6789141
Israel

Baek Jung Kim

New York University (NYU) - Leonard N. Stern School of Business ( email )

40 W 4th Street
918
New York, NY 10012
United States

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