Improving Customer Compatibility with Operational Transparency

43 Pages Posted: 30 Jul 2019 Last revised: 4 Aug 2019

See all articles by Ryan W. Buell

Ryan W. Buell

Harvard Business School

MoonSoo Choi

Harvard University - Technology & Operations Management Unit

Date Written: July 26, 2019

Abstract

Through a large-scale field experiment with 389,611 customers considering opening a credit card account with a nationwide retail bank, we investigate how providing transparency into an offering’s tradeoffs affects subsequent rates of customer acquisition and long-run engagement. Although we find transparency to have an insignificant effect on acquisition rates, customers who were shown each offering’s tradeoffs selected different products than those who were not. Moreover, prospective customers who experienced transparency and subsequently chose to open an account went on to exhibit higher quality service relationships over time. Monthly spending was 9.9% higher and cancellation rates were 20.5% lower among those who experienced transparency into each offering’s tradeoffs. Increased product usage and retention accrued disproportionately to customers with prior category experience – more experienced customers who were provided transparency spent 19.2% more on a monthly basis and were 33.7% less likely to defect after nine months. Importantly, we find that these gains in engagement and retention do not come at the expense of customers’ financial wellbeing – the probability of making late payments was reduced among customers who experienced transparency. We further find that the positive effects of transparency on engagement and retention were attenuated in the presence of a promotion that provided financial incentives to choose particular offerings. Taken together, these results suggest that providing transparency into an offering’s tradeoffs may be an effective strategy for informing customer choices, leading to better outcomes for customers and firms alike.

Keywords: Behavioral Operations, Operational Transparency, Customer Compatibility, Customer Behavior

Suggested Citation

Buell, Ryan W. and Choi, MoonSoo, Improving Customer Compatibility with Operational Transparency (July 26, 2019). Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 20-013. Available at SSRN: https://ssrn.com/abstract=3428690 or http://dx.doi.org/10.2139/ssrn.3428690

Ryan W. Buell (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan Hall 429
Boston, MA 02163
United States
617-496-6918 (Phone)

HOME PAGE: http://www.hbs.edu/rbuell

MoonSoo Choi

Harvard University - Technology & Operations Management Unit ( email )

Boston, MA 02163
United States

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