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Student spreadsheet for CU50.

Airline rewards are still based on miles flown. This is a mistake, according to Hal Brierley, the executive chairman and chief loyalty architect of Brierley + Partners. In this column, he points out the biggest problems with airline loyalty programs--and some ways to fix them.

In 2011, Kaiser Permanente Northern California (KPNC) region's efforts to reduce mortality in their 21 hospitals is showing promise. They developed and launched a region-wide initiative to improve the treatment of sepsis, a serious and often deadly medical condition. The case illustrates the challenges of spreading change in a complex, highly interdependent organization, and presents an alternative framework to traditional management models for addressing such situations. It also asks students to consider how change should be made under conditions of uncertainty, in which best performances remain unknown.

Pret A Manger, a London-based chain of sandwich shops, was known for its fast, genuine service and pre-packaged sandwiches prepared on-site daily. Instructed by its board to grow at 15 percent per year, Pret considered opening "twin" shops in locations too small to contain kitchens; these shops would receive sandwich deliveries throughout the day from a nearby "parent" shop. Would Pret's employees and customers accept twin shops or view them as counter to the Pret culture? Through this decision point, the case frames a discussion about how companies build service models to reliably deliver customer service excellence. The case also helps students understand the role of employee management systems in creating consistent service experiences and introduces a set of innovative employee management practices.

The service sector is dependent upon customers' willingness to contribute their knowledge, skills, and abilities to co-produce the service experiences they want and expect. Service organizations therefore seek to employ strategies that will enhance their customers' ability to do whatever they must to be successful in co-producing those experiences. Applying the concept of self-efficacy, we offer a theory-based approach to developing these strategies that firms may utilize. These strategies involve focusing both employee training and environmental cues on how to enhance the self-efficacy of the customer in performing whatever tasks are necessary toward a successful service experience.

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Delwarca Software provides business software to large corporate clients around the world. The firm serves customers who prefer to assemble corporate solutions using a combination of software programs from various suppliers rather than implementing a single enterprise resource planning system. Consequently, Delwarca must provide telephone support services for complex software-hardware interaction and performance problems in addition to the typical software support issues around software installation and upgrades, malware attacks, and processing failures. The manager of the remote support unit implemented a new triage program for customer calls hoping to reduce customer wait time, improve customer satisfaction, and reduce costs. After one year, customer dissatisfaction is at an all-time high and he must perform a quantitative analysis of the current process, considering wait times for customers as well as cost per call, before making a final recommendation. This case can be used in a first-year MBA course in Service Management or Operations Management or a course in industrial engineering. It can also be used to introduce simple queuing theory.

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The general manager of a chauffeured limousine transport company is concerned about underperformance at the company's customer service call center. The eight-person call center handles almost all customer interaction including discussing company services with prospective customers, scheduling pickups, providing pricing, confirming appointments, and handling billing inquiries. Customers have complained about extended wait times to speak with someone and about abandoned calls. On the other hand, customer satisfaction with the firm's fleet vehicles and drivers is extremely high. The general manager worries that call center service quality will limit the company's ability to expand operations into new markets. The company's founder has asked the general manager to look into the problems and propose solutions. Students must analyze the capacity utilization and demand for the call center while also considering the costs of problems including abandoned calls.

A restaurant chain based in California offers made-to-order sandwich wraps using fresh, healthy ingredients. The founders of the company take a very active role in day-to-day business and tightly control every aspect of the restaurant operation from hiring store managers to planning the menu. Management is concerned that employee turnover is high, customer satisfaction is decreasing, and revenue growth is flat. The newly hired human resources leader believes addressing employee turnover can help solve the other problems. She develops a profit-sharing program as a pilot at two restaurants. The managers in the pilot program have their compensation tied directly to restaurant profits. The program also allows managers to customize menus, work with local suppliers, and try different promotion ideas. After six months, profits at the pilot locations improve while customer reviews are mixed. The HR manager must review the complete results and decide whether to roll out the pilot program to more locations, modify the program, or abandon it altogether. Students consider the operational challenges of running a service business and the issues related to compensation, change management, and employee autonomy.

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Traditional metrics like satisfaction and Net Promoter scores correlate poorly with what matters most: share of wallet. Managers need to think about how they rank versus their competitors and apply a new formula, the Wallet Allocation Rule, to predict and improve their share of wallet.

In the mid-2000s, an American automaker opened an auto financing company in China, Shanghai-based C Automotive Finance Company (China) Ltd ("CAF"). CAF grew rapidly and broke even in three years. Nonetheless, the long cycle time of its application process led to rampant dissatisfaction among dealers and also lowered the number of car purchases financed by CAF as a percentage of total cars sold. The auto financing industry in China held great potential but was also becoming increasingly competitive as more and more foreign companies entered the market. In order stay on top of the game, CAF must improve the efficiency of its financing application process. What actions could CAF undertake to achieve this objective?

This is an MIT Sloan Management Review article. Consumers were surprised in October 2009 by the first of a series of highly publicized recalls of Toyota vehicles in the United States. Citing a potential problem in which poorly placed or incorrect floor mats under the driver's seat could lead to uncontrolled acceleration in a range of models, Toyota announced that it was recalling 3.8 million U.S. vehicles. For manufacturing executives who have strived for decades to emulate Toyota, the mere suggestion that it had quality issues was a serious matter. All over the world, executives paused to wonder if they had been chasing after the wrong manufacturing model. Despite Toyota's long record of building reliable, low-defect vehicles, public perceptions about quality are often greatly influenced by reports in the media and their overall timing, the author argues. The key question was the source of Toyota's problems: To what extent did they originate with the product designs and assembly, and to what extent could they be pegged to the company's supply and manufacturing systems? The author discusses two root causes for Toyota's quality problems. The first is an outgrowth of management's ambitions for rapid growth. Management's goal was to increase Toyota's global market share from 7.3% in 1995 to 10% over the next decade, then to 15% by 2010. The second is the result of the increasing complexity of the company's products. A typical auto sold in the United States or Europe has more than 60 electronic control units and more than 10 million lines of computer code -a fourfold increase over what was common a decade ago. However, the author notes that any thorough analysis would also need to acknowledge the role of the company's centralized management structure. The result: Top management in Japan was less sensitive to the expectations of regulators, culture, and politics in overseas markets, and consequently they were slower to respond to local problems.

In theory, customer feedback, whether positive or negative, is good. In reality, it can be hard to figure out which online reviews are legitimate-and how responsive to be.

InterfaceRAISE is a sustainability management consulting firm created to leverage the capabilities of its parent company Interface Inc., a carpet manufacturer recognized as a global leader in corporate environmental sustainability. This case illustrates the challenges of turning an internal capability into a client‐facing revenue stream. This is made especially difficult by the fact that the parent company is a manufacturing firm and InterfaceRAISE is a professional services firm (consulting). InterfaceRAISE is not being staffed by a traditional consulting firm model, relying instead on the part‐time availability of employees in the parent company. At the time of the case, InterfaceRAISE was grappling to identify the appropriate business model for the type of consulting firm it wants to be, to determine what its client portfolio should look like, and to set its pricing structure. InterfaceRAISE needed to decide how to accelerate its growth while better achieving its three objectives: improving its clients' sustainability performance, enhancing its parent company's brand image and sales, and increasing operating profits.

Managers typically look for ways to reduce wait time to increase customer satisfaction. New research suggests there's a better approach: showing customers a representation of the effort, whether literal or not, being expended on their behalf while they wait. (The prototypical example is the travel website Kayak, which shows customers each airline it searches.) Studies show that customers prefer waiting when the work being done is transparent-even when the waits are longer or the results are no better than those obtained with shorter waits.

Porcini's Inc. operates a chain of 23 full-service restaurants located near shopping malls and downtown areas in the northeastern United States. Known for providing excellent service, Porcini's serves high-quality Italian cuisine made from fresh ingredients. Looking for expansion opportunities, management considers launching a new chain of lower-cost, limited-menu restaurants called Porcini Pronto. The new outlets will be located along busy interstate highway exits in the region and will serve outstanding Italian food at reasonable prices to both travelers and local residents. Management is concerned that a poor customer experience at Porcini Pronto could tarnish the company's well-established and successful restaurant brand. The management team asks the vice president of marketing to develop the concept and to create an operating strategy for the new outlets. The VP must also analyze three alternative expansion strategies before management will make any commitments to the project. If Porcini's builds and operates the new restaurants, the company will maintain complete control of operations and the customer experience but expansion will take a very long time. Franchising and syndication are two other options which provide faster expansion but introduce the risk of losing control of the brand. The VP must analyze the options and make his final recommendation.

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It's one of the most basic aphorisms of business: The customer is always right. But when companies, especially large ones, try to rectify a service failure, they may run into opportunistic customers who try to take advantage of the situation. Treating customers justly can allow companies to settle grievances without giving in to over-the-top demands, the author finds. He argues that companies should do three things to resolve complaints without being exploited: ensure that compensation is fair, provide a convenient claims process, and express friendliness and concern. They should also offer any compensation promptly, which is apt to lessen excessive demands and leave customers feeling more satisfied.