Reports

Does IT Lead to More Equal Treatment? An Empirical Study of the Effect of Smartphone Use on Customer Complaint Resolution

Catherine Tucker and Shuyi Yu, 2018, 18-111-05

All firms have to deal with angry customers. Anecdotal evidence suggests that vociferous customers attract more attention from firms and get their problems solved sooner, while customers who have equally serious complaints but are not good at advocating for themselves are usually ignored and may eventually just stop saying anything. A particular concern for organizations may be that customers’ ability to advocate for themselves in a consumer complaint situation may also be related to underlying demographic factors such as education.

Here, Catherine Tucker and Shuyi Yu ask whether new communication technology mitigates unequal attention in resolution of customer complaints relative to the traditional phone call or letter. It is not clear whether new communication technologies should improve or make worse the lot of customers who are potentially less able to advocate for themselves. On the one hand, rich and educated customers are believed to be better at using technology, which would give them further advantages in complaint resolution. On the other hand, technologies may resolve the disadvantages facing less-educated communities and lead to fairer customer service by systematizing the communication and reducing in-person interactions.

The authors investigate this question using service performance data from Boston’s 311 system. They find that complaints that originate in more highly educated census blocks are more likely to be resolved quicker. However, they also find that the use of mobile information technologies improves the performance of customer service in the public sector and at least partially eliminates more educated customers’ advantage in complaint resolution relative to people who submit complaints in neighborhoods with lower education levels, by providing a standardized communication tool. To address the endogeneity of mobile device use, they turn to an instrumental variables approach, where they use plausibly exogenous instruments which capture the strength of the local cellphone signal and shift the ability of customers to submit complaints using mobile apps. Also, they present suggestive evidence that it is on occasions when these advanced digital tools are used to automate data and for more complex requests that apps are most effective at closing the gap between educated and less-educated customers.

Their results are important for managers who want to improve their customer service by facilitating and automating communications. They show that providing digital tools might increase customer retention by encouraging them to advocate for themselves. The results are important for policy, too. In January 2016, the FTC published a report entitled “Big Data: A Tool for Inclusion or Exclusion?” It expressed concern that the advent of digital data and associated technologies may lead to disadvantaged groups being excluded by firms. This work is somewhat optimistic on this front, suggesting that, in their setting, mobile communication technologies (and the associated data they can generate) actually help reduce inequality in outcomes. The main policy implication of the work, therefore, is the need for digital inclusion.

Catherine Tucker is Sloan Distinguished Professor of Management and Professor of Marketing at MIT Sloan School of Management, and Research Associate at NBER. Shuyi Yu is a doctoral student at MIT Sloan School of Management.

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