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Managerial decision making in customer management: adaptive, fast and frugal?

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Abstract

While customer management has become a top priority for practitioners and academics, little is known about how managers actually make customer management decisions. Our study addresses this gap and uses the adaptive decision maker as well as the fast and frugal heuristics frameworks to gain a better understanding of managerial decision making. Using the process-tracing tool MouselabWEB, we presented sales managers in retail banking with three typical customer management prediction tasks. The results show that a majority of managers in this study are adaptive in their decision making and that some managers use fast and frugal heuristics. Usage of adaptive decision making seems to be mainly driven by low objective task difficulty, the use of fast and frugal heuristics by experience. While adaptive decision making does not impact predictive accuracy, usage of fast and frugal heuristics is associated with proportionally greater use of high predictive quality cues and a significant increase in accuracy. Hence, the existing skepticism concerning heuristics should be questioned.

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Notes

  1. Using a cutoff value of 20% was based on the fact that (1) a lower cutoff was not possible since that would have not yielded enough participants to draw meaningful conclusions (only four participants used 10% of the information), (2) a higher cutoff does not seem consistent with the frugal heuristics framework, and (3) the number of participants using 20% or less of the information formed exactly the 10th percentile of all participants. Using the cutoff value of 150 or 300 seconds was based on discussion with the bank’s management. In order to provide stronger support for our findings, we conducted a sensitivity analysis which examined the robustness of our results with respect to different definitions of usage of fast and frugal heuristics. Across different definitions of usage of fast and frugal heuristics based on a range from (1) 14% to 26% (in 2% intervals) for information use, (2) 120 to 180 seconds (in 10 second intervals) for decision time in the low complexity condition, and (3) 270 to 330 seconds for decision time in the high complexity condition, all analyses reported in this article yielded similar results. Thus, our findings are robust to changes in how we operationalize usage of fast and frugal heuristics.

  2. A 2x3 contingency table analyzing the usage of decision strategies by task complexity and by task would not produce reliable results because there were too many cells with an expected value of less than five.

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Acknowledgments

The authors thank Walter Herzog, Jan R. Landwehr, Bernd Skiera, and the four anonymous reviewers for their helpful comments.

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Authors and Affiliations

  1. Institute of Retail Management, University of St.Gallen, Dufourstrasse 40a, 9000, St.Gallen, Switzerland

    Johannes C. Bauer

  2. School of Business and Economics, Goethe University Frankfurt, Grueneburgplatz 1, 60323, Frankfurt, Germany

    Philipp Schmitt

  3. Stern School of Business, New York University, Tisch Hall, 40 West 4th Street, New York City, NY, 10012, USA

    Vicki G. Morwitz & Russell S. Winer

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Bauer, J.C., Schmitt, P., Morwitz, V.G. et al. Managerial decision making in customer management: adaptive, fast and frugal?. J. of the Acad. Mark. Sci. 41, 436–455 (2013). https://doi.org/10.1007/s11747-012-0320-7

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