Mechanism Design Theory

In Customer Service

Mechanism design theory won the Nobel Prize 2007. In this blog post we will introduce the theory that affects the customer service environment on a daily basis.

In this blog post I’m going to attempt to do something I haven’t seen anywhere else. Something that I’m simply exited and inspired by. While researching for inspiration for blog posts, I realised that every customer service blog writes about the same things. If I want to read about how AI is going to affect customer service, there are at least ten posts. Which is not really a bad thing, AI is an interesting topic. The problem is just that none of these blogs delivers anything new or really interesting.

That is why I am going to attempt to do something a bit deeper in this blog post. I will apply a Nobel prize winning economic principle to the customer service environment. Principles that you probably have seen, but you haven’t realised that there is something more scientific going on here. While I can at least think of three principles that are interesting to discuss, we will focus on Mechanism Design Theory in this blog post. Mechanism design is one of the main branches of economic research (together with game theory, decision theory and general equilibrium theory).

The reason why this is a bit of a gamble is because usually in this principle, the example has to do with auctions and the relationship between seller and buyer. Or in general a market. But if you look at how they are using the example you can see how it can also be applied to what happens in a call center or customer service.

Mechanism design looks at how different types of rules have different consequences. So, it’s the same relationship as between how the dependent variable (consequence) reacts to the independent variable (rules). What Mechanism design says is that because of information asymmetry (gap in knowledge), you need rules or mechanisms that can try to overcome that. For example, if you look at the market, you have buyers with a set of incentives and sellers with completely other incentives. So, they have different information about the value of the transaction.

Applied to customer service

Apply this thinking to the customer service environment and you will see something similar going on. Your customer service is hoping to take as few calls as possible (like that would ever happen), and your customer has problems they need to solve. You have two parties that have their own self-interest, and each have their own private information about their preferences.

The real strength of Mechanism design is how it can make markets more powerful. So maybe applying mechanisms to a customer service environment can optimise productivity? According to the Nobel prize winner Eric Maskin, you start with the goals you have and then you reverse engineer your way back to what mechanisms that can achieve those goals. What Mechanism design does is to tell you what combination of mechanism is most likely to work best. While Mechanism design is much more scientific and mathematical, my guess would be to utilise all appropriate technology in an aligned process and gather your whole process in one system like our solution.  That shouldn’t be impossible right? 😉

I really think applying the holistic approach of omni channel (explain here) can be a key strategy here. Even if the strategy is scary to a lot of people. By giving good service on all channels, the pressure will decrease on the voice channel.

Anna Itzel - marketing manager at connectel
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