The Business Economics of Waiting Lines

Instructor: Jagina McIntyre

Jagina has conducted professional training in communications and analytics for 12 plus years, with a a degree from Kent State University in Journalism and Communications.

Welcome to the business economics of waiting lines, where you will learn how to optimize the use of customers waiting in line to drive additional benefits for the customer and company.

The Business Economics of Waiting Lines

Have you ever stood hours in a line at an amusement park for a ride that last less than a minute? Or maybe, you have bypassed a line at a restaurant by making reservations in advance. Then there are those times you might find yourself putting extra items in your basket at checkout? Well, you might want to know about the economics behind when and how to make a customer wait in line.

A waiting line system is when a person or object spends time waiting in a line for an activity or transaction to happen. A customer may be waiting in line to purchase groceries or get into a night club. An automobile may be waiting in line at an assembly plant to be shipped out to a dealership. A company should have a goal of creating the optimal waiting experience to minimize cost or increase sales, while pleasing customers.

When a low level of service is experienced in a waiting line, a customer can be dissatisfied with their experience and not return. When a high level of service is experienced, a customer is more likely to be satisfied with their experience and return. However, the upfront cost to a company for providing a higher level of service should be in line with customer expectations.

For example, you are at a local dine-in restaurant and have waited over thirty minutes for your food to be delivered to your table. The waiter has apologized several times and informed you that they are down a cook this evening. When your food is finally delivered, it is luke warm and you have experienced a low level of service in comparison to the time you had to wait. You are dissatisfied with your experience and are not sure you will return to this restaurant. A few minutes later the waiter returns with your bill. Enclosed is a gift certificate for a free appetizer, with the words written on check the 'and this meals on us.' Your experience has now translated into a high level of serve.

Optimal Waiting Line

The optimal waiting line is the best estimated number of potential customers that can fit into the service system at a given time. The estimated customers or population are divided by the customers the service system can hold. The service system has to be large enough to meet demand or customers are dissatisfied and may not return.

There are three parts to a service line or system:

  1. number of lines or servers - includes the arrangement of servers.
  2. arrival times of customers - includes how they arrive, for example in groups.
  3. waiting line rules - customer understanding the order in which they are serviced

Performance Measures

There are three measurements used to determine the economics of a waiting line:

  1. population - average number of customers in line.
  2. wait time - average amount of time spent waiting.
  3. system utilization rate - what percentage of time are servers busy.

The best scenario is to have a customer move through the service line with minimal interruption to the transaction. When an interruption or wait does occur it should be to optimize the experience.

Companies determine if they want to create an environment of income equality or income inequality. Income equality indicates that all customers will be treated the same, regardless of what they are purchasing and how much they spend. Where a waiting line is built around income, inequality establishes that certain customers will be treated differently depending on what they plan to spend or have already spent. For example, the local grocery store will offer express lines to their convenience shoppers or an airline may offer priority boarding to their frequent flyer members.

In a waiting-line system a customer may be treated in a special manner to encourage repeat purchases.

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