Same day delivery & satsifcation

Many businesses are under the assumptions that customers would like to have their purchases as soon as possible, thus many developments have been focused on reducing the lead time for the last mile delivery via various methods.The latest drone delivery attempts by Amazon and other companies is representing the new height of how business and technology are working together to fulfil the impulsion of purchase. 

Depending on which spectrum of the marketing model and KPI you are examining, if the goal is to increase the conversion and increase the turnover, shortening the delivery time is one method to achieve this goal. The outcome will generally increase the sales overall. However, there is the psychological element to be examined. Statistically, the longer a purchase is to be waited, the higher the customer satisfaction. Think of the phenomenon of every new iPhone launch. Assuming everything else is kept equal, we reduce the wait time to receiving your most wanted purchase, the assumed satisfaction should be reduced. Normally, the effort of reaching the financial requirement would also heighten the satisfaction level of your most wanted purchase, but that is not the discussion point here. The discussion point here is the wait time element only.

Efficiency = work / time

Time is always considered the shorter the better in business. The shorter the time, the higher the efficiency. In consideration of wait time, it is always assumed that the customers would not like to wait for their purchase. However, I argue that it is the delivery wait time is irrelevant to the satisfaction. I hypothesise that 

Satisfaction = quality x passion x time-of-use

I trust that this equation is trivial enough, yet how does the delivery wait time affect satisfaction? Let’s add these factors into the equation:

Satisfaction = (quality x passion x time-of-use) + delivery-wait-time

Using the assumption that the longer the delivery wait time, the lower the satisfaction, keeping everything else equal, let’s put in some numbers.

e.g. 

Same day delivery = 100 pts (pts is just an arbitrary unit)

Next day delivery = 80 pts

Keeping everything equal, using next day delivery service would result in 20 pts less satisfaction relative to using same day delivery.

If the former elements stay consistent(i.e. quality) or increase over time(i.e. time-of-use), they will outweigh the satisfaction contributed by reducing the delivery time. Put in simple English, it is unlikely the delivery option you chose to acquire the item would have any long meaningful impact on the long term satisfaction. In extension to this argument, for impulse purchase or purchase of new products, the reduction of delivery wait time will have higher contribution to satisfaction since the time of use is nearly none nor is the quality tested.

Unless the teleportation technology is readily available today, we have to fight against the physical conditions of transportation infrastructures and geographical distances. Until then, we have to rely on the pure numerical prediction of sales forecasts and risks of inventory stocks at the location nearest to the potential customers. I applaud the effort of Amazon mitigating the logistic hurdles into its own hands. Without putting too much thought, it is not hard to see the limitations of the drone delivery model. Perhaps the more efficient model relies on working with the cities to create more efficient delivery models than depending on existing transportation infrastructures.

Make no mistake that economy works in the supply and demand model, no matter how skewed. What we are experimenting today in reducing the delivery time is just the tip of an untapped ice berg, yet whether this is an ice berg or ice cube is to be mutually concluded by all parties in the near future.