Managing Service Quality

Purpose – The study is motivated by business' mixed response to increasing demand for customer service, leaving the question as to its impact on performance open. The study is concerned with the impact of customers' perception of customer service (bad/good) on variables that are known to drive revenue, i.e. customer satisfaction, perceived relative attractiveness, and commitment.

Design/methodology/approach – Data were collected through a survey among bank customers. Two groups were sampled: customers who have experienced good or bad customer service. The hypotheses were tested by applying structural equation modeling and running two group analysis using the PLS and LISREL softwares.

Findings – Customers that experience bad customer service do take into account the same variables in their evaluation as do customers that experience good customer service. They do however, put different weights on every factor in the evaluation process. Also the strength of the relationships between the variables seems to differ. Typically, analyses showed that customers experiencing bad customer service tend to consider more thoroughly all aspects of the service; the relationships between the variables were stronger and the explained variance of each construct higher, than in the group of customers experiencing good customer service. However, the paths are not different across the groups.

Research limitations/implications – The paper has only tested the model and hypotheses in one industry. Future research should test the same model using different industries reflecting different customer involvement levels.

Practical implications – From this study, service managers can learn that investing in customer service in ongoing customer relations is “the right thing to do” as it is linked to customer equity through customers' commitment to the firm. Second, as customer service in such relationships drives perceived relative attractiveness, saving the bottom line by cutting back on the human side of the customer interaction, may harm the firm's competitive position in the marketplace.

Originality/value – The impact of customer service on key performance variables in ongoing relations has to the knowledge never been studied before.