Service productivity vs service quality: a zero-sum game?

The purpose of this paper is to verify the relationship between productivity and quality in the services sector. More specifically, this study investigates the relationship between productivity and customer satisfaction and its effect on a firm’s performance. In addition, this study investigates the roles of productivity and customer satisfaction in the structural relationships among variables.

A theoretical model was proposed among innovation, productivity, customer satisfaction and firm performance. A sample of 127 firms from data sets of the American Customer Satisfaction Index and COMPUSTAT was collected. To test the hypotheses, this study used ordinal least squares analysis and path analysis.

The findings of this study verified that a positive relationship exists between productivity and customer satisfaction and that service productivity and customer satisfaction are positively associated with a firm’s performance. In addition, customer satisfaction was found to fully mediate the relationship between productivity and a firm’s performance.

This study only focused on a short period for each variable due to the difficulty of matching all the data sets used for measuring each variable, which limited the observation of the different effects of service productivity among industries.

The findings of this study suggest that managers can improve productivity without sacrificing customer satisfaction. In addition, services firms should consider innovation, productivity and customer satisfaction in a holistic way because all of these affect a firm’s performance. Furthermore, services firms need to pay more attention to customer satisfaction, which plays an important role as a mediator in increasing a firm’s performance.

This study highlights the importance of the relationship between productivity and customer satisfaction in the services sector. In particular, this study extended the theory of service productivity by Rust and Huang (2012) to explore the role of service productivity and customer satisfaction in measuring a firm’s performance.