Service Quality,Profitability,and the Economic Worth of Customers: What We Know and What We Need to Learn

Abstract

In the past, expenditures on quality have not been explicitly linked to profits because costs and savings were the only variables on which information was available. More recently, evidence about the profit consequences of service quality stemming from other sources has been found. This article synthesizes recent evidence and identifies relationships between service quality and profits that have been and need to be examined. The article views the literature in six categories: (1) direct effects of service quality on profits; (2) offensive effects; (3) defensive effects; (4) the link between perceived service quality and purchase intentions; (5) customer and segment profitability; and (6) key service drivers of service quality, customer retention, and profitability. In each category, the author identifies what is known and then suggests an agenda of relationships needing validation and questions needing answers. The article is organized around a conceptual framework linking the six topics.