Maintaining a constant quality level is one of the biggest challenges for service providers. This is especially valid for firms with a large customer base (e.g., airlines, banks, hotels, fast-food restaurants, railway operators). Variations of quality arise from various factors, such of interactions of customers with service employees and incongruence of demand and supply (congestion). Typical service failures include delays in service delivery, dirty facilities, or unfriendly service personnel. While extent research has thoroughly investigated the influence of such service failures on psychological outcomes such as customer satisfaction, no study has dealt with the revenue consequences. Drawing on two longitudinal datasets (one individual-level panel and one aggregate monthly time series) from a major European national railway company, we model both customer-satisfaction and revenue impacts of improving service quality for 28 different service attributes. A major novelty of the model is that we are able to disentangle actually experienced service failures from illusory memories, which are driven by both negative experiences in the past as well an unfavorable brand image. Results from a simulation study show that improvements in eight relevant service-failure categories and an enhancement of the company’s brand image entail a long-term revenue improvement potential of several EUR 100 million per year.
Dr. Alexander Edeling is a post-doctoral researcher in Marketing at the University of Cologne. He received his doctoral degree in Marketing in 2016 from the University of Cologne. His research interests are the marketing-finance interface, marketing budget allocation, digital marketing, pricing, sponsorship, econometric modeling, and empirical generalizations. Two of his dissertation projects were published in the Journal of Marketing Research and the Journal of Marketing, respectively. These articles were featured in forbes.com and the German-speaking media WirtschaftsWoche and NZZ am Sonntag, among others. Furthermore, he received several awards for his dissertation, including the IMU Research for Practice Award 2017 by the University of Mannheim and the third place at the EMAC / Sheth Foundation Doctoral Dissertation Competition 2017. Before joining the University of Cologne, Alexander graduated from the University of Mannheim with a Diploma in Business Administration majoring in Marketing, Management Accounting and Intercultural Studies. During his studies, he gained valuable practical experience through internships in various fields such as automobile, telecommunication, and consultancy.
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