How Do Customers Respond to Increased Service Quality Competition?

Ryan W. Buell; Dennis  Campbell; Frances X. Frei

Article | Manufacturing & Service Operations Management | Fall 2016

How Do Customers Respond to Increased Service Quality Competition?

by Ryan W. Buell, Dennis Campbell and Frances X. Frei

Abstract

When does increased service quality competition lead to customer defection, and which customers are most likely to defect? Our empirical analysis of 82,235 customers exploits the varying competitive dynamics in 644 geographically isolated markets in which a nationwide retail bank conducted business over a five-year period. We find that customers defect at a higher rate from the incumbent following increased service quality (price) competition only when the incumbent offers high (low) quality service relative to existing competitors in a local market. We provide evidence that these results are due to a sorting effect, whereby firms trade off service quality and price, and in turn, the incumbent attracts service (price) sensitive customers in markets where it has supplied relatively high (low) levels of service quality in the past. Furthermore, we show that it is the high-quality incumbent's most profitable customers who are the most attracted by superior quality alternatives. Our results appear to have long-run implications whereby sustaining a high level of service quality is associated with the incumbent attracting and retaining more profitable customers over time.

Keywords: service operations; service quality competition; retail banks; empirical operations; retention; Service Operations; Quality; Competition; Banking Industry; United States;

Format: Print

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Citation:

Buell, Ryan W., Dennis Campbell, and Frances X. Frei. "How Do Customers Respond to Increased Service Quality Competition?" Manufacturing & Service Operations Management 18, no. 4 (Fall 2016): 585–607.

Working Paper | HBS Working Paper Series | 2020

Can Shared Service Delivery Increase Customer Engagement? A Study of Shared Medical Appointments

Ryan W. Buell, Kamalini Ramdas and Nazlı Sönmez

Customers and providers alike often consider one-on-one service delivery to be ideal, assuming –perhaps unquestioningly – that devoting individualized attention maximizes customer engagement and improves outcomes. Alternatively, shared service delivery, in which customers are served in batch, may, through the dynamics of group interaction, lead to increased customer engagement. On the other hand, the loss of privacy and personal connection in shared delivery models may undermine engagement and performance. To explore this tradeoff, we conducted a randomized controlled trial with 1,000 patients who were undergoing glaucoma treatment over a three-year period at a large eye hospital. Using verbatim and behavioral transcripts from over 20,000 minutes of video recorded during our trial, we examine how shared medical appointments (SMAs) – in which groups of patients with similar conditions meet with a doctor simultaneously, and each receives one-on-one care in turn – impact patients' engagement during their appointments. Patients who experienced SMAs asked 37.2% more questions per minute, made 8.2% more comments per minute, answered 3.6% more questions per minute, and exhibited higher levels of non-verbal engagement across a wide-array of measures (attentiveness, positivity, head wobbling or ‘talai taḷḷāṭṭam’ in Tamil – a South Indian gesture to signal agreement or understanding – eye contact and end-of-appointment happiness), relative to patients who attended one-on-one appointments. We further find that patients in SMAs went on to report higher levels of satisfaction and exhibit greater levels of learning and medication compliance. These results shed light on the potential for shared service delivery models to increase customer engagement and enhance service performance.

Citation:

Buell, Ryan W., Kamalini Ramdas, and Nazlı Sönmez. "Can Shared Service Delivery Increase Customer Engagement? A Study of Shared Medical Appointments." Harvard Business School Working Paper, No. 21-001, July 2020. View Details

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How Do Customers Respond to Increased Service Quality Competition?

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