Chapter 18: The financial impact of service quality

Question 1

Offensive marketing

Answer 1

Service quality can help companies attract more and better customers to the business through offensive marketing. Offensive effects involve market share, reputation, and price premiums. When service is good, a company gains a positive reputation and through that reputation a higher market share and the ability to charge more than its competitors for services.

Question 2

Defensive marketing

Answer 2

When it comes to keeping the customers a firm already has – an approach called defensive marketing – researchers and consulting
firms have often documented and quantified the financial impact of existing customers. In general, the longer a customer remains with a company, the more profitable the relationship is for the organization.

Question 3

Service quality/profitability relationship

Answer 3

Better service quality leads to higher profitability as it will lead to better consumer loyalty, better company image, and more business from consumers.

Question 4

Service quality/customer intention relationship

Answer 4

Customer satisfaction and service quality perceptions affect consumer intentions to behave in other positive ways – praising the firm, preferring the company over others, increasing volume of purchases or agreeably paying a price premium.

Question 5

Balanced scorecards

Answer 5

A set of measures that gives top managers a fast but comprehensive view of the business that complements the financial measures with operational measures of customer satisfaction, internal processes, and the organization’s innovation and improvement activities – operational measures that are the drivers of future financial performance.