How responsive should a firm be to customers’ expectations?

Gila E. Fruchter and Agnieszka Wiszniewska-Matyszkiel

European Journal of Operational Research, 2024, vol. 314, issue 1, 323-339

Abstract: This study explores ways to optimally align quality with customer expectations in light of changes in expectations related to experience with the actual quality of the product. A firm's strategic decision is its responsivity. Responsivity is defined here as the extent to which the quality delivered is aligned with customer expectations. The issue is to find the level of responsivity that maximizes the firm's benefits by increasing the number of loyal customers. The key tradeoff is that although responsivity can help the firm increase its volume of loyal consumers, it is also costly. The main findings are a theoretical characterization of optimal responsivity and an extension to a strategy that offers good/service both with and without responsivity. The outcome is a win-win strategy, that significantly increases both profits and the number of loyal customers, whose expectations converge to the quality delivered. The potential impact of these findings on practice is significant: by understanding what determines the optimal level of responsivity and implementing this win-win strategy, firms can enhance customer satisfaction, loyalty, and profitability.

Keywords: OR in marketing; Quality expectations; Aligning delivered quality; Optimization; Responsivity (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:314:y:2024:i:1:p:323-339

DOI: 10.1016/j.ejor.2023.09.011

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