The Effect of Service Experiences over Time on a Supplier's Retention of Business Customers
Katherine N. Lemon () and
Matthew D. Bramlett ()
Additional contact information
Katherine N. Lemon: Wallace E. Carroll School of Management, Boston College, Fulton Hall, 140 Commonwealth Avenue, Chestnut Hill, Massachusetts 02467
Matthew D. Bramlett: Division of Vital Statistics of the National Center for Health Statistics, 3311 Toledo Road, Hyattsville, Maryland 20782
Management Science, 2006, vol. 52, issue 12, 1811-1823
This paper examines the link between a supplier's marketing and service operations and its business customers' subsequent repatronage behavior. We develop a dynamic model of service contract renewal for an individual firm, at the contract level, recognizing interdependencies among service contract renewal decisions due to the firm's purchase of multiple contracts from the same supplier. The decision to renew a service contract is modeled as a function of service quality and price, where service quality is measured by the supplier's service operations metrics over time. By incorporating longitudinal data about the supplier's service operations, this study investigates how average service levels, variability in service levels (especially extreme outcomes), and timing of service delivery influence firms' service contract renewal decisions. The study context is support services for high-technology systems in business markets in Germany and the United Kingdom, where service operations metrics over time typically have skewed distributions. Firm behavior is represented by a binary choice model at the contract level, estimated as a binary response model with a complementary log-log link function incorporating random intercepts. The study shows that a firm that has a few extremely favorable experiences for a given service contract is more likely to subsequently renew that service contract, after controlling for average service levels. Firms weigh recent experiences (i.e., within the past year)--rather than earlier experiences--when deciding whether or not to renew, so the timing of service experiences may be critical to the survival of buyer-seller relationships. Overall, the study suggests that models of customer retention should incorporate the extent, variability, and timing of a supplier's service delivery over time at the contract/product level.
Keywords: customer retention; dynamic models; services marketing; buyer-seller relationships; extreme outcome; service quality; service operations (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:52:y:2006:i:12:p:1811-1823
Access Statistics for this article
More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().