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The Behavioral Consequences of Service Quality

Article in Journal of Marketing · April 1996

DOI: 10.1177/002224299606000203

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Valarie A. Zeithaml Leonard L Berry

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 Valarie A. Zeithaml, Leonard L. Berry, & A. Parasuraman

The Behavioral Consequences of

Service Quality
If service quality relates to retention of customers at the aggregate level, as other research has indicated, then ev-
idence of its impact on customers' behavioral responses should be detectable. The authors offer a conceptual
model of the impact of service quality on particular behaviors that signal whether customers remain with or defect
from a company. Results from a multicompany empirical study examining relationships from the model concerning
customers' behavioral intentions show strong evidence of their being influenced by service quality. The findings
also reveal differences in the nature of the quality-intentions link across different dimensions of behavioral inten-
tions. The authors' discussion centers on ways the results and research approach of their study can be helpful to
researchers and managers.

D
elivering quality service is considered an essential Research on the relationship between service quality and
strategy for success and survival in today's competi- profits has begun to accumulate, and one thing is clear: The
tive environment (Dawkins and Reichheld 1990; link between service quality and profits is neither straight-
Parasurarnan, Zeithaml, and Berry 1985; Reichheld and forward nor simple (Greising 1994; Zahorik and Rust 1992).
Sasser 1990; Zeithaml, Parasuraman, and Berry 1990). Dur- The intermediate links between service quality and profits
ing the 1980s, the primary emphasis of both academic and have not been well understood. To delineate the complex re-
managerial effort focused on determining what service qual- lationship between these two variables, researchers and
ity meant to customers and developing strategies to meet cus- managers must investigate and understand many other rela-
tomer expectations (e.g., Parasuraman, Zeithaml, and Berry tionships, each of which is an integral part of the composite.
1985, 1988). Since then, many organizations-including One such relationship--between service quality and behav-
those whose primary offerings involve physical goods such ioral intentions-is the primary focus of our present re-
as automobiles or computers-have instituted measurement search. In the remainder of this introductory section, we pro-
and management approaches to improve their service. The vide a general overview of the extant knowledge about the
service-quality agenda has now shifted and reconfigured to link between service quality and profits. We then outline our
include other issues. The issue of highest priority today in- specific objectives and how our study attempts to extend
volves understanding the impact of service quality on profit current knowledge.
and other financial outcomes of the organization (Greising Seminal studies using the PIMS (Profit Impact of Mar-
1994; Rust, Zahorik, and Keiningham 1995). ket Strategy) data set have uncovered significant associa-
Executives of many companies in the 1980s were will- tions among service quality, marketing variables, and prof-
ing to trust their intuitive sense that better service would itability. Findings from these studies show that companies
lead to improved financial success and thus committed re- offering superior service achieve higher-than-normal market
sources to improving service prior to having documentation share growth (Buzzell and Gale 1987), that the mechanisms
of the financial payoff. Some of these companies, such as by which service quality influences profits include increased
Federal Express and Xerox, have been richly rewarded for market share and premium prices (Phillips, Chang, and
their efforts (Germano 1992; Kearns and Nadler 1992). But Buzzell 1983), and that businesses in the top quintile of rel-
executives in other companies have been reluctant to invest ative service quality on average realize an 8% higher price
in service improvements without solid evidence of their fi- than their competitors (Gale 1992). Evidence from compa-
nancial soundness. And in the current era of downsizing and nies large enough to have multiple outlets also suggest a
streamlining, interest in tools to ascertain and monitor the
positive quality-profitability relationship: The Hospital Cor-
payoff from service investments is high.
poration of America found a strong link between perceived
quality of patient care and profitability across its many hos-
Valarie A. Zeithaml is Principal, Partners for Service Excellence, a consult- pitals (Koska 1990); and the Ford Motor Company has
ing firm specializing in strategy, measurement, and implementation ofser-
vice quality. Leonard L. Berry is JCPenney Chair of Retailing Studies and demonstrated that dealers with high service-quality scores
Professor ofMarketing, Texas A&M University. A. Parasuraman is Professor have higher-than-normal profit, return on investment, and
and Holder of the James W. McLamore Chair in Marketing, University of profit per new vehicle sold (Ford Motor Company 1990).
Miami. Theauthors thank the editor and five anonymous JM reviewers for Although the previous findings document the financial
their constructive comments and suggestions on earlier drafts of this arti- and strategic impact of service quality across firms or out-
cle. They also thank the Marketing Science Institute and four of its corpo-
lets, the evidence is often too general to answer the ques-
ratesponsors for supporting the research on which this article is based.
tions foremost in executives' minds: If I invest in service

Journal of Marketing
Vol. 60 (April 1996),31-46 Service Quality /31
quality, will it payoff for my company? How will service 4. To suggest a research agenda whereby information about in-
quality payoff? How much should we invest in service qual- dividual-level behavioral consequences of service quality
ity to receive the best return? In addressing such questions, can be monitored and linked to sales and customer-retention
data to provide ongoing evidence of the financial impact of
researchers (Fornell and Wernerfelt 1987, 1988; Rust and service quality.
Zahorik 1993; Zahorik and Rust 1992) distinguish between
offensive effects (capturing new customers) and defensive In addressing these objectives, we provide a concise
effects (retaining customers). Determining the offensive im- synthesis of the extant literature on the subject and extend
pact of service quality parallels the age-old search for the the literature in three significant ways. First, our study in-
advertising-sales connection. Service quality's effects- volves a comprehensive (multicompany/multi-industry) ex-
similar to advertising's effects-are cumulative, and there- amination of service quality's impact at the individual-con-
fore evidence of the link may develop slowly. And, similar sumer level rather than at the company/industry level, as is
to advertising, service quality is one of many variables-in- the case in most previous studies. Second, in addition to ex-
cluding pricing, advertising, efficiency, and image-that si- amining the general relationship between service quality
multaneously influence profits. Furthermore, spending on and behavioral intentions, we explore changes in the
service per se does not guarantee results, because strategy strength of this relationship that are due to potential moder-
and execution must both be considered. ating effects of different levels of service relative to cus-
On the other hand, evaluating the defensive impact of tomers' expectation levels. Third, we incorporate a more ex-
service quality through customer retention promises to help tensive multiple-item behavioral-intentions measure than
companies gauge the financial impact of service quality. The has been used in previous research and examine service
relationship between retention and profits recently has been quality's impact on specific types of behavioral intentions.
estimated by a variety of researchers (e.g., Anderson and
Sullivan 1990; Fornell and Wernerfelt 1987, 1988; Reich-
held and Sasser 1990) and companies (e.g., IBM). If the re-
Conceptual Framework and
lationship between service quality and retention can be sim- Hypotheses
ilarly documented, the financial implications for a given
Background
company or even a given service initiative can be calibrat-
ed. Zahorik and Rust (1992) distinguish among five tasks Lowering customer defection rates can be profitable to com-
that must be completed to model the impact of service on panies. In fact, research has shown that it is a more prof-
profits: (I) identifying the key service attributes to include itable strategy than gaining market share or reducing costs.'
in the model, (2) selecting the most important attributes, (3) For example, in an empirical study linking customer satis-
modeling the link between programs and attitudes, (4) mod- faction to profits, Fornell and Wernerfelt (1987, 1988) ex-
eling behavioral response to service programs, and (5) mod- amine the impact of complaint-handling programs on cus-
eling the impact of service programs on profits. tomer retention and conclude that marketing resources are
The research we describe involves the first four tasks better spent keeping existing customers than attracting new
that Zahorik and Rust (1992) propose and concentrates on ones. In support of this position, Reichheld and Sasser
the fourth, namely, modeling behavioral response to quality (1990, p. 105) assert that customer defections have a
service. All four of these tasks are firmly in the domain of stronger impact on a company's profits than "scale, market
marketing and the first three have been studied extensively share, unit costs, and many other factors usually associated
in the last decade (for a review, see Zahorik and Rust 1992). with competitive advantage." For this reason, they extol the
In contrast, the fourth attribute, the impact of service quali- benefits of zero customer defections as an overall company
ty on behavioral response, has been the subject of only a few performance standard:
marketing studies to date (Boulding et al. 1993; Cronin and Ultimately, defections should be a key performance mea-
Taylor 1992). sure for senior management and a fundamental component
The underlying premise of our article is that if service of incentive systems. Managers should know the compa-
quality relates to retention of customers at the aggregate ny's defection rate, what happens to profits when the rate
(i.e., firm) level, as other research has suggested, then evi- moves up or down, and why defections occur (p. III).
dence of its impact on customers' behavioral responses Research and company efforts to quantify the financial impact
should be detectable. The consequences of service-quality of defection and retention have intensified in recent years.
perceptions on individual-level behavioral intentions can be
viewed as signals of retention or defection and are desirable Financial impact of defection. When customers are lost,
to monitor. With that in mind, our objectives are four-fold: new ones must be attracted to replace them, and replacement
comes at a high cost. Capturing new customers is expensive
I. To summarize existing evidence about the behavioral con-
sequences of service quality at the individual customer
"This is not to say that companies should focus on customer re-
level.
tention to the exclusion of strategies to attract new customers. For
2. To offer a conceptual model of the impact of service quality instance, share-building strategies should be a high priority for
on particular behaviors that signal whether customers re- companies that are new entrants or operate in emerging markets.
main with or defect from the company. However, for companies with an established customer base (espe-
3. To report the results of an empirical study examining rela- cially in mature markets with entrenched competitors) the net re-
tionships between service quality and customers' behavioral turn on investments could be much higher for retention strategies
intentions. than for strategies to attract new customers.

32/ Journal of Marketing, April 1996

 FIGURE 1
The Behavioral and Financial Consequences of Service Quality

r---------------------------------------------------------------------------,
I
I
I

±1
Ongoing Revenue
Increased Spending
Price Premium
Referred Customers

::l
Decreased Spending
Lost Customers
Costs to Attract New
L Focus of present study Customers
- - - - -~ Empirical links demonstrated in macro
studies

for it involves advertising, promotion, and sales costs, as a conceptual model focusing on individual-level behavioral
well as start-up operating expenses. New customers are consequences of service quality.
often unprofitable for a period of time after acquisition: In
the insurance industry, for example, the insurer typically A Model of the Behavioral Consequences of
does not recover selling costs until the third or fourth year of Service Quality
the relationship. Capturing customers from other companies Figure 1 is a conceptual model that depicts the behavioral
is also an expensive proposition: Anderson and Sullivan consequences of service quality as intervening variables be-
(1990) find that a greater degree of service improvement is tween service quality and the financial gains or losses from
necessary to make a customer switch from a competitor than retention or defection. The left portion of the model is at the
to retain a current customer. level of the individual customer and proposes that service
quality and behavioral intentions are related and, thus, that
Financial impact of retention. The longevity of a cus-
service quality is a determinant of whether a customer ulti-
tomer's relationship favorably influences profitability. Cus-
mately remains with or defects from a company.
tomers who remain with a firm for a period of years because
Starting on the left, the model begins with a customer's
they are pleased with the service are more likely than short-
assessment of service quality and posits that when service
term customers to buy additional services and spread favor- quality assessments are high, the customer's behavioral inten-
able word-of-mouth communication. The firm also may be tions are favorable, which strengthens his or her relationship
able to charge a higher price than other companies charge, with the company. When service quality assessments are low,
because these customers value maintaining the relationship. the customer's behavioral intentions are unfavorable and the
The initial costs of attracting and establishing these cus- relationship is more likely to be weakened. Behavioral inten-
tomers have already been absorbed and, due to experience- tions can be viewed as indicators that signal whether cus-
curve effects, they often can be served more efficiently (Re- tomers will remain with or defect from the company.
ichheld and Sasser 1990). Rose (1990) supports this view, Some of the links in Figure I (shown by dotted arrows)
contending that profit on credit card services purchased by a have been demonstrated empirically in several aggregate-
ten-year customer is on average three times greater than for level studies using overall multicompany analysis (e.g.,
a five-year customer. Buzzell and Gale 1987; Gale 1992; Reichheld and Sasser
Although the financial impacts of defection and reten- 1990). However, the mediating roles of behavioral inten-
tion have been studied at a macro level (i.e., company or in- tions and actual behavior on the relationship between ser-
dustry level), the micro-level (i.e., individual-level) process- vice quality and financial performance are not well under-
es through which these impacts occur have not been well stood, especially at the individual-customer level. We at-
understood. To attempt to fill this void, we develop and test tempt to add to our knowledge in this regard by undertaking

Service Quality I 33
an in-depth conceptual and empirical examination of the By integrating research findings and anecdotal evidence,
first link in the sequence of effects posited in Figure I. As a list of specific indicators of favorable behavioral inten-
we discuss in subsequent sections, multiple measures of ser- tions can be compiled. These include saying positive things
vice quality and behavioral intentions were operationalized about the company to others (Boulding et al. 1993), recom-
and used in surveys of customers from four different com- mending the company or service to others (Parasuraman,
panies. For ease of exposition in this section, the dependent Berry, and Zeithaml 1991a; Parasuraman, Zeithaml, and
construct is split broadly into favorable and unfavorable be- Berry 1988; Reichheld and Sasser 1990), paying a price pre-
havioral intentions. mium to the company, and remaining loyal to the company
(LaBarbera and Mazursky 1983; Newman and Werbel 1973;
Favorable behavioral intentions. Certain behaviors sig- Rust and Zahorik 1993). Loyalty may be manifested in mul-
nal that customers are forging bonds with a company. When tiple ways; for example, by expressing a preference for a
customers praise the firm, express preference for the compa- company over others, by continuing to purchase from it, or
ny over others, increase the volume of their purchases, or by increasing business with it in the future.
agreeably pay a price premium, they are indicating behav-
iorally that they are bonding with the company. Recent re- Unfavorable behavioral intentions. Customers perceiv-
search offers some evidence that customer satisfaction and/or ing service performance to be inferior are likely to exhibit
service-quality perceptions positively affect intentions to be- behaviors signaling they are poised to leave the company or
spend less with the company. These behaviors include com-
have in these ways. However, most of the research opera-
plaining, which is viewed by many researchers as a combi-
tionalizes behavioral intentions in a unidimensional way
nation of negative responses that stem from dissatisfaction
rather than delineate specific types of behavior. For example,
and predict or accompany defection (Richins 1983;
Cronin and Taylor (1992), using a single-item purchase-in-
Scaglione 1988).
tention scale, find a positive correlation with service quality
Complaining behavior itself is conceptualized as multi-
and customer satisfaction. Anderson and Sullivan (1990), in
faceted. According to Singh (1988), dissatisfaction leads to
analyzing data from a study of customer satisfaction among
consumer-complaining behavior (CCB) that is manifested in
Swedish consumers, find that stated repurchase intention is
voice responses (such as seeking redress from the seller),
strongly related to stated satisfaction across product cate- private responses (negative word-of-mouth communica-
gories. A study conducted by Woodside, Frey, and Daly tion), or third-party responses (taking legal action). His
(1989) uncovers a significant association between overall pa- three-dimensional typology of complaining behavior,
tient satisfaction and intent to choose the hospital again. founded on the object of the complaints (seller, friend, third
Several studies have examined the association between party), is statistically superior to previous models of CCB.
service quality and more specific behavioral intentions. In Maute and Forrester (1993) find strong support for a three-
previous studies (see Parasuraman, Berry, and Zeithaml way classification of dissatisfaction responses based on Hir-
1991a; Parasuraman, Zeithaml, and Berry 1988), we find a shman's (1970) exit, voice, and loyalty responses (loyalty
positive and significant relationship between customers' being the decision to remain with the company despite dis-
perceptions of service quality and their willingness to rec- satisfaction). Solnick and Hemenway (1992) observe that
ommend the company. Boulding and colleagues (1993), in though voice and exit (in their view the two main behavioral
one of two studies they conducted, find a positive correla- manifestations of dissatisfaction) can be substitutes for each
tion between service quality and a 2-item measure of repur- other, they often occur together. In the context of a health
chase intentions and willingness to recommend. In a second maintenance organization, they find that complaining cus-
study involving university students, they find strong links tomers were four and one-half times more likely to leave the
between service quality and behavioral intentions that are of plan voluntarily than noncomplaining customers.
strategic importance to the school, including saying positive Specific indicators of unfavorable behavioral intentions
things about the school, planning to contribute money to the suggested by the preceding discussion include different
class pledge on graduation, and planning to recommend the types of complaining (e.g., complaining to friends or exter-
school to employers as a place from which to recruit. nal agencies) and contemplation of switching to competi-
Individual companies are also monitoring the impact of tors. Another indicator of eventual defection is a decrease in
service quality on selected behavioral intentions. For exam- the amount of business a customer does with a company.
ple, Northwest Airlines found that the preference index (i.e., Differential impact of service-quality levels. Although
the preference for Northwest Airlines as the airline passengers superior service is likely to foster favorable behaviors and
like to fly) increased substantially in 1992, compared to 1991, reduce the likelihood of unfavorable behaviors, an impor-
following a major company effort to improve service. As tant unresolved issue is the service-quality level that com-
measured in random surveys, preference rose in Minneapolis panies must target to have the desired impact on behaviors.
(from 70% to 75%), Detroit (from 49% to 59%), and Mem- How much service quality is enough to retain customers? Is
phis (from 48% to 63%) (Executive Report on Customer Sat- there a level of service beyond which there are diminishing
isfaction 1992). Toyota found that intent to repurchase a Toy- returns in terms of strengthening behavioral intentions?
ota automobile increased from a base of 37% to 45% with a Does the degree of association between service quality and
positive sales experience, from 37% to 79% with a positive behavioral intentions change at different quality levels?
service experience, and from 37% to 91% with both positive Little published evidence directly addresses these ques-
sales and service experiences (McLaughlin 1993). tions. However, a study by Gale (1992), which quantitative-

34/ Journal of Marketing, April 1996

ly assesses the relationship between level of service quality the slope of the service performance-loyalty relationship,
and willingness to purchase at AT&T, offers some indirect our prior recommendation implies an upward-sloping
insight. Of AT&T's customers who rated the company's (rather than flat) relationship within the zone of tolerance.
overall quality as excellent, over 90% expressed willingness Available evidence suggests that the sensitivity of behav-
to purchase from AT&T again. For customers rating the ser- ioral intentions to changes in service quality is likely to vary
vice as good, fair, or poor, the percentages decreased to from below to within to above the zone of tolerance, though
60%, 17%, and 0%, respectively. According to these data, there is no consensus about the nature of this variation across
willingness to repurchase increased at a steeper rate (i.e., by the three regions of quality. A key empirical question is
43%) as the service-quality rating improved from fair to whether the relationship between behavioral intentions and
good than when it went from poor to fair (17%) or from service quality is flat or upward sloping within the zone of
good to excellent (30%). These results suggest that the im- tolerance and, if it is upward sloping, whether or not it is
pact of service quality on willingness to repurchase is most steeper than the relationship below and above the zone.
pronounced in some intermediate level of service quality. The discussion in the preceding sections implies that,
Coyne (1989, p. 73), however, makes the opposite predic- though service quality is positively associated with favor-
tion on the basis of research relating to the impact of customer able behavioral intentions and negatively related to unfavor-
satisfaction with service in a consumer-durable context: able behavioral intentions, customers' perceptions of the
There appear to be thresholds of service for affecting cus- service relative to their adequate and desired service levels
tomer behavior.... When satisfaction rose above a certain moderate these associations. More formally, we posit,
threshold, repurchase loyalty climbed rapidly. In contrast,
H( The service quality-behavioral intentions relationship (a)
when satisfaction fell below a different threshold, cus-
is positive (negative) for favorable (unfavorable) behav-
tomer loyalty declined equally rapidly. However, between
ioral intentions and (b) has a different slope below and
these thresholds, loyalty was relatively flat. I believe this
above the zone of tolerance relative to within it.
twin threshold framework applies to a wide variety of ser-
vice situations.
Impact of problem experience and resolution. Another
A similar categorization of service levels follows one de- aspect of service provision that can influence behavioral in-
finition of service quality in the literature-the extent to tentions involves the problem experience of customers.
which a service meets or exceeds customer expectations When customers encounter service problems, these experi-
(Parasuraman, Zeithaml, and Berry 1985, 1988)-and from ences are likely to affect behavioral intentions adversely.
recent research explicating the expectations construct as two However, the impact of problem resolution on customers'
levels of expectations (Zeithaml, Berry, and Parasuraman intentions is less clear. One view, based primarily on anec-
1993). The first level is desired service, which is the level of dotal evidence, is that superior problem resolution forges
service the customer hopes to receive, consisting of a blend of stronger bonds between customers and the company than
what the customer believes can and should be delivered. The would exist had no service problem occurred. For example,
second, lower level of expectations is adequate service, J. W. Marriott, chief executive officer of the Marriott hotel
which is the level of service the customer will accept. Ade- chain, states: "Sometimes those [disgruntled] customers
quate service is the minimum service a company can provide whom you make that extra effort to gain back become the
and still hope to meet customers' basic needs. A zone of tol- most loyal customers that you have" (Lovelock 1994, p.
erance, bounded on the lower end by adequate service and on 214). The reasoning underlying this view seems to be that a
the upper end by desired service, captures the range of service service problem gives a company the opportunity to demon-
within which a company is meeting customer expectations. strate its commitment to customer service through excellent
Although the zone-of-tolerance framework seems struc- recovery efforts. On the other hand, empirical evidence sug-
turally similar to Coyne's (1989) twin-threshold framework, gests that service failures may weaken the customer-compa-
the managerial implications of the two frameworks are dif- ny bond even when the problem is resolved satisfactorily
ferent. Coyne, invoking the flat satisfaction-loyalty relation- (Bolton and Drew 1992). We report (see Zeithaml, Parasur-
ship he hypothesizes between the two thresholds, suggests aman, and Berry 1990) that customers who experienced no
that unless a company already has a strong reputation for recent service problem with a company have significantly
service, it may not benefit by improving service much be- better service-quality perceptions than customers who expe-
yond the lower threshold: "If a company is already above rienced a recent service problem that was satisfactorily re-
the minimum acceptable threshold, but nearer the lower end solved. A plausible explanation for this finding is that satis-
of the service satisfaction band, investments to incremental- factory problem-resolution service, though perhaps pleasing
ly change position may not be warranted" (p. 75). In con- to customers, does not cause them to forget the service fail-
trast, we have argued previously (see Parasuraman, Berry, ure. And the memory of the failed service negatively affects
and Zeithaml 1991b, p. 47) that firms operating within the customers' overall perception of the company's service. The
zone of tolerance, while possibly enjoying competitive ad- existing empirical evidence on this question leads to our
vantage, should continue to improve service, even to the second hypothesis:
point of exceeding the desired service level: 'To develop a
Hz: Favorable (unfavorable) behavioral intentions are (a) high-
true customer franchise-unwavering customer loyalty- est (lowest) for customers experiencing no service prob-
firms must exceed not only the adequate service level but lem; (b) next highest (lowest) for customers experiencing
also the desired service level." Although we do not refer to service problems that are resolved, and (c) lowest (highest)

Service Quality /35

 for customers experiencing service problems that are not Surveys were mailed with a cover letter and postage-
resolved. paid return envelope to all customers in the sample. The
cover letter appeared on company letterhead and was signed
In summary, the first hypothesis suggests a positive
by a senior company official. Respondents were requested
(negative) relationship between service quality and favor-
to return completed questionnaires to a marketing research
able (unfavorable) behavioral intentions, the strength of
company hired to assist with data collection and coding. A
which is different below and above the zone of tolerance rel-
reminder postcard was sent two weeks after mailing the
ative to that within it. HI, along with H 2o is depicted in Fig-
questionnaires.
ure 2, which details the portion of the behavioral conse-
Overall response rate was 25% (3069 questionnaires).
quences model on which we focus in the present study.
Company-specific response rates were 30% (1566 question-
naires) for the computer manufacturer; 22% (522 question-
Methodology naires) for the retail chain; 24% (568 questionnaires) for the
automobile insurer; and 17% (413 questionnaires) for the
Sample Design and Mail Survey life insurer. Demographic profiles of the respondent samples
Four companies that provide services to end or business cus- were reviewed by managers in the respective companies and
tomers were sponsors of the research study. Questionnaires considered to be representative of their customer bases.
were mailed to business customers of a computer manufac-
turer, as well as to end customers of a retail chain, automo- Survey Instrument
bile insurer, and life insurer. The sponsoring companies gen- Operationalization of service quality. Several measures
erated mailing lists from their current customer bases. The of service quality were included in the questionnaire: (1) an
retail chain, automobile insurer, and life insurer each pro- overall, single-item rating scale with anchors at 1 (extreme-
vided random samples of 2400 customers. The computer ly poor) and 9 (extremely good); (2) a multiple-item scale of
manufacturer provided a larger random sample of 5270 cus- perceived service from an expanded version of the
tomers, because it wanted to conduct its own detailed, seg- SERVQUAL scale we originally developed (see Parasura-
ment-by-segment analysis following the completion of the man, Zeithaml, and Berry 1988) and later refined (see Para-
main study. A total of 12,470 questionnaires were mailed. suraman, Berry, and ZeithamI199Ia); and (3) two categori-

FIGURE 2
Hypothesized Effects of Service Quality on Behavioral Intentions

Performance
Relative to Adequate
and Desired Service

Perceived Service Favorable

Performance • Say positive things
• Recommend company
• Remain loyal to company
• Spend more with company
· Pay price premium

Unfavorable
· Say negative things
· Switch to another company
• Complain to external agencies
· Do less business with company
Problem
Resolved?

361Journal of Marketing, April 1996

cal questions to measure whether respondents had experi- tentions when service problems occur. The 13 items were
enced a recent service problem with the company and, if so, grouped into four a priori categories: word-of-mouth com-
whether the problem was resolved to their satisfaction. munications, purchase intentions, price sensitivity, and com-
The second measure (i.e., the revised SERVQUAL bat- plaining behavior. (These groupings were not made known
tery) represented the service dimensions of reliability (five to respondents.) The last two categories contained items not
items), responsiveness (three items), assurance (four items), included in prior service-quality research. Each item was ac-
empathy (four items), and tangibles (five items). Consistent companied by a 7-point likelihood scale (I = not at all like-
with the expanded conceptualization of customers' service ly, and 7 = extremely likely).
expectations (Zeithaml, Berry, and Parasuraman 1993), re-
spondents were asked to indicate their adequate- and de-
sired-service levels in addition to their perceptions of each Analyses, Results, and Discussion
SERVQUAL item. Thus, separate ratings of adequate, de-
Dimensions of Behavioral Intentions
sired, and perceived service were obtained on three 9-point
scales (I = low, 9 = high) arranged as three adjacent Factor analysis of the behavioral-intentions battery was con-
columns next to the SERVQUAL battery on the ducted to examine the dimensionality of the items. Because
questionnaire.I the battery was designed to represent four categories of be-
The questionnaire containing the SERVQUAL battery havioral intentions, a four-factor solution was obtained sep-
with the three columns of ratings used in this study was one arately for each company and subjected to oblique rotation
of three different questionnaire formats evaluated in a larg- to allow for potential correlation among the categories. The
er methodological study (Parasuraman, Zeithaml, and Berry item clusters implied by the factor loadings differed from
1994a). As such, the adequate-, desired-, and perceived-ser- the a priori clusters and varied somewhat across the four
vice scores used in the present study were based on a partial companies. The general patterns of loadings suggested that
sample from each company (the other two questionnaire for- a five-factor solution may help reconcile these differences.
mats did not produce separate scores for these variables). A A five-factor solution produced an unambiguous factor pat-
total of 1009 questionnaires contained scores for the ade- tern that was consistent across all companies. This consis-
quate-, desired-, and perceived-service variables: 498 from tent pattern suggested a reconfiguration of the 13 items into
the computer manufacturer, 188 from the retail chain, 191 five dimensions: loyalty to company (loyalty), propensity to
from the automobile insurer, and 132 from the life insurer. switch (switch), willingness to pay more (pay more), exter-
All three questionnaire formats contained measures for the nal response to problem (external response), and internal re-
remaining study variables (overall service quality, behav- sponse to problem (internal response). In Table I, we present
ioral intentions, and incidence of service-problem experi- the reconfigured behavioral-intentions battery, and in Table
ence and satisfactory problem resolution). Therefore, scores 2, we present the factor-loading matrices supporting it,
for these variables were based on the full sample. along with reliability coefficients for its multiple-item
components.
Operationalization of behavioral intentions. Previous re-
Of the five factors, loyalty (with five items) and pay
search has not captured the full range of potential behaviors
more (with two items) exhibit consistent patterns of load-
likely to be triggered by service quality. Cronin and Taylor
ings across the four companies. Switch (with two items) and
(1992) focus solely on purchase intentions and measure the
external response (with three items) also display a moderate
construct with a single-item scale. In the first of two studies
to high degree of uniformity in factor loadings. The final di-
by Boulding and colleagues (1993), repurchase intentions
mension, internal response, contains just one item that loads
and willingness to recommend were the only two behavioral
on the fifth factor.
intentions measured. In the second study, involving service
The 5-item loyalty scale has excellent internal consis-
quality of an educational institution, they used a 6-item scale
tency, which is evidenced by alphas ranging from .93 to .94
comprised largely of education-specific items, such as intent
across the four companies. The 3-item external-response
to contribute money to the class pledge and intent to recom-
scale has alphas of at least .6, with the values in two of the
mend the school to employers as a place to recruit.
four companies exceeding the threshold of .7 that Nunnally
A 13-item battery was developed to gauge a wider range
(1978) suggested. The 2-item scales measuring switch and
of behavioral intentions than have been suggested in the lit-
pay more have somewhat weaker alphas, with several values
erature or by anecdotal evidence from companies.3 This bat-
falling below .6, perhaps because of too few items in the re-
tery included items to capture several facets of behavioral
configured factors. In general, the alpha score for loyalty is
intentions not incorporated in previous service-quality stud-
high, particularly for an early study. The alpha scores for the
ies: likelihood of paying a price premium and remaining
other three factors with multiple items range from adequate
loyal to a company even when its prices go up, intent to do
to weak, indicating the need to add items to the scale in fur-
more business with the firm in the future, and complaint in-
ther research.
Although the factor structure of the behavioral-inten-
2The adequate- and desired-level service ratings were used in tions battery differs somewhat from the a priori specifica-
defining the lower and upper boundaries of the zone of tolerance to
tion, the loadings support the dichotomy in behavioral in-
verify the differential slopes predicted by H 1b for the quality-in-
tentions relationship. tentions of favorable and unfavorable categories. The largest
3A copy of the instrument containing the behavioral-intentions factor, loyalty, contains five favorable behavioral-intentions
and service-quality questions can be obtained from the third author. items: saying positive things about the company, recom-

Service Quality /37

 TABLE 1
Behavioral-Intentions Batterya

Behavioral-
Intentions Item
Dimension Label Item Wording

Loyalty 11 Say positive things about XYZ to other people.

12 Recommend XYZ to someone who seeks your advice.
13 Encourage friends and relatives to do business with XYZ.
14 Consider XYZ your first choice to buy - - - services.
15 Do more business with XYZ in the next few years.
Switch 16 Do less business with XYZ in the next few years (-).
17 Take some of your business to a competitor that offers better prices (-).
Pay More 18 Continue to do business with XYZ if its prices increase somewhat.
19 Pay a higher price than competitors charge for the benefits you currently
receive from XYZ.
External Response 110 Switch to a competitor if you experience a problem with XYZ's service.
111 Complain to other customers if you experience a problem with XYZ's service.
112 Complain to external agencies, such as the Better Business Bureau, if you
experience a problem with XYZ's service.
Internal Response 113 Complain to XYZ's employees if you experience a problem with XYZ's service.
aThe items were grouped as follows in the a priori categorization of the battery: Word-of-Mouth Communications-I 1, 12, 13; Purchase Inten-
tions - 14, IS, 16; Price Sensitivity - 17, 18, 19; Complaining Behavior - 110, 111, 112, 113. Each item was accompanied by a 7-point likelihood
scale (1 = not at all likely and 7 = extremely likely). Items identified with a -:» were reverse scored.

mending the company to someone who seeks advice, en- zone of tolerance relative to within it. This hypothesis was
couraging friends and relatives to do business with the com- tested by using multiple regression analysis to examine si-
pany, considering the company the first choice from which multaneously (I) whether the slope of the relationship with-
to buy services, and doing more business with the company in the zone of tolerance was significantly different from zero
in the next few years. Pay more contains two favorable and (2) whether this slope differed significantly from the
items: continuing to do business with the company even if slopes below and above the zone of tolerance. In accordance
its prices increase somewhat and paying a higher price than with procedures discussed by Cohen and Cohen (1983,
competitors charge for the benefits currently received from Chapter 8) for conducting this type of analysis, the follow-
the company. ing regression equation was estimated:
The second and fourth factors comprise all unfavorable
(I) Y = Bo + Bd,d j + Bdzd z + BIX + Bzd,X + B 3d zX + E,
behavioral-intentions items. Switch contains two of these:
doing less business with the company in the next few years where
and taking some business to a competitor that offers better Y = behavioral-intentions score;
prices. External response includes items that relate to expe- X =service-quality score;
riencing a service problem: switching to a competitor, com- d l = dummy variable with a value of I if the perceived service is
plaining to other customers, and complaining to external below the zone of tolerance, 0 otherwise;
agencies such as the Better Business Bureau. dz =dummy variable with a value of I if the perceived service is
The interpretation of internal response, the fifth factor above the zone of tolerance, 0 otherwise;
with one item (complaining to the company's employees if Bs = unstandardired regression coefficients; and
a service problem is experienced), is unclear. Customers
E = error term.
more favorably disposed toward a company may be more
likely to complain internally to give the company a "second The coefficients in Equation I that are relevant for examin-
chance." Conversely, disgruntled customers with an unfa- ing the first hypothesis are B I , B2, and B3• Specifically, B,
vorable image of the company may be more likely to com- represents the slope of the quality-intentions relationship
plain internally to vent their frustrations. The equivocal in- within the zone of tolerance, whereas B2 and B3 represent
terpretation of this factor and its being represented by just changes in B, below and above the zone of tolerance, re-
one item undermine its meaningfulness on conceptual and spectively. Thus, B I + B2 represents the slope below the
psychometric grounds. As such, we deleted this single-item zone, and B, + B3 represents the slope above the zone.
measure from all subsequent analyses. Service quality (the key independent variable X) was
operationalized in two ways: as the rating on the 9-point
Relationship Between Service Quality and
overall-quality (OQ) scale and as a weighted-average per-
Behavioral Intentions
ceived performance (WP) score across the SERVQUAL di-
The first hypothesis predicted a positive (negative) quality- mensions. Of late there has been debate in the literature
intentions relationship for favorable (unfavorable) behav- about the most appropriate way to operationalize service
ioral intentions, with different slopes below and above the quality (cf. Brown, Churchill, and Peter 1993; Cronin and

381 Journal of Marketing, April 1996

 TABLE 2
Factor Loading Matrices and Reliability Coefficients (Alphas) for Behavioral-Intentions Dimensions a
Computer Manufacturer Retail Chain Automobile Insurer Life Insurer Combined Sample

B-Iltems b F1 F2 F3 F4 F5 F1 F2 F3 F4 F5 F1 F2 F3 F4 F5 F1 F2 F3 F4 F5 F1 F2 F3 F4 F5
Loyalty [a] [.93] [.94] [.94] [.93] [.94]

11 93 - - - - 94 - - - - 91 - - - - 97 - - - - 96
12 97 - - - - 94 - - - - 94 - - - - 95 - - - - 95
13 93 - - - - 93 - - - - 95 - - - - 94 - - - - 94
14 65 - - - - 79 - - - - 87 - - - - 87 - - - - 79
15 63 - - - - 83 - - - - 78 - - - - 62 - - 32 - 73

Switch [a] [.67] [.53] [.63] [049] [.61]

16 - 71 - - - - 73 - - - - 90 - - - - 95 - - - - 72
17 - 83 - - - - 85 - - - - 74 - - - - - - 70 - - 83

Pay More [a] [.73] [.60] [.68] [.52] [.69]

18 - - 79 - - - - 75 - - - - 77 - - - - 70 - - - - 75
19 - - 88 - - - - 89 - - - - 94 - - - - 93 - - - - 92

Extemal Response [a] [.60] [.67] [.76] [.77] [.70]

110 - - - 66 - - - - 88 - - - - 83 - - - - 82 - - - - 74
111 - - - 71 - - - - 82 - - - - 81 - - - - 76 - - - - 78
112 - - - 84 - - - - 33 60 - - - 76 - - - - 61 45 - - - 79

Intemal Response [a] H H H H H

113 - - - - 99 - - - - 95 - - - - 99 - - - - 85 - - - - 99

aNumbers within brackets are reliability coefficients. The other numbers are factor loadings obtained after oblique rotation of the initial solutions (all loadings have been multiplied by 100). Load-
ings of less than .3 have been omitted. The total variance extracted by the five factors is 77%, 79%, 80%, and 78%, and the average interfactor correlation is .23, .22, .21, and .14 for the com-
puter manufacturer, retail chain, automobile insurer, and life insurer, respectively.
en
CD bBehavioral-intentions labels 11 through 113 correspond to those of the items listed in Table 1.
...<
c:;"
CD
0
c:
e!.
~
w
CD
-
Taylor 1992; Parasuraman, Berry, and Zeithaml 1993; Para- switch and external response-and, with few exceptions, are
suraman, Zeithaml, and Berry 1994b; Teas 1993). The cen- statistically significant at p < .01. The pattern of B I values
tral issue in this debate is whether service quality should be across the four companies suggests that the effects are gen-
measured as the difference between customers' perceptions erally stronger for loyalty and switch than for pay more and
and expectations ratings or simply as the perceptions rat- external response. The results for the combined sample pro-
ings. Although this issue continues to be debated, there is vide additional insight into the relative influences of service
some agreement that a study's purpose may influence the quality on the four behavioral-intentions dimensions: the
choice of which measure to use: The perceptions-only oper- strongest effects of both WP and OQ are on loyalty (.70 and
ationalization is appropriate if the primary purpose of mea- .55), followed by switch (-.67 and -.47), pay more (.43 and
suring service quality is to attempt to explain the variance in .37), and external response (-.28 and -.21) in that order.
some dependent construct; the perceptions-minus-expecta- The regression coefficients in Table 3 in the columns for
tions difference-score measure is appropriate if the primary Bz and B3 values pertain to the differential effects predicted
purpose is to diagnose accurately service shortfalls (Para- by H ( (the statistically significant Bz and B3 coefficients are
suraman, Zeithaml, and Berry 1994a). The purpose of our boldfaced). For each behavioral-intentions dimension with-
present study is the former. Moreover, as we discuss subse- in a given company, the Bz coefficients for WP and OQ have
quently, the two expectations measures (i.e., the adequate- the same sign except in a few instances. Similarly, the signs
and desired-service levels) were independently incorporated of the B3 coefficients are identical for WP and OQ. The sta-
into the analysis to operationalize the two dummy variables bility in the signs of the slope-change coefficients across
d( and dz. Therefore, the ratings from the SERVQUAL por- two different service-quality measures is encouraging in
tion of the survey were used to operationalize service quali- terms of drawing inferences about the direction of changes
ty as weighted-average performance scores, rather than dif- in the quality-intentions link below and above the zone of
ference scores. tolerance. However, support for the strength of these
To determine WP, a perceived performance rating was changes is mixed, as is evidenced by the pattern of statisti-
first computed for each SERVQUAL dimension by averag- cal significance of these coefficients. Therefore, based on
ing the ratings on the items forming the dimension. (The co- the presence of significant coefficients for at least one of the
efficient alpha values for reliability [five items], responsive- two service-quality measures (WP and OQ), only the fol-
ness [three items], assurance [four items], empathy [four lowing inferences seem warranted.
items] and tangibles [five items] ranged from .80 to .96 In the computer-manufacturer sample, the quality-inten-
across the four samples.) To obtain the WP score, the aver- tions relationship for loyalty and switch is flatter above the
age performance ratings for the dimensions were then zone of tolerance (implying diminished sensitivity to quali-
weighted by the relative importance of the dimensions. To ty improvements beyond the desired-service level), but is
measure the relative importance of the five dimensions, re- unchanged below the zone of tolerance. The relationship for
spondents were asked to allocate 100 points among the di- pay more is flatter both below and above the zone. In the re-
mensions according to how important each dimension was tail-chain sample, the relationship for loyalty, switch, and
to them in evaluating a company's service. The relative external response is flatter below the zone of tolerance but
points allocated to the dimensions were used as weights in remains unchanged above the zone of tolerance (implying
computing the WP score. undiminished returns for quality beyond the desired-service
The dummy variables d( and dz were operationalized by level). In the automobile-insurer sample, the relationship for
comparing each respondent's WP score with his or her loyalty is steeper below the zone of tolerance but remains
weighted-average adequate- and desired-service scores unchanged above the zone. However, the relationship for
(computed using a procedure similar to that used in deter- switch is flatter below the zone and considerably steeper
mining WP). The d( value was I if WP was less than the above the zone, which implies that there are increasing pay-
weighted-average adequate-service score, 0 otherwise. The offs as service improves from below to within to above the
dz value was 1 if WP was greater than the weighted-average zone. The relationship for external response in the automo-
desired-service score, 0 otherwise. bile-insurer sample is similar to that in the retail-chain sam-
The regression analysis was performed separately for ple (i.e., flatter below the zone but unchanged above it). All
the four companies, as well as for the combined sample. In of the slope-change coefficients in the life-insurer sample
each instance, two equations were estimated for each be- are nonsignificant. This lack of significance may be due to
havioral-intentions dimension: one using WP scores and the insufficient data points below and above the zone-only 15
second using OQ scores as values for the independent vari- respondents in the life-insurer sample had WP scores below,
able X. The average score across items comprising the be- and only 8 had WP scores above the zone. A similar defi-
havioral-intentions dimension represented the dependent ciency may account for the lack of significance of any of the
variable Y. In Table 3, we summarize the regression-analy- B3 coefficients in the retail-chain sample; only 16 respon-
sis results pertaining to the first hypothesis. dents had WP scores above the zone.
The regression coefficients in the first two columns of In the combined sample, the quality-intentions relation-
Table 3 (B I values) offer strong support for the hypothesized ship for loyalty and switch is flatter below but remains un-
quality-intentions links within the zone of tolerance. The co- changed above the zone. Thus, exceeding the adequate-ser-
efficients for WP and OQ are all in the hypothesized direc- vice threshold can sharply increase the payoffs (in terms of
tions-positive for loyalty and pay more and negative for fostering customer loyalty and curtailing propensity to

40I Journal of Marketing, April 1996

 TABLE 3
Regression Analysis Results

Change in Slope:
Slope Within Below Zone Above Zone Adjusted
Zone of Tolerance (B 1)8 of Tolerance (B 2) of Tolerance (B 3 ) R-squared Values b
Independent
Variable (X) WP OQ WP OQ WP OQ WP OQ
Computer Manufacturer
Loyalty .67 .58 -.09 (ns) -.02 (ns) -.15 (ns) -.23 (p < .1) .37 .41
Switch -.55 -.44 .23 (ns) .08 (ns) .33 (ns) .36 (p < .1) .14 .15
Pay More .56 .54 -.23 (p < .1) -.25 (p < .05) -.29 (ns) -.52 (p < .01) .16 .19
External
Response -.2 -.12 (ns) -.08 (ns) -.09 (ns) .21 (ns) .03 (ns) .08 .07
Retail Chain
Loyalty .78 .56 -.33 (p < .1) -.11 (ns) -.29 (ns) -.23 (ns) .39 .46
Switch -.69 -.33 .46 w « .05) .12 (ns) .74 (ns) .29 (ns) .20 .15
Pay More .43 .18 (ns) -.22 (ns) .02 (ns) -.85 (ns) -.28 (ns) .19 .17
External
Response -.47 -.25 (p < .05) .43 ip « .05) .29 ip « .05) .16 (ns) .15 (ns) .20 .19
Automobile
Insurer
Loyalty .78 .49 -.08 (ns) .25 (p < .1) -.15 (ns) -.01 (ns) .50 .47
Switch -.87 -.63 .45 (p < .1) .24 (ns) -.73(p<.1) -.69 (p < .05) .28 .28
Pay More .39 .32 -.15 (ns) .05 (ns) -.14 (ns) -.13 (ns) .11 .15
External
Response -.57 -.57 .55 (p < .1) .52 (p < .05) .15 (ns) .45 (ns) .20 .13
Life Insurer
Loyalty .72 .52 .10 (ns) .14 (ns) .52 (ns) 1.27 (ns) .68 .62
Switch -.45 -.37 .14 (ns) .13 (ns) .92 (ns) 1.12 (ns) .28 .30
Pay More .40 .38 -.05 (ns) -.10 (ns) .25 (ns) .62 (ns) .08(p<.1) .12 (p < .05)
External
Response -.32 (ns) -.14 (ns) .15 (ns) .03 (ns) .65 (ns) .20 (ns) .03 (ns) .00 (ns)
All Companies
Loyalty .70 .55 -.12 (p < .1) .01 (ns) -.10 (ns) -.15 (ns) .45 .48
Switch -.67 -.47 .35 (p < .01) .16 (p < .05) .15 (ns) .05 (ns) .21 .20
Pay More .43 .37 -.10 (ns) -.07 (ns) -.25 (ns) -.34 (p < .05) .16 .18
f External
~. Response -.28 -.21 .06 (ns) .06 (ns) .22 (ns) .12 (ns) .11 .10
oc aThe 61 values are significant at p < .01 unless otherwise stated.
~ bThe adjusted A-squared values are for the regression model specified in Equation 1; the values are significant at p < .01 unless otherwise stated.
~
-..."'"
 TABLE 4
Mean Scores for Service Quality and Behavioral Intentions

Service Qualitya Behavioral Intentions b

External
Company WP OQ Loyalty Switch Pay More Response

Computer Manufacturer 7.3 6.8 5.3 3.8 3.9 3.6

Retail Chain 6.5 6.2 4.9 3.9 3.2 4.3
Automobile Insurer 7.8 7.3 5.6 3.1 3.5 4.2
Life Insurer 7.6 7.0 5.0 3.1 3.4 3.8
aMean scores on a 9-point scale.
bMean scores on a 7-point scale.

switch). However, the combined-sample results for the pay more prone to switch and complain externally-than the au-
more dimension reveal considerable flattening of the quali- tomobile insurer's customers.
ty-intentions relationship above the zone of tolerance. In
fact, the slope for the OQ-pay more relationship changes Impact of Service-Problem Experience and
from .37 below the desired-service level to just .03 (.37 - Resolution on Behavioral Intentions
.34) above. Thus, companies wishing to improve service be- H2 predicts that customers experiencing no service problems
yond the desired-service level should do so cautiously and have the best behavioral-intentions scores (highest for fa-
cost-effectively, because recouping the added expense by vorable intentions and lowest for unfavorable intentions-
charging price premiums may not be a viable option. The H2a) , customers experiencing problems that were resolved
quality-intentions relationship for external response- would have intermediate scores (H 2b) , and customers with
which, as indicated by its B I coefficients, is flatter within unresolved service problems would have the worst scores
the zone than for the other three dimensions-remains un- (H 2e ) . To test this hypothesis, the combined sample was clas-
changed below and above the zone as well. Thus, relative to sified into three groups of respondents: those experiencing
the other dimensions, external response appears much less no recent service problems; those experiencing problems
affected by changes in quality over a wide range. that were resolved; and those experiencing problems that
The pattern of adjusted R-squared values in the last two were not resolved. Analysis of variance was conducted to
columns of Table 3 offer two noteworthy insights based on determine whether scores on each behavioral-intentions di-
the overall ability of service-quality-related variables (db mension differed across the groups. The F-values for all four
dz, and X) to explain the variation in scores on each behav- ANOVAs were significant at p < .001. Eight prespecifed
ioral-intentions dimension. First, the relationship of quality contrasts (first-group mean versus second-group mean and
(both WP and OQ) with loyalty and switch is consistently second-group mean versus third-group mean for each of the
stronger in the two pure-service companies (automobile and four behavioral-intentions dimensions) were also evaluated.
In Table 5, we present the group means and the significance
life insurers) than in the two product companies (computer
levels for the planned contrasts.
manufacturer and retail chain); however, the reverse is true
The alpha level for testing the significance of individual
for the quality-pay more relationship: The relationship is
contrasts was reduced by applying the Bonferroni correction
consistently stronger in the two product companies than in
to ensure that the overall probability of Type I error across
the two pure-service companies (for additional analyses, see
all eight contrasts did not exceed .05 (for details, see foot-
the Appendix). Second, the quality-pay more relationship is
note b in Table 5). The evidence in Table 5 fully supports the
consistently weaker than the quality-loyalty relationship in
second hypothesis for the loyalty, switch, and external re-
all four companies and the combined sample. We examine
sponse dimensions, and partially supports it for the pay
the implications of these insights subsequently. more dimension. The findings clearly show that customers
In Table 4, we summarize the mean scores for service experiencing no service problems have the strongest levels
quality and behavioral intentions by company. An across- of loyalty intentions and the weakest switch and external re-
company comparison of the mean-score patterns provides sponse intentions. However, their pay more intentions are
additional support for inferring that service quality is asso- not significantly higher than those of customers experienc-
ciated positively with favorable behavioral intentions and ing service problems that were resolved satisfactorily.
negatively with unfavorable behavioral intentions. With few Among customers experiencing recent service problems,
exceptions, the better a company's service-quality scores, those receiving satisfactory resolution have significantly
the higher are its loyalty and pay more means and the lower higher loyalty and pay more intentions, and significantly
are its switch and external response means. To illustrate, the lower switch and external response intentions, than those
retail chain's WP and OQ scores are considerably lower than with unresolved problems. Thus, effective service recovery
the corresponding scores for the automobile insurer. Match- significantly improves all facets of behavioral intentions.
ing behavioral-intentions data show that the retail chain's However, with the possible exception of the pay more di-
customers are less loyal and less willing to pay more-and mension, the improvements do not restore intentions to the

42/ Journal of Marketing, April 1996

levels expressed by customers not experiencing service viously mentioned, customers favorably disposed toward a
problems. These results are consistent with those from a company may complain to give it a second chance, while
study in which Bolton and Drew (\ 992) examine the impact customers unfavorably disposed may also complain merely
of problem experience and resolution on telephone cus- to vent their frustrations. Therefore, in expanding this com-
tomers' evaluation of billing service: Customers rated the ponent, it would be useful (from a diagnostic standpoint) to
service substantially lower if they had experienced a billing add items that capture why customers are likely or unlikely
problem, and the effect of satisfactorily resolving the prob- to complain. For example, respondents could be asked to
lem did not completely offset its negative impact. rate the likelihood of the following (on the same 7-point
scale used in the behavioral-intentions battery):
Discussion and Implications • Complain to XYZ's employees about a service problem be-
cause I am confident they will resolve the problem.
We developed a conceptual model of the behavioral and fi-
nancial consequences of service quality (Figure I. A portion • Complain to XYZ's employees about a service problem to
help relieve my frustration (reverse scored).
of the model-the quality-intentions link-was empirically
examined at the individual-customer level in a multicompa- Second, additional research is needed to examine further
ny context. Two distinctive features of the study's empirical our tentative insights pertaining to intercompany differences
component were the development of a more extensive be- in the quality-intentions relationship and the changes in its
havioral-intentions battery than has been used in previous slope below and above the zone of tolerance relative to
research and the investigation of changes in the quality-in- within it. Although the total sample size was large for each
tentions link at different service levels relative to customers' company, the subsamples of respondents below and above
expectations. The study's findings have important implica- the zone were relatively small, and this possibly contributed
tions for researchers and managers. to the lack of significance of some of the slope-change co-
efficients. Obtaining larger samples of respondents below
Directions for Further Research and above the zone in further studies would facilitate a more
The distinctive aspects of the empirical study contribute robust examination of changes in the quality-intentions rela-
several new insights whose implications we subsequently tionship. One option for doing so is to select samples from
explore. However, our findings also reveal certain weak- companies that are well known for their excellent (or poor)
nesses with methodological implications. First, the behav- service. Another option is to devise a suitable quota-sam-
ioral-intentions battery developed here, though more com- pling procedure to ensure large enough subsamples below,
prehensive than intentions scales used in previous studies, within, and above the zone. Multicompany research using
needs further development. In particular, more items are such sampling procedures is needed for more definitive con-
needed to strengthen the reliability of three of its compo- clusions about the intriguing differences uncovered in this
nents, namely, switch, pay more, and external response. study, which concern changes in the quality-intentions link
With additional items, the scales should be reevaluated for within and across dimensions and companies.
their psychometric properties. Consideration should also be In addition to addressing the previous issues, further re-
given to augmenting and including in the battery internal re- search should also focus on aspects of the conceptual model
sponse-the component that was eliminated because it had not examined here. For example, the association between
only one item subject to equivocal interpretation. As we pre- behavioral intentions and remaining with or defecting from

TABLE 5
Mean Behavioral-Intentions Scores for Respondents Classified According to Service Problem Experience

Significance Levels for

Mean Scores for Customers Experiencing a Planned contrastse

Service Problems Service Problems

Behavioral- No Service That Were That Were Group 1 Group 2
Intentions Problems Resolved Not Resolved Mean versus Mean versus
Dimension (Group 1; n 2153)= (Group 2; n 455)= (Group 3; n 346)= Group 2 Mean Group 3 Mean

Loyalty 5.47 5.01 4.11 .000 .000

Switch 3.35 4.00 4.49 .000 .000
Pay More 3.76 3.63 3.11 .036 .000
External
Response 3.70 3.95 4.43 .000 .000
aThe behavioral-intentions scores are on a 7-point likelihood scale.
bThe reported significance levels are for one-tailed tests, because H2 implies directional comparisons of group means. Because multiple con-
trasts were evaluated to test this hypothesis, the Bonferroni correction was applied to the customary alpha level of .05 to control the Type I
error rate. Specifically, the alpha level was lowered by a factor of eight (the total number of planned contrasts) to yield a critical alpha level of
.006 for testing the significance of each contrast (Myers 1979, pp. 298-300). At this reduced alpha level, seven of the eight planned contrasts
are significant; the sole exception is the Group 1 versus Group 2 contrast for the pay more dimension.

Service Quality I 43
the company merits study. Rust and Zahorik (1993) sug~est Managerial Implications
ways to investigate this link, including panel data, longitu- The overall findings offer strong empirical support for the
dinal analysis with customers, and cross-sectional surveys intuitive notion that improving service quality can increase
asking customers about previous and current providers. ~d­ favorable behavioral intentions and decrease unfavorable in-
ditional cross-sectional research might ask customers to 10- tentions. The findings demonstrate the importance of strate-
dicate not only their behavioral intentions but also their ac- gies that can steer behavioral intentions in the right direc-
tual behaviors. For example, customers could be asked tions, including striving to meet customers' desired-service
whether they have said positive things about the company levels (rather than merely performing at their adequate-ser-
(actual behaviors) instead of how likely they would be to vice levels), emphasizing the prevention of service prob-
say positive things (behavioral intentions). Such research lems, and effectively resolving problems that do occur.
also needs to be supplemented with longitudinal research to However, multiple findings suggest that companies wanting
verify the causal direction of the quality-intentions link. to improve service, especially beyond the desired-service
Data from studies tracking service quality and behavioral in- level, should do so in a cost-effective manner: the quali-
tentions over time can be analyzed to determine the impact ty-pay more relationship in the combined sample, while u~­
of service quality in a given period on behavioral intentions wardly sloping below the desired service level, becomes vir-
in subsequent periods. tually flat above that level (Table 3); the adjusted R-squared
If the longitudinal data set also contains information for values for the quality-pay more regressions are weaker than
individual customers on variables such as purchase frequen- for the quality-loyalty regressions across all companies and
cy and volume and new-customer referrals, the impact .of for both measures of service quality (Table 3); and, in each
service quality on actual behavior can be traced. Companies of the four companies, the mean score for pay more inten-
that have information systems linking customer data and tions is considerably lower than for loyalty intentions (Table
purchase data could also examine increases or decreases in 4).
spending that result from different levels of service quality. In addition to these general implications, the conceptual
This type of research would provide direct evidence of the model and the empirical findings have specific implications
financial impact of service quality at the individual level. for firms' research and resource-allocation decisions per-
An intriguing finding worthy of further research is the taining to improving service quality. A salient issue on the
pattern of across-company differences implied by the differ- service quality research agenda of many companies is un-
ences in the adjusted R-squared values for the various qual- derstanding the impact of service quality on profits. One of
ity-intentions regression equations (Table 3). As previously the reasons it has been difficult for individual firms to cali-
highlighted, the quality-intentions link for the loyalty and brate this impact is that the relationship is complex and con-
switch dimensions is consistently stronger for the two pure- sists of multiple intervening relationships. As was suggested
service companies than for the two product companies, in our model of individual customer response, a chain of re-
whereas the reverse is true for pay more. Is it possible that lationships is integral to the overall impact.
the role of service within a firm's total offering (i.e., core
Companies first must examine the impact of their ser-
versus supplemental component) is a plausible explanation vice-quality provision on customers' responses, including
for this pattern of differences? Because service is all that a intentions signaling behaviors that are potentially favorable
pure-service provider, such as a life insurance company, de- or unfavorable to the company. For most companies, a bat-
livers in exchange for customers' money, customers' com- tery of behavioral-intentions questions could be incorporat-
mitment to the company might be extremely responsive to ed easily into the measurement systems currently used to
service-quality improvements; however, these customers' capture service-quality assessments. Doing so provides a
willingness to pay more may not be as responsive, because continuous source of information relating to such questions
they may feel they have, in effect, already paid for high- as,
quality service. Alternatively, the pay more findings may
simply reflect customers' general reluctance to pay for in- • What levels of service quality must we deliver to retain
surance services and may not apply to pure services overall. customers?
In contrast, because service is not the core of what a • What service initiatives should we undertake to encourage
product company sells to customers, their commitment to customers to recommend the company, spend more with the
company, or pay a price premium?
the company may be less sensitive to changes in service
quality (especially if product quality is mediocre); however, • What attributes should we focus on to reduce the likelihood
of customers spreading negative word-of-mouth communica-
customers may be somewhat more willing to pay more for
tions when service problems occur?
better service, because they may consider service to be an
• To retain customers, should we spend our money on proac-
extra feature. To what extent and under what circumstances
tive service improvements or on handling complaints?
are these speculations likely to be true? Furthermore, what
is the nature and extent of the impact of factors other than In essence, behavioral intentions become dependent vari-
the service component (e.g., price, product characteristics) ables with potentially higher validity (because they are more
on customers' behavioral intentions? Additional conceptual closely related to actual behaviors) and richer diagnostic
and empirical research addressing these issues can improve value than the "overall service quality" or "customer satis-
our understanding of the behavioral consequences of service faction" variables currently being used in most measure-
quality. ment programs.

44/ Journal of Marketing, April 1996

 Companies also can use surveys eliciting behavioral in- Appendix
tentions as an early warning system to identify customers in
To formally test the significance of these and other inter-
danger of defection and to take timely corrective action. It
company differences implied in our discussion, an extended
has long been speculated that many service customers ex-
version of regression Equation I was estimated for the com-
hibit "spurious loyalty"-they remain with companies they
bined sample:
are dissatisfied with because they see no alternatives. Local
telephone customers, with no choice in service providers, (AI) Y = Bo + Bgigi + Bg1g 1 + Bg3g3 + Bd1d l + Bd1d 1 + BIX
are often cited as customers exhibiting spurious loyalty. Be- + B1dlX + B3d 1X
cause of the deregulation of that industry-and the immi- + gl[Bgldldl + Bgldldl + B4X + Bsd,X + B6d1Xj
nent competition among cable companies, long-distance + gl[Bgldldl + Bgldld2 + B7X + BsdlX + B'IdlXj
+ g3[Bg3dldi + Bg3dld2 + BloX + BlldlX + B11d1Xl
companies, and other regional Bell companies-firms sup- + E,
plying local telephone service might be able to strengthen
customer retention by identifying customers most in danger where
of defection. gl =dummy variable with a value of I when
Another measurement implication for companies to un- the company is the retail chain, 0
derstand better and leverage the relationships in the concep- otherwise;
tual model (Figure I) is to query customers about whether gl = dummy variable with a value of I when

they have manifested, rather than merely would manifest, the company is the automobile insurer, 0
otherwise;
favorable or unfavorable behaviors. Companies should also
consider connecting their marketing database to their ac- g3 = dummy variable with a value of I when
the company is the life insurer, 0 other-
counting information systems to explore the links between wise; and
customers' assessments of service quality and their purchase
Y, X, d l, d1 , B's, and E =same as those defined for Equation I.
behavior. L. L. Bean has accounting systems that track vital
purchasing patterns of individual customers: what they pur- When g t- g2, and g3 are 0, Equation A I pertains to the
chase, when they buy, and how much they spend over time. computer manufacturer, with B I representing the slope of the
Companies with such systems could benefit from integrat- quality-intentions relationship within the tolerance zone and
ing their customer-research database with actual purchase B 2 and B 3 representing changes in that slope below and
data to enhance their knowledge of how and to what extent above the zone, respectively. Using the computer manufac-
behavioral intentions act as precursors of purchasing turer as the reference company, B4 through B6 , B 7 through
behavior. B9 , and B IO through B I2 are the corresponding slope-change
Yet another facet of the conceptual model that merits coefficients for the retail chain, automobile insurer, and life
thorough analysis at the individual company level involves insurer, respectively. As in the case of Equation I, Equation
actual increases or decreases in revenue from retention or A I was estimated for each of the four behavioral-intentions
defection of customers. Reichheld and Sasser (1990) call for dimensions. The results show consistent statistical signifi-
accounting systems that capture the expected cash flows cance (at p < .05) only for B I. With a few exceptions (that re-
from and life-time value of a loyal customer. This call could vealed no meaningful pattern), the slope-change coefficients
be expanded to include an examination of the revenue im- B 2 through B 12 are not significant. An inadequate number of
plications of individual behavioral-intentions components sample units with nonzero values for the variables corre-
as well. For example, what is the potential revenue differen- sponding to these eleven coefficients (and the consequent
tial between customers indicating a low versus a high low variance for these variables) is a highly plausible expla-
propensity to switch? Is there a difference in the revenue nation for this lack of significance: The percentage of re-
streams from customers expressing a strong versus a weak spondents (relative to the total sample) with nonzero values
inclination to pay a price premium for a company's service? was less than 5% for five of the variables, less than 10% for
Examining such questions will facilitate a more detailed cal- another five variables, and less than 20% for the remaining
ibration and a clearer understanding of the financial conse- one variable. A set of tables summarizing these regression re-
quences of service quality. sults can be obtained from the third author.

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46/ Journal ofMarketing, April 1996

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