A dynamic model of customers' usage of services: Usage as an antecedent and consequence of satisfaction

As firms seek ways to manage customer relationships over the long term, und erstanding the dynamics of the service provider-customer relationship becom es a key priority. In this article, the authors develop and test a dynamic model of customer usage of services, identifying causal links between custo mer's prior usage levels, satisfaction evaluations, and subsequent service usage. The authors quantify the (heretofore anecdotal) relationship between customer satisfaction and subsequent service usage and provide new theoret ical insights into the antecedents of customer satisfaction by introducing the concept of perceived payment equity. The primary contribution of the ar ticle is an understanding of how service usage changes over time, and parti cularly, how the consumer's view of the fairness or "equity" of the exchang e over time affects the consumer's usage of services. Specifically, payment equity represents the customer's changing evaluation of the fairness of th e level of economic benefits derived from usage in relation to the level of economic costs, that is, the customer's evaluation of the fairness of the exchange. By examining the antecedents of payment equity, it can be determi ned how customers use price and usage over time to update their evaluations of the fairness of the exchange. This evaluation affects overall satisfact ion, which in turn affects future usage. The results suggest that customers ' usage levels can be managed through pricing strategies, more generally dy namic customer satisfaction management.