Ew. Anderson et al., CUSTOMER SATISFACTION, PRODUCTIVITY, AND PROFITABILITY - DIFFERENCES BETWEEN GOODS AND SERVICES, Marketing science, 16(2), 1997, pp. 129-145
There is widespread belief that firms should pursue superiority in bot
h customer satisfaction and productivity. However, there is reason to
believe these two goals are not always compatible. If a firm improves
productivity by ''downsizing,'' it may achieve an increase in producti
vity in the short-term, but future profitability may be threatened if
customer satisfaction is highly dependent on the efforts of personnel.
If so, there are potential tradeoffs between customer satisfaction an
d productivity for industries as diverse as airlines, banking, educati
on, hotels, and restaurants. Managers in these types of service indust
ries, as well as goods industries in which the sen ice component is in
creasing, need to understand whether or not this is the case. For exam
ple, if efforts to improve productivity can actually harm customer sat
isfaction-and vice-versa-the downsizing of U.S. and European companies
should be viewed with concern. It follows that developing a better un
derstanding of how customer satisfaction and productivity relate to on
e another is of substantial and growing importance, especially in ligh
t of expected continued growth in services throughout the world econom
y. The objective of this paper is to investigate whether there are con
ditions under which there are tradeoffs between customer satisfaction
and productivity. A review of the literature reveals two conflicting v
iewpoints. One school of thought argues that customer satisfaction and
productivity are compatible, as improvements in customer satisfaction
can decrease the time and effort devoted to handling returns, rework,
warranties, and complaint management, while at the same time lowering
the cost of making future transactions. The second argues that increa
sing customer satisfaction should increase costs, as doing so often re
quires efforts to improve product attributes or overall product design
. A conceptual framework useful in resolving these contradictory viewp
oints is developed. The framework serves, in turn, as a basis for deve
loping a theoretical model relating customer satisfaction and producti
vity. The model predicts that customer satisfaction and productivity a
re less likely to be compatible when: Ij customer satisfaction is rela
tively more dependent on customization-the degree to which the firm's
offering is customized to meet heterogeneous customers' needs-as oppos
ed to standardization-the degree to which the firm's offering is relia
ble, standardized, and free from deficiencies; and 2) when it is diffi
cult (costly) to provide high levels of both customization and standar
dization simultaneously. To move forward from the model's propositions
to the development of testable hypotheses, we argue that services are
more Likely than goods to have the preceding characteristics. Hence,
tradeoffs between customer satisfaction and productivity should be mor
e prevalent for services than for goods. Although this classification
is not precise-many services are standardizable and many goods have a
service component-it has the advantage of allowing an initial test of
the propositions. The empirical work employs a database matching custo
mer-based measures of firm performance with traditional measures of bu
siness performance, such as productivity and Return on Investment (ROI
). The central feature of this database is the set of customer satisfa
ction indices provided by the Swedish Customer Satisfaction Barometer
(SCSB). The SCSB provides a uniform set of comparable customer-based f
irm performance measures and offers a unique opportunity to test the s
tudy's hypotheses. The findings indicate that the association between
changes in customer satisfaction and changes in productivity is positi
ve for goods, but negative for services. Ln addition, while both custo
mer satisfaction and productivity are positively associated with ROI f
or goods and services, the interaction between the two is positive for
goods but significantly less so for sen ices. Taken together, the fin
dings suggest support for the contention that tradeoffs are more likel
y for services. Hence, simultaneous attempts to increase both customer
satisfaction and productivity are likely to be more challenging in su
ch industries. Of course, this does not imply that such firms should n
ot seek improvements in both productivity and customer satisfaction. F
or example, appropriate applications of information technology may imp
rove both customer satisfaction and productivity simultaneously. The f
indings should provide motivation for future research concerning the n
ature of customer satisfaction and productivity, as well as appropriat
e strategy and tactics for each one. It is worth emphasizing that this
is an issue that is not only important today, but certainly will beco
me even more important in the future. As the growth of services contin
ues and world markets become increasingly competitive, the importance
of customer satisfaction will also increase. To compete in such a worl
d, firms must strike the right balance between their efforts to compet
e efficiently and their efforts to compete effectively.