Using service quality data for competitive marketing decisions

Although there have been many research articles about how to measure service quality, how service quality perceptions are formed, what effect service quality has on behavior and service quality's financial impact, there has been little discussion to date of the potential impact of service quality on competitive marketing decisions. This paper considers directly the issue of how an analysis of the impact of comparative service quality can inform tactical marketing decisions in a competitive marketplace. We propose and empirically demonstrate a simple theoretical framework of how market shave changes result from changes in service quality, by the focal firm and/or by a competitor. In addition we show how price changes trade-off against changes in service quality, and how comparative customer value is affected by changes in service quality and/or price. Our framework enables us to evaluate the projected market share shifts produced by proactive changes in service quality and/or price, and also enables us to evaluate the projected effectiveness of reactions to competitors' changes in service quality and price. For example, our framework suggests that a quickly-implemented increase in service quality (rather than a matching price cut) may sometimes be an effective tactical response to a competitor's price cut. We illustrate the implementation of our framework on actual longitudinal industry data. We show how the market share impact of changes in service quality and/or price can be projected and how this information can be used to drive competitive marketing decisions.