Service quality, profitability, and the economic worth of customers: What we know and what we need to learn

In the past, expenditures on quality have not been explicitly linked to profits because costs and savings were the only variables on which information was available. More recently, evidence about the profit consequences of service quality stemming from other sources has been found. This article synthesizes recent evidence and identifies relationships between service quality and profits that have been and need to be examined. The article views the literature in six categories: (1) direct effects of service quality on profits; (2) offensive effects; (3) defensive effects; (4) the link between perceived service quality and purchase intentions; (5) customer and segment profitability; and (6) key service drivers of service quality, customer retention, and profitability. In each category, the author identifies what is known and then suggests an agenda of relationships needing validation and questions needing answers. The article is organized around a conceptual framework linking the six topics. Valarie A. Zeithaml is Professor, Area Chair of Marketing and Sarah Graham Kenan Distinguished Scholar at the Kenan-Flagler Flagler Business School of the University of North Carolina, Chapel Hill. She obtained an MBA and doctorate from the University of Maryland and has devoted the past 20 years to researching and teaching the topics of service quality and services management. She has won numerous teaching and research awards, including the Ferber Award from theJournal of Consumer Research, the Maynard Award from theJournal of Marketing, the Jagdish Sheth Award from theJournal of the Academy of Marketing Science, and the O'Dell Award from theJournal of Marketing Research.