Evidence from past research and insights from an exploratory investigation are combined in a conceptual model that defines and relates price, perceived quality, and perceived value. Propositions about the concepts and their relationships are presented, then supported with evidence from the literature. Discussion centers on directions for research and implications for managing price, quality, and value.

If service quality relates to retention of customers at the aggregate level, as other research has indicated, then evidence 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 intentions. The authors’ discussion centers on ways the results and research approach of their study can be helpful to researchers and managers.

The authors respond to concerns raised by Cronin and Taylor (1992) and Teas (1993) about the SERVQUAL instrument and the perceptions-minus-expectations specification invoked by it to operationalize service quality. After demonstrating that the validity and alleged severity of many of those concerns are questionable, they offer a set of research directions for addressing unresolved issues and adding to the understanding of service quality assessment.

The attainment of quality in products and services has become a pivotal concern of the 1980s. While quality in tangible goods has been described and measured by marketers, quality in services is largely undefined and unresearched. The authors attempt to rectify this situation by reporting the insights obtained in an extensive exploratory investigation of quality in four service businesses and by developing a model of service quality. Propositions and recommendations to stimulate future research about service quality are offered.

The authors present a unified strategic framework that enables competing marketing strategy options to be traded off on the basis of projected financial return, which is operationalized as the change in a firm's customer equity relative to the incremental expenditure necessary to produce the change. The change in the firm's customer equity is the change in its current and future customers’ lifetime values, summed across all customers in the industry. Each customer's lifetime value results from the frequency of category purchases, average quantity of purchase, and brand-switching patterns combined with the firm's contribution margin. The brand-switching matrix can be estimated from either longitudinal panel data or cross-sectional survey data, using a logit choice model. Firms can analyze drivers that have the greatest impact, compare the drivers’ performance with that of competitors’ drivers, and project return on investment from improvements in the drivers. To demonstrate how the approach can be implemented in a specific corporate setting and to show the methods used to test and validate the model, the authors illustrate a detailed application of the approach by using data from the airline industry. Their framework enables what-if evaluation of marketing return on investment, which can include such criteria as return on quality, return on advertising, return on loyalty programs, and even return on corporate citizenship, given a particular shift in customer perceptions. This enables the firm to focus marketing efforts on strategic initiatives that generate the greatest return.

Relying on a Bayesian-like framework, the authors develop a behavioral process model of perceived service quality. Perceptions of the dimensions of service quality are viewed to be a function of a customer's prior expectations of what will and what should transpire during a service encounter, as well as the customer's most recent contact with the service delivery system. These perceptions of quality dimensions form the basis for a person's overall quality perception, which in turn predicts the person's intended behaviors. The authors first test this model with data from a longitudinal laboratory experiment. Then they develop a method for estimating the model with one-time survey data, and reestimate the model using such data collected in a field study. Empirical findings from the two tests of the model indicate, among other things, that the two different types of expectations have opposing effects on perceptions of service quality and that service quality perceptions positively affect intended behaviors.