A service company’s major goal often tries to identify profitable customers and to retain those customers through long-term relationships (e.g., Reinartz & Kumar, 2003). Retention has been shown as a sound strategy for long-term success (e.g., Reichheld & Sasser, 1990). Frequently, companies employ a market orientation strategy to reach their retention goals. Market orientation occurs when organizations base their procedures and structures around the customer (Narver & Slater, 1990), with the intention of garnering customer loyalty through superior customer satisfaction. The importance of the customer and the delivery of quality service has been illustrated in many literature sources, (e.g., Zeithaml, Berry, & Parasuraman, 1996) yet many companies continue to use policies that exploit the customer or service quality in favor of bottom line profits. Long-term contracts may be such a policy.
Key Terms in this Chapter
Market Orientation: Basing procedures and structures of the firm around the customer.
Contingency theory: Theory that states for organizations to be effective, they have to achieve the proper fit between their structure and their environment.
Satisfaction: The fulfillment of a need, claim, or desire.
Contract: A formal or legally binding agreement such as one for the sale of something, or one setting out terms of employment.
Service: An act or performance offered by one party to another;
Service Failure: A gap that exists between customer expectations and service performance.
Brand Equity: Positive differential effect that knowing the brand name has on customer response to service.