IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-00632076.html
   My bibliography  Save this paper

Managing Retention in Service Relationships

Author

Listed:
  • Sam Aflaki

    (HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Ioana Popescu

    (INSEAD - Institut Européen d'administration des Affaires)

Abstract

Consider a firm that can actively manage and customize the service offered to customers in a repeat business context. What is the long-term value of such flexibility, and how should firms manage the service relationship over time? We propose a dynamic model of the firm-client relationship that relies on behavioral theories and empirical evidence to model the evolution of service quality expectations and their impact on customer retention and profitability. We find that firms can extract higher long-term value by managing service experiences and expectations over time. Varying service in the long run is not optimal, however. We characterize the optimal dynamic service policy and show that it converges to a steady-state service level. Loss aversion expands the range of constant optimal service policies, suggesting that behavioral asymmetries limit the value of responsive service. Sensitivity results characterize the effect of customer margin, loyalty, and memory on policies and profits.

Suggested Citation

  • Sam Aflaki & Ioana Popescu, 2011. "Managing Retention in Service Relationships," Working Papers hal-00632076, HAL.
    • Handle: RePEc:hal:wpaper:hal-00632076
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Slotnick, Susan A. & Sobel, Matthew J., 2022. "Collaboration with a supplier to induce fair labor practices," European Journal of Operational Research, Elsevier, vol. 302(1), pages 244-258.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00632076. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.