Customer Loyalty and Supplier Quality Competition | Zendy

Noah Gans | Zendy

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Customer Loyalty and Supplier Quality Competition

Author(s) -

Noah Gans

Publication year - 2002

Publication title -

management science

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.954

H-Index - 255

eISSN - 1526-5501

pISSN - 0025-1909

DOI - 10.1287/mnsc.48.2.207.256

Subject(s) - competitor analysis , competition (biology) , business , loyalty business model , service quality , marketing , quality (philosophy) , customer retention , service (business) , microeconomics , industrial organization , economics , ecology , philosophy , epistemology , biology

We develop a model of customer choice in response to random variation in quality. The choice model yields closed-form expressions which reflect the effect of competing suppliers' service quality on the long-run fraction of purchases a customer makes at the various competitors. We then use the expressions as the basis of simple normative models for suppliers seeking to maximize their long-run average profits. The results provide insight into the effect of switching behavior on the service levels offered by competing suppliers.Customer Loyalty, Quality Competition, Bayesian Bandit

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