Date Added: May 2010
Consider a firm that has the flexibility to actively manage and customize the service offered to its 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? The author propose a dynamic model of the firm - client relationship that relies on behavioral theories and empirical evidence to model the endogenous evolution of service expectations and customer satisfaction, as well as their impact on repurchase decisions. In general, the authors find that firms can extract higher long-term value by managing service experiences and expectations over time.