Customer Loyalty and Supplier Quality Competition
Author:
- 1 February 2002
- journal article
- Published by Institute for Operations Research and the Management Sciences (INFORMS) in Management Science
- Vol. 48 (2) , 207-221
Abstract
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.Keywords
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