Impact of Participative Service Relationships on Quality, Satisfaction and Retention: An Exploratory Study

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Abstract

Within any service there is scope for considerable variation in the degrees to which both parties become involved in the relationship; beyond a certain minimum level, customers and service providers may be more or less participative. However, participative behavior should yield benefits. Customers who are more willing to share information and develop closer personal contacts might be expected to benefit in terms of a higher quality of service provision, because the provider will be more knowledgeable about their needs and expectations. Similarly, greater degrees of participation by the service provider should enhance customer awareness of the ways in which the supplier operates and, in turn, should result in more realistic expectations of what the supplier can offer. Thus, it can be argued that the extent to which both parties participate in a relationship will affect the perceived quality of the service provided; this, in turn, is expected to make an impact on overall satisfaction and customer retention. This paper presents an exploratory analysis of the relationships between relationship participation, quality, satisfaction, and retention using data from over 1,200 small firms. The results highlight the importance of participative behavior, particularly on the part of the service provider, in explaining perceived quality and satisfaction; in turn, satisfaction is found to be an important influence on retention. The direct impact of participation on retention is found to be weak.

Section snippets

Modeling the Effects of Participation in the Service Relationship

This section discusses the concept of participation in service relationships and explores its impact on the quality of service provided, overall satisfaction, and customer retention. Although it can be argued that all service encounters constitute a relationship in some form or another, it is clear that there is considerable variation in the form that these relationships take, with some requiring considerable closeness and involvement; whereas, others, by their nature, are more distant and

Customer Relationships in the UK Banking Sector

Before any specific analysis of customer participation in service relationships, it is desirable to examine the context in which those relationships develop. The UK banking sector is dominated by a small number of large banks providing retail and corporate services, both nationally and internationally. From the perspective of the banks, the small business segment is arguably of particular importance because of the profit and revenue opportunities it presents (Bannock and Doran, 1991). The value

Data Collection and Measurement

Data for the empirical analysis were obtained from a membership survey conducted by the Forum of Private Business (FPB) in January/February 1996. (The Forum of Private Business is a UK-based organization that seeks to represent and promote the interests of smaller businesses. It currently has around 20,000 members.) This is a biennial survey that provides one of the most comprehensive sets of data relating to the bank–small business relationship in the UK. Approximately 14,000 questionnaires

Empirical Analysis

The relationships outlined in Figure 1 were estimated using a series of multiple regression equations. In general, inspection of the residuals suggested that there were no substantive problems with non-normality and heteroscedasticity, and the relatively low variance inflation factors suggested that the impact of multicollinearity was limited. The first five equations presented in Table 3 seek to explain the different dimensions of participation as a function of the institutional atmosphere of

Conclusion

Participation in service relationships is held to be of particular importance for continuously produced services in which credence qualities play an important role in customer evaluation. Financial services in general and banking in particular would fall into this category. An empirical analysis of participation in the relationship between banks and small businesses has focused on dimensions of participative behavior by both parties to the relationship. Different dimensions of participation

Acknowledgements

The authors thank the Forum of Private Business (FPB) for the provision of the database and four anonymous JBR referees for helpful comments on an earlier draft.

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