Return on Quality or Just Returning Customers? A Study of the Return on Quality in an After-Market Setting

Abstract: Companies with efficient after-market service operations are better at securing long-term growth and thus remain competitive facing an intensifying global competition (Jacob & Ulaga, 2008). One way of achieving operational efficiency is to invest in quality. Scholars propose that quality of operations not only reduces costs, but it also has beneficial effects on customer satisfaction, retention and repurchase behaviour. In an influential article, Rust et al., (1995) argued that (1) Quality is an investment. (2) Quality efforts must be financially viable. (3) It is possible to spend too much on quality. (4) Not all quality efforts are equally valid. The present study empirically investigates whether there is a Return on Quality (ROQ) in an after-market operation setting. We conceptualize quality in two different ways in our study; operating performance which is followed up internally, and quality that customers perceive (customer satisfaction). Analysing internal company data from four of the studied organisation's major markets, we find weak support for the ROQ in an after-market setting. First of all, operating performance measures do not fully explain the variation in customer satisfaction. Second, customer satisfaction is only weakly linked to purchasing behaviour in the short run. Finally, we do find some indications of a positive relationship between operating and financial performance, but the improvements in operating performance need to be relatively large. Given our ambiguous results, we believe that the ROQ is difficult to achieve in the short term, and propose further research of long-term customer behaviour based on the customers' current satisfaction with after-market services.