Cloudonomics: The Business Value of Cloud Computing, + Website

Service Quality Impacts

The leading thinkers in understanding service quality are longtime collaborators Leonard Berry and A. Parasuraman, of Texas A&M, and Valarie Zeithaml, of Duke University. As Berry and Parasuraman have emphatically stated: “Service quality is the foundation for services marketing because the core product being marketed is a performance. The performance is the product; the performance is what customers buy.”1

To understand the importance of service quality and reliability, consider this math regarding the “iceberg of ignorance,” from Chuck Chakrapani, president of the largest independent research company in Canada, Leger Marketing. Receiving only 50 complaints might indicate a loss of 2.5 million impacted customers. This math is based on the number of dissatisfied customers and the percentage of those who actively complain.

A satisfied customer may tell 5 to 8 potential customers about how great a company is. Unfortunately, a dissatisfied customer will tell twice as many people—10 to 16—how awful the company is. Consequently, one dissatisfied customer can cost a firm up to two dozen: the 16 people they complain to and the 8 to whom they don’t recommend the firm.2

That was the traditional math, anyway. Today there is a new dynamic. A single unsatisfied customer—such as Dave Carroll—with a single incident—such as having his guitar damaged by an airline—can tell over 11 million people—not accounting for duplicate views—about his experience.3

The relationship ...