A Dynamic Model of Customers’ Usage of Services: Usage as an Antecedent and Consequence of Satisfaction

Abstract

As firms seek ways to manage customer relationships over the long term, understanding the dynamics of the service provider–customer relationship becomes a key priority. In this article, the authors develop and test a dynamic model of customer usage of services, identifying causal links between customer's prior usage levels, satisfaction evaluations, and subsequent service usage. The authors quantify the (heretofore anecdotal) relationship between customer satisfaction and subsequent service usage and provide new theoretical insights into the antecedents of customer satisfaction by introducing the concept of perceived payment equity. The primary contribution of the article is an understanding of how service usage changes over time, and particularly, how the consumer's view of the fairness or “equity” of the exchange over time affects the consumer's usage of services. Specifically, payment equity represents the customer's changing evaluation of the fairness of the level of economic benefits derived from usage in relation to the level of economic costs, that is, the customer's evaluation of the fairness of the exchange. By examining the antecedents of payment equity, it can be determined how customers use price and usage over time to update their evaluations of the fairness of the exchange. This evaluation affects overall satisfaction, which in turn affects future usage. The results suggest that customers’ usage levels can be managed through pricing strategies, communications, and more generally dynamic customer satisfaction management.