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Service Quality Erosion
by Bob Powell, 11/28/07
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Service quality is important because the market value of companies depends on customer satisfaction. One point on the UofM Business School 100-point American Consumer Satisfaction Index (ACSI) scale translates to 3% of company market value.

And this isn't just because of concern about losing customers. Examples: Bank loan officers who less time with customers sell fewer ancillary services. Insurance claims agents who take less time per claim give excessive payouts.

Based on work at MIT, this paper describes the structure that can drive entire industries into a vicious cycle of declining service quality.

Service Quality Erosion
Service Quality Erosion data

See also The Insurance Crisis that describes how rising settlement costs for insurance companies are largely caused by systematic, long-term underinvestment in claims adjusting capacity. Whereas it's easier to blame lawyers and frivolous lawsuits, this explains how an insurance company's own policies led to increased payouts and lawsuits.

URL: http://www.exponentialimprovement.com/cms/servqualeros.shtml

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