The long-term impact of service empathy and responsiveness on customer satisfaction and profitability: a longitudinal in
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The long-term impact of service empathy and responsiveness on customer satisfaction and profitability: a longitudinal investigation in a healthcare context Jun Ye 1 & Beibei Dong 2 & Ju-Yeon Lee 3
# Springer Science+Business Media New York 2017
Abstract Rising labor costs in healthcare industries have led many firms to underinvest in service empathy and responsiveness by downsizing staffing levels. Although such a strategy may help contain operating costs and improve productivity in the short run, its sustainability and long-term effect remain unclear, as the literature offers competing explanations of such an effect on customer satisfaction and overall profitability. Using 24 quarters of longitudinal patient satisfaction data and archival financial data from 25 clinical units in a large healthcare organization, this study examines how empathy and responsiveness influence profitability over time. The findings show that downgrading empathy and responsiveness allows firms to lower costs, resulting in immediate productivity benefits; however, this strategy has an enduring negative effect on customer satisfaction and ultimately hurts profitability in the long run. Keywords Customer satisfaction . Profitability . Empathy . Responsiveness . Service quality
* Beibei Dong [email protected] Jun Ye [email protected] Ju-Yeon Lee [email protected]
1
School of Management, Xiamen University, 422 Siming South Road, Xiamen, Fujian 361005, China
2
College of Business and Economics, Lehigh University, 621 Taylor St, Bethlehem, PA 18015, USA
3
College of Business, Iowa State University, 2167 Union Drive, Ames, IA 50011-2027, USA
Mark Lett
1 Introduction With labor increasingly becoming the largest component of operating costs in service industries, many firms are choosing to downsize staffing levels, thus reducing employee-to-customer ratios, to contain costs and improve productivity (Makarem and Al-Amin 2014). In the airline industry, the number of passenger per flight attendant increased from 582 in 2009 to 609 in 2015 for American Airlines, from 481 to 576 for Delta Airlines, from 1032 to 1083 for Southwest, and from 596 to 663 for US Airways (AirlineFinancials.com 2016). In the healthcare industry, the number of patient visits per employee increased by 20%, from 182 to 219 between 2006 and 2015 (IBISWorld Report 2015). Media have trumpeted concerns about hospital understaffing and the resultant adverse patient outcomes (Robbins 2015). This topic became controversial when in 1999, the state of California, despite huge opposition from hospitals, mandated the minimum nurse-to-patient ratio according to the type of clinical practices (Robbins 2016). Although downsizing service staffing levels may immediately reduce costs, whether this strategy is sustainable and how it will ultimately affect a firm’s profitability remain uncertain (Ostrom and Iacobucci 1995). This uncertainty comes from two conflicting pathways through which service attributes affect a firm’s profitability: productivity and customer satisfaction (Mittal et
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