Assessing the Influence of Economic and Customer Experience Factors on Service Purchase Behaviors

Abstract

Past studies have overlooked the joint effects of economic and customer experience factors on service purchase behaviors. Furthermore, service firms tend to make substantial investments in enhancing customer experience, mitigating the negative effects of service failures through recovery efforts and increasing overall customer satisfaction. Yet, largely due to a paucity of data, we know little about how the state of the economy influences the way in which customers use past service experiences to make future purchase decisions. We hypothesize that the state of the economy moderates the effects of customer experience factors on customers’ service purchase behaviors. In addition, we examine how personal income influences the degree to which the aggregate economy influences service purchase decisions. We test the proposed model using panel survey and transaction data from an international airline carrier. Our findings demonstrate that, contrary to wisdom in the popular press, customer experience matters more when the economy is doing better, not worse. Furthermore, lower income consumers are more sensitive to changes in the economy than higher income consumers. We validate the hypothesized model using a controlled experiment and establish that aggregate measures of the economy can be used to predict individual perceptions and purchase intentions.