The long-term impact of service empathy and responsiveness on customer satisfaction and profitability: a longitudinal investigation in a healthcare context

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.