The strategic role of service in manufacturing industries

This study examined the role played by service in influencing industry and firm performance. Service demand was defined as the importance of the service attribute in the customer's buying decision. Service supply was defined as the quality of service provided by a firm relative to its competitors.;Four basic questions regarding the strategic role of service were investigated. A detailed theoretical discussion led to the following conclusions: (1) The importance of service to customers should alter industry structure to positively impact profitability and negatively impact average firm market share (i.e. increase industry fragmentation). (2) A firm's beliefs regarding the importance of service to customers and their willingness to pay for service, should determine the service strategy that will be pursued by a firm. (3) In an industry where service is not important to customers a large proportion of firms should pursue a service parity strategy. This proportion should decline as service importance increases; and there would be a corresponding increase in the proportion of firms pursuing an inferior or superior service strategy, respectively. Thus a contingent fit between service importance and service quality is indicated. (4) In environments where service is very important, a superior service strategy should provide the highest profitability and market share. In environments where service is somewhat important a parity strategy should do so. In environments where service is not important an inferior service strategy, should provide the best firm performance. (5) A firm's image should influence customer perceptions of the service quality provided by the firm; a strong positive relationship between image and perceived service quality should be expected.;Propositions and hypotheses reflecting these conclusions were empirically investigated using PIMS (Profit Impact of Marketing strategies) data. Some of the suggested relationships were strongly supported by the data, others were weakly supported and some were not supported. Reasons for the deviations from expected results were suggested. They included the following: (1) Limitations inherent to the PIMS data. (2) Changing economics of service delivery. (3) Misperceptions of firms regarding the costs of service delivery associated with alternative service strategies.;The study concluded with suggestions for new service research using causal modeling methodologies.