ServiceFriday: Service Innovation and its Impact on Customer Engagement and Loyalty

Promoting brand loyalty and customer engagement is increasingly important in a world of service where innovation is constant. Brand loyalty is “a customer’s favorable attitude towards the service organization that results in repeat buying behavior.” Customer brand engagement behaviors (CBEBs) encompass customer actions involving the collection of brand information, participation in brand marketing activities and interacting with others. But how does service innovation affect CBEBs and brand loyalty?

Service innovation is defined as “how actors in service systems integrate and act on available resources to create value for themselves and others, resulting in a new and better process that enhances their well-being or makes them better-off in some respect.” Three focal components of service innovation are the service concept newness, perceived value and relative advantage. Relative advantage refers to “the degree to which an innovation is perceived as being better than its precursor.”

A study, recently published in the Journal of Services Marketing, focused on service innovation’s impact on CBEBs and brand loyalty. The study also examined the impact of CBEBs on brand loyalty. Data was collected from a pool of 430 Uber customers who completed an online survey. The survey’s questions used a scale to measure customer agreement with the aforementioned service innovation dimensions, CBEBs and brand loyalty.

After assembling a structural model of the data, the results displayed a “positive link” between perceived service concept newness and CBEBs. Perceived value affected collecting brand information and interacting with others, but had no significant impact on participating in brand marketing activities. Perceived relative advantage partially influenced CBEBs as the results indicated that relative advantage significantly impacted collecting brand information and participating in brand marketing activities. However, the researchers noted that there was no link between relative advantage and interacting with others.

Researchers discovered that brand loyalty was partially influenced by CBEBS. “In addition, although brand loyalty is influenced by participating in brand marketing activities and interacting with others, the results found that collecting brand information does not influence brand loyalty.” researchers wrote. The results also indicated that although perceived relative advantage and perceived value impacted brand loyalty, perceived service concept newness did not significantly affect brand loyalty.

Managerial implications

Service firms likely know of the benefits of customer brand engagement, but it is not easy to effectively engage customers through service innovation. The results show that participating in brand marketing activities and interacting with others positively influences brand loyalty. Therefore, managers would be wise to design a way in which people within the service system can contribute their resources to “enhance the outcomes” of service innovation. An example of this is how Microsoft has promoted online communities and forums for their software.

It is crucial that managers develop strategies that nurture customer engagement. Uncertainty is often the cause for customers to learn more about new services. So, trying to reduce the uncertainty linked to the newness of a service is of great importance. Researchers recommend that “customers be part of the service development process for services with high novelty.”

Lastly, the results indicate the importance of perceived value and the relative advantage of service innovation in regards to brand loyalty. In the tech savvy world of today, customers are increasingly using apps on their phone, laptop, tablet, or other internet-based tools to order and pay for services. This led researchers to suggest that “service organizations must ensure that the technology interfaces are easy to use, interactive, highly responsive, and of high quality.”

To learn more about the impact of service innovation on service firms’ brand loyalty and customer engagement, read the full article at the Journal of Services Marketing. (A fee may apply.)