Abstract/Details

Service quality and customer lifetime value in professional sport franchises


1996 1996

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Abstract (summary)

The economics of professional sports in the 1990s, coupled with increased competition for the entertainment dollar, has resulted in a shift of emphasis from acquiring customers to retaining customers. One method to improve retention is through developing strong relationships with customers by constantly striving to provide high quality service.

Inability to control the core product, a severe obstacle not faced by other industries, serves to further heighten the need to provide high quality service within this context. With winning in professional sports being cyclical by nature, service quality is one area under the sport marketers control which can be utilized to gain a competitive advantage. Therefore, as in other industries, sport managers are searching for tools to effectively measure service quality.

In addition to measuring service quality, marketers have also started to measure the value of individual customers. The availability of information technology has enabled marketers to store information on consumers, assess their value to the organizations, and create individualized marketing efforts. Nonetheless, efforts toward measuring customer relationship value are scarce in the literature.

The standard approach for measuring relationship value is customer lifetime value (LTV). LTV is "the present value of expected benefits (e.g. Gross margin) less the burdens (e.g., direct costs of servicing and communicating) from customers" (Dwyer, 1989). While this model focuses on estimated income streams from the relationship, it does not account for the added benefits from the relationship.

This study developed and empirically tested a model of expanded LTV. Besides measuring a discounted revenue stream, the model measured the strength of the existing relationship and expanded relationship dimensions, as well as an individual's opportunity cost for being in a relationship with a professional franchise. The sensitivity of model parameters was tested and comparisons were made to the standard LTV model. The model was validated by segmenting customers into LTV deciles, and comparing these segments on their ratings of overall service quality, as measured by SERVQUAL (Parasuraman, et. Al., 1988).

This model was empirically tested based on a survey distributed to 5000 season account holders of a professional basketball team (n = 1,380). The expanded LTV model was sensitive to alterations in the inflation rate and discount factor (discount rate adjusted for opportunity costs), but relatively insensitive to changes in ticket price and marketing costs. Additionally, the expanded model captured more information about the relationship between customers and franchises than the standard model.

Perceptions and expectations of service quality increased with higher levels of customer investment for both dimensions of service quality and service areas. However, the overall impact of LTV on service quality gap (perception expectation) scores was negligible.

Indexing (details)


Subject
Marketing;
Management;
Recreation
Classification
0338: Marketing
0454: Management
0814: Recreation
Identifier / keyword
Social sciences, sports
Title
Service quality and customer lifetime value in professional sport franchises
Author
McDonald, Mark Alan
Number of pages
204
Publication year
1996
Degree date
1996
School code
0118
Source
DAI-A 57/10, Dissertation Abstracts International
Place of publication
Ann Arbor
Country of publication
United States
ISBN
9780591170177, 0591170175
Advisor
Sutton, William A.; Milne, George R.
University/institution
University of Massachusetts Amherst
University location
United States -- Massachusetts
Degree
Ph.D.
Source type
Dissertations & Theses
Language
English
Document type
Dissertation/Thesis
Dissertation/thesis number
9709627
ProQuest document ID
304302908
Copyright
Database copyright ProQuest LLC; ProQuest does not claim copyright in the individual underlying works.
Document URL
http://search.proquest.com/docview/304302908
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