Many firms see service customization as a powerful tool, but this application is not well understood yet. The paper (Coelho & Henseler, 2012) developed a model of customer relationship outcomes of service customization and the efficacy of service customization. The main idea about differentiation is to identify profitable market segments and to design products and services that satisfy that segment. Now, the more popular form of differentiation among firms is that of customization; firm’s offering tailored to meet the heterogeneous customers’ needs, aims at satisfying as many needs as possible for each individual customer and an answer to the shifting nature of customer demand for greater variety, more features, and higher quality in products as well as services. Developments in computing power have offered these possibilities and companies will keep investing in these technologies because of the strong need for information.
The methodology used in this paper are two large-scale studies in different service industries based on the European Customer Satisfaction Index framework and applied PLS path modeling to test this model. Customization is a big plus for firms because it increases their service quality, customer satisfaction and with that customer loyalty toward a service provider. It investigates the simultaneous effects of service customization on customer loyalty and other relationships variables and offers new insights relatively to the nature and size of customization effects. The paper found that this customization has both direct and mediated effects on customer loyalty. These findings and service customization is a great instrument for relationship marketing which depends on customer satisfaction and customer trust. Service providers can use this paper’s findings and thus, service customization as an effective instrument for achieving not only higher customer satisfaction, but also higher customer loyalty. Service customization is most effective for companies that have deficits in satisfying their customers, while at the same time their customer relationships are characterized by a high level of trust and could help managers to decide upon resource allocation to enhance customer loyalty.
A business example can be found in the banking industry. By introducing non-banking products or services, banks can cater to customer lifestyles and needs. For example, ‘’banks have begun to offer insurance on items such as mobile phones, travel insurance, identity theft protection and premier event access’’ (zafin.com). Banks can explore lifestyle bundles with Internet services in association with a, for example, home loan. By allowing customers to customize their experiences through various channels, and by allowing banks to offer suitable products and services based on customer data, a bank could create customer stickiness and retention.