Customer satisfaction/dissatisfaction has become an important issue for marketing practitioners. The authors examine the issue in terms of customer service. In particular, practitioners and academicians have noted that simply investing in greater service delivery may not return the cost of the additional investment. Part of the problem is that customers’ response to service increments can be nonlinear, and satisfaction and dissatisfaction thresholds may not occur at the same point. The authors propose a method for analyzing this complex behavior in a way that can lead to the development of more accurate service strategies through an understanding of the relationships among customer-transaction costs, satisfaction, and purchase loyalty. They use a catastrophe model to describe a service loyalty customer-response surface. Then, by presenting a “real-world” application with a small service-quality customer dataset provided by General Electric Supply, they show how one actually estimates such a model and interprets the results.
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