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The effect of standardization and customization on service satisfaction

Article  in  Journal of Service Science · June 2010

DOI: 10.1007/s12927-010-0001-3

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Journal of Service Science (2010) 2:1-23
DOI 10.1007/s12927-010-0001-3

The Effect of Standardization and Customization on Service

Satisfaction

Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

Received: 21 February 2010 / Accepted: 31 May 2010 / Published: 30 June 2010

© The Society of Service Science and Springer 2010

ABSTRACT
Standardization versus customization in service design is a topic of considerable discussion
and debate. While it is recognized that service providers need to standardize or customize
their services, it is unclear how such efforts may affect customer satisfaction. We hypothesize
that standardization and customization may contribute to service satisfaction in a nonlinear
fashion, and simultaneous efforts of standardizing and customizing service may not produce
synergy in affecting customer perceptions of service. Empirical data collected from a sample
of automobile after sale service customers offer considerable support for these hypotheses.

KEYWORDS
Standardization, Customization, Service Satisfaction, Nonlinear Effect.

Guangping Wang
Management Division, Pennsylvania State University
e-mail: gww10@psu.edu
Jianling Wang
College of Economics and Management, Nanjing University of Aeronautics and Astronautics
e-mail: wjl7520@126.com
Xiaoqin Ma
Lecturer of Marketing, Yancheng Institute of Technology
e-mail: jasmine_mxq@163.com
Robin G Qiu ( ), corresponding author
College of Economics and Management, Nanjing University of Aeronautics and Astronautics, and
Department of Information Science, Pennsylvania State University
e-mail: robinqiu@psu.edu
2 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

1. INTRODUCTION
Effectively managing customer service satisfaction is a topic of vast interest for marketing
practitioners and academics alike because of their positive impact on customer behavior and
firm performance (Homburg et al. 2005, Morgan et al. 2005, Rust et al. 2002, Zeithaml, et al.
1996). Customer satisfaction is one of the primary factors leading to customer loyalty and
continuation of relationships (Rust & Chung 2006). Various studies have found that higher
level of customer satisfaction leads to greater customer loyalty and word of mouth recom-
mendations (Anderson & Sullivan 1993, Bolton & Drew 1991; Guo et al. 2009, Lai et al.
2009, Oliver 1980).
Service satisfaction is intricately related to perceived service quality (Parasuraman et al.
1988; Zeithaml et al. 1996). Marketing researchers have treated service quality and satis-
faction both as perceptual constructs from a disconfirmation perspective. Service quality has
been defined as “the outcome of an evaluation process where the consumer compares his
expectations with the service he has received” (Gronroos 1982, p. 37) or the difference
between expected service and perceived service (Parasuraman et al. 1985, Zeithaml et al.
1990). Customer satisfaction has also been conceptualized as the perceived discrepancy
between prior expectations and actual performance (Oliver 1980, Tse & Wilton 1988),
although it has been suggested that quality appraisal is more cognitive-oriented, while
satisfaction is a more emotional evaluation (Bagozzi 1992, Lai et al. 2009).
As service businesses increasingly focus on the needs of small segments of customers or
even individual customers, one fundamental issue is how to deliver superior value to its
customers in a cost-effective way so as to ensure customer satisfaction. From service delivery
standpoint, the challenge has been to manage service quality and service productivity
simultaneously. As the key to reducing cost, achieving reliability, and improving productivity
is to standardize the service process and product, whereas the key to ensure that customer
needs are met is to customize the service offering, this challenge eventually boils down to the
balance of standardization and customization of service processes and offerings.
Although much research has been done in the service area from various perspectives such
as the SERVQUAL model (Parasuraman et al. 1988, Roses et al. 2009), the gap model
(Zeithaml et al. 1990), service personnel management (Gwinner et al. 2005), and operations
© The Society of Service Science and Springer
 The Effect of Standardization and Customization on Service Satisfaction 3

design (Anderson et al. 1997), few studies are explicitly devoted to balancing standardization
and customization. As a result, our understanding of how standardization and customization
affect customer response (e.g., satisfaction) is limited. How are standardization and custom-
mization perceived by customers in affecting service satisfaction? Is more customization or
more standardization always better for the customer? Can standardization and customization
efforts interact to provide synergy, or will they distract from each other in affecting service
satisfaction? These managerially interesting questions remain to be answered.
Accordingly, the objective of this research is to gain insights on these perplexing
questions. We take an operations perspective to quality and link it to customer satisfaction,
and examine the possible interactive and nonlinear effects of standardization and custom-
mization on service satisfaction. We report an empirical study using data collected from
customers of automobile after-sale services in a metropolitan area in eastern China. We
conclude with a discussion on the implications and limitations of study results.

2. CONCEPTUAL BACKGROUND AND HYPOTHESES

2.1 Customer Satisfaction

Customer satisfaction is typically viewed from a disconfirmation perspective as a function
of expected quality and perceived quality, or the extent to which perceived service
performance meets or fails to meet prior expectations (Anderson & Sullivan 1993, Oliver
1980). Post-consumption satisfaction is the consumer’s response to the evaluation of the
perceived discrepancy between prior expectations and the actual performance of the product
or service (Oliver 1980, Tse & Wilton 1988). Following this literature, we define customer
satisfaction as the customer’s overall evaluation of the service experience, based on a
comparison between prior expectation and perceived performance.

2.2 Standardization and Customization

A firm’s service offerings can range from one-size-fits-all to totally personalized expe-
riences for each customer (Pullman et al. 2001). Although researchers have demonstrated
satisfaction is a function of the quality of the service the customer receives, little research has
Journal of Service Science (2010) 2:1-23
4 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

been conducted to examine how standardized or customized service may affect satisfaction.
Quality can be conceived as consisting of two opposing but presumably complementary
categories: freedom from deficiencies and meeting customer needs (Juran 1988). Freedom
from deficiencies refers to the degree to which the service is reliable with respect to the
variance customers experience in the set of features, feature levels, and service delivery.
Meeting customer needs involves designing customized attributes, features, and unique ways
of delivering the service. This dual nature of quality requires both standardization and
customization of the service design and delivery process (Anderson et al. 1997). Standar-
dization provides a means to service reliability and freedom from defects, whereas custom-
mization improves the probability of meeting customers’ specific needs. Consistent with this
reasoning, Lovelock (1992) points out seven operational issues that marketers need to
understand in order to achieve a smooth and productive service operation. One of them is
standardization versus customization. The key is to develop customer-oriented strategies that
provide better service to customers but also make the operation run more smoothly
(McCutcheon et al. 1994).
As humans are a must in most service operations and humans are notorious for the
unreliability and variability in their behavior, service organizations strive to mimic one of the
fundamental characteristics of industrial production, which is standardizing the human factors
in the production and delivery of service. Standardization takes the form of manuals,
operating procedures, and other blue prints to regulate individual behaviors so as to control,
predict, and minimize mistakes and deviation among employees. The primary goal of
standardization is to control the output activity and service quality through scientific
management of service to minimize the risks associated with the human factor. Not only the
process is under control, the cost is also minimized, and efficiency maximized through
standardization. The service will be delivered within minimal time and cost and with
maximal reliability. The customer will thus not meet with unpleasant surprises, leading to
satisfaction.
The reliability aspect of quality, achieved through standardizing the service design and
delivering process, has traditionally been found to be the most critical factor influencing
service quality perceptions and satisfaction (Parasuraman et al. 1988), but customization is
© The Society of Service Science and Springer
 The Effect of Standardization and Customization on Service Satisfaction 5

increasingly important for service quality (Fornell et al. 1996), especially when there is
heterogeneity in market demands and competition from other service firms (Peters & Saidin
2000). The idea of meeting the specific needs of smaller and smaller market segments is at
the heart of marketing, and is described as a strategy that creates and delivers superior
customer value (Treacy & Wiersema 1993). Researchers argue that customizing the firm’s
offering to meet the diverse needs of individual customers is more important for service firms
than for goods firms (Anderson et al. 1997). The production and delivery of the service
should be unique, where customized encounters take place with human beings interacting
with each other to solve the customer’s unique problems (Gronroos 1990, Zeithaml et al.
1990).
As such, both standardization and customization are approaches service firms can take to
pursue service quality and customer satisfaction, and in general we expect both standar-
dization and customization contribute positively to service satisfaction.

2.3. Quadratic Effect of Standardization

Although the idea is that standardization serves to increase predictability and reliability and
reduce variability and cost, all of which are desired by the customer, the effect of standar-
dization on customer satisfaction may be null or negative at low or medium levels of
standardization. There are significant costs and investments involved in the standardization
effort (Polo-Redondo & Cambra-Fierro 2008), and there is a steep learning curve for the
company as well as for the employees (Senge 1990). The additional investment in service
design, employee training, and capital equipment may increase the cost of the final product.
As the company standardizes its service offerings in its initial stages, the number of its
offerings may be reduced, yet greater service reliability and lower product cost may not have
been realized. As a result, customer satisfaction may improve only minimally or even suffer.
As the level of standardization increases, economy of scale sets in, service failure rate
drops dramatically, and so do cost and waiting time. Delivery speed and predictability will
improve tremendously. Through effective implementation, the employees have more com-
plete knowledge of what to deliver, feel confident and a sense of security, and need not figure
out solutions for specific customer problems (Sandoff 2005). With no energy wasted on
Journal of Service Science (2010) 2:1-23
6 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

figuring out the specifics of individual customer problems and through economy of scale, the
company and the employees are able to reduce cost and increase efficiency dramatically
while offering industrialized uniform services. A combination of high reliability, fast
delivery, and low cost will heighten customer satisfaction. As such, when customers come in
for fast, reliable, and “one size fits all’ services (e.g., oil change, fast food), this positive
effect on satisfaction may grow much stronger as the level of standardization increases (Rust
et al. 1994). As such, we hypothesize:

H1: The relationship between standardization and service satisfaction is curvilinear

such that the relationship is null or negative at low standardization but positive at
high standardization.

2.4 Quadratic Effect of Customization

A similar relationship can be conceived between customization and satisfaction. Customi-
zation aims to identify individual customer needs and match service offering to these specific
needs, thereby enhancing customer experience. Customer delight occurs when performance
significantly exceeds customer expectations. A high level of customization will delight the
customer because of the individualized attention and specific tailored solutions. High custom-
mization through discovery of latent needs and provision of tailored solutions can heighten
customer satisfaction.
Lovelock & Wirtz (2004) suggest that firms can build especially strong bond with custom-
mers through customization, leading to loyalty or higher level of customer retention. Custo-
mized service requires employees’ cerebral contributions and intellectual input and can be a
substantial source of differentiation (Safizadeh et al. 2008). Compared to competitive offe-
rings, based on which the customer may form baseline expectations, the firm’s more
customized service, even only slightly more so than competition, may significantly affect the
customer.
However, customization means higher cost, longer waiting time, and higher customer
involvement in the service delivery process, which are sacrifices for a better fitting product.
At a low level of customization, the offering may not exactly meet the customer’s needs and
© The Society of Service Science and Springer
 The Effect of Standardization and Customization on Service Satisfaction 7

specifications, yet the cost, involvement, and other sacrifices may have increased. The
custom-mer may not be willing to pay a higher price for a service which is not necessarily
better (Bardakci & Whitelock 2004). In other word, the marginal return for the additional cost
may be zero or even negative. Only when the customization effort is able to identify the exact
customer problem and offer the exact product for the customer needs, the customer will be
delighted to pay a price premium for the customized solution.
Take medical services for example. A complicated case of medical problem requires
highly individualized attention, diagnosis, and treatment. A standard emergency room trea-
tment or a supermarket clinic service will certainly not do, yet a low level of customization
with a few additional tests is still inadequate. High customization occurs when a specialist or
a group of specialists start to provide diagnosis and offer individualized treatments, which
will effectively show a positive result. The more customized the service, the greater expe-
rience the patient has. As the level of customization increases, the service may become highly
specialized and more difficult to obtain elsewhere. A highly customized solution solves the
exact problem and offers superior value for the customer, resulting in patient satisfaction.
Therefore, we hypothesize:

H2: The relationship between customization and service satisfaction is curvilinear such
that the relationship is null or negative at low customization but positive at high
customization.

2. 5 Interaction between Standardization and Customization

There is a dilemma that service firms face in their effort to standardize and customize its
service offerings. That is, simultaneous pursuit of standardized and customized service might
be counterproductive. Researchers have argued that the pathways from different quality
improvement efforts to firm profitability are different (Rust et al. 2002). Firms may imple-
ment quality improvement efforts with an emphasis on either revenue expansion or cost
reduction, or both to increase profitability. While firms cannot ignore either revenue expan-
sion or cost reduction completely, Rust et al. (2002) show that firms adopt primarily a
revenue expansion emphasis or a cost reduction emphasis perform better than those that try to
Journal of Service Science (2010) 2:1-23
8 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

emphasize both revenue expansion and cost reduction.

By the same token, the route by which standardization and customization lead to customer
satisfaction is different. Standardization presumably results in fewer defects, reduced cost due
to less rework and improved operating efficiencies, and reduced price to the customer, thus
leading to increased service reliability and higher value perceptions. In other words,
standardization contributes to customer satisfaction through greater reliability, less risk, and
lower cost to the customer. Customization, on the other hand, may result in lower efficiency,
lower productivity, and higher costs; it enhances customer satisfaction through better, tailored
customer solutions.
Standardization and customization require different organizational resources to accom-
plish. Standardization calls for a strict process while customization requires flexibility and
innovation (McCutcheon et al. 1994). Standardization originates from the organization’s
pursue of reliability and lower cost. Customization is driven by the desire to satisfy each
individual customer, generate greater revenue, and expand the market. As a result, the effort
to standardize or customize is often implemented by different functional areas in the
organization. Standardization can be led by the operations department, while customization is
often initiated by the marketing or sales department. These departments may not work well
with each other as interdepartmental coordination is a constant struggle for management. In
addition, organizational culture supporting standardization or customization efforts tends to
be different. The culture that supports standardization is more focused on internal operational
efficiency and cost reduction, whereas that for customization is more market and customer
oriented. Because the inherent contradiction involves the simultaneous pursuit of both
standardization and customization, the resulting service offering may be of questionable
quality, which will compromise customer evaluation and satisfaction. Hence,

H3: The effects of customization and standardization on service satisfaction are weaker
when the firm attempts to standardize and customize simultaneously.

2.6 Empirical Model

To test these non-linear hypotheses, we develop an empirical model (Figure 1) that inclu-
© The Society of Service Science and Springer
 The Effect of Standardization and Customization on Service Satisfaction 9

des the linear, quadratic, and interactive terms of standardization and customization. In
addition, given that satisfaction may be affected by some other important factors as well, we
consider the inclusion of two control variables, namely, perceived competence and perceived
value, as mediation factors between standardization/customization and satisfaction. Perceived
competence is the cognitive evaluation of the service provider’s ability to provide superior
service that the customer needs (Zeithaml et al. 1990). The firm’s ability to deliver customi-
zed or standardized service offerings to individual customers frequently is reflected in the
competence of frontline customer contact employees (Gwinner et al. 2005). Perceived value
is the customer’s perception of the worth of service considering all the benefits and costs
associated with it (Ruiz et al. 2008). Research suggests that perceived quality and perceived
value are two most important predictors of satisfaction (Choi et al. 2004, Fornell et al. 1996,
Ruiz et al. 2008, Zhou et al. 2009).

Perceived
Standardization
Competence

Standardization2

Standardization Service
*Customization Satisfaction

Customization2

Perceived
Customization Value

Figure 1. Empirical Model

3. METHODS

3.1 Sample and Data Collection

The sample frame for our study consists of customers of after sale auto service providers in
Journal of Service Science (2010) 2:1-23
10 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

China. Auto repair services are considered appropriate for this research because the services
require a moderate level of employee contact and can be highly standardized, highly
customized, or somewhat in between (Schmenner 1986). Further, as China’s market economy
develops rapidly, competition among auto service providers has become increasingly fierce
and dynamic, and customer satisfaction has become a key to the survival of these firms.
By adopting the European automobile sales and service model, the Chinese automobile
industry uses the business model of 4S (sales, spare parts, service, and survey) stores, aimed
at providing consumers better services throughout the lifecycle of automobiles. Our survey
was conducted on customers who had recently used auto-services from their 4S stores in a
large eastern city of China. Only those who agreed to participate in this study received our
questionnaire. Confidentiality was guaranteed. Over a period of five months, 650 surveys
were distributed and 593 completed usable questionnaires were received, with a response rate
of 91.2%.
Three quarters of the sample were male (75.2%). The median age was 31-40 years, with
majority (94.3%) between 21-50 years of age. About 17% were high school graduates, 29%
had some college, 43% had college degrees, while the rest held graduate degrees. Median
monthly household income was in the RMB 5001-7000 Yuan (approx. US$700-1000) cate-
gory. Most of the respondents had 3 or more years of driving experience.

3.2. Measures
We developed multi-item measures for the constructs in our model tailored to the Chinese
auto service setting based on the construct definitions and the field interviews with auto
service managers and customers. We conducted 5 interviews each with 4S managers and
consumers before drafting the questionnaire, and had 15 consumers respond to a draft survey
as a pilot study to assess readability, clarity, and face validity of the measures. Based on the
feedback from these managers and consumers, we finalized the survey instrument (Dillman et
al. 2008). The survey asked the consumers to evaluate their recent auto service purchase
experience. As Chinese use 10 for a typical scale for the best, each construct was measured
with three items on 10-point Likert scales from 1 = strongly disagree to 10 = strongly agree.
We list all measurement items in Table 1.
© The Society of Service Science and Springer
 The Effect of Standardization and Customization on Service Satisfaction 11

Table 1. Measurement Items and Standardized Factor Loadings

Constructs Measurement Items SFL*
Standardization The services provided by this outlet are standardized ones. .91
The services I received were standardized ones. .91
The service outlet is known for its standardized services. .66
Customization The services provided by this outlet are customized ones. .91
The services I received were customized to my needs. .95
The service outlet is known for its customized services .80
Competence I am confident with the staff’s ability to service my vehicle. .91
The service staff competently delivered the service to me. .90
The service staff is competent for required auto services. .83
Value The service staff tried to save me money. .92
The service I received was good for the money. .93
Considering the service delivered, the price this outlet
.79
charged was reasonable.
Satisfaction My choice for the after sales service at this outlet was wise. .84
The service facility and equipment at this outlet is
.87
satisfactory.
I am satisfied with the service I received at this outlet. .88
Note: SFL: Standardized factor loading.

4. ANALYSIS AND RESULTS

4.1 Analysis Procedure

We test the hypotheses by estimating the model in Figure 1 with the structural equation
modeling technique. We first evaluate the measurement properties by examining the reli-
ability and validity of the constructs and the overall measurement model fit with the five
latent constructs (standardization, customization, competence, value, and satisfaction). We
then estimate three structural models in a hierarchical fashion (Cohen et al. 2003): a main
effect model with five latent constructs, an interaction model as depicted in Figure 1, and a
full model with an addition of a method factor. Evidence for supporting the hypotheses is
evaluated with model fit and path coefficients.

4.2 Measurement Model

We evaluated the psychometric properties of the measures by estimating a confirmatory

Journal of Service Science (2010) 2:1-23

12 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

factor measurement model that included five latent constructs (DeVellis 1991). The fit
statistics are as follows: χ2 = 362.56 (df = 80), root mean squared error of approximation
(RMSEA) = .08; non-normed fit index (NNFI) = .97, confirmatory fit index (CFI) = .97, and
goodness fit index (GFI) = .91. These statistics indicate the model fits the data reasonably
well.
The constructs were evaluated in terms of their unidimensionality, convergent validity,
reliability, and discriminant validity. All items load significantly on their expected constructs
(see Table 1 for standardized factor loadings), and modification indices suggest no significant
cross-loadings, indicating convergent validity of the measurement items and unidimension-
ality of the latent constructs. The average variance extracted (AVE) ranges from .70 to .78,
and both the Cronbach’s alpha and composite reliability measures range from .75 to .90,
suggesting internal reliability. For discriminant validity, we compared the squared correlation
with the average AVE of any pair of latent constructs and found that in no circumstance does
the squared correlation exceed the average AVE (Fornell & Larcker 1981).

Table 2. Description Statistics and Construct Correlation Matrix

Mean Stdev AVE 1 2 3 4 5
1. Standardization 5.0 2.20 0.70 -
2. Customization 5.6 2.04 0.70 0.27 -
3. Competence 6.5 1.76 0.78 0.35 0.59 -
4. Satisfaction 5.9 1.75 0.78 0.43 0.51 0.68 -
5. Value 5.8 2.05 0.75 0.19 0.65 0.52 0.52 -
Note: All correlations are significant at p < .01; AVE: average variance extracted.

In addition, we conducted Chi-square tests for all possible pairs of constructs comparing a
measurement model where the correlation between the two constructs was freely estimated
and a model where the correlation was constrained to unity. In all cases, the unconstrained
model fitted the data better than the constrained model, demonstrating discriminant validity
of the constructs. In sum, the overall results suggest acceptable measurement properties. In
Table 2, we present the means, standard deviations, AVEs, and correlation matrix of the

© The Society of Service Science and Springer

 The Effect of Standardization and Customization on Service Satisfaction 13

latent constructs.

4.3. Hypothesis Testing

Given the acceptable construct measurement properties, we proceeded to test the
hypotheses in a three step hierarchical procedure (Cohen et al. 2003). First, a structural model
with only five latent constructs was estimated (Model 1). The fit index were χ2 = 380.22 (df
=81); RMSEA = .08; NFI = .97; NNFI = .97; CFI=.96; GFI = .91; AGFI= .86. Second, the
nonlinear terms were added to the model (Model 2). The quadratic terms of standardization
and customization and the interaction term of standardization x customization were calcu-
lated after standardizing the summated scales of these two constructs with their loadings and
errors computed following Ping’s (Ping 1998; Ping 1995) single indicator procedure. This
procedure has been favorably reviewed for its robustness (Cortina et al. 2001) and success-
sfully applied in previous research on nonlinear effects (Agustin & Singh 2005). Following
Cohen et al. (2003), we also standardize all observed variables to avoid nonessential
multicollinearity among the interaction and quadratic terms and their respective component
variables. The model had fit index as follows: χ2 = 591.22 (df = 111); RMSEA = .08; NFI
= .95; NNFI = .94; CFI = .96; GFI = .88; AGFI = .82.
Third, given all measures were collected with one questionnaire and may contain common
method bias (Podsakoff et al. 2003), we included a common method factor in the model
following the procedures detailed in (Williams & Anderson 1994) (Model 3). The fit indices
for the final full model with nonlinear terms and a common method factor are: χ2 = 601.14 (df
=103); RMSEA = .08; NFI = .95, NNFI = .93; CFI=.96; GFI = .88; AGFI = .80. The
explained variances in the endogenous constructs are: competence = .17, value = .06, and
service satisfaction = .40. The path coefficients for all three models are reported in Table 3.
As the final full model (Model 3) takes the common methods factor into account and
presents the most comprehensive depiction of the data structure, we interpret the findings
from this model. The results lend substantial support to the three hypotheses. Both the linear
(path coefficient = .31, p < .001) and quadratic (path coefficient = .16, p < .001) effects of
standardization on satisfaction are positive and significant, in full support of H1. For custom-
mization, although its linear effect on satisfaction is not significant (path = .03, p > .10), its
Journal of Service Science (2010) 2:1-23
14 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

quadratic effect is positive and significant (path = .19, p < .001), in partial support of H2. The
linear effect of customization appears to be indirect through competence and value. The path
coefficient from the interaction term to satisfaction is negative and significant (path = -.16, p
< .001), which supports H3.

Table 3. Standardized Path Coefficients

Path from Path to Model 1 Model 2 Model 3
Standardization Competence .21*** .19*** .20***
Standardization Value .02 .05 -.01
Standardization Satisfaction .22*** .31*** .31***
Customization Competence .55*** .61*** .16***
Customization Value .65*** .62*** .21***
Customization Satisfaction .01 .08 .03
Competence Satisfaction .48*** .43*** .32***
Value Satisfaction .24*** .21*** .13***
2
Standardization Competence -.02 -.04
2
Standardization Value .05 .05
2
Standardization Satisfaction .18*** .16***
2
Customization Competence .18*** .27***
2
Customization Value -.02 .04
2
Customization Satisfaction .11* .19***
Standardization*Customization Competence -.18*** -.18***
Standardization*Customization Value -.10* -.07*
Standardization*Customization Satisfaction -.15*** -.16***
* ** ***
Note: p < .10; p < .05; p < .01.

To facilitate interpretation of the results, we calculated satisfaction scores at different

levels of standardization and customization, i.e., three standard deviations below and above
the means (see Table 4), and constructed a corresponding Fig. 2 to illustrate the nonlinear
effects of standardization and customization on satisfaction. As shown, at any given level of
standardization, the effect of customization on satisfaction is curvilinear and U-shaped. The
effect is negative at low customization, bottoms out at about the mean, and turns positive at
high customization. The same can be said for the effect of standardization at any given level
of customization.
© The Society of Service Science and Springer
 The Effect of Standardization and Customization on Service Satisfaction 15

Table 4. Satisfaction Scores at -3 to +3 Standard Deviations of Customization and

Standardization
Standardization
Customization -3 -2 -1 0 1 2 3
-3 0.69 0.68 0.99 1.62 2.57 3.84 5.43
-2 0.25 0.08 0.23 0.70 1.49 2.60 4.03
-1 0.19 -0.14 -0.15 0.16 0.79 1.74 3.01
0 0.51 0.02 -0.15 0.00 0.47 1.26 2.37
1 1.21 0.56 0.23 0.22 0.53 1.16 2.11
2 2.29 1.48 0.99 0.82 0.97 1.44 2.23
3 3.75 2.78 2.13 1.80 1.79 2.10 2.73

Figure 2. Nonlinear Relationship between Standardization, Customization, and Service

Satisfaction

As the table and graph show, the greatest level of service satisfaction (5.43) occurs when
customization is at the highest (+3) and standardization at the lowest (-3). Satisfaction is
reasonably high (3.75) at low customization (-3) and high standardization (+3). When both
customization and standardization are high (+3), satisfaction is only 2.73. These results
Journal of Service Science (2010) 2:1-23
16 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

confirm that simultaneous pursue of high standardization and customization has a negative
effect on customer satisfaction. Satisfaction is the lowest (0 or negative) when both stan-
dardization and customization are at about or slightly below the mean level. As such, the
nonlinear effect of these two service design and delivery processes is evident.

5. DISCUSSION
We theorize that the effects of customization and standardization are both curvilinear, and
that simultaneous pursuit of standardization and customization has a negative impact on
satisfaction. We find empirical support for our hypotheses using data collected from a sample
of customers of automobile services.

5.1 Theoretical and Managerial Implications

While research on services is concerned with the service design and delivery process, little
research has been conducted to investigate the possible nonlinear effects of standardization
and customization on customer outcomes. It is significant to notice that for both standar-
dization and customization, their effects on customer satisfaction are negative when they are
at low levels. Only when the firms are fairly competent in providing relatively more stan-
dardized or customized offerings do their effects become positive. In line of the argument
that simultaneously pursues revenue expansion and cost reduction may be counterproductive
(Rust et al. 2002), our empirical findings suggest that customer satisfaction can be achieved
through either a high level of standardization or a high level of customization, but high levels
of both standardization and customization actually do not produce maximal satisfaction.
This study suggests that service companies should focus on either customizing the service
to ensure customers’ specific needs are met, or standardizing the service so as to reach the
highest possible efficiency and lowest possible cost structure. Marketing strategies are
increasingly determined in a disaggregate manner, leading to service customization (Rust and
Chung, 2006). Customization is the most promising way of differentiating from competitors.
Companies are embracing what latest technologies can do for them in personalizing service
offering. Recent trends in e-service that leads to completely personalized interactions bet-
ween service providers and customers are but one example for such relationship.
© The Society of Service Science and Springer
 The Effect of Standardization and Customization on Service Satisfaction 17

Although the importance of customization is well recognized by service firms, many firms
continue their path to greater standardization (Sandoff 2005). This is a strategy that can cut
cost and increase efficiency to a great degree and thereby also increase customer satisfaction.
The U-shaped quadratic relationship between standardization and satisfaction is a vindication
that within well chosen market segments, firms can be successful through operational effi-
ciency and low cost.
A middle ground, however, is difficult to reach as far as customer satisfaction is concer-
ned. Firms must manage the trade-off between increasing customer satisfaction through
customization and increasing productivity through standardization (Rust & Chung 2006).
Research has suggested that ignoring this trade-off and trying both simultaneously may lead
to suboptimal financial results (Rust et al. 2002). We demonstrate the simultaneous pursuit of
standardization and customization may cause customer satisfaction to suffer. However, it is
also clear from our research that firms must keep standardization and customization both
above industrial average level since satisfaction will deteriorate when the service is not at par
with competitive offerings. With advanced technology, firms should explore the possibilities
of managing the balance between customization and standardization (Cao et al. 2006).

5.2 Limitations and Future Research

This study contributes to the literature by linking service operations to customer outcomes
and opens up ample opportunities for future research. For example, investigations into service
operations could be expanded to include other design issues such as modulation, in addition
to standardization and customization. Research can also examine the possible interactive
effect between these operational factors and marketing factors such as customer knowledge
and customer orientation on the customer evaluations. The domain of customer evaluation
could be expanded into behavioral responses including loyalty and word of mouth. Such
investigations should improve our understanding on the dynamic relationships among
operations, marketing, and customer responses.
This study is based on data collected from Chinese consumers, which we deem appropriate
for our research objectives. Literature suggests that national culture may be a factor influen-
cing consumers’ expectations and service experiences (Clark 1990; Donthu & Yoo 1998;
Journal of Service Science (2010) 2:1-23
18 Guangping Wang, Jianling Wang, Xiaoqin Ma, and Robin G. Qiu

Pullman et al. 2001). Thus the relationship between customer satisfaction and service design
factors such as standardization and customization can be subject to cultural influences.
Whether our findings here can be generalized to other countries is a question to be answered
by future cross-cultural studies.

ACKNOWLEDGEMENT
This work was done with great help from Nanjing University of Aeronautics and Astro-
nautics (NUAA) - IBM Logistics and Service Science Lab, Nanjing, China. This work was
partially supported by Department of Education Grant (08JA630040 China), Nanjing Univer-
sity of Aeronautics and Astronautics Endowed Professor Scholarships (1009-905346, 1009-
908332), Jiangsu Science and Technology Innovation Award (JSTIA269008: 2009-2011),
and IBM Faculty Award (2008-2009, China).

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AUTHOR BIOGRAPHIES
Guangping Wang (Ph.D., Louisiana State University, 2000) is an
Associate Professor of Marketing at the School of Graduate Pro-
fessional Studies, Penn State University. His research focuses on
sales management, service delivery, organizational behavior, and
customer relationship management.

Xiaoqin Ma (Ph.D., Jilin University, 2010), is a Lecturer of Mar-

keting at the School of Economics and Management, Yancheng
Institute of Technology, China. Her research interests include con-
sumer shopping behavior, retail service, and consumer internet beha-
vior.

© The Society of Service Science and Springer

 The Effect of Standardization and Customization on Service Satisfaction 23

Jianling Wang Dr. Wang teaches courses in marketing management,

service marketing, E-marketing management and consumer behavior.
She holds a Ph.D. in management science and engineering with focus
on marketing engineering. Dr. Wang’s research interests include
Marketing Decision, Service Operations and Management, and Cus-
tom Satisfaction Modeling. She has had over 20 papers published in
journals and conferences proceedings.

Robin G. Qiu is with Department of Information Science at the

Pennsylvania State University. Dr. Qiu currently serves as the Editor-
in-Chief of International Journal of Services Operations and Infor-
matics and the Editor-in-Chief of Service Science, an associate editor
of the IEEE Transactions on Systems, Man and Cybernetics, and is on
the editorial boards of several other international journals. Dr. Qiu
was an associate editor of IEEE Transactions on Industrial Informatics, the founder and
General Chair of the 2005-2008 IEEE International Conference on Service Operations and
Logistic, and Informatics, the founding and General Chair of 2009 INFORMS International
Confe-rence on Service Science. He was the founding chair of the Logistics and Services
Technical Committee, Intelligent Transportation Systems Society, IEEE and the founding
chair of Service Science Section of the INFORMS (the first of its kind-a worldwide Service
Science identity). He has had over 100 peer-reviewed publications. His papers have appeared
in IEEE Transactions on System, Man and Cybernetics, IEEE Transactions on
Semiconductor Manu-facturing, Decision Support Systems, Journal of Intelligent
Manufacturing, International Journal of Production Economics, International Journal of
Production Re-search.

Journal of Service Science (2010) 2:1-23

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