The trade‐off of service quality and cost: a system dynamics approach

Abstract

Purpose

The purpose of this paper is to find if there is an existing trade‐off between service quality and cost when strategies of low‐cost accommodation and uncompromised reduction are implemented.

Design/methodology/approach

The model is designed on hand system dynamics, using Vensim™ software. It consists of a situation where no side effects are interrupting the result. The modeled service system is designed as two parts: a situation where five sorts of customer variables are introduced, continued by a situation where low‐cost accommodation and uncompromised reduction change the system.

Findings

There is no typical trade‐off pattern between service quality and cost when implementing Frei's two solutions. Rather, the findings resulted in an almost conform line of quality curve so that the promotion of Frei's solutions can be interpreted as the result of cost reduction.

Research limitations/implications

Owing to the use of simulation tools, it is still critical whether the result holds in the real world where various influences to the service system can exist.

Originality/value

There are various papers regarding service quality and cost but not that much about managerial tools used in a service system. Aside from many statistically proofed papers, this paper uses system dynamics to simulate certain managerial tools for service when implemented into a system.

Citation

Kim, S. and Wook Kim, S. (2010), "The trade‐off of service quality and cost: a system dynamics approach", Asian Journal on Quality, Vol. 11 No. 1, pp. 69-78. https://doi.org/10.1108/15982681011051831