Learning from Service Experience Ratings: Effects on Experience Quality, Credence Quality and Customer Satisfaction

Authors:
Scott A. Fay, professor of marketing, Whitman School of Management
Ali Kozehgaran, doctoral student in marketing, Whitman School of Management 


Journal: 
Journal of Retailing (2025)


Summary:
The "How did we do?" surveys you get after a service visit help businesses monitor employee effort, but relying on them too heavily can lead companies to overlook the quality that matters most to customers in the long run.


Research Questions:
• Under what conditions should a retailer solicit service experience ratings?
• How does the use of SERs impact customer satisfaction and future demand?
• How can retailers best use SERs to influence the amount of effort employees expend?
• How does soliciting SERs impact consumers’ perceptions of service quality and the actual delivery of experience quality?


Millions of "rate your experience" surveys are sent out every day, yet little is known about their real impact on service quality, customer satisfaction and business performance. Our research asks: Under what conditions should a business invest in post-service surveys? Do these surveys cause employees to prioritize visible friendliness (a good impression) over harder-to-judge technical quality? And can they hurt customer satisfaction in some situations?


What We Know:
Almost every business today asks customers to rate their experience–from Uber drivers to dentists to coffee shops. These ratings shape employee bonuses, hiring decisions and company strategy. Yet most businesses treat all post-service feedback as a reliable measure of quality, without recognizing a fundamental problem: customers can only rate what they notice right away. Whether the mechanic actually fixed your brakes correctly, whether your financial advisor gave you sound advice, or whether your doctor prescribed the right treatment–these things only become clear much later, long after the survey is completed.


This gap between what surveys measure and what actually matters to customers is what motivated our research. We wanted to understand the ripple effects of this blind spot–how it changes employee behavior, how it shapes the quality of service customers ultimately receive, and whether there are situations where businesses would actually be better off not surveying customers at all. Our goal was to give business owners and managers a clearer picture of what these surveys can and cannot do, so they can use them more thoughtfully rather than treating them as a one-size-fits-all solution.


Novel Findings:
Our research uncovers several findings that challenge conventional wisdom about customer feedback. First, we show that even when surveys are completely free to administer, there are situations where they reduce a business’s profit. For instance, when employees are already deeply motivated to do quality work, adding a rating system can backfire by shifting their focus away from what they do best. Second, we find that higher customer expectations don’t always push businesses to deliver better service. Counterintuitively, when expectations rise too high, the smartest move for a business may be to accept losing some customers rather than spending heavily to meet unrealistic standards. 
Third, and perhaps most surprisingly, we show that these experience-focused surveys can become more valuable in industries where technical quality is what matters most, like auto repair or healthcare. This happens because when employees are already delivering solid technical work, even a small nudge toward friendliness and attentiveness can be enough to tip customers from “okay” to “satisfied.” Finally, we identify a self-fulfilling prophecy: when customers believe a business genuinely cares about their experience, the business responds by actually investing more in experience quality, which, in turn, validates the customers’ belief and creates a virtuous cycle.


• Higher customer expectations can lead retailers to provide lower quality service
• SERs may be most valuable precisely when the hard-to-observe "credence" aspects of service matter most
• More altruistic employees can paradoxically result in fewer satisfied customers


Novel Methodology:
We use a game-theory-style model that represents the strategic interaction between a business, its employees and its customers. This allows us to mathematically pinpoint when surveys help and when they backfire, something that would be very difficult to establish through observational data alone, since businesses that choose to use surveys may differ in many ways from those that don’t. Think of it as a simulation of the decision-making chain: the business decides whether to survey customers and how to pay employees, the employee decides how to split effort between being pleasant and doing thorough work and the customer decides whether to come back.


Implications for Practice:
For businesses offering simple, everyday services like restaurants, salons and coffee shops, the message is clear: post-service surveys are a smart investment. They’re cheap to run, customers have similar expectations and the things you’re measuring, friendliness, speed, atmosphere, are essentially the whole product. Tying employee rewards to these ratings can meaningfully boost repeat visits and long-term revenue.


For businesses offering complex, expertise-driven services like auto repair, healthcare, financial advising or education, the picture is more nuanced. Surveys can still be valuable, but managers should resist the temptation to treat ratings as the full story. Rewarding employees primarily for high scores may quietly discourage them from investing time in the technical work that customers won’t appreciate until weeks or months later. In these industries, surveys work best as a complement to–not a replacement for–a workplace culture that attracts and supports employees who genuinely care about doing excellent behind-the-scenes work.


For all businesses, one practical takeaway stands out: don’t chase perfection. Our findings suggest that aiming for solid, consistently good experience ratings–say, a reliable 3 out of 5 stars–can be more profitable than pouring resources into achieving top marks, especially when the real value of your service lies in technical quality that surveys can’t capture.


Implications for Policy:
Our findings carry important implications for regulators and policymakers, particularly in industries where consumer protection is at stake. In healthcare, education, financial services and other regulated sectors, there is a growing trend of using patient satisfaction scores, student evaluations and client feedback surveys to assess and reward service providers. Our research suggests that tying high-stakes consequences–funding, licensing, bonuses–to these immediate ratings can create perverse incentives. A doctor who knows her performance review depends on patient ratings may spend more time on bedside manner and less on the difficult, sometimes uncomfortable clinical decisions that save lives. A financial advisor evaluated on post-meeting surveys may prioritize making clients feel reassured rather than delivering honest but unwelcome advice. Policymakers should ensure that performance evaluation frameworks in these industries do not rely too heavily on metrics that only capture what consumers can judge in the moment. Supplementing post-service ratings with longer-term outcome measures–patient recovery rates, student learning gains, portfolio returns–would help protect consumers from the unintended consequences of well-meaning feedback systems.


Implications for Society:
Our findings highlight a societal risk that extends well beyond any single industry: the rise of instant feedback culture may be quietly reshaping the kind of service we receive. When every interaction ends with a rating prompt, service providers across the economy face pressure to optimize for the snapshot, the immediate impression, rather than the full picture. This is not just a business problem. It affects the quality of healthcare patients receive, the rigor of education students experience and the soundness of financial advice families rely on. The cumulative effect is a society where surface-level quality steadily crowds out deeper, harder-to-observe quality. Our research is a reminder that ratings are a lens, not a mirror. They show part of reality, and the part they miss can matter more than the part they capture.


Implications for Research:
Our work lays the groundwork for several future research directions. The most natural extension is to explore how post-service ratings affect professionals in non-profit settings–healthcare, education, government–where the pressure to score well on immediate feedback could pull effort away from outcomes that take months or years to materialize. Another key challenge is finding mechanisms to incentivize the hidden, behind-the-scenes quality that surveys can’t capture. Over time, clues about this quality can emerge through repeat visits, complaint patterns, or long-term results, but how businesses can use these signals credibly, without gaming them, is an open question. Future research could also examine how evolving customer expectations, shaped by advertising, AI, and new technologies, interact with feedback strategies, and whether surveys sometimes backfire by amplifying negative impressions when service quality falls short. Perhaps most exciting is the possibility of rethinking what surveys are for entirely: rather than just monitoring employees, they could be redesigned to help employees understand what each customer actually wants, or to gather feedback on the deeper quality dimensions that current surveys miss.


Full Citation:
Fay, S. and Kozehgaran, A. (2025) “Learning from Service Experience Ratings: Effects on Experience Quality, Credence Quality, and Customer Satisfaction,” Journal of Retailing.  


Abstract: 
This paper examines the effects of service experience ratings (SERs) in service industries. SERs are defined as consumers’ assessments of a service encounter (typically on a 3-, 5-, or 10-point numeric scale) that are made immediately after the encounter. We conceptualize SERs as being a mechanism for retailers to observe how much effort employees expend on the provision of experience quality. Using a principal-agent analytical model in which the worker provides credence quality for altruistic reasons and SERs enhance customers’ recognition of the experience quality that is delivered, we investigate whether a retailer should solicit SERs, how SERs influence a worker’s expenditure of effort on experience and credence qualities, and the impact of SERs on customer retention. SERs present a fundamental tradeoff between the benefits from heightened customer satisfaction (which generates future profit) and larger costs (due to monitoring costs and additional compensation to induce the worker to exert more effort). We find that soliciting SERs is profitable for a retailer when the cost of administrating surveys is low, most consumers appreciate the effort workers devote to providing experience attributes, consumers expect a low service quality, and satisfied customers generate high future profit. The nuanced effects of SERs lead to several surprising results. For example, it may be optimal for the retailer to respond to higher expectations about quality by providing a lower-quality service. Also, although SERs only assess experience quality, it is possible that SERs may become more beneficial when consumers highly value credence quality. Another intriguing result is that there are situations in which SERs do not enhance a retailer’s profit even if were costless to collect this information. For example, higher worker altruism may eliminate the incentive to collect SERs and, as a result, lead to fewer customers being satisfied with the service.


Web URL for the Article:
https://www.sciencedirect.com/science/article/abs/pii/S0022435925001216