Aim: The aim of this study is to examine and compare the importance of services and products in grocery store and to study the effects of services and products on customer retention.

Method: This study is quantitative and data is collected by conducting a survey. Primary data is collected through questionnaires by visiting the stores in two cities of Sweden, namely Bollnäs and Gävle. In order to study the importance of service and products, importance scale is used in the questionnaire. Comparative analysis is used to analyze the data.

Results & Conclusions: The results show that customers are more concerned about the quality of products rather than quality of services. Further, it is found that among all service elements, personal interaction is considered more important whereas, among products elements, quality of products has most influence on customer decisions. After the comparison of services and products, we found out that product quality influences customer retention to a greater extent.

Suggestions for future research: Research always continues and could be followed up with more perception dimensions either from customers’ perspectives or from managerial perspectives. Future research can be conducted to study managerial perception of service and product quality. Furthermore, future research can be conducted to find out other factors that determine customer retention. Customers from multiple stores and larger cities can also be the theme for future researches.

Contribution of the study: This study helps retail business to build strong customer base by focusing first on quality of products and then services. Further this helps firms to know how customer’s decision making is affected. Firms with limited resources can first focus on product improvement then on services.