Purpose: This study examines whether cost reduction policies undermine or strengthen perceived service quality in manufacturing and service organizations, testing the proposition that data driven, prevention focused, resource protective cost practices are systematically related to the five SERVQUAL dimensions of Reliability, Responsiveness, Assurance, Empathy, and Tangibles.

Methodology: Grounded in Cost of Quality theory, the SERVQUAL Gaps Model, the Resource Based View, and Total Quality Management and lean process theory, a survey research design was employed. A 60 item Likert questionnaire was completed by 200 employees drawn from three manufacturing plants and three service firms, and a simultaneous multiple regression model tested the predictive relationship between the five service quality dimensions and smart cost reduction adoption.

Results: The full scale demonstrated acceptable internal consistency, Cronbach's alpha of 0.736, and all five service quality dimensions emerged as significant, positive predictors of smart cost reduction adoption, together explaining 42.9 percent of its variance. Conclusions: Prevention oriented frugality co varies with, rather than erodes, customer perceived quality across both sectors.

Limitations: The cross sectional, single region design restricts causal inference and generalizability.

Contributions: The study offers a theory grounded, quantitative basis for reconciling efficiency and service excellence, extending Cost of Quality, SERVQUAL, and Resource Based View scholarship.