How do customers perceive service quality? This paper reviews the literature on service quality, focusing on the "zone of tolerance" – the range of acceptable or expected service outcomes. It uses this concept to explore the relationships between customer satisfaction with individual transactions (service encounters) and overall service satisfaction. The paper offers nine propositions that identify factors influencing customers’ perceptions of service quality and how the thresholds of the zone of tolerance can be adjusted during service delivery. It considers the design implications of these propositions, providing a framework for managing customer expectations and enhancing service experiences. This theoretical exploration provides valuable insights for service managers seeking to improve customer satisfaction and loyalty. By understanding the dynamics of the zone of tolerance, organizations can better tailor their services to meet customer needs and expectations.