Nothing happens until customers adopt an innovation. In the chapter the authors develop a new theory for measuring firms’ innovativeness as perceived by their customers. The approach follows the logic of a structural equation model with antecedents and consequences. Antecedents include four areas where customers can perceive changes: core service; service delivery; customer relationship management; and servicescape. Since firms innovate and customers perceive, we suggest that key informants with the firms are interviewees pertaining to innovation efforts. The outcome of perceived changes in any of the four innovation areas results in a cognitive and an emotional satisfaction which co-varies with perceived innovativeness. Perceived innovativeness co-varies with perceived relative attractiveness in the market place and, finally, customer loyalty which is a proxy variable for actual behavior. From these analyses, service managers can a priori estimate the effects of various innovation efforts before any investments have been done.