The aim of this essay is to explain the importance of customer satisfaction in service organisations.
Clear meaning of the customer satisfaction has been provided along with the causes and results from the effective implementation.
Our findings indicate that the true nature of the association between satisfaction and loyalty is significantly influenced by competitive setting differences. Accounting for such differences allows firms and managers to
significantly increase their ability to effectively convert
satisfaction investments into loyalty. Also, we identify important trade-offs between the intercept and slope of the association between the two metrics, indicating that firms' incentives to invest or not in satisfaction differ dramatically
. Depending on the shape of their satisfaction-loyalty curve, firms can obtain a certain level of loyalty by indirectly choosing how much to invest in satisfaction. Therefore, customer satisfaction must be treated as an endogenous variable. In our subsequent analysis
, we control for both satisfaction endogeneity and competitive settings
heterogeneity using a Two-Stage Least Squares 3-level hierarchical linear model, correcting the
standard error estimates via a jackknife procedure. This research provides
precise, important theoretical and managerial insights
, and broadens our understanding of the essential features of the satisfaction-loyalty relationship
J. Heskett’s “service-profit chain” model has been used in order to understand the relationships between profitability of a service organisation with customer satisfaction and loyalty and the outcomes of this relationship
Customer satisfaction is a key and valued outcome of good marketing practice. According to Drucker (1954), the principle purpose of a business is to create satisfied customers. Increasing customer satisfaction has been found to lead to higher future profitability (Anderson, Fornell, and Lehmann 1994), lower costs related to defective goods and services (Anderson, Fornell, and Rust 1997), increased buyer willingness to pay price premiums
, provide referrals, and use more of the product
(Reichheld 1996; Anderson and Mittal 2000), and higher levels of customer retention and loyalty (Fornell 1992; Anderson and Sullivan 1993; Bolton 1998). Increasing loyalty, in turn, has been found to lead to increases in future revenue (Fornell 1992; Anderson, Fornell, and Lehmann 1994) and reductions in the cost of future transactions (Reichheld 1996; Srivastava, Shervani, and Fahey 1998). All of this empirical evidence suggests that customer satisfaction is valuable from both a customer goodwill perspective and an organization's financial perspective.
Examples has been illustrated based on the first five case study from Lovelock’s book “Services Marketing: A European Perspective” (See appendix 1). Furthermore the identification of methods and techniques of customer satisfaction measurement has been illustrated.
The need to measure customer satisfaction is essential for any organization. PART understands the importance of building and effectively managing the relationship with riders. To do so it needs to understand and meet rider expectations. It is imperative to identify the parameters which cause customer satisfaction or dissatisfaction and continuously measure them to bring about the changes needed on the basis of customer perceptions.
Finally techniques and strategies for customer satisfaction improvement have been discussed.
More and more service organisations nowadays recognise that customer satisfaction is crucial for business success.
Additional, understanding and anticipating what customers want and require for the future, has led service organisations scrutinising for possible service features and managerial factors that will enable them to stimulate a positive response and astonish
Customer satisfaction is one of the most important key factors for customer’s future purchase (Mittal & Kamakura, 2001). Those clients that have been satisfied by consuming or buying any goods or services will most likely inform others about
their great encounters likewise those dissatisfied customers will without any doubt communicate about
their bad experience of the products or services. This is another reason why a company should take into consideration the level of customer satisfaction, as it defines the image of the products/services and the company that the customers have in their mind. By delivering goods and services that meets with the needs and wants of consumers, they will have a positive image and
will talk good about the company, but in case a company do not meet the needs or wants of the customers, it will create a negative image for the company in the mind of the customers and thus discouraging the customer to buy products or services
from that particular company.
However, a question has been raised of which service attributes and qualities are decisive for the satisfaction of the customer and which features merely prevent dissatisfaction (Matzler et al, 1996) .
Various model have been developed attempting to clarify the meaning of customer satisfaction, what causes it and what results from it. J. Heskett et al. has developed the service-profit chain (appendix 2), which establishes relationships between profitability, customer loyalty and employee satisfaction, loyalty and productivity . Moreover, Kano’s (1984) model of customer satisfaction (appendix 3) distinguishes between three types of product requirement, which influence customer satisfaction in different ways when met.
Garbarino and Johnson (1999) did consider segments in the customer base in their study of satisfaction where they analyzed the different role played by satisfaction between low relational and high relational customers. Their study, however, involved customers from only a single organization
. Our approach extends this
work by studying customers from multiple organizations
, and shares some similarities with Anderson and Sullivan (1993) with respect to the type of analysis and sampling methods. The goals of their research
, however, were to study the antecedents and consequences of customer satisfaction rather than
investigate how different types of satisfaction may influence the overall measure of customer satisfaction. In addition, our theoretical approach shares some similarities to Hutchison, Kamakura, and Lynch (2000) who posited that unobserved heterogeneity is a problem for
interpreting results from behavioral experiments. The basic point of their argument is that aggregation may create effects that do not
exist in any segments, or may mask effects that do exist. The present study makes a similar point and provides an analytical method for overcoming such a problem. Kekre, Krishnan, and Srinivasan (1995) examine heterogeneity
of effects across individual customers of a single company using a random effect ordered profit model. These models are similar to the hierarchical linear models considered here, and a single customer could be considered a subunit.
Must-be requirements, one-dimensional requirements and attraction requirements (Matzler et al, 1996). Furthermore, in his journal “Customer satisfaction and the internal market: Marketing our customers to our employees”, Nigel F. Piercy re-examines the belief that customer
satisfaction lies at the heart of all the endeavours of all organizations by analysing the internal and external
customer satisfaction, internal and external quality of service and the relationship between internal and external markets (Piercy, 1995) .
Although the models, mentioned above, have been useful materials for understanding the concept and meaning of customer satisfaction, for the purpose of this essay more attention will be given on J. Heskett’s “service-profit chain” model, as little emphasis has been given to the service organizations by the other two models which have been concentrating more on customer satisfaction in relation to tangible products (ie. Cars, PCs, etc.). However, there are companies that their core products are tangible such as “Sullivan’s Motor World” but at the same time there are services that support these products (supplementary services) such as after sales support and service and there is a need to be studied also, as they are part of the organisation’s overall process and will affect the customers’ opinion for the company.
Other authors have examined the heterogeneity of customer satisfaction effects. Danaher (1998) shows how latent class regression can be used to segment customers and estimate regression effects by segment simultaneously. Our work is different in that we
assume pre-defined subunits - our concern is not to define segments that have different effects
. For the problems examined here, the subunits already exist. Danaher (1998) identifies segments of customers (end users) who place different emphasis on different service attributes. Malthouse (2002) defines such a process as sub segmentation. A firm has targeted a market segment and
acquired customers/end users. It then sub segments these customers/end users from a market segment into smaller, more homogeneous groups based on some criteria such as utility for aspects of the product in the case of Danher (1998).
As it can be seen in appendix 2 there are several links in the service profit chain that have to be carried out effectively in order to bring about in generating customer satisfaction. The factors that have to be considered in each link along with their results either positive or negative will cause either customer satisfaction or dissatisfaction.
In attempting to measure customer satisfaction, it is possible that attributes can have different satisfaction implications for different consumer and market segments - the usage context, segment population, and market environment can
influence satisfaction and product use (Anderson and Mittal 2000). Failure to take into account segment-specific variation may lead a firm to focus on the wrong aspect for a given set of consumers (Anderson and Mittal 2000). Furthermore, consumers with similar satisfaction
ratings, yet different characteristics
, may exhibit different levels of repurchase behavior (Mittal and Kamakura 2001). It is clear, then, that market and consumer segments should be important factors to consider when measuring customer satisfaction and its implications.
For example, beginning from the first link, the internal service quality, and referring to “Sullivan’s Motor World” case study, it can be realized that the lack of the appropriate workplace design in the service department along with the lack of new sophisticated computer systems made
the service work process time consuming and hard in contributing to the overall image of the company.
An important conceptual question concerns when one approach should be preferred over the other. We make two points in response to this question. First, the pre-defined subunit approach to studying heterogeneity is more appropriate when the resulting managerial actions
will be implemented at the subunit level. Second, managerial actions implemented at the subunit level are most reasonable when there is homogeneity within a subunit and heterogeneity across subunits; when this is not the case the organization should seek actions that can be implemented for sub segments of customers within a subunit
. We give several examples to illustrate
Scarcely customers are becoming satisfied if the working environment does not contribute the most to employee satisfaction.
For that reason, if Mrs Costa was not satisfied with her job, colleagues, working environment and the bank as a company, she would not handle Mr Mahaleel’s problem with such professionalism.
Employees feeling enthusiastic about their job not only communicate this feeling both verbally and non-verbally, but are also eager to work hard towards satisfying their customers (Van Looy, 1998).
Based on the demographic information received on the survey, it has been concluded that 60.5% of respondents were female and 39.4% male (Figure 1). The prevalent age range, at 26.9% was 55-64 years old (Figure 1). 72.2% of the respondents answered
full time for their employment status, 21.5% and chose $30,000$44,999 as their annual income (Figure 3). When asked “which best describes your race?” respondents answered 61.6% White, 31.3% Black, and 7.1% Other (Figure 2). Based on the open-ended question of “Where do
you work”, 418 determined the top 5 largest employers. Baptist Hospital was the largest with 93 responses, Wells Fargo, UNCG, and GTCC were second with 14 responses each, Forsyth Medical Center and BB&T were third with 10 responses
, Forsyth Tech Community College was
fourth with 8 responses, Moses Cone and Tyco both came in fifth with 7 responses (Figure 2).
The basic rationale of generating positive internal quality in services organisations depends on the overall management perspective which should guide decisions by managing the quality as an integral part of the whole organisation and developing and
reinforcing its personnel to commit
their selves to company’s goals and strategies.
While it seems clear that increasing customer satisfaction is beneficial to a marketing manager, how to measure it is less clear. Customer satisfaction has been studied from the perspective of the individual customer and what drives their satisfaction (Oliver and Swan 1989; Oliver 1993; Fournier and Mick 1999) as well as from an industry-wide perspective to compare customer satisfaction scores across firms and industries
(Fornell 1992; Anderson, Fornell, and Lehmann 1994; Fornell et al. 1996; Mittal and Kamakura 2001), while other research has examined customer
satisfaction in a single organization (Schlesinger and Zornitsky 1991; Hallowell 1996; Loveman 1998) or across several organizations (DeWulf, Odekerken-Schröder, and Iacobucci 2001). In addition, specific tools for measuring customer satisfaction have been developed in the past
, including SERVQUAL (Parasuraman, Berry, and Zeithaml 1988, 1991). Thus, there exists an ample literature on which to draw when attempting to measure customer satisfaction.
The effective management of the internal service quality will in turn increase employee satisfaction and thus reducing employee turnover. “Estimates suggest that separation, replacement and training costs are 1.5 to 2.5 times annual salary for each person who quits (Solomon, 1988), which means that the departure of a middle manager usually costs an organization around $75,000 (Dalton et al, 1993)” . These figures, however, only begin to illustrate the value of retaining loyal employees.
A firm's future profitability depends on satisfying customers in the present - retained customers should be viewed as revenue producing assets for the firm (Anderson and Sullivan 1993; Reichheld 1996; Anderson and Mittal 2000). Empirical studies have found
evidence that improved customer satisfaction need not entail higher costs, in fact, improved customer satisfaction may lower costs due to a reduction in defective goods, product re-work, etc. (Fornell 1992; Anderson, Fornell, and Rust 1997). However, the key to building long-term customer satisfaction and retention and reaping the benefits these efforts
can offer is to focus on the development of high quality products and services. Customer satisfaction and retention that are bought through price promotions, rebates, switching barriers, and other such means are unlikely to have the same long-run impact on
profitability as when such attitudes and behaviors are won
through superior products and services
(Anderson and Mittal 2000). Thus, squeezing additional reliability out of a manufacturing or service delivery process may not increase perceived quality and customer
satisfaction as much as tailoring goods and services to meet customer needs (Fornell, Johnson, Anderson, Cha, and Everitt 1996).
Long-tenured employees develop personal relationships with customers. “These relationships are the foundation for a reinforcing cycle of positive interactions between employees and customers (Reichheld, 1993; Reichheld and Sasser, 1990; Schlesinger and Heskett, 1991)” . Employees who perceive relationships with
customers provide better service.
A second example can be when actions primarily involve reach media. If a company is communicating a single message with, for example, television, newspapers, billboards, etc., the message must be tailored to the subunit reached by the media. A third example is managerial
actions that are most naturally applied at
the subunit level of retail stores, car dealerships, supermarkets, and bank branches, as discussed previously
. A corporation could send employees of certain subunits, but not all, for specialized customer service training programs. Corporations often choose where to locate subunits, and might opt for more expensive locations in regions where "convenience" is more important. In addition, pricing strategies often must
be executed at the subunit level (Singh, Chintagunta, and Dube 2002).Of course; there are numerous examples of situations
where customer sub segmentations are more appropriate. See Danaher (1998) or Malthouse (2002) for further discussion and examples.
Customers who receive better service express fewer complaints and thereby create fewer problems for employees. Employees in turn react more favourably to encounters with customers as they are satisfied and these reactions result in better service and low
level of employee turnover, which again leads to higher customer satisfaction.
The question posed by this paper for discussion, 'Customers cannot be satisfied until all causes for dissatisfaction are eliminated' is entirely false. Customer satisfaction levels are determined and influenced by many elements
, not all relating directly to
the service encounter, and customer satisfaction can be achieved despite an unsatisfactory service experience. And like wise an unsatisfactory evaluation of a service can be attained with out service failure, this and the factors by which it is caused will be illustrated through the duration of this paper.
Employee satisfaction sequentially will mean that employee retention and loyalty accelerates with consequential benefits as far as service standards are concerned. Where employees remain in the organisation for several years, customers can experience continuity and at the same time the firm spends less on recruitment, selection, training and service familiarisation.
The Primary objective of the Customer Satisfaction Survey is to determine satisfaction levels of PART Express riders. Secondary objectives are to determine ridership demographics, price sensitivity, what marketing channel is
best to target respondents, the level of satisfaction on specific PART attributes, and determine ways PART can improve services
. Determining ridership demographics will aid PART in understanding its current customers, as well as identifying target markets. Understanding which marketing channel works best to gain riders will give PART an indication of where to focus strategic marketing efforts
. Attribute levels will break down each element of the PART experience and allow respondents to rate each task, giving detailed information beneficial for
improving customer satisfaction.
In “Euro Disney: an American in Paris” case study there has been mentioned a problem of employee turnover and retention, which was not effectively handled and affected several problems to the company’s management
The association between customer satisfaction and customer loyalty is one of the most central relationships for marketing theory and practice. To improve our understanding of this essential relationship in marketing
, we develop a
comprehensive and flexible theoretical framework for analyzing the association between customer satisfaction and customer loyalty, which simultaneously incorporates heterogeneity in the possible dimensions of competitive settings
. This theoretical framework is grounded by more than 40 years of academic and
practitioner research on the association between these two constructs, which allows us to more precisely examine the true
nature of the association between satisfaction and loyalty by incorporating competitive setting heterogeneity. In addition, we test our theoretical framework by estimating a 3-level empirical hierarchical linear model, using American Customer
Satisfaction Index data and several customer, firm and industry characteristics
It is quite difficult for Euro Disney to expect from those employees who interact with the customers face-to-face to be retained and consequently be productive when they are not satisfied with their working conditions.
Customer satisfaction measures how well a company's products or services meet or exceed customer expectations. These expectations often reflect many aspects of the company's business activities including the actual product
, service, company, and how the company operates in the global environment
. Customer satisfaction measures are an overall emotional evaluation that is based on the customer's lifetime of product and service experience. In today’s world customer satisfaction is very important in order to continue to have a business because with
no customers there is no business.
Something unmanageable can cause this kind of problem as the weather but employee’s needs and wants must be fulfilled as well, in order to be productive and for that reason the notion of employee as customer has been previously developed.
Consider the case of a newspaper owner, discussed in more detail below. An owner in the U.S. has multiple newspapers and wants to know whether to invest in improving either the service or the content of its individual papers
. Investing in content could involve hiring additional reporters so that
local news can be covered more thoroughly, adding pages to existing sections, adding special-interest sections, etc. For most newspapers in the U.S. these actions would have to be taken at the subunit level. One might object by suggesting, for example
, that large metropolitan newspapers (which represent only a small percentage of U.S. newspapers) could improve content for
specific suburban communities by hiring
reporters and adding customized local sections. We would argue that the suburban "zone" would be a subunit.
For example, Berry (1981) states that whether managing customers or employees “the central purpose remains the same: the attraction of patronage through the satisfaction of needs and wants” (Rust et al).
There are several means for measuring customer satisfaction including surveys, focus groups, complaint analysis and user groups. The most common used is surveys as it is the only way to get customer feedback unless they contact you, which most people are too busy to
bother with unless they are extremely upset for some reason. Surveys can be provided in several way through mail, email or over the phone and the best way to get information is to
allow customers to answer questions on a
weighted scale for example on a scale of
1 to 5 with 1 being dissatisfied and 5 being satisfied.
In both cases individuals and organizations are involved in exchange. The nature of what is exchanged may vary, but the importance of satisfying needs and wants remains constant, meaning that the management of employees is often similar to the management of
Understanding consumer satisfaction and the elements that influence it are fundamental for management of any service organisation trying to remain competitive. Due to the intangible nature of services any attempt to gain competitive advantage can easily
be replicated by competitors. Also there is a perceived high risk in choosing a service provider as you cannot evaluate the service prior to purchase.
In turn, employee retention and loyalty will result to the outcome of efficient productivity by employees. Positions must be designed so that employees can perform several jobs if necessary. For example from “Benihana comes to London” case study can be understood that the effective scheduling programme along with the reservation system and the layout of the restaurant have helped outlet’s management to enhance productivity with the best way and at the same time to keep customers satisfied.
The present research represents the first study of which we are aware to measure customer satisfaction from a representative sample of customers who are in turn from a representative sample of organizations in a single industry
. The analysis was replicated in a second industry to confirm that the findings are not unique to a single industry.
The appropriate and integrated implementation of the links in the service profit chain mentioned above will result to the external service value for the customer meaning that all the functions must be operated in a manner that the overall service concept will give the ultimate image of the company.
With demographic information attained about PART Express riders, it is recommended that the results be used by the Marketing department to promote PART services to retain current riders, and to acquire potential riders. A demographic profile of the PART typical rider has been determined and should be used as a reference for marketing purposes
, to determine the characteristics and
interests of the majority of current PART Express Riders.
Singapore Airlines can be considered as the company with one of the best-integrated service concepts that influence the ultimate image of the company to their customers. For example the contemporary airplanes updates, SIA employees’ philosophy and service culture with the appropriate training and recruitment as well as supportive tools and encouraging job design facilitate the company’s efforts in producing the most suitable external service value for its customers which will influence the feelings and attitudes of their customers towards its services either positive or negative.
Resulting from research into this issue it has been found that a very extensive array of information relating to this topic is available. However due to the time and length restraints this paper has concentrated on the elements which
influence consumer satisfaction, incorporating findings from articles, texts and research on the topic
This will determine if our customer is either satisfied or dissatisfied.
So far, the factors that cause customer satisfaction in a service organisation have been examined with the illustration of a number of examples for a better understanding.
Many route, schedule and service recommendations were suggested and will be reviewed. From these suggestions PART should determine if changes suggested, are necessary and need to be made to existing routes. Potential areas that are not currently served need to be examined to see if
there is potential ridership available. The Customer Satisfaction Survey will be conducted once per year during the fourth
quarter of the PART fiscal year. Results to this survey will be publicized on the PART website and in a press release to the media.
Creating a satisfied customer by offering a superior external service value, the organisation can gain a number of benefits including customer loyalty, company’s profitability and growth.
It used to be thought that the differences in behaviour between customers who are “very satisfied” and the customers who are merely “satisfied” would be almost unnoticeable.
PART targeted existing Express riders for the customer satisfaction survey. Surveys were distributed to all Express routes, PART’s email list, Facebook, Twitter, as well as posted on the homepage of the PART website; designated to capture a demographic mix of respondents
. 530 completed surveys were received and analyzed. Respondents are estimated to be roughly 50% of ridership and constitute an adequate survey sample size. The survey consisted of 19 questions
, formatted as open ended, 5 point Likert Scale, basic demographics, and numerical questions (Appendix A).
In reality the differences are truly significant and if are not implemented with the write manner the implications for the organisation that is complacent would be catastrophic. The customer who is merely “satisfied” is between seven and ten times more likely to move to our competitors than a
customer who is “very satisfied” (CIM study text, 2002).
Customer satisfaction is an issue gaining focus from Managers and Marketers alike within the increasingly competitive service industry. A satisfied customer is a source of invaluable word-of- mouth recommendations and thus can stimulate further purchases.
For that reason Xerox puts its effort to create the so-called “Apostles”, customers so satisfied that they convert the uninitiated to a product or service and avoid creating “Terrorists” customers so unhappy that they speak out against o poorly delivered service at every opportunity.
An attribute table was used to measure the satisfaction level of PART Express riders from the following categories: customer service, professionalism, quality of transportation, understanding customers’ needs, bus operator performance, PART Hub staff performance, price, and convenience of transportation. These attributes seem to be going down in satisfaction rating since last year. (Figure 7).
Terrorists can reach hundreds of potential customers and with the word of mouth even discourage them to try the service (Heskett et al). It is the “very satisfied” customer who is genuinely loyal to the company and will repurchase the product.
All industries can utilize these best practices that have customers such as retail, manufacturing and...