Customer satisfaction

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Customer satisfaction (often abbreviated as CSAT, more correctly CSat) is a term

frequently used in marketing. It is a measure of how products and services supplied by a
company meet or surpass customer expectation. Customer satisfaction is defined as "the
number of customers, or percentage of total customers, whose reported experience with
a firm, its products, or its services (ratings) exceeds specified satisfaction goals."[1]
The Marketing Accountability Standards Board (MASB) endorses the definitions,
purposes, and constructs of classes of measures that appear in Marketing Metrics as
part of its ongoing Common Language in Marketing Project. [2] In a survey of nearly 200
senior marketing managers, 71 percent responded that they found a customer
satisfaction metric very useful in managing and monitoring their businesses. [1]
It is seen as a key performance indicator within business and is often part of a Balanced
Scorecard. In a competitive marketplace where businesses compete for customers,
customer satisfaction is seen as a key differentiator and increasingly has become a key
element of business strategy.[3]
"Within organizations, customer satisfaction ratings can have powerful effects. They
focus employees on the importance of fulfilling customers' expectations. Furthermore,
when these ratings dip, they warn of problems that can affect sales and profitability....
These metrics quantify an important dynamic. When a brand has loyal customers, it
gains positive word-of-mouth marketing, which is both free and highly effective." [1]
Therefore, it is essential for businesses to effectively manage customer satisfaction. To
be able do this, firms need reliable and representative measures of satisfaction.
"In researching satisfaction, firms generally ask customers whether their product or
service has met or exceeded expectations. Thus, expectations are a key factor behind
satisfaction. When customers have high expectations and the reality falls short, they will
be disappointed and will likely rate their experience as less than satisfying. For this
reason, a luxury resort, for example, might receive a lower satisfaction rating than a
budget motel—even though its facilities and service would be deemed superior in
'absolute' terms."[1]
The importance of customer satisfaction diminishes when a firm has
increased bargaining power. For example, cell phone plan providers, such
as AT&T and Verizon, participate in an industry that is an oligopoly, where only a few
suppliers of a certain product or service exist. As such, many cell phone plan contracts
have a lot of fine print with provisions that they would never get away if there were, say,
100 cell phone plan providers, because customer satisfaction would be far too low, and
customers would easily have the option of leaving for a better contract offer.

Purpose
"Customer satisfaction provides a leading indicator of consumer purchase
intentions and loyalty." [1] "Customer satisfaction data are among the most frequently
collected indicators of market perceptions. Their principal use is twofold:" [1]

1. "Within organizations, the collection, analysis and dissemination of these data

send a message about the importance of tending to customers and ensuring that
they have a positive experience with the company's goods and services." [1]
2. "Although sales or market share can indicate how well a firm is
performing currently, satisfaction is perhaps the best indicator of how likely it is
that the firm’s customers will make further purchases in the future. Much
 research has focused on the relationship between customer satisfaction and
retention. Studies indicate that the ramifications of satisfaction are most strongly
realized at the extremes."

On a five-point scale, "individuals who rate their satisfaction level as '5' are likely to
become return customers and might even evangelize for the firm. (A second important
metric related to satisfaction is willingness to recommend. This metric is defined as "The
percentage of surveyed customers who indicate that they would recommend a brand to
friends." When a customer is satisfied with a product, he or she might recommend it to
friends, relatives and colleagues. This can be a powerful marketing advantage.)
"Individuals who rate their satisfaction level as '1,' by contrast, are unlikely to return.
Further, they can hurt the firm by making negative comments about it to prospective
customers. Willingness to recommend is a key metric relating to customer satisfaction." [1]
purpose diagram,

Theoretical Ground[edit]
"In literature antecedents of satisfaction are studied from different aspects. The
considerations extend from psychological to physical and from normative to positive
aspects. However, in most of the cases the consideration is focused on two basic
constructs as customers expectations prior to purchase or use of a product and his
relative perception of the performance of that product after using it.
Expectations of a customer on a product tell us his anticipated performance for that
product. As it is suggested in the literature, consumers may have various "types" of
expectations when forming opinions about a product's anticipated performance. For
example, four types of expectations are identified by Miller (1977): ideal, expected,
minimum tolerable, and desirable. While, Day (1977) indicated among expectations, the
ones that are about the costs, the product nature, the efforts in obtaining benefits and
lastly expectations of social values. Perceived product performance is considered as an
important construct due to its ability to allow making comparisons with the expectations.
It is considered that customers judge products on a limited set of norms and attributes.
Olshavsky and Miller (1972) and Olson and Dover (1976) designed their researches as to
manipulate actual product performance, and their aim was to find out how perceived
performance ratings were influenced by expectations. These studies took out the
discussions about explaining the differences between expectations and perceived
performance." [4]
In some research studies, scholars have been able to establish that customer satisfaction
has a strong emotional (i.e., affective component). [5] Still others show that the cognitive
and affective components of customer satisfaction reciprocally influence each other over
time to determine overall satisfaction. [6]
Especially for durable goods that are consumed over time, there is value to taking a
dynamic perspective on customer satisfaction. Within a dynamic perspective, customer
satisfaction can evolve over time as custom
ers repeatedly use a product or interact with a service. The satisfaction experienced with
each interaction (transactional satisfaction) can influence the overall, cumulative
satisfaction. Scholars showed that it is not just overall customer satisfaction, but also
customer loyalty that evolves over time. [7]
The Disconfirmation Model[edit]
The Disconfirmation Model is based on the comparison of customers’ [expectations] and
their [perceived performance] ratings. Specifically, an individual’s expectations are
confirmed when a product performs as expected. It is negatively confirmed when a
product performs more poorly than expected. The disconfirmation is positive when a
product performs over the expectations(Churchill & Suprenant 1982). There are four
constructs to describe the traditional disconfirmation paradigm mentioned as
expectations, performance, disconfirmation and satisfaction." [4] "Satisfaction is
considered as an outcome of purchase and use, resulting from the buyers’ comparison of
expected rewards and incurred costs of the purchase in relation to the anticipated
consequences. In operation, satisfaction is somehow similar to attitude as it can be
evaluated as the sum of satisfactions with some features of product." [4] "In the literature,
cognitive and affective models of satisfaction are also developed and considered as
alternatives(Pfaff, 1977). Churchill and Suprenant in 1982, evaluated various studies in
the literature and formed an overview of Disconfirmation process in the following
figure:" [4]

Construction
Organizations need to retain existing customers while targeting non-customers.
[8]
 Measuring customer satisfaction provides an indication of how successful the
organization is at providing products and/or services to the marketplace.
"Customer satisfaction is measured at the individual level, but it is almost always reported
at an aggregate level. It can be, and often is, measured along various dimensions. A
hotel, for example, might ask customers to rate their experience with its front desk and
check-in service, with the room, with the amenities in the room, with the restaurants, and
so on. Additionally, in a holistic sense, the hotel might ask about overall satisfaction 'with
your stay.'"[1]
As research on consumption experiences grows, evidence suggests that consumers
purchase goods and services for a combination of two types of benefits: hedonic and
utilitarian. Hedonic benefits are associated with the sensory and experiential attributes of
the product. Utilitarian benefits of a product are associated with the more instrumental
and functional attributes of the product (Batra and Athola 1990). [9]
Customer satisfaction is an ambiguous and abstract concept and the actual manifestation
of the state of satisfaction will vary from person to person and product/service to
product/service. The state of satisfaction depends on a number of both psychological and
physical variables which correlate with satisfaction behaviors such as return and
recommend rate. The level of satisfaction can also vary depending on other options the
customer may have and other products against which the customer can compare the
organization's products
Work done by Parasuraman, Zeithaml and Berry (Leonard L) [10] between 1985 and 1988
provides the basis for the measurement of customer satisfaction with a service by using
the gap between the customer's expectation of performance and their perceived
experience of performance. This provides the measurer with a satisfaction "gap" which is
objective and quantitative in nature. Work done by Cronin and Taylor propose the
"confirmation/disconfirmation" theory of combining the "gap" described by Parasuraman,
Zeithaml and Berry as two different measures (perception and expectation of
performance) into a single measurement of performance according to expectation.
The usual measures of customer satisfaction involve a survey[11] using a Likert scale. The
customer is asked to evaluate each statement in terms of their perceptions and
expectations of performance of the organization being measured. [1][12]
Good quality measures need to have high satisfaction loadings, good reliability, and low
error variances. In an empirical study comparing commonly used satisfaction measures it
was found that two multi-item semantic differential scales performed best across
both hedonic and utilitarian service consumption contexts. A study by Wirtz & Lee (2003),
[13]
found that a six-item 7-point semantic differential scale (for example, Oliver and Swan
1983), which is a six-item 7-point bipolar scale, consistently performed best across both
hedonic and utilitarian services. It loaded most highly on satisfaction, had the highest
item reliability, and had by far the lowest error variance across both studies. In the study,
 the six items asked respondents’ evaluation of their most recent experience with ATM
[13]

services and ice cream restaurant, along seven points within these six items: “pleased
meto displeased me”, “contented with to disgusted with”, “very satisfied with to very
dissatisfied with”, “did a good job for me to did a poor job for me”, “wise choice to poor
choice” and “happy with to unhappy with”. A semantic differential (4 items) scale (e.g.,
Eroglu and Machleit 1990),[14] which is a four-item 7-point bipolar scale, was the second
best performing measure, which was again consistent across both contexts. In the study,
respondents were asked to evaluate their experience with both products, along seven
points within these four items: “satisfied to dissatisfied”, “favorable to unfavorable”,
“pleasant to unpleasant” and “I like it very much to I didn’t like it at all”.[13] The third best
scale was single-item percentage measure, a one-item 7-point bipolar scale (e.g.,
Westbrook 1980).[15] Again, the respondents were asked to evaluate their experience on
both ATM services and ice cream restaurants, along seven points within
“delighted to terrible”.[13]
Finally, all measures captured both affective and cognitive aspects of satisfaction,
independent of their scale anchors.[13] Affective measures capture a consumer’s attitude
(liking/disliking) towards a product, which can result from any product information or
experience. On the other hand, cognitive element is defined as an appraisal or
conclusion on how the product’s performance compared against expectations (or
exceeded or fell short of expectations), was useful (or not useful), fit the situation (or did
not fit), exceeded the requirements of the situation (or did not exceed).
Recent research shows that in most commercial applications, such as firms conducting
customer surveys, a single-item overall satisfaction scale performs just as well as a multi-
item scale.[16] Especially in larger scale studies where a researcher needs to gather data
from a large number of customers, a single-item scale may be preferred because it can
reduce total survey error.[17]