Customer satisfaction, a business term, 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]

It is seen as a key performance indicator within business and is part of the four 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.[2]

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]

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, a hundred cell phone plan providers, because customer satisfaction
would be way too low, and customers would easily have the option of leaving for a better
contract offer.

There is a substantial body of empirical literature that establishes the benefits of customer
satisfaction for firms.

Contents
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 1 Purpose
 2 Construction
 3 Methodologies
 4 See also
 5 References
  6 External links

[edit] Purpose
Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty.
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 an 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]

[edit] Construction
Organizations need to retain existing customers while targeting non-customers.[3] 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]

Customer satisfaction is an 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 factors the customer, such as other products against which the customer
can compare the organization's products.
Work done by Parasuraman, Zeithaml and Berry[4] between 1985 and 1988 delivered
SERVQUAL which 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 researcher with a satisfaction "gap" which is semi-
quantitative in nature. Cronin and Taylor extended the disconfirmation theory by combining the
"gap" described by Parasuraman, Zeithaml and Berry as two different measures (perception and
expectation) into a single measurement of performance relative to expectation.

The usual measures of customer satisfaction involve a survey[5] with a set of statements using a
Likert Technique or scale. Customer satisfaction is generally measured on a five-point scale.

Customer satisfaction data can also be collected on a 10-point scale.[1]

Arguably, consumers are less complex than some of these surveys tend to portend. When the
customer is asked to evaluate each statement in terms of their perception and expectation of
performance of the service being measured, they are basically in two simple states; satisfied or
not satisfied. On or off, just like a switch. A business can measure its customer satisfaction index
by relating the aggregates of satisfied customers versus dissatisfied customers.

Regardless of the scale used, the objective is to measure customers’ perceived satisfaction with
their experience of a firm’s offerings. Marketers then aggregate these data into a percentage of
top-box responses. Satisfaction levels are usually reported as either “top box” or, more likely,
“top two boxes.” Marketers convert these expressions into single numbers that show the
percentage of respondents who checked either a “4” or a “5.”[1]

[edit] Methodologies
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American Customer Satisfaction Index (ACSI) is a scientific standard of customer satisfaction.

Academic research has shown that the national ACSI score is a strong predictor of Gross
Domestic Product (GDP) growth, and an even stronger predictor of Personal Consumption
Expenditure (PCE) growth. On the microeconomic level, research has shown that ACSI data
predicts stock market performance, both for market indices and for individually traded
companies. Increasing ACSI scores has been shown to predict loyalty, word-of-mouth
recommendations, and purchase behavior. The ACSI measures customer satisfaction annually for
more than 200 companies in 43 industries and 10 economic sectors. In addition to quarterly
reports, the ACSI methodology can be applied to private sector companies and government
agencies in order to improve loyalty and purchase intent. Two companies have been licensed to
apply the methodology of the ACSI for both the private and public sector: CFI Group, Inc.
applies the methodology of the ACSI offline, and Foresee Results applies the ACSI to websites
and other online initiatives. ASCI scores have also been calculated by independent researchers,
for example, for the mobile phones sector,[6] higher education,[7] and electronic mail.[8]

The Kano model is a theory of product development and customer satisfaction developed in the
1980s by Professor Noriaki Kano that classifies customer preferences into five categories:
Attractive, One-Dimensional, Must-Be, Indifferent, Reverse. The Kano model offers some
insight into the product attributes which are perceived to be important to customers.

SERVQUAL or RATER is a service-quality framework that has been incorporated into

customer-satisfaction surveys (e.g., the revised Norwegian Customer Satisfaction Barometer[9])
to indicate the gap between customer expectations and experience.

J.D. Power and Associates provides another measure of customer satisfaction, known for its top-
box approach and automotive industry rankings. J.D. Power and Associates' marketing research
consists primarily of consumer surveys and is publicly known for the value of its product awards.

Other research and consulting firms have customer satisfaction solutions as well. These include
A.T. Kearney's Customer Satisfaction Audit process,[10] which incorporates the Stages of
Excellence framework and which helps define a company’s status against eight critically
identified dimensions.

For Business to Business (B2B) surveys there is the InfoQuest box[1]. This has been used
internationally since 1989 on more than 110,000 surveys (Nov '09) with an average response rate
of 72.74%. The box is targeted at "the most important" customers and avoids the need for a
blanket survey.

These customer satisfaction methodologies have not been independently audited by the
Marketing Accountability Standards Board (MASB) according to MMAP (Marketing Metric
Audit Protocol).