Customer satisfaction

From Wikipedia, the free encyclopedia

Customer satisfaction, a term frequently used in marketing, 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 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.[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]

Therefore, it is essential for businesses to effectively manage customer satisfaction. To be able

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
[hide]
  1 Purpose
 2 Measuring customer satisfaction
 3 Methodologies
 4 See also
 5 References
 6 External links

[edit] Purpose

A business ideally is continually seeking feedback to improve customer satisfaction.

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] Measuring customer satisfaction

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

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)[5] 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[6] with a set of statements using a
Likert Technique or scale. The customer is asked to evaluate each statement and in term of their
perception and expectation of performance of the organization being measured. Their satisfaction
is generally measured on a five-point scale.
Customer satisfaction data can also be collected on a 10-point scale.[1]

Regardless of the scale used, the objective is to measure customers’ perceived satisfaction with
their experience of a firm’s offerings. It is essential for firms to effectively manage customer
satisfaction. To be able do this, we need accurate measurement of satisfaction.[7]

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. According to studies by Wirtz & Lee (2003)[8], they
identified a six-item 7-point semantic differential scale (e.g., Oliver and Swan 1983), which is a
six-item 7-point bipolar scale, that 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[8], the six items asked
respondents’ evaluation of their most recent experience with ATM services and ice cream
restaurant, along seven points within these six items: “please me to 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)[9] , 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”.[8]

The third best scale was single-item percentage measure, a one-item 7-point bipolar scale (e.g.,
Westbrook 1980)[10]. Again, the respondents were asked to evaluate their experience on both
ATM services and ice cream restaurants, along seven points within “delighted to terrible”.[8]

It seems that dependent on a trade-off between length of the questionnaire and quality of
satisfaction measure, these scales seem to be good options for measuring customer satisfaction in
academic and applied studies research alike. All other measures tested consistently performed
worse than the top three measures, and/or their performance varied significantly across the two
service contexts in their study. These results suggest that more careful pretesting would be
prudent should these measures be used.[8]

Finally, all measures captured both