Customer Satisfaction

Chapter Objectives:
Understand the importance of customer satisfaction to
company performance.
Differentiate between the ‘should’ and ‘is’ factors of
customer
satisfaction.
Discuss the different levels of customer satisfaction
utilizing
the Customer Satisfaction Development Model.
Elaborate on the theory of Cognitive Dissonance.
Discuss how Contrast Theory and Assimilation
Contrast
Theory relate to Cognitive Dissonance.
Explain the advantages of a continuous customer
satisfaction
study for an organization.
Discuss the eight phases of a customer satisfaction
study.
Distinguish between the two subjective forms of
customer
satisfaction measurement.
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The Concept and Relevance of Customer
Satisfaction
If one wants to elucidate the phenomenon of customer
retention, it is first necessary
to come up with a clear, conceptual definition of the
notion of satisfaction. In order to
be able to retain customers, companies must be able to
satisfy the needs and desires
of their customers. The English word ‘satisfaction’
stems from the Latin, from the
words ‘satis’ (enough) and ‘facere’ (to make). In light
of these early findings, one
Customer
Orientation
Product
Quality
Customer
Satisfaction
Customer
Retention
Company
Success
Personnel Technology Organization
Customer
Value
Figure 4.1: The concept and relevance of customer
satisfaction
60 Customer Relationship Management
can say that customer satisfaction is all about ‘doing
enough for the customer’ (Rust,
Zahorik & Keinigham, 1996, p. 229). In its general use,
the concept of satisfaction
indicates psychological states such as well-being,
happiness, and contentment.
To achieve a customer’s satisfaction, it is necessary to
be aware of his expectations,
and to be knowledgeable of what he likes and does not
like. It is not uncommon for
companies to hold the satisfaction of a customer to be
self-evident, or for them to
believe that their long relationship with a customer
allows them to exactly know
their level of satisfaction. A low rate of complaint is
very often rashly equated with
customer satisfaction. However, this is frequently a
misconception. Experience
shows that only about four percent of all unsatisfied
customers complain; the
other 96 percent keep to themselves, deciding to switch
companies (Wilson, 1991,
p. 134).
Some impressive research results and empirical values,
coming from various
fields, concerning the economic affect of customer
satisfaction, will be brought
together in the following section. They show the
importance, meaning and benefit of
customer satisfaction for a company (Töpfer & Mann,
1999, p. 60).
Examples from various fields:
It is about 600 percent more expensive to get new
customers than to keep the
existing ones.
With satisfied customers the chance is about 300
percent higher that they will
stay, than it is in the case of unsatisfied customers.
The chance that very satisfied customers will become
the best form of
advertising for a company is almost as high as 100
percent.
95 percent of annoyed customers will stay loyal, if the
problem can be solved
within five days.
75 percent of customers who switch to the competition
do so because of being
disturbed by poor service quality.
25 percent of customers who switch to the competition
do so because of being
bothered by inadequate goods or too high of a price.
Over 30 percent of American service provider expenses
originate in
improvement expenditure.
Over 30 percent of annual sales revenue is forgone due
to the correction of
errors by the average American company.
Every percentage point of sustained customer
satisfaction amounts to a 7.25
percent climb in the return on investment (ROI).
If the customer rejection rate is reduced by five percent,
thereby enhancing
customer commitment, this amounts to a 28–85 percent
increase in profit.
Customer Satisfaction Viewed According to a
Theoretical Model
In its classical definition, customer satisfaction is the
degree of correspondence
between the expectations that a potential customer has
for a product or service,
and the perceived service that is in fact provided. If the
perceived service fulfills
or exceeds the standard of comparison it is based on,
customer satisfaction arises.
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Customer Satisfaction 61
A service that falls short in comparison to expectations
leads to dissatisfaction. In the
prior chapter, we discussed how the Kano method can
be used in order to determine
which product and service features are expected as part
of the basic offering, and
which features help to pleasantly surprise the customer,
which increases customer
satisfaction.
Objectively measurable customer satisfaction results
therefore, from an inner
process of comparison between:
The personal needs, wishes, and expectations of
customers on the one hand
(the ‘should’ factor) and;
The perceived quality of products and services on the
other hand (the ‘is’
factor).
From that the following relationship can be derived:
•
•
Should < Is => Convinced Customer
Should = Is => Ostensibly Satisfied Customer
Should > Is => Disappointed Customer
Figure 4.2: Origination of customer satisfaction
The ‘Should’ Factor (Level of Standard)
The ‘should’ factor (also known as ‘should service’) is
understood to be the sum
of ideas and expectations with regard to a product or
company service, (like for
example, friendly and helpful salespeople, informed
advice, reasonable price, high
quality, a long guarantee period, etc.). The ‘should’
factor is influenced by the
following factors (Rapp, 1995, pp. 31–32):
Personal Needs
The expectations regarding a company’s service are
strongly influenced by
the individual standards of varying customers (a
customer who uses his PC
for working at home has different standards than a
customer who uses his PC
for multimedia purposes).
Extent of Experience
All of a customer’s prior experiences create an
important basis for their
expectations concerning a company’s service (a
customer who has worked a
lot with different PCs has different expectations than a
non-professional).
Direct Communication Regarding the Company’s
Service
Direct communication by the company via public media
or private
communication is a decisive factor with regard to the
customer’s expectations
(a customer expects definite service features which
have been promised in
advertisements and by salespeople).
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62 Customer Relationship Management
Indirect Communication Regarding the Company’s
Service
Indirect communication includes word of mouth
between friends and
acquaintances, communication concerning a spectrum
of service via
independent media (for example, consumer
organizations which provide an
independent product/service rating service, like the
German consumer safety
group known as Stiftung Warentest, or like Consumer
Reports in the United
States), or communication stemming from the
competition regarding the same
or a comparable company service.
In the end, the actual experience of a product is
evaluated on the basis of expectations.
The ‘should’ factor represents the standard of
comparison for evaluating a product.
The standard of comparison that a customer’s
expectations are based on is not always
the same. One can differentiate the following standards:
Expected Performance
That which the customer can expect based on prior
experience. This standard
of comparison is made up of experiences with the same
or similar products
(also with other brands).
Desired Performance
What the customer ideally imagines. The optimum
standard of comparison is
being used here.
Minimum Tolerable Performance
This is the minimum that a customer can expect.
Adequate Performance
What the customer sees as being reasonable, and which
can be achieved
according to reasonable means.
Product Type Norms
Normally present level of standard. According to this
standard of comparison
the normal or the typical is expected.
Best Brand Norms
The level of standards that are present with the best
choices currently being
offered.
Comparison Level
Experience with similar products, or knowledge of
those that other consumers
have received. Here the relationship between costs and
benefits is decisive.
There is no general answer as to which standard of
comparison a customer will
apply. The complex structure and dynamic quality of
people’s expectations make
generalizations impossible. As legendary economist
John Kenneth Galbraith has
said, ‘There is certainly no absolute standard of beauty.
That precisely is what makes
its pursuit so interesting.’ (Galbraith, 1967, p. 221). For
this reason, the standard of
comparison can take on various forms, according to
each individual and according
to each situation.
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Customer Satisfaction 63
The ‘Is’ Factor (Perception)
The ‘is’ factor (also known as ‘is service’) characterizes
the actual, perceived
experience of the customers in their use or consumption
of the product. It is only
with the help of this factor that the customers can
establish whether their expectations
have been fulfilled.
For the customer, the perceived service is of paramount
importance. Here it is
crucial to establish that the reality of the good or service
which is being sold is not
the only consideration; all services, features, and
warranties which are bound up
with it should also be encompassed. As is shown in
Figure 4.3, in order to assess
the firm’s ability to meet the ‘is factor’ for its
customers, there is a need to view the
entire product and service experience through the eyes
of the customer.
Homburg and Rudolph (1998, p. 41) differentiate
between the objective and
subjective service. The objective service is the actually
received service. This is the
same for all customers. The subjectively perceived offer
is revealed by the level of
standards, and by the expectations of various customers
being placed in relationship
to the service. Therefore, as a result of a varying level
of standards, an individually
perceived product-service results. Only by appropriately
orienting the business
toward the satisfaction of the needs of the customers
will a firm be able to understand
what the majority of its customers’ desire.
A ‘Should’ and ‘Is’ Comparison of Customer
Satisfaction
The ‘should’ and ‘is’ comparison leads to a fulfillment
or non-fulfillment of
expectations. The feeling of satisfaction or
dissatisfaction originates from the
individual evaluation of their feelings concerning the
shopping or purchasing
experience. Depending on whether the customer is
satisfied or dissatisfied, different
behavior reactions can be derived:
With the Eyes of the Customer
The Kind of Telephone Contact
Believability/Trust Price to Service Relationship
Observance of Appointment Commitments
Politeness/Friendliness of the Employees
Reliability, Availability
Politeness and Appearance
Speed of Employees
Advertising/Communication Competence of Employees
Choice Product Range/ Understandability of Service
Depth of Product Range
Design
Offers and Alternatives
Behavior During Complaints
Company Image
Flexibility/Motivation
Guarantee/Generosity
Material Environment
Reliability of the Product/Service
Technical Features of the Service
Security The Solution/Benefit/Success Provided
Figure 4.3: The customer’s perception of quality
(Meyer, Dornach & Muller, 1998, p. 30)
64 Customer Relationship Management
From dissatisfaction there arises, for the customer, the
following possibilities for
action:
Rejection
In the case of a rejection (also known as a defection),
the customer has the
option of either a change of business, brand, or product,
or he may opt to entirely
relinquish the product. In the case of a change of
business, the customers stay
with the same product, but they get that product from
another provider. An
unhappy Mercedes driver, for example, may stay with
their brand, but the
customer will get a new car from a different car dealer.
In the case of a brand
change, dissatisfied consumers decide to give their
business to a competing
brand. This would be in the case where the above-
mentioned Mercedes driver
would opt to buy an Audi instead. In a product change,
the customers decide
in favor of a different product category. The customer
remains true to their
service provider, but they opt for another product. The
last possibility open to
a customer is to relinquish the current product
altogether.
Negative Word of Mouth Advertising
Negative word of mouth advertising entails dissatisfied
customers disclosing
negative opinions concerning the product or company.
According to a wellestablished
marketing literature rule of thumb—that negative word
of mouth
propaganda is ten times as effective as positive
customer feedback—the
ramifications of this form of negative advertising are
considerable. Bad news
travels faster than good news.
Complaints
This is the individual form of rejection. The consumer
encounters the company
directly and complains about a defective product or
faulty service.
Satisfied customers have the following possibilities for
action:
Cross-Selling
Cross-selling means that satisfied customers will be
prepared to buy other
products from a provider. Why should a customer who
is happy with the
quality of a company’s product and service opt for
another provider?
Customer Commitment
Customer commitment describes the constancy of a
customer’s contact with
a company, which is understood as a special bond, and
which is based on
voluntary choice and satisfaction (Fest, 1999, p. 106).
Decreasing Price Sensitivity
The introduction of higher prices is easier with satisfied
customers than it is
with unsatisfied customers. Consumers who can trust in
a company’s quality
and service are as a rule also prepared to pay more.
Positive Word of Mouth Advertising
Positive word of mouth advertising entails satisfied
consumers telling other
people positive things about the company or product.
The customer will
actively recommend the product or service.
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Customer Satisfaction 65
The preceding discussion helps to further expand upon
the ideas expressed by
the economist Albert O. Hirschman in his classic book,
‘Exit, Voice, & Loyalty’
(Hirschman, 1972). Hirschman’s view was that
customers and employees had the
three primary options, which were referenced in the
book’s title, for dealing with an
organizational decline. It will become apparent to the
reader that these three options
of exiting the firm, voicing concern for the
organizational decline, or remaining loyal
to the firm are in the main determined by whether a
customer is satisfied with the
overall performance of the firm. In Hirschman’s view,
the more disenchanted an
individual was with the organization, the more likely
they were to exit. Hirschman’s
work set the stage for subsequent studies on customer
satisfaction as have been
discussed in this chapter. In the following section, the
topic of variety seeking (see
Figure 4.4), which has attracted increasing scientific
interest in recent years, will be
dealt with in detail.
Variety seeking is the phenomenon whereby
consumers display an inclination
for change that can be traced back to a need for variety
(Haseborg & Mäßen, 1997,
p. 164). This inclination has led to variety seeking being
identified as an important
factor in the description, prognosis, and control of
consumer behavior.
The tendency of variety seeking is understood as a
personality trait of consumers
that display a ‘desire for a new and novel stimulus’
(Hoyer & Ridgway, 1983, p. 115)
(individual specific definition). People strive according
to behavior aimed at an inner
level of stimulus that is experienced as satisfying or
comfortable. In this context a
fundamental need for stimulus is being assumed. The
necessary stimulus offers new,
diverse, and intense impressions. In the area of
consumer behavior, stimulation, with
the satisfaction it brings in relation to the consumer’s
need for variety, is evoked
through the use of various products. The consumer who
is endeavoring to achieve his
optimal level of stimulus will examine his environment
for those stimuli that serve to
satisfy and maintain this level of stimulus. The various
products that characterize his
Defector
Negative Word
of Mouth
Advertising
Complaints
Cross-
Selling
Customer
Commitment
Decreasing Price
Sensitivity
Positive Word of
Mouth
Advertising
No Behavioral
Reaction
Behavioral
Reaction
Dissatisfaction
Variety
Seeking
Satisfaction
‘Should’ and ‘Is’
Comparison Between
Expected and Perceived
Service
Figure 4.4: The reaction of customers when
dissatisfied or satisfied
66 Customer Relationship Management
environment enable the maintenance, alteration, and
satisfaction of his inner level
of stimulus. For example, through variety seeking a
consumer can return to balance
motives like curiosity, boredom (satiety), or the need
for uniqueness or exclusivity
(McAlister & Pessemier, 1982, p. 312).
The behavior of variety seekers reveals itself through an
individual specific
assessment, and likewise through a product-oriented
assessment (product specific
definition). It is of note that generally the tendency for
variety seeking becomes
more marked when the number of product alternatives
increases, when there is a
lower perceived difference between the products, when
the brand trust is low, and
when the perceived product risk is low (Hoyer &
Ridgway, 1983, pp. 116–117).
Additionally, there arises the possibility of a study that
is product feature specific
(product feature specific definition). ‘For an individual
consumer, particular product
features will come under more consideration than
others, in terms of satisfying the
need for variety. For example, a consumer may, in the
choice and consumption
of soft drinks, on one occasion opt for a fruity drink,
and another time for a less
fruity drink, which in both cases must be caffeine free’
(Haseborg & Mäßen, 1997,
p. 165).
The assessment of variety seeking offers an explanation
for the often-observed
fact that customers will also change a provider or
product, even when they are satisfied
with this provider or product. It can be shown, in the
context of an empirical study
concerning a well-known German automobile
manufacturer, that variety seeking
exercises a considerable negative influence on the
factor of customer commitment
(Peter, 1998, pp. 77–79). Clearly, a significant
development of the personality
feature of variety seeking leads to customers
abandoning products or providers,
even in the case of high customer satisfaction. For the
organization therefore, it is of
decisive importance how many of its customers are
variety seekers and/or to what
extent the current product encourages variety seeking.
A lasting relationship to the
customer is not, in this case, attained via the
optimization of customer satisfaction,
but instead is more likely achieved through measures
that technically, economically,
psychologically, or emotionally persuade the customer
to commit, so that the
commitment supersedes the wish for change.
Customer Satisfaction Development
The ‘should’ and ‘is’ comparison explained above
provides a starting point for
securing the present satisfaction of the customer. From
this status quo model
measures can be derived which raise customer
satisfaction on the basis of present
standards. As necessary as this information is for
raising customer satisfaction, it
is limited to present customer standards and does not
live up to the demands of
proactive management. Proactive management
anticipates future customer or market
standards and develops corresponding strategies.
The following Customer Satisfaction Development
(CSD) model is an
assessment that not only takes into effect the present
wishes of the customer; but
also the future standards of customers are considered.
The model’s foundation relies
on Bruggemann’s (1974, pp. 281–284) process-oriented
notion for attaining work
satisfaction. This model is illustrated in Figure 4.5.
Customer Satisfaction 67
The present satisfaction or dissatisfaction of a customer
results from the ‘should’
and ‘is’ comparison. When viewed in the long term, this
leads to maintenance,
lowering, or raising of the individual level of standards.
If the product or service
adds up to expectations, then maintenance of the level
of standards is achieved.
However, if the actual product and the expectations
concerning it drift apart from
each other, then either a raising or lowering of
individual level of standards occurs.
Raising of the level of standards: unstable customer
satisfaction
The rising of the level of standards represents each
situation where the perceived
product service highly exceeds the personal
expectations of the customer. Thus,
the customer is pleased to the highest extent with the
product or with the services
accompanying the product.
This phenomenon is none more apparent than in the
personal computer industry.
In this business, every innovation results in customer
expectations being raised.
While not long ago customers were satisfied with
simple functions and application
possibilities, today a very impressively outfitted
computer is standard equipment. It
is becoming apparent here that customer satisfaction is
not a goal that is attainable
once and for all. Instead it is a continuously developing,
dynamic target.
Maintenance of the level of standards: stable customer
satisfaction
If perceptions more or less positively correspond with
expectations, then one can
speak of stabilized customer satisfaction. The customer
is satisfied and constantly
maintains their level of standards. Marketing research
however, is unanimous in
finding that the exact fulfillment of expectations is
neither simple, nor reflective
Wishes and
Expectations
Concerning the
Produc
Perceived Features of
Products
(Is Service)
Difference of Should Versus Is
t
Customer Satisfaction Customer Dissatisfaction
Raising of the
Level of Standards
Maintaining of the
Level of Standards
Lowering of the
Level of Standards
Maintaining of the
Level of Standards
Unstable Customer
Satisfaction
Stable Customer
Satisfaction
Unstable Customer
Satisfaction
Stable Customer
Satisfaction
Present
Positive Negative
Future
Figure 4.5: Model assessment toward the analysis of
customer satisfaction
68 Customer Relationship Management
of the optimal state of affairs. This kind of customer
satisfaction is effective from
a short-term perspective, but in the long term it
threatens the loss of customers. If
a competitor reacts first to raised customer needs and
wishes, and loss of market
share to the competition ensues, then clearly the firm
should have erected barriers to
change earlier, which could have hindered or made
impossible a customer’s turning
to a competitor’s product. But this does not take into
account the appropriate longterm
strategy for a customer-centric company. Erecting
barriers after the fact is
a reactionary way of doing business, and it is advisable
that a company be more
proactive in order to successfully anticipate the future
needs and desires of its
customers.
The goal of a company should therefore be to
continuously exceed the consumer’s
expectations, in that the company again and again
enriches with additional benefits,
qualitatively improves, and technologically develops
what it has to offer. In other
words, the objective should be to keep in focus the goal
of steadily raising the level
of standards, because only this form of satisfaction
furthers long-term success.
Lowering of the level of standards: unstable customer
satisfaction
Lowering of the level of standards occurs when the
perceived product service does
not correspond with expectations. The customer is not
satisfied. There may be a few
reasons for this. Either the customer’s expectations are
too high, or the service is,
in fact, unsatisfactory (or both). In this situation, it is
necessary for the company
to know how its customers behave when dissatisfied,
because only then can they
understand how and where they can apply the
appropriate marketing techniques, so
that the customer can be brought back into a state of
satisfaction.
Maintenance of the level of standards: stable customer
satisfaction
Stable customer satisfaction exists when perceptions
more or less negatively
correspond with the customer’s expectations. This case
may manifest itself according
to circumstances in oligarchic states or in monopolies.
Even if a customer is not
happy with the provider or the product, they do not
have the possibility of choosing
from alternative offers. Either there are no similar
providers around, like the way
it was in Germany and in the United States during the
telephone monopolies, or a
change to another company involves enormously high
costs for the customer. An
example of this is private health insurance in Germany.
The decision for a private
health insurance company is usually a lifetime decision,
because to change back later
to public health insurance is only possible in
exceptional cases. Switching later to
another private health insurance company is also rarely
worthwhile, in that the insured
in most cases loses the already accumulated payments.
In this way, the customer is
persuaded to remain with his current provider in spite of
dissatisfaction.
Another example would be the liberalization of the
electricity market in
Germany. Recently, state utility companies have
become openly critical of the
private companies they have agreed to allow to use their
power grid infrastructure.
The state utility companies have continuously been
coming up with new strategies in
order to keep customers, like for example, in the high
fees for changing companies,
and/or the extra fees for using their grid infrastructure.
Since 1998, 2.1 percent of
households have managed to leave their former (state)
company. Competition in the
Customer Satisfaction 69
utility market exists, therefore, only on paper, despite
warnings from the antitrust
commission and quite a few legal actions (Delhaes,
2001, p. 136).
On the basis of the CSD model assessment, a portfolio
can be derived, which, in
connection with information having to do with
individual customer segments, can
reveal which measures and strategic decisions a
company must initiate and realize in
order to achieve a higher level of customer satisfaction
in the future.
Faultfinders are customers whose level of standards
sink or remain constant,
and who are not satisfied with the present service. The
focus of strategic measures
lies here in the area of price management. This group of
malcontents are typically
very price conscious, and are apt to consider other
competing products if the price
is right.
Travelers are customers whose level of standards
increase, and who are not
satisfied with the present service. The focus of strategic
measures here lies in the
area of improving the company’s quality of service. In
an environment that is not
customer oriented, the ability to understand the nature
of the lack of satisfaction
may be lost, as would be the business for the firm. By
seeking feedback from the
customers, there remains the possibility of keeping
them with the firm once their
needs are met.
Convenients are customers whose level of standards
remain constant and who
are satisfied with the present service. The focus of
strategic measures here lies in the
area of quality assurance. These are customers who are
most likely to remain loyal,
unless there is a perceived drop in the quality of the
product service provided.
Pushers are customers whose level of standards
increase, and who are satisfied
with the present service. The focus of strategic
measures here lies in the area of the
company’s capacity for innovation. These are the
customers who in effect push the
firm to continuously improve their level of product
service.
Increasing
Level of Standard
‘Travelers’
‘Faultfinders’ ‘Convenients’
‘Pushers’
Decreasing
Dissatisfaction Satisfaction
Customer Satisfaction
Figure 4.6: Relationship between level of standards
and customer satisfaction
70 Customer Relationship Management
In the area of CSD experience, it has been shown that
the raising of customer
satisfaction often has less to do with so-called hard
factors like organization and
technology, but instead is something that is dependent
on the capacities of management
and employees. In order to successfully put to use the
knowledge gleaned from the
portfolio analysis, it is necessary to draw the
appropriate consequences at the level of
management, and to activate the potential of managers
and employees toward the optimal
realization of strategic goals. Toward this end, in the
area of CSD , the management
screening method is used for potential analysis and
potential development.
Figure 4.7: Strategic focus with regard to different
customer types
Present Customer
Satisfaction
Strategic Goals
Potential Analysis
Potential Development Management Success
Future Customer
Standards
Figure 4.8: Strategic goals and potential
development
Customer Satisfaction from a Behavioral Science
Perspective
Theory of Cognitive Dissonance
The theory of cognitive dissonance developed by
Festinger (1957) operates under
the assumption that individuals strive to maintain or to
regain the freedom to object
to thought processes. Engaging cognitions like
opinions, values, items of knowledge,
and also feelings, for an individual in an imbalance (this
is labeled as cognitive
dissonance), manifest as uncomfortable psychic tension.
Strategy
Faultfinders Travelers Convenients Pushers
Innovation
Quality
Service
Price
Customer
Customer Satisfaction 71
Festinger’s basic assumption is that every individual is
seeking cognitive
consonance (harmony), and so when disturbed by
dissonance, the person seeks to
eliminate this state by reducing the dissonance. This
takes place according to the
following possibilities (Wottawa & Gluminstri, 1995, p.
164):
The addition of new cognitions that may encourage
consonance or reduce
dissonance.
Rejection or suppression of the dissonant cognition
(subtraction).
Exchange of the dissonant cognition with consonant
cognition (substitution).
Dissonance can also arise in various phases of the
purchasing process (Nieschlag,
Dichtl & Hörschgen, 1994, p. 558):
After the acquisition of information that contradicts
earlier experience or
which alters information and decision behavior.
After the decision to purchase (post decisional
dissonance), in cases where
the customer has relinquished positive aspects of the
rejected option, and has
accepted negative aspects of the chosen option. This
shows itself in various
ways: for one, in the reevaluation of the chosen option
to the credit of the
rejected option; another way is via the weakening of
assurance that a correct
decision has been made; and thirdly via selective
seeking for consonant
information (confirmation).
During use of the product, if the product does not
correspond with
expectations.
In order to satisfy the customers, it is important to
guarantee the presence of
consonance-inducing information during the course of
the entire purchasing process.
Although consonance-inducing measures are important,
the task is not to allow
cognitive dissonance to arise in the first place.
The customer is especially receptive to consonant
information in the post purchase
phase. This is substantiated by a study done concerning
the rate of cancellation of
purchase contracts in the automobile sector.
•
••
•
•
•
Cancellation Rate of
Purchase Contracts
in the Automobile
Sector
2.4%
Advertising with
Positive
Information
5.2%
No Advertising
%
Figure 4.9: Cancellation rate of purchase contracts
in the automobile sector
after consonant information (Donnelly &
Ivancevich, 1970, pp. 339–400)
72 Customer Relationship Management
As you can see from Figure 4.9, the study concluded
that positive advertising did
help to reduce the level of purchase contract
cancellations in the automobile sector.
In connection with the theme of ‘customer satisfaction’,
it is often concluded on
the basis of the theory of cognitive dissonance that
reducing dissonance may be all
that is required, owing to the tendency of experiences
adapting to expectations. It is
important to meet high product standards, which results
in higher levels of customer
satisfaction. However, this assumption leaves out of
consideration at what level of
dissonance the above process no longer applies, and
where other behavior patterns
(e.g., switching products) arise. This will be explained
in more detail below.
The Contrast Theory
The contrast theory is based on Helson’s ‘adaption level
theory’ (1964), and states
that a person corrects their perceptions when
expectations and performance do not
correspond. In this case, however, in contrast to the
theory of cognitive dissonance,
the difference is exaggerated. This can arise in two
ways (Homburg & Rudolph,
1998, pp. 34–35):
If the performance is worse than expectations, the
person corrects his
perceptions such that the product or service appears
worse than it actually is.
If the performance is better than expectations, the
person will separate their
perceptions from their expectations and overvalue the
product or service.
A sports analogy might make this concept easier to
understand. Assume that an
individual is a recreational tennis player, and has had
much success in defeating other
players in the neighborhood. Due to this success, the
individual decides to join the
city tennis league, where the majority of the players
have played competitive tennis
at the high school or university level in the past. Since
the recreational player is used
to winning, a stunning loss or a streak of losses may
make the recreational player
question his ability. It may not have been that the
recreational player performed
any worse than previously, only the level of the
competition had improved. The
recreational player must adjust their perception of their
own ability in order to deal
with the situation. This same scenario can appear in the
marketplace, where there is
a tendency of perceiving the quality of service to be
much worse than it actually was,
just because the service was beneath the customer’s
level of expectations.
The Assimilation Contrast Theory
In Sherif and Hovland’s (1961) assimilation contrast
theory, the propositions of the
preceding theories are combined. The perceived
discrepancy between the ‘should’
and ‘is’ performance determines which theory will
come into play. If the perceived
service departs only negligibly from expectations, then
it still falls in the area of
the customer’s assumptions. The customer tends to
align their perceptions with
their expectations, in order to assimilate them. If the
discrepancy passes the level of
tolerance, then the contrast effect sets in.
•
•
Customer Satisfaction 73
Revisiting our recreational tennis-playing friend, the
key to a successful
improvement in the city league will be in how they deal
with the increased level of
competition. If the recreational player expected some
setbacks in the city league in
an effort to improve their game, then it is less likely that
the contrast effect would
set in. Having realistic performance expectations goes a
long way to eliminating the
discrepancies between ‘should’ and ‘is’ performance.
Measuring Customer Satisfaction
The Goal of Measuring Customer Satisfaction
Like all company activities, striving for customer
satisfaction is subject to the
economical imperative. This means that the results of a
customer satisfaction analysis
must bring in more than it costs. The satisfaction of a
customer is accordingly a
means to increase profit (Simon & Homburg, 1998, p.
30).
Customer satisfaction can only be implemented as a
strategic venture. Therefore,
the goal of customer satisfaction research should be to
present the customer situation
as much as possible objectively and all-inclusively. To
that end, some basic standards
of measurement can be employed. These standards
should be employed:
systematically
regularly
objectively
pervasively – in a way that is differentiated according to
market segments
(e.g. regions, states, customer groups, branches).
The advantages of a continuous study of customer
satisfaction are obvious:
Customer-oriented Management
During the course of a customer satisfaction analysis, a
customer shares their
goals, needs, and wishes. The company is thereby given
the opportunity to
adjust what it has to offer to the expectations and
perceptions of the customer.
Because of reliable feedback received from the
customer’s side, it is possible
for the company to guide its actions toward establishing
and assuring a longterm
relationship with the customer.
Comparison with the Competition
A customer will only maintain a relationship with a
company if the products
and services being offered lead to satisfaction and are
better than alternative
offers. Therefore, it is of fundamental importance that a
company compares its
service with that of competitors.
Comparison over Time
It is important for a company to not only use
satisfaction studies to ascertain
possible sources of satisfaction or dissatisfaction, but to
also use them for
analyzing and deriving possible strategies for action.
Via regular studies,
comparisons can be derived with regard to product and
service quality over a
given time period.
••••
•
•
•
74 Customer Relationship Management
Profit from Specific Insights
Through innovation and strategic changes, the rapid and
early attainment
of customer satisfaction can be an advantage. By goal-
oriented teamwork,
products and services can be developed or directly
adjusted to the expectations
of potential customers.
The Eight Phases of a Customer Satisfaction Study
A measurement of customer satisfaction can be divided
into eight phases
Phase 1: establishment of the study’s subject matter
and goals
In this phase, it must be clarified who should be
surveyed. In the study, existing
customers, former customers, and the competition’s
customers should be included.
For the different groups there are naturally different
research goals.
Phase 2: exploratory phase
In general, the exploratory phase consists of extensive
discussions with customers,
during which it should be discovered what customer
standards and expectations
are being applied to the product or service. Out of that
analysis will come insights
helpful for the choice and design of appropriate study
methods.
Phase 3: choice and design of study methods
In this phase, decisions are made concerning the type of
survey (complete survey
or sample survey), the survey method (telephone
survey, written survey, or personal
interview), and the format of the questions (open or
closed questions). The type
of survey will typically be decided based on the size of
the total population being
surveyed (if large, then a sample is appropriate). The
survey method is also dictated
based on the size of the customer base, as well as based
on the sensitivity of the
questions being asked. Generally, it is preferable to
offer some open-ended questions
if you are unsure how the survey respondents will
respond.
Phase 4: pretest
In the pretest phase the chosen study method should be
tested on a small number
of customers (about 20 people). If flaws show
themselves in this phase, then the
method needs to be reworked. A company can save
time and money by including a
test phase.
Phase 5: implementation of the study
In this phase, the study is carried out. Before the actual
survey, the customer should
be given notice via a letter of what is to come. In this
way, the distance between
the questioner and the questioned is reduced and the
motivation to cooperate is
increased. After the study, it is advisable, via an
additional mailing, to allow the
customer an opportunity to provide feedback.
•
Customer Satisfaction 75
Phase 6: analysis of study data
After the implementation phase comes the analysis of
the collected data. Here three
alternatives can be differentiated:
Descriptive analysis, which processes data graphically
(average value, modal
value, median).
Univariate and bivariate procedures, which reveal
correlations or differences
between one or two variables, for example relationships
between price and
sales volume.
Multivariate procedures that serve the purpose of
studying several variables,
like for example, regression or cluster analysis. The
objective of regression
analysis consists of an examination of relationships
between one dependent
(metrically scaled) variable and, as a rule, several
independent (metrically
scaled) variables. The dividing up of variables into
dependent and independent
variables is done in advance due to a logical
relationship. Regression analysis
is subject to a definite direction of the relationship,
which is not reversible
(dependence analysis). Cluster analysis has as its goal
to bring a number of
objects (people, products, companies), according to
their similarity, into a
natural order of groups or classes that are differentiated
from each other. The
groups, formed in this way, should differ from each
other as much as possible
in that the objects contained in them, with regard to the
studied properties
or distinctive characteristics, display a marked
homogeneity not shared with
contrasting groups (Meffert, 2000, pp. 165–169). Thus,
in cluster analysis,
measurement of a correlation, and additionally a
rectifying development
between variables, is in the foreground
(interdependence analysis).
The overriding goal in the interpretation of data is the
identifying of weak points, in
order to proceed with eliminating them via focused
improvement efforts.
Phase 7: formulation of plans of action
On the basis of evaluated data, corresponding
approaches to action can now be
formulated toward the enhancement of satisfaction.
Since not all of the surveyed
criterion influence satisfaction to an equal extent,
improvement of measures
should be initiated, which presumably will have the
greatest influence on customer
satisfaction.
Phase 8: implementation of plans of action
The implemented plans of action for the enhancement
of customer satisfaction
should be regularly reviewed and analyzed with regard
to their success or lack
thereof. In this way emerging weak points can be
identified early on, reengineered
and debugged.
•
•
•
76 Customer Relationship Management
Procedures for Measuring Customer Satisfaction
In the literature, the following classification of
procedures for measuring customer
satisfaction has prevailed. Accordingly, the procedures
are broken down with regard
to measuring satisfaction within subjective or objective
procedures.
Objective procedures for measuring customer
satisfaction
Objective procedures rest on the observation of
verifiable and definitely measurable
criteria, like, for example:
sales
profit
market share
rate of repurchase
rate of customer loss
The conclusiveness of these economic figures is, to be
sure, often rather limited. Other
factors of influence, like, for example the competitive
situation, market growth, new
innovations, etcetera, also qualify these indicators.
Rising profit cannot necessarily be
traced back to rising customer satisfaction. In practice,
the employment of subjective
procedures is more advisable.
•••••
1. Establishment of Study Subject Matter
and of Study Goals
2. Exploratory Phase
8. Implementation of Plans of Action
3. Choice and Design of Study Methods
4. Pretest
5. Implementation of Study
6. Analysis of Study Data
7. Formulation of Plans of Action
Possible Reworking of
Methods
Controlling
Figure 4.10: The eight phases of a customer
satisfaction study
Customer Satisfaction 77
Subjective procedures for measuring customer
satisfaction
These procedures do not involve any directly
observable quantities, but rather
determine values indicating the customer’s subjectively
perceived level of satisfaction.
Feature-oriented and event-oriented procedures can
here be differentiated:
Feature-oriented Procedures
Feature-oriented procedures are based on the
assumption that all of a
customer’s experience of satisfaction can be traced back
to an assessment of
the individual features of the product. In feature-
oriented procedures, there is
a differentiation between implicit and explicit
measurement.
Implicit measurement is shown via the systematic
recording and study of
complaint behavior, for example. In this context, active
complaint behavior is
assumed. In reality, however, this is often not a given.
According to various
empirical studies, high time expenditure, poor prospects
of success, or anger
connected with the problem, are all reasons why
customers take no measures
to make a complaint. Accordingly, companies who take
a low rate of complaint
to be an index of customer satisfaction are typically in
error.
Explicit methods of satisfaction are measured on the
basis of onedimensional
or multidimensional satisfaction scales.
One-dimensional procedures measure customer
satisfaction on the basis
of one of several indicators (e.g. overall satisfaction).
However, this leads to
problems if conclusions are to be drawn as to which
factors in particular are
responsible for the dissatisfaction of customers. One-
dimensional procedures
make it very hard to stack rank the indicators of
customer satisfaction.
Multidimensional procedures lead to convincing
judgments, because
several different services are assessed. This is
conducive to finding out the
state of overall satisfaction. Basically, they are quite
practical, and gather the
positive as well as the negative judgments of customers.
On the other hand,
even these procedures exhibit disadvantages; as a rule
they do not gather all
relevant data, and are not in the position to portray
individual psychological
processes or consumer experiences completely,
concretely, and with the
necessary urgency.
Event-oriented Procedures
Event-oriented measuring procedures disclose customer
satisfaction on the
basis of actual events during the consuming process. Of
the most important
variations, the critical incident technique and the
sequential incident technique
are here of note. These measuring methods are for
finding out about experiences
relevant to satisfaction, for identifying experienced
customer problems, and
for the determination of minimum and value increasing
qualities. There
are disadvantages with regard to standardization and
comparability. Their
suitability as guiding information is consequently not as
highly valued as that
of feature-oriented procedures.
•
•
78 Customer Relationship Management
Questions for Discussion
How is customer satisfaction defined at your company
or university? Describe
how customer satisfaction can be best measured at your
organization.
Provide some examples when the level of service that
you received was less
than your expectations. What led to the level of
experience being less than
what you desired? What was the result of your
experience? Make sure to use
the ‘should’ and ‘is’ terminology in your answers.
What are some suggested strategies for a firm to best
alleviate customer losses
due to the variety-seeking phenomenon?
Using the CSD model, discuss how the four different
customer types
(faultfinders, travelers, convenients, and pushers) are
influencing the standards
of service in the banking, automotive, and information
technology industries.
How has the understanding of customer satisfaction
expanded since Albert O.
Hirschman’s famous book, Exit, Voice, & Loyalty first
appeared in the 1970s?
Using the eight phases of a customer satisfaction study,
discuss how such a
study could be implemented successfully in your
company or university.
1.
2.
3.
4.
5.
6.
Figure 4.11: Procedures for measuring customer
satisfaction (Homburg
& Werner, 1998, p. 133; Topfer & Mann, 1999, pp.
59–110)