Module 6
Defining and Measuring Customer
Satisfaction
At the end of the discussion students will be able to:
Define customer satisfaction and understand the benefits associated with
satisfied customers.
Appreciate various methods for measuring customer satisfaction and discuss
the limitations of customer satisfaction measurements.
Discuss factors to consider when investing in customer satisfaction
improvements.
Understand the many factors that influence customer expectations.
The Importance of Customer Satisfaction
The importance of customer satisfaction cannot be overstated. Without
customers, the service firm has no reason to exist.
Every service business needs to proactively define and measure customer
satisfaction.
Waiting for customers to complain in order to identify problems in the service
delivery system or gauging the firm’s progress in customer satisfaction based
on the number of complaints received is naive.
What Is Customer Satisfaction/Dissatisfaction?
Although a variety of alternative definitions exist, the most popular definition of
customer satisfaction/dissatisfaction is that it is a comparison of customer
expectations to perceptions regarding the actual service encounter. Comparing
customer expectations with their perceptions is based on what marketers refer to as
the expectancy disconfirmation model.
Simply stated, if customer perceptions meet expectations, the expectations are said to
be confirmed and the customer is satisfied. If perceptions and expectations are not
equal, then the expectation is said to be disconfirmed. Although the term
disconfirmation sounds like a negative experience, it is not necessarily so.
Expectancy disconfirmation model - Model proposing that comparing customer expectations to their
perceptions leads customers to have their expectations confirmed or disconfirmed.
Confirmed expectations - Customer expectations that match customer perception resulting in customer
satisfaction
Disconfirmed expectations - Customer expectations that do not match customer perceptions
Negative disconfirmation - Customer perceptions that are lower than customer expectations
resulting in customer dissatisfaction
Positive disconfirmation - Customer perceptions that exceed customer expectations resulting in
delighting customers
If perceptions and expectations are not equal, then the expectation is said to be disconfirmed.
Although the term disconfirmation sounds like a negative experience, it is not necessarily so.
There are two types of disconfirmations. If actual perceptions were less than what was expected, the
result is a negative disconfirmation, which results in customer dissatisfaction and may lead to
negative word-of-mouth publicity and/or customer defection.
In contrast, a positive disconfirmation exists when perceptions exceed expectations, thereby resulting
in customer satisfaction, positive word-of-mouth publicity, and customer retention. Every day,
consumers utilize the disconfirmation paradigm (pe-ruh-daim) by comparing their expectations with
perceptions.
Alternative Satisfaction Dimensions:
Normative deficit definition - Compares actual outcomes to those that are
culturally acceptable. Equity definition Compares gains in a social exchange—if
the gains are unequal, the loser is dissatisfied.
Normative standard definition Expectations are based on what the consumer
believes he/she should receive—dissatisfaction occurs when the actual
outcome is different from the standard expectation.
Procedural fairness definition Satisfaction is a function of the consumer’s belief
that he/she was treated fairly.
The Benefits of Customer Satisfaction
● Positive word-of-mouth generated from existing customers often translates into more
new customers.
● Satisfied current customers often purchase more products more frequently and are less
likely to be lost to competitors than are dissatisfied customers.
● Companies who command high customer satisfaction ratings also seem to have the
ability to insulate themselves from competitive pressures, particularly price competition.
● In fact, customers are often willing to pay more and stay with a firm that meets their
needs than to take the risk associated with moving to a lower priced service offering.
● Finally, firms that pride themselves on their customer satisfaction efforts generally
provide better environments in which to work.
Figure 6.1: Customer Service Hall of Fame
Figure 6.2: The Customer Service Hall of Shame
Figure 6.3: Nine Key Attributes of Reputation
The Benefits of Customer Satisfaction Surveys
● Such surveys provide a formal means for customer feedback to the firm, which may identify existing and
potential problems.
● Satisfaction surveys also convey the message to customers that the firm cares about their wellbeing and
values customer input concerning its operations.
● However, the placement of customer feedback forms by some companies, such as Delta Airlines who
inserts their survey near the back of their inflight magazines, makes customers wonder if they really
want the feedback.
● Other benefits are derived directly from the results of the satisfaction surveys.
● Satisfaction results are often utilized in evaluating employee performance for merit and compensation
reviews and for sales management purposes, such as the development of sales training programs.
● Survey results are also useful for comparison purposes to determine how the firm stacks up against the
competition.
● When ratings are favorable, many firms utilize the results in their corporate advertising.
Measuring Customer Satisfaction
Measures of customer satisfaction are derived via indirect and direct measures.
Indirect measures
– Sales records, profits, customer complaints
Direct measures
– The Scale of 100 approach
– The “very dissatisfied/very satisfied” approach
– The combined approach
- Provides a benchmark against which future satisfaction surveys should be compared
- Provides diagnostic information that pinpoints specific areas for improvement
Understanding Customer Satisfaction Ratings
1. Customers are satisfied with the goods and services
Despite the lack of standardization among data collection procedures and measures utilized for satisfaction
studies, they share one common characteristic.
“Virtually all self-reports of customer satisfaction possess a distribution in which a majority of the responses
indicate that customers are satisfied and the distribution itself is negatively skewed” (see Figure 6.5).
Satisfaction ratings may be influenced by numerous factors that occur during the data collection process.
The following section provides explanations for inflated satisfaction results and reinforces the notion that
obtaining accurate measures of customer satisfaction is not an easily accomplished task. Customers are
genuinely satisfied one possible reason for high satisfaction scores is simply that customers are satisfied
with the goods and services they typically purchase and consume—that’s why they buy these products from
the firm in the first place!
2. Response Bias
Some experts argue that the reason ratings are so high is that companies hear from only
satisfied customers. In contrast, dissatisfied customers do not believe that the firm’s survey will
do them any good or is worth their time to complete; therefore, the questionnaire is discarded.
Other experts discount this explanation. Their argument is that it makes more sense for highly
dissatisfied customers to express their opinion than it does for highly satisfied customers to do
so. This position is supported by prior research, which indicates that dissatisfaction itself is
more action oriented and emotionally intense than satisfaction.
Others argue that it is possible that highly dissatisfied customers and highly satisfied customers
are more likely to respond than are those who are more neutral.
3. Data Collection Method
A third explanation for inflated satisfaction scores is the data collection method used to obtain results. Prior
research suggests that higher levels of satisfaction are obtained via personal interviews and phone surveys
compared with results from mail questionnaires and/or self-administered interviews.
In fact, studies indicate that as much as a 10 percent difference exists between questionnaires administered
orally and self-administered questionnaires. The reason is that respondents to personal interviews and
phone surveys may feel awkward expressing negative statements to other “live” individuals as opposed to
expressing them anonymously on a self-administered questionnaire.
Research on data collection modes’ effects on satisfaction ratings has produced some interesting results.
The data collection mode does indeed appear to influence the level of reported satisfaction; however, the
negatively skewed distribution of the satisfaction ratings remains unchanged, regardless of the data
collection mode.
4. Question Form
The way the question is asked on the questionnaire, or the question form, has
also been posited as a possible explanation for inflated satisfaction ratings. It
does appear that asking the question in positive form (“How satisfied are
you?”) as opposed to negative form (“how dissatisfied are you?”) does have an
impact on satisfaction ratings. Asking a question in the positive form appears
to lead to greater reported levels of satisfaction than does posing the
question in a negative form.
Figure 6.6: Responses by Question Form
Five criticisms of customer satisfaction research
- as they relate to customer retention provide insights into why firms with high satisfaction ratings may
potentially lose customers.
1. First, satisfaction research focuses on whether current needs are being met but fails to investigate
customers’ future needs.
2. A second criticism of customer satisfaction research is that it tends to focus on registered complaints.
3. A third criticism is that customer satisfaction research tends to focus on global attributes and ignores
operational elements.
4. A fourth criticism of customer satisfaction research is that it often excludes the firm’s employees from
the survey process.
5. Finally, a fifth criticism is that some firms are convinced that customers may not know what they want
and that sometimes ignoring the customer is the best strategy to follow, particularly when it comes to
new product innovation.
Types of Customer Expectations
Predicted service - The level of service quality a consumer believes is likely to occur.
Desired service - The level of service quality a customer actually wants from a service
encounter.
Perceived service superiority - A measure of service quality derived by comparing
desired service expectations and perceived service received.
Adequate service - The level of service quality a customer is willing to accept.
Perceived service adequacy - A measure of service quality derived by comparing
adequate service and perceived service.
Figure 6.9: Comparison between Customer Evaluation of Service Quality and
Customer Satisfaction
Zone of tolerance
Level of quality ranging
from high to low and
reflecting the difference
between desired service
and adequate service;
expands and contracts
across customers and
within the same customer,
depending on the service
and the conditions under
which it is provided.
Figure 6.11: Factors Influencing Expected Service
Factors Influencing Service Expectations:
The other four factors that influence desired service expectations also
influence predicted service expectations and include
(1) explicit service promises;
(2) implicit service promises;
(3) word-of-mouth communications; and
(4) past experience .
Explicit service
Explicit service promises encompass the firm’s advertising, personal selling,
contracts, and other forms of communication.
Due to the lack of a tangible product, consumers of services base their
evaluations of the service on various forms of information available.
The more ambiguous the service, the more customers rely on the firm’s
advertising when forming expectations.
Implicit service
Implicit service promises also influence desired service and predicted service.
The tangibles surrounding the service and the price of the service are
common types of implicit service promises.
As the price increases, customers expect the firm to deliver higher quality
services.
In the absence of a tangible product, the price becomes an indicator of quality
to most consumers.
Word-of-mouth communications
Word-of-mouth communications also play an important role in forming customer
expectations.
As discussed on Buyer Behavior, customers tend to rely more on personal sources of
information than on non personal ones when choosing among service alternatives.
Since services cannot be evaluated fully before purchase, customers view word-of-
mouth information as unbiased information from someone who has been through
the service experience.
Sources of word-of-mouth information range from friends and family to consultants
to product review publications such as Consumer Reports.
Past experience
Finally, past experience also contributes to customer expectations of desired
and predicted service.
Service evaluations are often based on a comparison of the current service
encounter to other encounters with the same provider, other providers in the
industry, and other providers in other industries.
Factors Influencing Service Expectations:
Adequate Service
Adequate service reflects the level of service the consumer is willing to accept
and is influenced by five factors:
(1) transitory service intensifiers;
(2) perceived service alternatives;
(3) customer self-perceived service roles;
(4) situation factors; and
(5) predicted service
Transitory Service Intensifiers. In contrast to enduring service intensifiers,
transitory service intensifiers are individualized, short-term factors that
heighten the customer’s sensitivity to service.
Self-perceived Service Role. As has been discussed on numerous occasions,
the service customer is often involved in the production process and can
directly influence the outcome of the service delivery system.
Situational Factors. As a group, customers are not unreasonable. They
understand that from time to time situational factors beyond the control of the
service provider will lower the quality of service.
Predicted Service. The level of service consumers believe is likely to occur is
the fifth and final factor that influences adequate service expectations.
Predicted service is a function of the firm’s explicit and implicit service
promises, word-of-mouth communications, and the customer’s own past
experiences.
The Link between Expectations, Customer Satisfaction, and Service Quality
• When evaluating the service experience, consumers compare the three types
of expectations (predicted service, adequate service, and desired service) to the
perceived service delivered.
• Customer satisfaction is calculated by comparing predicted service and
perceived service.
• Perceived service adequacy, which compares adequate service and perceived
service, and perceived service superiority, which compares desired service and
perceived service, are measures of service quality