Customer satisfaction

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Customer satisfaction is a term frequently used in marketing to evaluate customer experience. 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] Enhancing customer satisfaction and fostering customer loyalty are pivotal for businesses, given the significant importance of improving the balance between customer attitudes before and after the consumption process. [2]

Contents

Expectancy Disconfirmation Theory is the most widely accepted theoretical framework for explaining customer satisfaction. [3] However, other frameworks, such as Equity Theory, Attribution Theory, Contrast Theory, Assimilation Theory, and various others, are also used to gain insights into customer satisfaction. [4] [5] [6] However, traditionally applied satisfaction surveys are influence by biases related to social desirability, availability heuristics, memory limitations, respondents' mood while answering questions, as well as affective, unconscious, and dynamic nature of customer experience. [2]

The Marketing Accountability Standards Board endorses the definitions, purposes, and measures that appear in Marketing Metrics as part of its ongoing Common Language in Marketing Project. [7] 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] Customer satisfaction is viewed 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 major differentiator and increasingly has become an important element of business strategy. [8]

Purpose

A business ideally is continually seeking feedback to improve customer satisfaction. Business Feedback Loop PNG version.png
A business ideally is continually seeking feedback to improve customer satisfaction.

Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty. [1] The authors also wrote that "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. [9] A second important metric related to satisfaction is willingness to recommend. This metric is defined as "[t]he percentage of surveyed customers who indicate that they would recommend a brand to friends." A previous study about customer satisfaction stated that when a customer is satisfied with a product, he or she might recommend it to friends, relatives and colleagues. [10] This can be a powerful marketing advantage. According to Faris et al., "[i]ndividuals 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]

Theoretical ground

In the research literature, the antecedents of customer satisfaction are studied from different perspectives. These perspectives extend from the psychological to the physical as well as from the normative perspective. However, in much of the literature, research has been focused on two basic constructs, (a) expectations prior to purchase or use of a product and (b) customer perception of the performance of that product after using it.

A customer's expectations about a product bear on how the customer thinks the product will perform. Consumers are thought to have various "types" of expectations when forming opinions about a product's anticipated performance. Miller (1977) described four types of expectations: ideal, expected, minimum tolerable, and desirable. Day (1977) underlined different types of expectations, including ones about costs, the nature of the product, benefits, and social value.

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." [11]

In some research studies, scholars have been able to establish that customer satisfaction has a strong emotional, i.e., affective, component. [12] Still others show that the cognitive and affective components of customer satisfaction reciprocally influence each other over time to determine overall satisfaction. [13]

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 customers 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. [14]

The Disconfirmation Model

"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." [11] "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 a product." [11] "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:" [11]

Construction

A four-item six-point customer service satisfaction form FBI Conspiracy Theory (Redacted) - Customer Service Satisfaction Form.jpg
A four-item six-point customer service satisfaction form

Organizations need to retain existing customers while targeting non-customers. [15] 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. [16] 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). [17]

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) [18] 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 [19] 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] [20]

Good quality measures need to have high satisfaction loading, 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), [21] 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, [21] 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: “pleased 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), [22] 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”. [21] The third best scale was single-item percentage measure, a one-item 7-point bipolar scale (e.g., Westbrook 1980). [23] Again, the respondents were asked to evaluate their experience on both ATM services and ice cream restaurants, along seven points within “ delighted to terrible”. [21]

Finally, all measures captured both affective and cognitive aspects of satisfaction, independent of their scale anchors. [21] 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).

A single-item four-point HappyOrNot customer satisfaction feedback terminal HappyOrNot Terminal.jpg
A single-item four-point HappyOrNot customer satisfaction feedback terminal

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. [24] 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. [25] An interesting recent finding from re-interviewing the same clients of a firm is that only 50% of respondents give the same satisfaction rating when re-interviewed, even when there has been no service encounter between the client and firm between surveys. [26] The study found a 'regression to the mean' effect in customer satisfaction responses, whereby the respondent group who gave unduly low scores in the first survey regressed up toward the mean level in the second, while the group who gave unduly high scores tended to regress downward toward the overall mean level in the second survey.

Methodologies

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. [27] On the microeconomic level, academic studies have shown that ACSI data is related to a firm's financial performance in terms of return on investment (ROI), sales, long-term firm value (Tobin's q), cash flow, cash flow volatility, human capital performance, portfolio returns, debt financing, risk, and consumer spending. [28] [29] Increasing ACSI scores have 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. [30]

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 [31] ) 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, [32] which incorporates the Stages of Excellence framework and which helps define a company’s status against eight critically identified dimensions.

The Net Promoter Score (NPS) is also used to measure customer satisfaction. On a scale of 0 to 10, this score measures the willingness of customers to recommend a company to others. Despite many points of criticism from a scientific point of view, the NPS is widely used in practice. [33] Its popularity and broad use have been attributed to its simplicity and its openly available methodology.

For B2B customer satisfaction surveys, where there is a small customer base, a high response rate to the survey is desirable. [34] The American Customer Satisfaction Index (2012) found that response rates for paper-based surveys were around 10% and the response rates for e-surveys (web, wap and e-mail) were averaging between 5% and 15% - which can only provide a straw poll of the customers' opinions.

In the European Union member states, many methods for measuring impact and satisfaction of e-government services are in use, which the eGovMoNet project sought to compare and harmonize. [35]

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

There are many operational strategies for improving customer satisfaction but at the most fundamental level you need to understand customer expectations.

Recently there has been a growing interest in predicting customer satisfaction using big data and machine learning methods (with behavioral and demographic features as predictors) to take targeted preventive actions aimed at avoiding churn, complaints and dissatisfaction. [36]

Prevalence

A 2008 survey found that only 3.5% of Chinese consumers were satisfied with their online shopping experience. [37] A 2020 Arizona State University survey found that customer satisfaction in the United States is deteriorating. Roughly two-thirds of survey participants reported feeling "rage" over their experiences as consumers. A multi-decade decline in consumer satisfaction since the 1970s was observed. A majority of respondents felt that their customer service complaints were not sufficiently addressed by businesses. [38] A 2022 report found that consumer experiences in the United States had declined substantially in the 2 years since the beginning of the COVID-19 pandemic. [39] In the United Kingdom in 2022, customer service complaints were at record highs, owing to staffing shortages and the supply crisis related to the COVID pandemic. [40]

See also

Related Research Articles

Marketing research is the systematic gathering, recording, and analysis of qualitative and quantitative data about issues relating to marketing products and services. The goal is to identify and assess how changing elements of the marketing mix impacts customer behavior.

Brand equity, in marketing, is the worth of a brand in and of itself – i.e., the social value of a well-known brand name. The owner of a well-known brand name can generate more revenue simply from brand recognition, as consumers perceive the products of well-known brands as better than those of lesser-known brands.

<span class="mw-page-title-main">Services marketing</span> Branch of marketing specialised in services

Services marketing is a specialized branch of marketing which emerged as a separate field of study in the early 1980s, following the recognition that the unique characteristics of services required different strategies compared with the marketing of physical goods.

<span class="mw-page-title-main">Consumer behaviour</span> Study of individuals, groups, or organisations and all the activities associated with consuming

Consumer behaviour is the study of individuals, groups, or organisations and all the activities associated with the purchase, use and disposal of goods and services. Consumer behaviour consists of how the consumer's emotions, attitudes, and preferences affect buying behaviour. Consumer behaviour emerged in the 1940–1950s as a distinct sub-discipline of marketing, but has become an interdisciplinary social science that blends elements from psychology, sociology, social anthropology, anthropology, ethnography, ethnology, marketing, and economics.

The loyalty business model is a business model used in strategic management in which company resources are employed so as to increase the loyalty of customers and other stakeholders in the expectation that corporate objectives will be met or surpassed. A typical example of this type of model is: quality of product or service leads to customer satisfaction, which leads to customer loyalty, which leads to profitability.

<span class="mw-page-title-main">Brand loyalty</span> Marketing term for a consumers emotional attachment to a given brand

In marketing, brand loyalty describes a consumer's positive feelings towards a brand and their dedication to purchasing the brand's products and/or services repeatedly regardless of deficiencies, a competitor's actions, or changes in the environment. It can also be demonstrated with other behaviors such as positive word-of-mouth advocacy. Corporate brand loyalty is where an individual buys products from the same manufacturer repeatedly and without wavering, rather than from other suppliers. Loyalty implies dedication and should not be confused with habit, its less-than-emotional engagement and commitment. Businesses whose financial and ethical values rest in large part on their brand loyalty are said to use the loyalty business model.

The Kano model is a theory for product development and customer satisfaction developed in the 1980s by Noriaki Kano, which classifies customer preferences into five categories.

SERVQUAL is a multi-dimensional research instrument designed to capture consumer expectations and perceptions of a service along five dimensions that are believed to represent service quality. SERVQUAL is built on the expectancy–disconfirmation paradigm, which, in simple terms, means that service quality is understood as the extent to which consumers' pre-consumption expectations of quality are confirmed or disconfirmed by their actual perceptions of the service experience. When the SERVQUAL questionnaire was first published in 1985 by a team of academic researchers, A. Parasuraman, Valarie Zeithaml and Leonard L. Berry to measure quality in the service sector, it represented a breakthrough in the measurement methods used for service quality research. The diagnostic value of the instrument is supported by the model of service quality which forms the conceptual framework for the development of the scale. The instrument has been widely applied in a variety of contexts and cultural settings and found to be relatively robust. It has become the dominant measurement scale in the area of service quality. In spite of the long-standing interest in SERVQUAL and its myriad of context-specific applications, it has attracted some criticism from researchers.

Net promoter score (NPS) is a market research metric that is based on a single survey question asking respondents to rate the likelihood that they would recommend a company, product, or a service to a friend or colleague. The NPS is a proprietary instrument developed by Fred Reichheld, who owns the registered NPS trademark in conjunction with Bain & Company and Satmetrix. Its popularity and broad use have been attributed to its simplicity and transparent methodology.

The American Customer Satisfaction Index (ACSI) is an economic indicator that measures the satisfaction of consumers across the U.S. economy. It is produced by the American Customer Satisfaction Index based in Ann Arbor, Michigan.

The following outline is provided as an overview of and topical guide to marketing:

Disconfirmed expectancy is a psychological term for what is commonly known as a failed prophecy. According to the American social psychologist Leon Festinger's theory of cognitive dissonance, disconfirmed expectancies create a state of psychological discomfort because the outcome contradicts expectancy. Upon recognizing the falsification of an expected event an individual will experience the competing cognitions, "I believe [X]," and, "I observed [Y]." The individual must either discard the now disconfirmed belief or justify why it has not actually been disconfirmed. As such, disconfirmed expectancy and the factors surrounding the individual's consequent actions have been studied in various settings.

Customer engagement is an interaction between an external consumer/customer and an organization through various online or offline channels. According to Hollebeek, Srivastava and Chen S-D logic-Definition of customer engagement is "a customer’s motivationally driven, volitional investment of operant resources, and operand resources into brand interactions," which applies to online and offline engagement.

An incentive program is a formal scheme used to promote or encourage specific actions or behavior by a specific group of people during a defined period of time. Incentive programs are particularly used in business management to motivate employees and in sales to attract and retain customers. Scientific literature also refers to this concept as pay for performance.

<span class="mw-page-title-main">Claes Fornell</span> American business researcher

Claes Fornell is an expert on customer satisfaction analytics and capital asset management.

Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business, or to non-use entirely. Selling organizations generally attempt to reduce customer defections. Customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship and successful retention efforts take this entire lifecycle into account. A company's ability to attract and retain new customers is related not only to its product or services, but also to the way it services its existing customers, the value the customers actually perceive as a result of utilizing the solutions, and the reputation it creates within and across the marketplace.

The service recovery paradox (SRP) is a situation in which a customer thinks more highly of a company after the company has corrected a problem with their service, compared to how they would regard the company if non-faulty service had been provided. The main reason behind this thinking is that successful recovery of a faulty service increases the assurance and confidence from the customer.

Service quality (SQ), in its contemporary conceptualisation, is a comparison of perceived expectations (E) of a service with perceived performance (P), giving rise to the equation SQ = P − E. This conceptualistion of service quality has its origins in the expectancy-disconfirmation paradigm.

AISDALSLove, is a hierarchy of effects model in advertising adapted from AIDA's hierarchy of effects model which has been used by many researchers, both academicians and practitioners, to measure the effect of an advertisement.

Consumer value is used to describe a consumer's strong relative preference for certain subjectively evaluated product or service attributes.

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