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COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning is a trademark used herein under license.

ALL RIGHTS RESERVED.

Chapter 12

DEFINING AND MEASURING CUSTOMER

SATISFACTION

Chapter 12

DEFINING AND MEASURING CUSTOMER

SATISFACTION



AMERICAN CUSTOMER SATISFACTION INDEX

(ACSI)


(ACSI) Top Firms (all produce goods)Top Firms (all produce goods)

Dole FoodDole Food MarsMars H.J. HeinzH.J. Heinz Proctor & GambleProctor & Gamble PepsiCoPepsiCo HondaHonda Mercedes-BenzMercedes-Benz MaytagMaytag




(ACSI)


(ACSI) Bottom Firms (all produce services)Bottom Firms (all produce services)

Internal Revenue ServiceInternal Revenue Service PolicePolice U.S. Postal ServiceU.S. Postal Service Continental AirlinesContinental Airlines McDonald’sMcDonald’s BankAmerica Corp.BankAmerica Corp. Unicom (electric utilities)Unicom (electric utilities) RamadaRamada Aetna Life & Casualty (insurance)Aetna Life & Casualty (insurance)



RECIPE FOR CUSTOMER SERVICE DISASTERS


Labor shortagesLabor shortages motivated employees are difficult to findmotivated employees are difficult to find

who can blame them…who can blame them…low paylow pay no career pathsno career paths no respectno respect little training in customer relationslittle training in customer relations





AutomationAutomation effectiveness was sacrificed in the name of effectiveness was sacrificed in the name of

efficiencyefficiency general feeling that companies are continuing to general feeling that companies are continuing to

distance themselves from their customersdistance themselves from their customers examples are numerous …examples are numerous …

mounting frustrations with automated phone and mounting frustrations with automated phone and other service delivery systemsother service delivery systems

e-commerce strategies should take note!e-commerce strategies should take note!





Customers are tougher to pleaseCustomers are tougher to please increasingly educatedincreasingly educated more informedmore informed more discretionary incomemore discretionary income

not at the mercy of shop keepers anymorenot at the mercy of shop keepers anymore

expectations have increasedexpectations have increased





Skyrocketing inflationSkyrocketing inflation efforts to reduce pricesefforts to reduce prices

services were slashedservices were slashed

price competition ensued (price wars)price competition ensued (price wars) firms once again cut costs firms once again cut costs

service was sacrificed againservice was sacrificed againinterestingly, advertising was also cut during a interestingly, advertising was also cut during a

time customers were attempting to make more time customers were attempting to make more informed decisionsinformed decisions



THE IMPORTANCE OF CUSTOMER SATISFACTION


The average business does not hear from 96% of The average business does not hear from 96% of its unhappy customersits unhappy customers

For every complaint received, 26 customers For every complaint received, 26 customers actually have the same problemactually have the same problem

The average person with a problem tells 9 or 10 The average person with a problem tells 9 or 10 peoplepeople 13% tell more than 2013% tell more than 20




Customers who have their complaints resolved

tell an average of 5 peopleComplainers are more likely to do business

with you again than non-complainers54-70% if the complaint is resolved at all95% if the complaint is resolved quickly



WHAT IS CUSTOMER SATISFACTION/DISSATISFACTION?

WHAT IS CUSTOMER SATISFACTION/DISSATISFACTION?

Expectancy Disconfirmation ModelExpectancy Disconfirmation Model ConfirmationConfirmation

perceptions = expectationsperceptions = expectations

Negative DisconfirmationNegative Disconfirmation perceptions < expectationsperceptions < expectations

Positive DisconfirmationPositive Disconfirmation perceptions > expectationsperceptions > expectations



THE BENEFITS OF CUSTOMER SATISFACTION

THE BENEFITS OF CUSTOMER SATISFACTION

Positive word-of-mouth Positive word-of-mouth

Purchase more frequentlyPurchase more frequently

Less likely to be lost to competitorsLess likely to be lost to competitors

Insulated from price competitionInsulated from price competition

Positive work environmentsPositive work environments



THE BENEFITS OF CUSTOMER SATISFACTION SURVEYS

THE BENEFITS OF CUSTOMER SATISFACTION SURVEYS

Provides a formal means of customer feedbackProvides a formal means of customer feedback

Conveys a caring message to customersConveys a caring message to customers

Used to evaluate employee performanceUsed to evaluate employee performance Merit and compensation reviewsMerit and compensation reviews Employee training programsEmployee training programs

Comparison against competitionComparison against competition

Provide information for advertisingProvide information for advertising



MEASURING CUSTOMER SATISFACTION


Indirect MeasuresIndirect Measures sales records, profits, customer complaintssales records, profits, customer complaints

Direct MeasuresDirect Measures The Scale of 100 ApproachThe Scale of 100 Approach

Federal Express’ original approach (score = 83)Federal Express’ original approach (score = 83)

The “Very Dissatisfied/Very Satisfied” ApproachThe “Very Dissatisfied/Very Satisfied” Approach The Combined ApproachThe Combined Approach





FedEx’s “Hierarchy of Horrors”FedEx’s “Hierarchy of Horrors” wrong-day deliverywrong-day delivery right day, late deliveryright day, late delivery pick-up not madepick-up not made lost packagelost package customer misinformed by FedExcustomer misinformed by FedEx billing and paperwork mistakesbilling and paperwork mistakes employee performance failuresemployee performance failures damaged packagesdamaged packages



UNDERSTANDING CUSTOMER SATISFACTION RATING

UNDERSTANDING CUSTOMER SATISFACTION RATING

Virtually all self-reports of customer Virtually all self-reports of customer satisfaction possess a distribution that is satisfaction possess a distribution that is ………………???………………???

High dissatisfaction High satisfaction

Conceptual Distribution of Satisfaction Measurements

Source: Robert A. Peterson and William R. Wilson, “Measuring Customer Satisfaction: Fact and Artifact,” Journal of the Academy of Marketing Science 20,1 (1992), p. 61.



SAMPLING OF SATISFACTION RESULTSSAMPLING OF SATISFACTION RESULTS

SamplePercentageSatisfied

British Airways Customers 85

HMO Enrollees 92

Sear’s Customers 84

Children’s InstructionalPrograms/Parents

82

Medical Care 84

Clothing/and WhiteGoods/Adults

82

Shoes/Students 83




FACTORS INFLUENCING CUSTOMER SATISFACTION RATINGS


Customers are genuinely satisfiedCustomers are genuinely satisfied

Response biasResponse bias

Data collection methodData collection method personal vs. non-personalpersonal vs. non-personal

Question formQuestion form satisfied vs. dissatisfiedsatisfied vs. dissatisfied



RESPONSE BY QUESTION FORMRESPONSE BY QUESTION FORM

Question Form

Response Category “Satisfied” “Dissatisfied”

Very Satisfied 57.4% 53.4%Somewhat Satisfied 33.6% 28.7%Somewhat Dissatisfied 5.0% 8.5%Very Dissatisfied 4.0% 9.4%





Question contextGeneral question prior to specific question

Timing of questionRecent vs. Past Purchase

Social desirability bias

Mood



CUSTOMER SATISFACTION:HOW GOOD IS GOOD ENOUGH?

CUSTOMER SATISFACTION:HOW GOOD IS GOOD ENOUGH?

Should a firm invest $100,000 to attempt to Should a firm invest $100,000 to attempt to improve ratings from 95% to 98%?improve ratings from 95% to 98%?

Depends Upon:Depends Upon: satisfaction ratings of other firmssatisfaction ratings of other firms dollar investment needed relative to the impact on the bottom dollar investment needed relative to the impact on the bottom

line by increasing market shareline by increasing market share number of time periods needed to recoup the investmentnumber of time periods needed to recoup the investment opportunity costs associated with other uses of the firm’s opportunity costs associated with other uses of the firm’s

fundsfunds



CUSTOMER SATISFACTION MODELSCUSTOMER SATISFACTION MODELS

[Panels A, B, and C of Figure 12.3, p.309.][Panels A, B, and C of Figure 12.3, p.309.]

Babich Satisfaction Models Illustrate:Babich Satisfaction Models Illustrate: the value of knowing competitive ratingsthe value of knowing competitive ratings

high customer satisfaction scores make the firm high customer satisfaction scores make the firm more resistant to competitive efforts to increase more resistant to competitive efforts to increase their market sharetheir market share



CRITICISMS OF CUSTOMER SATISFACTION RESEARCHCRITICISMS OF CUSTOMER SATISFACTION RESEARCH

Does not necessarily translate into customer retentionDoes not necessarily translate into customer retention Focus is on current needs onlyFocus is on current needs only

Focuses on registered complaintsFocuses on registered complaints

Fails to involve employee viewpointsFails to involve employee viewpoints

Fails to involve customer viewpointsFails to involve customer viewpoints

surveys are generally designed internally by middle and surveys are generally designed internally by middle and

upper managersupper managers



CUSTOMER SATISFACTION:CUSTOMER SATISFACTION:

A CLOSER LOOKA CLOSER LOOK



The Zone of Tolerance

Source: Valerie A. Zeithaml, Leonard L. Berry, and A. Parasuraman, “The Nature and Determinants of Customer Expectations of Service,”Journal of the Academy of Marketing Science 21,1 (1993), pp. 1-12.

Expectedservice

Desiredservice

Zone oftolerance

Adequateservice



Factors Influencing Expected Service

Source: Adapted from Valerie A. Zeithaml, Leonard L. Berry, and A. Parasuraman, “The Nature and Determinants of Customer Expectations of Service,” Journal of the Academy of Marketing Science 21,1 (1993), pp. 1-12.

Enduring service intensifiers•Derived expectations•Personal service philosophies

Personal needs

Transitory service intensifiers•Emergencies•Service problems

Perceived servicealternatives

Self-perceivedservice role

Situational factors•Bad weather•Catastrophe•Random over-demand

Explicit service promises•Advertising•Personal selling•Contracts•Other communications

Implicit service promises•Tangibles•Price

Word-of-mouth•Personal•“Expert” (Consumer Reports, publicity, consultants, surrogates)

Past experience

Predicted service

Expectedservice

Desired service

Zone oftolerance

Adequate service

Perceived service

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