Customer satisfaction- a relationship perspective

Customer satisfaction is as much an economic as it is a strategic business imperative that is not always to measure. It largely depends on how the product1 has performed relative to the customer’s expectations. It is particularly relevant in contemporary times as businesses strive for competitive advantage in an increasingly global environment where customers have become all-powerful.

The challenge for businesses is not so much to satisfy the customer at point of purchase or consumption but to provide an integrated service experience at the pre-purchase, post-purchase and future-purchase phases of the customer-relationship continuum.

As indicated in the graph below, the life cycle of the customer can be explained in terms five related but distinct phases that call upon specific functions of the organisation. These functions need to be carefully orchestrated to ensure that the consumer is attracted to the brand, then convert that consumer into a customer of a product, which is well supported by service strategies to retain that customer whilst anticipating his/her changing needs for future-purchases.

During the pre-purchase phase, the marginal cost to the organisation far outweighs marginal revenues as it engages heavily in marketing, advertising, promotional, and sales-training activities. Thereafter revenue increases as the cost of conversion and retention fall relative to revenues.

These pre-purchase activities are designed to gain the customer’s confidence in the brand, create expectations in their minds as to the product’s value with the view of a purchase. The strategies and tactics employed by the organisation in converting the ‘consumer’ who scans the market place for value-for-money products into a “customer of value” can and does influence customer satisfaction. Simply put, if the customer feels as if he/she has been subliminally induced into a purchase decision, it is highly likely that he/she will experience post-purchase remorse which in turn may affect a re-purchase decision, due to this reduced level of satisfaction.

As the relationship spans the pre-purchase and into the post-purchase phase where the organisation now shifts attention to strategies that will stop defection and cause a re-purchase of not only the same product but also other products on offer with an increased frequency. In order to do this the organisation must know the customer well. It must strive towards the creation of relationships with its customers where an emotional attachment is created between the customer and the brand rather than the mere focus on discrete economic transactions.

This type of relationship driven service/product differentiation will then place the organisation in a more conducive space to anticipate the customer’s needs and expectations. By doing so the customer-satisfaction challenge during each phase can be consolidated to ensure that expectations held by the customer pre and post purchase are aligned with the organisation’s intentions and actions.

a) Importance of service quality.

Service quality is increasingly ranked as a high strategic objective for businesses that are serious about creating and sustaining a long-term competitive advantage. It is well-supported by various total-quality-management approaches that strive to integrate all service-delivery intentions regarding service integrity, reliability, responsiveness, assurance and quality, together with the customer relationships straddling Figure 1 continuum.

Service quality is an effective differentiator in any market especially with regard to the delivery of intangible products. The following matrix demonstrates the key organisational outcomes of service quality:

Outcomes where service quality is advocated as a strategic objectiveRationale1. Enables small firms to compete with larger ones.Superior quality service costs far less that the differentiation it creates, thereby allowing smaller less financially resourced firms to compete well.2. Encourages repeat purchases of same product, purchases of new product and overall frequency of purchased.Superior service quality positively affects the recipient and creates a “feel-good” factor. It reassures the customer that the right choice was made in terms of product and provider which reduces risks that would otherwise exist in future purchases.

3. Creates new customers.The “feel-good” factor combined with the low-risk of dissatisfaction, stimulates positive word-of-mouth that ultimately attracts new customers, who also perceive a low-risk encounter.4. Improves organisational morale.Superior service quality positively impacts on the way the organisation and its people are perceived by stakeholders, customers, community, and competitors. As a consequence morale is elevated as personnel feel rewarded for a job well done.

5. Improves brand image and value.Superior service quality differentiates homogenous service offerings, and visibly manifests a customer-centric culture. These are the building blocks of a strong brand image which ultimately adds value to the organisation as a whole. 6. Supports higher prices therefore higher profits.Superior service quality leads to greater customer satisfaction which leads to confidence, loyalty, and emotional affinity to the brand. Subject to the product’s cross-elasticity, demand is not affected by higher prices are and higher profits are generated as price sensitivity lessens.

7. Reduces costs therefore higher profits.Marketing, selling, and administrative costs are reduced when service quality is high as customer complaints are low therefore low recovery costs, low defection rates and increase word-of-mouth therefore less customer acquisition costs.8. Contributes to overall brand equity, in particular brand preference.Brand equity comprises strong loyalty to and awareness and preference for the brand. Service quality is a strong differentiator and determinant of preference.

9. Reduces delivery gap (difference between what the service promises and what is actually experienced by the customer).Given the inseparability of the customer and provider’s involvement in the production process, a commitment to superior service quality must also commit to maximizing the customer’s satisfaction in the production process. The greater the satisfaction, the greater the “feel-good,” the more ownership the customer takes of the process, therefore the less risk of a substantive delivery gap.

Dr. Maurice Roussety is an Executive Consultant at DST Advisory and Lecturer in Small Business, Franchising and Entrepreneurship at Griffith University in Queensland, Australia. Maurice holds a PhD from the Griffith University in Intellectual Property and Franchise Goodwill Valuation. He also holds a Master’s degree in Leadership and a Master of Business Administration.