Customer Satisfaction Research

By Songlin Liu And Joe Glines

Topics To Be Covered
Why Customer Satisfaction Is Important Models of Customer Satisfaction Methodology of Monitoring Customer Satisfaction Customer Satisfaction: A Closer Look Conclusions: Dos of Customer Satisfaction Study

Why Is Customer Satisfaction Important?

Customer Loyalty Word of Mouth Ability to charge Higher prices

Provide information for Investors Help Keep Employee Morale High Diagnosis Tool for Improvement

Customer Satisfaction / Loyalty

XeroxCompletely Satisfied customers (5) vs. Satisfied customers (3,4)
Completely Satisfied where 6X more likely to repurchase over the next 18 months than its satisfied customers
Source: Harvard Business Review, Nov-Dec 95

Customer Loyalty
Costs for transforming an active customer into a loyal customer:
Costs for winning a new customer:

Costs for winning back dissatisfied customers:

Esomar; 1999

Word of Mouth (WOM)

Positive Word of Mouth: 1 person tells 3 Negative Word of Mouth: 1 person tells 9-10
100 people Total (70% are Satisfied) 70 Positive tell 3 people each = 210 + WOM 30 Negative tell 9 people each = 270 WOM
Source: Esomar 1999

Models of Customer Satisfaction

ESOMARResearch, 1998 European Society for Opinion and Marketing

ECSI- European Customer Satisfaction Index 1998 Richard Oliver, 1997

ESOMAR
Subjectively Perceived Performance Customers Expectations
Influence on other peoples Expectations and Product Evaluation

Customer Satisfaction Product Value

Image Expectation and Requirement

(re-) Purchase / Customer Loyalty

Price (Absolute and in comparison to competition)

ECSI
Image Customer Expectations

Perceived Value

Perceived Quality
Product Characteristics (Hardware)

Customer Satisfaction Index

(CSI)

Loyalty (Retention)

Service Characteristics (Software)

Perceived Quality

ECSI Model
European customer Satisfaction Index model, 1998

Richard Oliver
Expectations

Complaining
Disconfirmation

Performance

Customer Satisfaction

Negative W-O-M

Affect
Repurchase Intention Equity

Monitoring Customer Satisfaction

Set up the objectives
Determine the target groups

Choose the methods of data collection

Develop the measurement

Analyze and report the data

Objectives of Customer Satisfaction Programs

Measuring and tracking satisfaction Developing profiles of strengths and weaknesses Determining the relevance of specific performance aspects for global satisfaction Developing a list of actions to increase customer loyalty

Methods of Data Collection

Four sources of customer satisfaction data

Customer complaint analysis Customer feedback through own staff Qualitative customer groups Quantitative customer satisfaction surveys Target groups Methods/Frequency of measurements/Sample size Development of a questionnaire Analysis/Benchmark

Surveys

Target Groups
Customer
Non-customer Defecting customer Competitors customer Dealer/trade

Levels of Measurements
Global aspects of satisfaction Satisfaction with performance dimensions

Satisfaction with performance attributes

Example of Questionnaire Topics

Overall satisfaction Sales support Availability/delivery Product After-sales service Recommendation Customer loyalty Purchase frequency Demographics

Overall Satisfaction as Latent Variable

The use of multiple questions measurement

Considering all your experience of company X, how
satisfied are you, in general? To what degree did company X fulfill your

expectations?
Imagine a company which is perfect in all aspects. How close to this ideal do you consider the company X to be?

Structural Equation Model of Customer Satisfaction

Image
.16 .14 .20

Expectations
.20

.06

Perceived Value
.13

.22 .27 .19

Customer Satisfaction

.49

Loyalty

Postal Service
.27 .40

Customer interaction The ECSI model for Post Denmark

Indirect vs. Direct Measurement

Direct measurement
How satisfied are you with the delivery period?

Indirect measurement: the gap between expectation and performance

Expectation: Which of the following delivery

periods would you expect when purchasing a new car? Performance: What was the actual delivery period of your new car?

Benchmarking: Three Alternatives

Comparative evaluation of different companies
Each respondent evaluates the different companies

one after the other

Each respondent evaluates only one company;

competitors will be evaluated in separate samples

Analysis and Reporting

Customer Satisfaction Index (CSI)
Impact of single satisfaction aspects on overall satisfaction and loyalty

Stated importance Derived importance

Analysis and Reporting

relationship between measurements

Correlation analysis Combination of factor and regression analysis CHAID analysis and discriminant analysis Structural equation modeling Neural Network

Customer Satisfaction: A Closer Look

Customers Satisfaction Needs and the relationship of customer satisfaction to loyalty differ by:

Customer Groups Industries/Products Competitive Situations

Customer Groups
Loyalist and Apostle

Completely satisfied customer Needs match companies offering very well Positive WOM

Defector and Terrorist

More than dissatisfied, quite dissatisfied and Neutral. Spread Negative WOM Ready to switch

Customer Groups
The Mercenary

Defies Satisfaction Loyalty rule Maybe completely satisfied but isnt loyal Chase low prices, Fashion, Impulse

The Hostage

Customers are stuck in virtual Monopoly Complain frequently, Create low morale with employees

Customer Groups
Type Satisfaction High Behavior Cost Low

Loyalist / Apostle Defector / Terrorist

Mercenary Hostage

Staying and Supportive Leaving or Left Unhappy

Coming and Going Unable to Switch

Low to Medium
High Low to Medium

High
Medium

Low

Industry / Products
Automotive Study

low image model 50% of repurchasers are influenced by Satisfaction level

High image model - 30% of repurchasers are influenced by Satisfaction level

Source: Esomar, 1999

Competitive Situations
High L o y a l t y Low
1

Source: Harvard Business Review, Nov-Dec 95

Low Competition Varying levels of Competition Significant barriers to switching

Slight barriers to switching

Highly Competitive
3 4 5

Completely Dissatisfied

Completely Satisfied

Non-Linear Relationships
Symmetric Asymmetric Asymmetric

Linear

Satisfaction Maintaining

Satisfaction Enhancing

Source: Strengthening the satisfaction-profit chain; E. Anderson

Kado Model

Customer Satisfaction

Degree of Fulfillment

Dos of Customer Satisfaction Study

Correctly define target groups Prioritize customer groups by value Use multi-level measurements Use multiple questions in each each scale Determine the relevance of different satisfaction aspects to overall satisfaction and loyalty

Dos of Customer Satisfaction Study (cont)

Use benchmark over self, time and competitors Determine the relationship of satisfaction to loyalty Take into account of non-linear relationship Need support from top management Reflect organizational responsibilities Provide inputs for managerial improvement