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Associate Professor, Department of Management Studies, PSNA College of Engineering and
Technology, Dindigul.

Assistant Professor, Department of Management Studies, PSNA College of Engineering and
Technology, Dindigul


Modern day, Firms are looking in to the needs and wants of their customers. Customer
satisfaction is important because many researches have shown that customer satisfaction has a
positive effect on an organisation’s profitability. Building a strong brand requires putting
customers and their needs at the forefront of every organizational decision. Brands help in
building emotional relationships with customers, which in turn brings tangible returns for the
organization in terms of customer loyalty. There is also a positive connection between
customer satisfaction, loyalty and service quality. Therefore, customer satisfaction, loyalty
and service quality are all very important for an organisation to be a successful one. Brand
loyalty also provides the firm with trade leverage and valuable time to respond to competitive
moves (Aaker, 1991). In sum, loyalty to the firm’s brands represents a strategic asset which
has been recognized as a major cause of the brand justice.

Keywords: Customer satisfaction, customer loyalty, Service quality


A dominant brand creates significant images in the minds of consumers (Keller, 1993), with
brand image and reputation enhancing differentiation and thus potentially having a positive
influence on buying behaviour.

Brands represent a business, organization, product, service or celebrity. Building a strong
brand requires putting customers and their needs at the forefront of every organizational
decision. Brands help in building emotional relationships with customers, which in turn brings
tangible returns for the organization in terms of customer loyalty.
According to Hoyer and MacInnis (2001), customer retention is “the practice of working to
satisfy customers with the intention of developing long-term relationships with them”.
According to Hansemark and Albinsson (2004), “satisfaction is an overall customer attitude
towards a service provider, or an emotional reaction to the difference between what customers
anticipate and what they receive, regarding the fulfillment of some need, goal or desire”.
According to Anderson and Jacobsen (2000) “customer loyalty is actually the result of an
organisation creating a benefit for a customer so that they will maintain or increase their
purchases from the organisation.


Customer satisfaction is tied directly to profitability. If customers are happy, they tend to be
loyal. And if they’re loyal they not only buy more, they refer to other customers. Bain &
Company found that, an increase of 5% in customer retention can increase profits by 25% to
95%. The same study found that it costs six to seven times more to gain a new customer than
to keep an existing one.

It is critical to give customers the opportunity to provide feedback about their overall
satisfaction level and specific likes and dislikes. It is equally important to consistently
measure and monitor that input. Without satisfaction, firms will be losing business, missing
opportunities, and putting itself at a competitive disadvantage.

Customer Satisfaction is seen as a key performance indicator within business. In a

competitive marketplace where business competes for customers, customer satisfaction is
seen as a key differentiator and increasingly has become a key element of business strategy.
Organisations are increasingly interested in retaining existing customers while targeting non-
customers; measuring customer satisfaction provides an indication of how successful the
organization is at providing products and/or services to the marketplace.

Customer 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.

Kotler (1998) noted that customer satisfaction, whether the buyer is satisfied after purchase,
depends on the offer’s performance in relation to the buyer’s expectation. Customer
satisfaction is a result of your product or service meeting a certain set of customer

Satisfaction is often confused with loyalty. Satisfaction is an emotional or feeling reaction

(Westbrook, Newman, Taylor, 1978). It is the result of a complex process that requires
understanding the psychology of customers. The range of emotion is wide with, for example,
contentment, surprise, pleasure, or relief. Satisfaction is influenced, in the end, by
expectations and the gap between perceived quality and expected quality, called "expectancy
disconfirmation". The figure below shows the main linkage of this process.


Source: Rust, Zahorik, Keiningham, 1996

High-quality products and associated services designed to meet customer needs will create
customer satisfaction. This high level of satisfaction will produce increased customer loyalty.


Brand loyalty consists of a consumer's commitment to repurchase or otherwise continue using

the brand and can be demonstrated by repeated buying of a product or service. Brand loyalty
is more than simple repurchasing. Customers may repurchase a brand due to situational
constraints (such as vendor lock-in), a lack of viable alternatives, or out of convenience. Such
loyalty is referred to as "spurious loyalty".

True brand loyalty exists when customers have a high relative attitude toward the brand which
is then exhibited through repurchase behavior. This type of loyalty can be a great asset to the
firm: customers are willing to pay higher prices, they may cost less to serve, and can bring
new customers to the firm.

Businesses with high customers' loyalty rates have proven to reach great financial results.
Buchanan & Gillies identified six reasons explaining why long-term customers are more
profitable than others are:

• Regular customers place frequent, consistent orders and, therefore, usually cost less to
• Long-established customers tend to buy more.
• Satisfied customers may sometimes pay premium prices
• Retaining customers makes it difficult for the competitors to enter a market or increase
their share.
• Satisfied customers often refer new customers to the supplier at virtually no cost.
• The cost of acquiring and serving new customers can be substantial. A higher
retention rate implies that fewer new customers need be acquired, and that they can be
acquired more cheaply. In fact, the acquisition cost of a new customer is three to five
times more expensive than retention cost.

Amine (1998) in her literature distinguishes two main approaches to define the loyalty
construct: the behavioural one suggests that the repeat purchasing of a brand over time by a
consumer expresses their loyalty, and; the attitudinal perspective which assumes that
consistent buying of a brand is a necessary but not sufficient condition of ‘true’ brand loyalty

and it must be complemented with a positive attitude towards this brand to ensure that this
behaviour will be pursued further.

Thus, brand loyalty is a function of both behaviour and attitudes. It is a consumer’s preference
to buy a particular brand in a product category. It occurs because consumers perceive that the
brand offers the right product features, image, or level of quality at the right price. This
perception becomes the foundation for new buying habits. Consumers will initially make a
trial product of the brand and, when satisfied with the purchase, tend to form habits and
continue to purchase the same brand because the product is safe and familiar.


Traditionally, service quality has been conceptualized as the difference between customer
expectations regarding a service to be received and perceptions of the service being received
(Grönroos, 2001; Parasuraman, Zeithaml, & Berry, 1988).

In some earlier studies, service quality has been referred as the extent to which a service
meets customers’ needs or expectations (Lewis & Mitchell, 1990; Dotchin & Oakland, 1994).
It is also conceptualized as the consumer’s overall impression of the relative inferiority or
superiority of the services (Zeithaml, Berry, & Parasuraman, 1990).

Dabholkar, Shepherd, and Thorpe (2000) also found that customer satisfaction strongly
mediated the effect of service quality on behavioral intentions. Service quality literature
indicated that perceptions of high service quality and high service satisfaction resulted in a
very high level of purchase intentions (Boulding, Kalra, Staelin, & Zeithaml, 1993; Cronin &
Taylor, 1992; Taylor, 1997; Taylor & Baker, 1994; Zeithaml et al., 1996).

Cöner and Güngör (2002) claimed that customer loyalty was affected by product quality,
service quality, and retailer image. They also suggested "quality of product and service … is
directly related to customer satisfaction, and … lead[s] to the loyalty of the customer".

Based on empirical findings in service quality and satisfaction literature, service quality is one

of the backgrounds of satisfaction (Anderson & Sullivan, 1993; Cronin & Taylor, 1992, 1994;
Reidenbach & Sandifer-Smallwood, 1990; Spreng & Mackoy, 1996; Woodside, Frey, &
Daly, 1989), and loyalty is one of the consequences of satisfaction (Cöner & Güngör, 2002;
Cronin & Taylor, 1992, 1994; Dabholkar, Shepherd, & Thorpe, 2000).

Customer satisfaction literature showed that the relationship between customer satisfaction
and customer loyalty depended on the type of satisfaction. The positive impact of visible
satisfaction on customer loyalty was stronger than that of hidden satisfaction on customer
loyalty (Bloemer & Kasper, 1995; Bloemer & Ruyter, 1998).

Luarn and Lin (2004) tested their hypothesized customer loyalty model and found that
customer satisfaction, perceived value, and customer loyalty were different constructs. Their
findings indicated that not only customer satisfaction and perceived value directly affected
customer loyalty, but also indirectly affected customer loyalty through commitment.


Parasuraman et al. (1988) identified five dimensions of service quality (viz. reliability,
responsiveness, assurance, empathy, and tangibles) that link specific service characteristics to
consumers’ expectations.
(a) Tangibles - physical facilities, equipment and appearance of personnel;
(b) Empathy - caring, individualized attention;
(c) Assurance - knowledge and courtesy of employees and their ability to convey trust and
(d) Reliability - ability to perform the promised service dependably and accurately; and
(e) Responsiveness - willingness to help customers and provide prompt service.



Several authors have found a positive correlation between customer satisfaction and loyalty
(Anderson & Sullivan, 1993; Bolton & Drew, 1991; Fornell, 1992). Numerous studies in the
service sector have also empirically validated the link between satisfaction and behavioral

intentions such as customer retention and word of mouth (Anderson & Sullivan, 1993; Bansal
& Taylor, 1999; Cronin & Taylor, 2000). Hart and Johnson (1999) have added that one of the
conditions of true customer loyalty is total satisfaction.



Sureshchandar et al, (2003) identified that strong relationships exist between service quality
and customer satisfaction while emphasizing that these two are conceptually distinct
constructs from the customers’ point of view.
Spreng and Mackoy (1996) also showed that service quality leads to customer satisfaction
while working on the model developed by Oliver (1997). In a recent study conducted by
Ribbink (2004) revealed that this relationship also exists in the e-commerce industry.


In various studies the relationship between service quality and customer preference loyalty
had been examined (Boulding, Kalra, Staelin, & Zeithaml, 1993; Cronin & Taylor, 1992). In
their study Cronin and Taylor (1992) focused exclusively on repurchase intentions, whereas
Boulding et al. (1993) focused on the elements of repurchasing as well as the willingness to
In the study by Cronin and Taylor service quality did not appear to have a significant
(positive) effect on repurchase intentions (in contrast to the significant positive impact of
satisfaction on repurchase intention), whereas Boulding et al. (1993) found positive
relationships between service quality and repurchase intentions and willingness to


Based on the views and research done by numerous researchers and academicians, it can be
concluded that customer satisfaction is very important. Thus, though customer satisfaction
does not guarantee repurchase on the part of the customers but still it plays a very important
part in ensuring customer loyalty and retention. Customer satisfaction and quality of service

were also found to be important antecedents of customer loyalty. Although customer
satisfaction affected customer loyalty less than did service quality, customer satisfaction
played a significant role in the mediating relationship between the others and customer loyalty
and directly improved customer loyalty. Therefore, organisations should always strive to
ensure that their customers are very satisfied.


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