One More Time: How Do You

Satisfy Customers?
Earl Naumann and Donald W. Jackson, Jr.

W ith the service industry on the rise each product. More-

and worldwide competition heating over, they need to un-
up, customer satisfaction is once derstand the relative
again in the limelight. When value meets or ex- importance of product
ceeds expectations, customers are satisfied. If and service attributes of
their expectations of value are not met, there is the sub-areas of each
no chance of satisfying them. But the formulation product.
of customer expectations is a complex, ambigu- On the outlay side
ous process. of the equation, cus-
To be able to create and deliver customer tomers' perceptions and
value, it is important to understand its compo- expectations are again
nenLs. At the most basic level, value from a cus- the determining factors.
tomer's perspective is the ratio of benefits to out- The three components
lays. However, because customers can seldom of outlays are the trans-
determine objectively either the benefits or the action price, life cycle costs, and degree of risk.
outlays, it is their expectations and perceptions of Transaction price is what is paid for the product
these factors that are most important. The benefits or service at the time of purchase. Life cycle cost
they expect are shaped primarily by how they is the total cost of ownership, including operat-
perceive product and service quality, whether or • ing, repair, service, and disposition expenses. The
not their perception is valid. degree of risk involves how certain customers are
Because quality is ultimately defined by cus- about the product and its benefits. The less cer-
tomers, the concept is inherently vague. Defini- tain they are, the higher the cost. The transaction
tions of quality, such as "fitness of use" or "con- price, life cycle costs, and degree of risk collec-
formance to customer expectations," reflect this tively influence the customers' perceptions and
ambiguity. Nevertheless, customers at least im- expectations of outlays.
plicitly integrate their perceptions of product and Integrating these concepts provides the basic
service quality into a whole bundle of expected model of customer value presented in F i g u r e 1.
benefits. Because quality often cannot be ob- If the expected benefits are greater than the ex-
served directly, customers use product and tan- pected outlays, customer value is high. Con-
gible service attributes as indicators of quality--a versely, if the expected benefits are less than the
mileage guarantee for a tire, "fit and finish" for an expected outlays, customers perceive the product
automobile, "clarity of sound" in a stereo system. as having low value. If the expected benefits
Unfortunately for many firms, customers exactly match the expected outlays, customers
usually do not draw distinctions between product are likely to be ambivalent about the product.
and service quality. They tend to combine prod-
uct and service attributes as part of a total pack- T W O - F A C T O R T H E O R Y OF
age to which they attach some perceived value. C U S T O M E R SATISFACTION
Most firms' products fall somewhere on a con-
tinuum between pure product and pure service. I n 1968, Frederick Herzberg put forth his
So managers need to understand the relative "two-factor theory of motivation" in one of
importance to customers of the tangible versus the most popular H a r v a r d B u s i n e s s R e v i e w
intangible elements of the bundle of attributes for articles ever, "One More Time: How Do You Mo-

O n e More Time: How Do You Satisfy Customers? 71

 example, one hygiene factor, "poor working con-
Figure 1 ditions," resulted in dissatisfied employees, but
Components o f Customer Value having g o o d working conditions did little to sat-
isfy employees. What does this have to do with
customer satisfaction?
Perceptions of
A similar type of two-factor theory can be
product and
service quality applied to customer satisfaction. For most prod-
ucts, a variety of product and service attributes
can be identified. Some are "hygiene" factors,
Expected Benefits and others are "satisfiers," to use a slightly more
appropriate term. The hygiene factors are those
Expected Outlays attributes that customers expect to be part of the

Perceptions of
transaction price,
life cycle costs,
and risk
/ product or service. The absence of hygiene fac-
Source: Adaptedfrom Naumann (1995),p. 103.
tivate Employees?" Based on empirical data, he
identified two categories of factors, one he called
"hygiene factors" and the other he called "motiva-
tors." The hygiene factors contributed primarily to
job dissatisfaction and very little to job satisfac-
tion. The motivators contributed primarily to
satisfaction and very little to dissatisfaction. For
tors results in customer dissatisfaction, but their
presence would not necessarily contribute to
customer satisfaction.
In many cases, reliable delivery is a hygiene
factor. Delivering an order to a customer on time
is a minimum acceptable level of performance. It
is simply an expected level of service. Failure to
meet that level of expected service results in
dissatisfaction. However, consistently delivering
an order on time may not contribute that much to
customer satisfaction.
More broadly, a c o m p a n y should ensure that
hygiene factors meet customers' expectations.
Anything b e y o n d that probably will not increase
the expected benefits to customers. However,

Figure 2
Hygiene Factors and Satisfiers

• Believable • Immediate response to customers

• Honest • Individualized attention
• Quick complaint resolution

Reliability Courtesy
• Product does what it is supposed to do • Customers treated with respect and
• Company is there when needed consideration
• Basic competence--possesses necessary skills

Accessibility Empathy
• Can be contacted quickly and easily • Takes time to really understand the customer's
• Convenient phones, location, hours, etc. situation and engage in joint problem solving
• Provides "extra service"

Delivery Exceptional Quality

• Timely; meets deadlines • Durable
• Technical excellence

Accuracy Personnel
• Billing, invoice, orders, product specifications, • Thoroughly trained
etc. as they should be - Knowledgeable

72 Business Horizons / May-June 1999

more resources should be devoted to
the satisfiers, because these are the Figure 3
attributes that go b e y o n d customers' Qantas Airways: Survey o f Passenger Needs in Order o f Priority
basic expectations and enable a firm to
create a unique competitive advantage
with customers. Free consulting or
problem-solving services typically fall 1. No lost baggage 12. Assistance with connections
b e y o n d a customer's minimum accept- 2. No damaged baggage 13. Being kept informed of delays
Clean toilets 14. Transport to cities
able performance levels, and can add 3.
4. Comfortable seats 15. Accurate arrival information to
unexpected value to the bundle of 5. Prompt baggage delivery relatives/friends
attributes. 6. Ample leg room 16. Well-organized boarding
Examples of potential hygiene 7. Good quality meals 17. Quick/friendly airport check-in
factors and satisfiers are presented in 8. Prompt reservation service 18. Self-service baggage trolleys
F i g u r e 2. The list is rather general 9. Courteous and efficient cabin crew 19. On-time arrival
because the relevant attributes are very 10. Clean and tidy cabin 20. Provision of pillows/rugs
product-specific. They differ greatly 11. Comfortable cabin temperature/ 21. Assistance with customs/immigration
w h e n it comes to, say, buying a car humidity 22. On-time departures
and buying a computer. They also vary
Source..Juran (1988)
a good deal across market segments or
customer groups. A cardiology patient
needing bypass surgery would be con- Figure 4
cerned about different attributes than a patient Focus Group Findings o n Qantas Airways Data:
with high blood pressure. Evaluating Hygiene and Satisflers
Nevertheless, any firm that performs poorly
on the hygiene factors will have dissatisfied cus-
tomers. Lack of trust, reliability, or basic c o m p e -
tence will quickly lead to dissatisfaction. But • No lost baggage • Comfortable seats
being trustworthy, reliable, and competent are • No damaged baggage • Prompt baggage delivery
not enough to create high customer satisfaction. • Clean toilets • Ample leg room
They are necessary but insufficient attributes. • Courteous and efficient cabin crew • Good quality meals
The satisfiers have the potential for creating • Clean and tidy cabin • Prompt reservation service
• Comfortable cabin temperature/ • Assistance with connections
high customer satisfaction. Being responsive, • Transport to cities
humidity
courteous, empathetic, and having exceptionally • Being kept informed of delays • Quick/friendly airport
well-trained employees pleases customers. But • Accurate arrival information to check-in
the hygiene factors must be present at an accept- relatives/friends
able level before the satisfiers b e c o m e important. • Well-organized boarding
J.M. Juran provided an example of this in his • Self-service baggage trolleys
1988 book, Juran on Planning for Quality. He • On-time arrival
summarized a study done by Qantas Airways in • Provision of pillows/rugs
which it surveyed 2,500 passengers to determine • Assistance with customs/
their "essential needs" in air travel. Juran pro- immigration
• On-time departures
vided a list of product and service attributes
ranked in order of importance, as s h o w n in Fig-
u r e 3. We used this list as input for a series of
focus groups, in which participants were asked to w h e n hygiene factors meet customer expecta-
identify the attributes of air travel that would tions and satisfiers are delivered at a level that
cause them to be extremely dissatisfied with the exceeds customer expectations. This critical fact is
service they received, as well as those that would often obscured w h e n product and service at-
lead to extreme satisfaction. The results a p p e a r in tributes are merely ranked to establish a priority
Figure 4. list for managerial action.
Most of the attributes at the top of the list in
Figure 3 were hygiene factors. The satisfiers, on CUSTOMER SATISFACTION GRID
average, were ranked consistently lower. This
distinction would be important for Qantas to A c o m p a n y ' s ability to deliver these hy-
know. If Qantas perfected its delivery system to giene or satisfier attributes is typically
provide "zero-defect" performance on the hy- not a black-and-white, yes-or-no
giene factors, it would eliminate the causes of proposition. Instead, its performance on each
customer dissatisfaction. Unfortunately, customer attribute could range from very low to very high
satisfaction levels would not necessarily increase. relative to its competitors. Moreover, the hygiene
High satisfaction levels can only be achieved factors could be aggregated for an overall hy-

One More Time: How Do You SatisfyCustomers? 73


Figure 5
Customer Satisfaction Grid
Basics Only Well-Managed
• Ignores satisfiers Customer Satisfaction
• May have to compete • High customer retention
mainly on price
Ignores Satisfaction Unmet Expectations
• High customer tumover • Lack of attention to
things customers expect
• High customer turnover
Low Performance on Satisfier Attributes High
giene performance score, and the satisfiers could
be aggregated for an overall satisfier performance
score.
If the idea that product and service attributes
can be divided into hygiene factors and satisfiers
is combined with some measure of a firm's per-
formance in delivering the attributes, a Customer
Satisfaction Grid (Figure 5) can be developed.
The vertical axis of the grid consists of an aggre-
gate performance measure on the hygiene at-
tributes that customers expect to receive, such as
product characteristics or service elements. The
horizontal axis depicts an aggregate performance
measure on the satisfiers. The four quadrants of
the matrix represent radically different customer
satisfaction levels. Regardless of the industry or
type of business, firms in the lower left quadrant
are in a crisis, because they are ignoring cus-
tomer satisfaction. Their customer turnover is
probably quite high. Mthough firms may muddle
along here for a short while, the long-term out-
look is bleak. Unless they b e c o m e strongly com-
mitted to radical changes to get closer to custom-
ers and deliver better value, they will soon be out
of business.
Firms in the upper left quadrant have a much
greater chance for survival. They are performing
very well on the basic attributes demanded by
customers, the hygiene factors. Unfortunately,
they have neglected the satisfier attributes. An
example of a business in this situation is a restau-
rant that serves good food but has a bland atmo-
sphere and competent but uninspiring waiters or
waitresses. The survival of these businesses de-
pends largely on the intensity of competition they
face. If competitors have not achieved high cus-
tomer satisfaction levels, then these firms have a
chance to maintain the status quo. However, as
competitors begin to perform at high levels and
74
use the satisfiers to differentiate themselves and
deliver better value to customers, these firms'
market positions will quickly erode.
Companies in the bottom right quadrant of
the matrix are in a puzzling situation. They have
not met customers' basic expectations. Perfor-
mance is high on some or all satisfiers, but hy-
giene factors remain deficient. Firms that have
been disappointed with the market results of
their TQM efforts are probably in this condition.
Tangible products may have much higher quality,
but low performance on hygiene service factors
may be a constraint to improving market position.
These firms are not delivering good value across
all product or service attributes.
Because firms in this corner are performing
well on satisfiers, they have a good deal of po-
tential. They need to be more thorough and com-
prehensive in identifying and delivering hygiene
attributes. But because low performance on hy-
giene factors leads to customer dissatisfaction and
higher customer turnover, these firms face a criti-
cal time pressure. If they do not improve quickly,
their customer base will erode.
The top right quadrant is where the innova-
tive industry leaders are located. They have man-
aged customer satisfaction well, maintaining a
good grasp of all customer expectations and with
effective value-added delivery systems. If such
firms compete with companies from elsewhere in
the matrix, there is little doubt which will be
most successful. The innovative firms have devel-
oped a sustainable competitive advantage.
Companies in this quadrant are delivering
good customer value on all or most product and
service attributes, so their customers perceive
higher levels of expected benefits. If the prices
are below the expected benefits, good value is
provided. Firms in the other quadrants are offer-
ing fewer benefits, so their prices must come
down.
The Customer Satisfaction Grid can be used
by any company. All that is needed to develop it
is a sound customer-satisfaction program that
includes external benchmarking. To make the
grid strategically useful, however, it is necessary
to identify additional categories of product and
service attributes.
PRE-SAI.i~., TRANSACTION,
AND POST-SALF. ATIqRIBUTES
H ygiene and satisfier attributes may
come into play before, during, or after
a transaction. So they may be divided
into three segments: "pre-sale" attributes, which
precede a transaction; "transaction" attributes,
which take place at the time of purchase; and
"post-sale" attributes, which extend throughout a
product's life.
Business Horizons / May-June 1999
Pre-Sale A t t r i b u t e s
Attributes that typically precede the sale include
services that provide information and assistance
to the customer in the decision-making process.
Technical sales seminars that educate customers
about new product developments are one ex-
ample. These seminars could be part of a cus-
tomer-training program. Managerial and technical
assistance provided to customers are other ex-
amples of pre-sale services. Likewise, involving
suppliers in quality circles is a c o m m o n practice
for some firms.
Virtually all customers expect some pre-sale
attributes, but m a n y firms do not k n o w precisely
which ones their customers want. Pre-sale at-
tributes are often used as "search attributes" by
customers to assess expected benefits. In the
purchase of a car, tangible characteristics such as
horsepower, mileage ratings, and appearance
may be search attributes. More intangible charac-
teristics such as handling, acceleration, ride, and
responsiveness may be search attributes evalu-
ated in a test drive. Information about these at-
tributes must be conveyed to customers before a
purchase decision. If a firm does not k n o w what
roles search attributes play in a customer's pur-
chase decision, developing a positive customer
relationship is difficult. Poor delivery of search
attributes may immediately kill a potential sale.
Transaction Attributes
Transaction attributes, which are associated with
the exchange transaction b e t w e e n a firm and its
customers, are as varied as pre-sale attributes.
One example is providing customers with a com-
puter and m o d e m loaded with ordering software
to s p e e d order cycle times or enable customers t o
place their orders by fax. Other examples include
inventory information, changes in lot sizes, order
fill rates, commitment to firm delivery dates, fi-
nancing and credit terms, and information on
guarantee or return policies.
Very often the transaction services provided
are based o n the n e e d s of the seller, not the n e e d s
of the customer. The c o m m o n complaint heard
from customers in these cases is, "You are hard
to do business with." What they m e a n is that the
seller has not paid attention to the transaction-
related attributes and seems to be ignoring cus-
tomers or treating them impersonally. Personal-
ized service is something everyone wishes for,
whether transacting business with a corporation
or an individual.
Post-Sale Attributes
The third category of attributes includes those
that apply after a transaction. The post-sale pe-
One More Time: How Do You SatisfyCustomers?
riod is w h e n most of the tangible product at-
tributes come into play. Reliability, durability, ease
of use, defect rates, and so on are clearly post-
sale attributes. Operating or performance charac-
teristics are also typical examples.
As noted previously, customers use search
attributes as decision-making criteria prior to
making a purchase. However, some attributes
that may b e important must be experienced to be
evaluated. Experience-based attributes are those
that cannot be evaluated before the purchase. To
evaluate them, customers have to buy and use
the products in some fashion. A new car must be
reliable, durable, or have g o o d resale value. But
there is really no way for a consumer to person-
ally evaluate these attributes before making the
purchase.
Therefore, customers use a variety of other
means to ascertain the expected benefit from
experience-based attributes. In the case of a res-
taurant, the cues may be the location, the furnish-
ings, or the appearance of the personnel. In a
dental practice, the cues may be the physical
facilities or the friendliness of the personnel.
When experience-based attributes are impor-
tant in a customer's decision process, cues must
be provided that give customers some way to
evaluate them before the purchase. If these at-
tributes are important, but no surrogate cues are
available to customers, then the risk portion of
the customer value equation (Figure 1) increases.
Decomposing the Bundle of Attributes
Combining the two-factor concept with the pre-
sale, transaction, and post-sale attributes offers
several insights. It is important to understand
what minimum level of performance customers
d e m a n d (which hygiene factors absolutely must
be present) and which factors provide the oppor-
tunity to increase the overall level of customer
satisfaction and even create customer delight (the
satisfiers).
If the pre-sale hygiene factors do not meet
customer expectations, dissatisfaction may result,
and the customers may be lost. If the transaction
and post-sale hygiene factors do not meet cus-
tomer expectations, dissatisfaction may result
along with high customer turnover. Delivering
the satisfier attributes at a level above customer
expectations creates high customer satisfaction
levels with all the subsequent benefits.
C ustomer satisfaction is not created merely
by providing good product quality or
establishing a good service department.
Well-satisfied customers stay with a c o m p a n y
w h o s e performance on hygiene attributes meets
their expectations and whose performance on
satisfiers exceeds them. This process is dynamic,
75
 however. Today's satisfiers may be tomorrow's
hygiene factors. Customer expectations continu-
ally ratchet upward as competition intensifies.
Companies that do not improve fast enough will
be left behind. ~I
References
Frederick Herzberg, "One More Time: How Do You
Motivate Employees?" Harvard Business Review, Janu-
ary-February 1968, pp. 53-62.
J.M. Juran, Juran on Planning for Quality (New York:
Free Press, 1988).
76
Earl Naumann isthe president and C E O of
N a u m a n n and Associates, a (au: man-
agement consulting?] firm in Boise, Idaho.
Donald W. Jackson, Jr. is a professor of
marketing at Arizona State University,
Tempe, Arizona. Thisarticle isadapted
from Creating Customer Value: The Path
to Sustainable Competitive Advantage,
by Earl Naumann (Cincinnati, OH: Thom-
son Executive Press, 1995).
Business Horizons / May-June 1999