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Customer satisfaction, a term frequently used in marketing, is a measure of how products and services supplied by a company meet or surpass

customer expectation. Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals."[1] In a survey of nearly 200 senior marketing managers, 71 percent responded that they found a customer satisfaction metric very useful in managing and monitoring their businesses.[1] It is seen as a key performance indicator within business and is often part of a Balanced Scorecard. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. Within organizations, customer satisfaction ratings can have powerful effects. They focus employees on the importance of fulfilling customers expectations. Furthermore, when these ratings dip, they warn of problems that can affect sales and profitability. These metrics quantify an important dynamic. When a brand has loyal customers, it gains positive word-of-mouth marketing, which is both free and highly effective. Therefore, it is essential for businesses to effectively manage customer satisfaction. To be able do this, firms need reliable and representative measures of satisfaction. In researching satisfaction, firms generally ask customers whether their product or service has met or exceeded expectations. Thus, expectations are a key factor behind satisfaction. When customers have high expectations and the reality falls short, they will be disappointed and will likely rate their experience as less than satisfying. For this reason, a luxury resort, for example, might receive a lower satisfaction rating than a budget moteleven though its facilities and service would be deemed superior in absolute terms.[ The importance of customer satisfaction diminishes when a firm has increased bargaining power. For example, cell phone plan providers, such as AT&T and Verizon, participate in an industry that is an oligopoly, where only a few suppliers of a certain product or service exist. As such, many cell phone plan contracts have a lot of fine print with provisions that they would never get away if there were, say, a hundred cell phone plan providers, because customer satisfaction would be way too low, and customers would easily have the option of leaving for a better contract offer. There is a substantial body of empirical literature that establishes the benefits of customer satisfaction for firms.


A business ideally is continually seeking feedback to improve customer satisfaction. Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty. Customer satisfaction data are among the most frequently collected indicators of market perceptions. Their principal use is twofold[: 1. Within organizations, the collection, analysis and dissemination of these data send a message about the importance of tending to customers and ensuring that they have a positive experience with the companys goods and services 2. Although sales or market share can indicate how well a firm is performing currently, satisfaction is an indicator of how likely it is that the firms customers will make further purchases in the future. Much research has focused on the relationship between customer satisfaction and retention. Studies indicate that the ramifications of satisfaction are most strongly realized at the extremes. On a five-point scale, individuals who rate their satisfaction level as 5 are likely to become return customers and might even evangelize for the firm. (A second important metric related to satisfaction is willingness to recommend. This metric is defined as "The percentage of surveyed customers who indicate that they would recommend a brand to friends." When a customer is satisfied with a product, he or she might recommend it to friends, relatives and colleagues. This can be a powerful marketing advantage.) Individuals who rate their satisfaction level as 1, by contrast, are unlikely to return. Further, they can hurt the firm by making negative comments about it to prospective customers. Willingness to recommend is a key metric relating to customer satisfaction.[1]

Construction (Measuring customer satisfaction)

Organizations need to retain 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 is measured at the individual level, but it is almost always reported at an aggregate level. It can be, and often is, measured along various dimensions. A hotel, for example, might ask customers to rate their experience with its front desk and check-in service, with the room, with the amenities in the room, with the restaurants, and so on. Additionally, in a holistic sense, the hotel might ask about overall satisfaction with your stay. As research on consumption experiences grows, evidence suggests that consumers purchase goods and services for a combination of two types of benefits: hedonic and utilitarian. Hedonic benefits are associated with the sensory and experiential attributes of the product. Utilitarian benefits of a product are associated with the more instrumental and functional attributes of the product (Batra and Athola 1990). Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of 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. Work done by Parasuraman, Zeithaml and Berry (Leonard L) between 1985 and 1988 provides the basis for the measurement of customer satisfaction with a service by using the gap between the customer's expectation of performance and their perceived experience of performance. This provides the measurer with a satisfaction "gap" which is objective and quantitative in nature. Work done by Cronin and Taylor propose the "confirmation/disconfirmation" theory of combining the "gap" described by Parasuraman, Zeithaml and Berry as two different measures (perception and expectation of performance) into a single measurement of performance according to expectation. The usual measures of customer satisfaction involve a surveywith a set of statements using a Likert Technique or scale. The customer is asked to evaluate each statement and in term of their perception and expectation of performance of the organization being measured. Their satisfaction is generally measured on a five-point scale.

Customer satisfaction data can also be collected on a 10-point scale. Regardless of the scale used, the objective is to measure customers perceived satisfaction with their experience of a firms offerings. It is essential for firms to effectively manage customer satisfaction. To be able do this, we need accurate measurement of satisfaction. Good quality measures need to have high satisfaction loadings, good reliability, and low error variances. In an empirical study comparing commonly used satisfaction measures it was found that two multi-item semantic differential scales performed best across both hedonic and utilitarian service consumption contexts. According to studies by Wirtz & Lee (2003) , they identified a six-item 7-point semantic differential scale (e.g., Oliver and Swan 1983), which is a six-item 7-point bipolar scale, that consistently performed best across both hedonic and utilitarian services. It loaded most highly on satisfaction, had the highest item reliability, and had by far the lowest error variance across both studies. In the study, the six items asked respondents evaluation of their most recent experience with ATM services and ice cream restaurant, along seven points within these six items: please me to displeased me, contented with to disgusted with, very satisfied with to very dissatisfied with, did a good job for me to did a poor job for me, wise choice to poor choice and happy with to unhappy with. A semantic differential (4 items) scale (e.g., Eroglu and Machleit 1990), which is a four-item 7point bipolar scale, was the second best performing measure, which was again consistent across both contexts. In the study, respondents were asked to evaluate their experience with both products, along seven points within these four items: satisfied to dissatisfied, favorable to unfavorable, pleasant to unpleasant and I like it very much to I didnt like it at all. The third best scale was single-item percentage measure, a one-item 7-point bipolar scale (e.g., Westbrook 1980)[10]. Again, the respondents were asked to evaluate their experience on both ATM services and ice cream restaurants, along seven points within delighted to terrible. It seems that dependent on a trade-off between length of the questionnaire and quality of satisfaction measure, these scales seem to be good options for measuring customer satisfaction in academic and applied studies research alike. All other measures tested consistently performed worse than the top three measures, and/or their performance varied significantly across the two service contexts in their study. These results suggest that more careful pretesting would be prudent should these measures be used. Finally, all measures captured both affective and cognitive aspects of satisfaction, independent of their scale anchors. Affective measures capture a consumers attitude (liking/disliking) towards a product, which can result from any product information or experience. On the other hand, cognitive element is defined as an appraisal or conclusion on how the products performance compared against expectations (or exceeded or fell short of expectations), was useful (or not

useful), fit the situation (or did not fit), exceeded the requirements of the situation (or did not exceed). Factors contributing to customer satisfaction: 1. Quality is Never an Accident If you have a lousy product or service, good luck selling it. Theres a reason the AMC Pacer and Chevy Vega arent around anymore. No amount of aggressive PR or marketing can save a product or service that just plain stinks. The consumer has to be happy with the quality of a product, at least to the you get what you paid for level. If you pay $350 for Boses QuietComfort noise-canceling headphones, youre going to reach a level of quality thats at the top rung. If you settle for the $20 headphones at Wal-Mart, dont expect them to muffle the sound of an airplane engine, or the baby thats sitting in the seat behind you. 2. Separation Anxiety In any market, theres usually more than one of the same products, perhaps dozens. Tide, Biz, Cheer, Gain. The grocery store laundry aisle is stocked with laundry detergents, all seemingly the same product in a different package. Customer service may not work when choosing detergent, but word of mouth certainly plays into customer satisfaction. If a product is the best one among several identical products, then its necessary to separate it from the rest, through marketing, customer service and good-old fashioned product quality. 3. Access 2.0 No website? No contact information? No search engine optimization? No business, then. The age of the Internet has made finding products and services a snap. What used to take minutes of flipping through a phone book now takes seconds on the Web. Emailing and searching for products and services on the Internet has become such a central reference point, companies have invested millions in making sure access is extremely easy. Because, if it takes a Web surfer more than a few frustrating minutes to maneuver a site, theyre gone. Customers are satisfied when there are no barriers, or at the very least, limited barriers to access a service. Remember the phrase, banking hours? The competition made the banks step up and stay open later on weekdays and even open their doors on weekends. Work weekends? Thats something that would have made the banking industry shudder 20 years ago. 4. At Face Value When a product or service costs more, but is worth it, its value becomes acceptable to the consumer. When a consumer always buys Nike, Sony or goes for the $100 massage over the $35

one, the positive features of the products or service should outweigh the cost, creating a strong sense of good value. I would happily pay more if necessary to have great customer service, said Barry L. Brown, President of a Florida-based consulting firm. Great customer service is rare these days. I drive 30 minutes to a particular location for a car wash and oil change when there are several within five minutes of my house. The difference? Great customer service. 5. A Nice Atmosphere Ask any sensible person and theyll tell you that given the same product or service, they would rather shop at the place that offers a clean, safe and well-organized environment. Lowes knew this and capitalized on it when going up against hardwares 2,000-pound gorilla, Home Depot. The North Carolina chain carried out extensive customer research and discovered that women initiate 80% of home-improvement decisions. So Lowes decided to do what Home Depot wasnt doing, make its stores brighter, cleaner and more shopper-friendly. When you need a power drill thats the same brand and the same price, the store thats psychologically more inviting will win out every time. Thats why Lowes now has 1,375 stores in 49 states, and ranks 42nd on the Fortune 500 list. 6. The Waiting Game When it takes 20 minutes to get your Bloomin Onion at Outback, or the Christmas Amazon delivery comes on Dec. 27, the timing aspect of customer satisfaction is shot. When products and services miss their delivery milestones, customers start to see red. If theyre waiting at the restaurant, they tend to think theres not enough staff working. If their products are late in the mail, then someone mishandled their order. Excuses dont fly when customers are counting on a service. One example is the dreaded time window. When the cable/repair guy says he will be there between 9 and 1, and doesnt show, that tends to boil the blood of any customer. In a society that demands instant results for everything from food to foreign policy, a good business has to keep the wait time to a minimum. 7. The one R: Responsibility A company has a commitment to tell the truth. Hiding facts, figures and excessive small print doesnt go far when it comes to customer satisfaction. If a company doesnt stand by its product, or hassles the customer when a refund or exchange is in order, that will stick. When something goes wrong with a product or service, if the supplier goes above and beyond the call of duty in taking responsibility, the end result is often that the customer is so impressed with the suppliers response, it negates the original problem.

8. Hold On to What Youve Got Repetition when it comes to customers is a good thing. When a company keeps a customer, its more profitable than finding a new one. As early as the 1980s, the American Consumer Association found that it was five times more expensive to win a new customer than to keep an existing one. Thats a major windfall for companies. Brands like Apple and Starbucks know that the stronger the bond customers have with their products, the longer the relationship will last. 9. Youre in Good Hands, Hopefully Theres a reason Allstates Youre In Good Hands slogan has worked for so long. Customers like to know that a company cares. Corporations face a constant image problem, being portrayed as soulless fat cats interested in squeezing out as much profit as possible. When oil companies, drug makers and insurers reap billions in profits while consumers pay more and more for their products it makes people mad. Campaigns to show that the company cares are critical to keep customers satisfied. When customers are informed, and feel that their opinion matters, they are more satisfied. 10. Tech Isnt Just for Geeks Technology means more than a fancy Flash website. In order to satisfy customers, companies have to keep up with the latest technological advances or suffer the consequences. Change is never easy, but business as usual isnt a viable alternative anymore. Technology can help small and mid-size companies look like big companies by improving the quality of the purchasing experience without adding staff to the payroll.