Defining and Measuring Customer Satisfaction Chapter 11 Defining and Measuring Customer Satisfaction

Chapter Objectives Define customer satisfaction and understand the benefits associated with satisfied customers. Appreciate various methods for measuring customer satisfaction and discuss the limitations of customer satisfaction measurements. Discuss factors to consider when investing in customer satisfaction improvements. Understand the many factors that influence customer expectations. © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Opening Vignette: Ratemyprofessor.com This website provides the means for students to rate their satisfaction with their professors Contains over 10 million ratings of over one million instructors from 6,000 colleges and universities www.ratemyprofessor.com © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Consumer Movement: 1970s and Beyond Skyrocketing inflation during the 1970s forced many firms to slash service in an effort to keep prices down Deregulation led to price competition (price wars) and services were slashed to hold costs down Labor shortages also contributed to the decline in customer service Automation distanced customers Customers have become more informed and tougher to please © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Importance of Customer Satisfaction The average business does not heard from 96 percent of its unhappy customers For every complaint received, 26 customers actually have the same problem The average person with a problem tells nine or 10 people; 13 percent will tell more than 20 Customers who have their complaints satisfactorily resolved tell an average of five people about the treatment they received Complainers are more likely to do business with you again than noncomplainers: 54 percent to 70 percent if resolved at all, and 95 percent if handled quickly © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

What Is Customer Satisfaction and Dissatisfaction? Expectancy disconfirmation model Confirmation Negative disconfirmation Positive disconfirmation = Perceptions Expectations Perceptions < Expectations > Perceptions Expectations © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Benefits of Customer Satisfaction Positive word-of-mouth generated from existing customers often translates into more new customers Satisfied current customers often purchase more products more often than dissatisfied customers Satisfied current customers are less likely to be lost to competitors than dissatisfied customers High customer satisfaction ratings help insulate the firm from price competition Firms that pride themselves on their customer satisfaction efforts tend to have more positive work environments © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.1: The Customer Service Hall of Fame © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.2: The Customer Service Hall of Shame © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.3: Nine Key Attributes of Reputation © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Benefits of Customer Satisfaction Surveys Provide a formal means of customer feedback to the firm Convey a caring message to customers Used to evaluate employee performance Merit and compensation reviews Employee training reviews Used for comparison against competition Provide information for advertising © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Measuring Customer Satisfaction Indirect measures Sales records, profits, customer complaints Direct measures The Scale of 100 approach The “very dissatisfied/very satisfied” approach The combined approach Provides a benchmark against which future satisfaction surveys should be compared Provides diagnostic information that pinpoints specific areas for improvement © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.4: FedEx’s Hierarchy of Horrors © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Understanding Customer Satisfaction Ratings Virtually all self-reports of customer satisfaction possess a distribution in which a majority of the responses indicate that customers are satisfied and the distribution itself is negatively skewed To feel above average is normal It is not unusual to see results in the 80 to 90 percent range © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.5: Distribution of Satisfaction Measurements © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Factors Influencing Customer Satisfaction Ratings Genuinely satisfied customers Response bias Data collection method Personal (interviews, phone surveys) vs. nonpersonal (mail questionnaires) Question form Positive form (“How satisfied are you?”) vs. negative form (“How dissatisfied are you?”) © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.6: Responses by Question Form © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Factors Influencing Customer Satisfaction Ratings (cont’d) Question context A general satisfaction question (“In general, how satisfied are you with the products in your house?” prior to a specific satisfaction question (“How satisfied are you with your Toyota?”) Question timing Recent vs. past purchase Social desirability bias Mood © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Are Customer Satisfaction Surveys Worth It? Benchmarking with past satisfaction measures and comparisons with competition provide more meaningful feedback to companies When firms use satisfaction surveys in conjunction with other measures, the information provided is invaluable © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Customer Satisfaction: How Good Is Good Enough? Should a firm invest $100,000 in an attempt to improve customer satisfaction ratings from 95 percent to 98 percent? © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Customer Satisfaction: How Good Is Good Enough? Should a firm invest $100,000 in an attempt to improve customer satisfaction ratings from 95 percent to 98 percent? It depends upon: The satisfaction ratings of the firm’s competitors The dollar investment necessary to increase customer satisfaction relative to the impact of increasing the firm’s market share The number of time periods needed to recoup the investment The opportunity costs associated with other uses of the firm’s $100,000 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Criticisms of Customer Satisfaction Research Focuses on whether current needs are being met but fails to investigate customers’ future needs Tends to focus on registered complaints Tends to focus on global attributes and ignores operational elements Often excludes the firm’s employees from the survey process Some firms are convinced that customers may not know what they want and that sometimes ignoring the customer is the best strategy to follow © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Types of Customer Expectations Predicted service Desired service Comparing desired service expectations to perceived service received results in a measure of perceived service superiority Adequate service Comparing adequate service with perceived service produces a measure of perceived service adequacy © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.9: Comparison between Customer Evaluation of Service Quality and Customer Satisfaction © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.10: The Zone of Tolerance © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 11.11: Factors Influencing Expected Service © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.