COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. C hapter 12 D EFINING A ND M EASURING C USTOMER S ATISFACTION

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. AMERICAN CUSTOMER SATISFACTION INDEX (ACSI)  Top Firms (all produce goods)  Dole Food  Mars  H.J. Heinz  Proctor & Gamble  PepsiCo  Honda  Mercedes-Benz  Maytag

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. AMERICAN CUSTOMER SATISFACTION INDEX (ACSI)  Bottom Firms (all produce services)  Internal Revenue Service  Police  U.S. Postal Service  Continental Airlines  McDonald’s  BankAmerica Corp.  Unicom (electric utilities)  Ramada  Aetna Life & Casualty (insurance)

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. RECIPE FOR CUSTOMER SERVICE DISASTERS  Labor shortages  motivated employees are difficult to find  who can blame them…  low pay  no career paths  no respect  little training in customer relations

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. RECIPE FOR CUSTOMER SERVICE DISASTERS  Automation  effectiveness was sacrificed in the name of efficiency  general feeling that companies are continuing to distance themselves from their customers  examples are numerous …  mounting frustrations with automated phone and other service delivery systems  e-commerce strategies should take note!

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. RECIPE FOR CUSTOMER SERVICE DISASTERS  Customers are tougher to please  increasingly educated  more informed  more discretionary income  not at the mercy of shop keepers anymore  expectations have increased

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. RECIPE FOR CUSTOMER SERVICE DISASTERS  Skyrocketing inflation  efforts to reduce prices  services were slashed  price competition ensued (price wars)  firms once again cut costs  service was sacrificed again  interestingly, advertising was also cut during a time customers were attempting to make more informed decisions

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. THE IMPORTANCE OF CUSTOMER SATISFACTION  The average business does not hear from 96% of its unhappy customers  For every complaint received, 26 customers actually have the same problem  The average person with a problem tells 9 or 10 people  13% tell more than 20

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. THE IMPORTANCE OF CUSTOMER SATISFACTION  Customers who have their complaints resolved tell an average of 5 people  Complainers are more likely to do business with you again than non-complainers  54-70% if the complaint is resolved at all  95% if the complaint is resolved quickly

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. WHAT IS CUSTOMER SATISFACTION/DISSATISFACTION?  Expectancy Disconfirmation Model  Confirmation  perceptions = expectations  Negative Disconfirmation  perceptions < expectations  Positive Disconfirmation  perceptions > expectations

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. THE BENEFITS OF CUSTOMER SATISFACTION  Positive word-of-mouth  Purchase more frequently  Less likely to be lost to competitors  Insulated from price competition  Positive work environments

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. THE BENEFITS OF CUSTOMER SATISFACTION SURVEYS  Provides a formal means of customer feedback  Conveys a caring message to customers  Used to evaluate employee performance  Merit and compensation reviews  Employee training programs  Comparison against competition  Provide information for advertising

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. MEASURING CUSTOMER SATISFACTION  Indirect Measures  sales records, profits, customer complaints  Direct Measures  The Scale of 100 Approach  Federal Express’ original approach (score = 83)  The “Very Dissatisfied/Very Satisfied” Approach  The Combined Approach

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. MEASURING CUSTOMER SATISFACTION  FedEx’s “Hierarchy of Horrors”  wrong-day delivery  right day, late delivery  pick-up not made  lost package  customer misinformed by FedEx  billing and paperwork mistakes  employee performance failures  damaged packages

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. UNDERSTANDING CUSTOMER SATISFACTION RATING  Virtually all self-reports of customer satisfaction possess a distribution that is ………………??? High dissatisfaction High satisfaction Conceptual Distribution of Satisfaction Measurements Source: Robert A. Peterson and William R. Wilson, “Measuring Customer Satisfaction: Fact and Artifact,” Journal of the Academy of Marketing Science 20,1 (1992), p. 61.

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. SAMPLING OF SATISFACTION RESULTS Source: Robert A. Peterson and William R. Wilson, “Measuring Customer Satisfaction: Fact and Artifact,” Journal of the Academy of Marketing Science 20,1 (1992), p. 61.

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. FACTORS INFLUENCING CUSTOMER SATISFACTION RATINGS  Customers are genuinely satisfied  Response bias  Data collection method  personal vs. non-personal  Question form  satisfied vs. dissatisfied

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. RESPONSE BY QUESTION FORM Source: Robert A. Peterson and William R. Wilson, “Measuring Customer Satisfaction: Fact and Artifact,” Journal of the Academy of Marketing Science 20,1 (1992), p. 65.

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. FACTORS INFLUENCING CUSTOMER SATISFACTION RATINGS  Question context  General question prior to specific question  Timing of question  Recent vs. Past Purchase  Social desirability bias  Mood

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. CUSTOMER SATISFACTION: HOW GOOD IS GOOD ENOUGH?  Should a firm invest $100,000 to attempt to improve ratings from 95% to 98%?  Depends Upon:  satisfaction ratings of other firms  dollar investment needed relative to the impact on the bottom line by increasing market share  number of time periods needed to recoup the investment  opportunity costs associated with other uses of the firm’s funds

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. CUSTOMER SATISFACTION MODELS [Panels A, B, and C of Figure 12.3, p.309.]  Babich Satisfaction Models Illustrate:  the value of knowing competitive ratings  high customer satisfaction scores make the firm more resistant to competitive efforts to increase their market share

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. CRITICISMS OF CUSTOMER SATISFACTION RESEARCH  Does not necessarily translate into customer retention  Focus is on current needs only  Focuses on registered complaints  Fails to involve employee viewpoints  Fails to involve customer viewpoints  surveys are generally designed internally by middle and upper managers

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. CUSTOMER SATISFACTION: A CLOSER LOOK

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. The Zone of Tolerance Source: Valerie A. Zeithaml, Leonard L. Berry, and A. Parasuraman, “The Nature and Determinants of Customer Expectations of Service,” Journal of the Academy of Marketing Science 21,1 (1993), pp Expected service Desired service Zone of tolerance Adequate service

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. Factors Influencing Expected Service Source: Adapted from Valerie A. Zeithaml, Leonard L. Berry, and A. Parasuraman, “The Nature and Determinants of Customer Expectations of Service,” Journal of the Academy of Marketing Science 21,1 (1993), pp Enduring service intensifiers Derived expectations Personal service philosophies Personal needs Transitory service intensifiers Emergencies Service problems Perceived service alternatives Self-perceived service role Situational factors Bad weather Catastrophe Random over-demand Explicit service promises Advertising Personal selling Contracts Other communications Implicit service promises Tangibles Price Word-of-mouth Personal “Expert” (Consumer Reports, publicity, consultants, surrogates) Past experience Predicted service Expected service Desired service Zone of tolerance Adequate service Perceived service