1. 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

2. 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

3. 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)

4. 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

5. 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!

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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.

16. 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.

17. 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

18. 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.

19. 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

20. 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

21. 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

22. 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

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

24. 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. 1-12. Expected service Desired service Zone of tolerance Adequate service

25. 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. 1-12. 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