Topic 4

Chapter 11
Defining and Measuring
Customer Satisfaction

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“If you can’t measure it, goes the old cliché,
you can’t manage it. In fact, if you can’t measure
it, managers seem unable to pay attention to it.”

Fortune Magazine

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The major objectives of this topic are to
introduce you to the importance and benefits of
customer satisfaction and the important factors
to consider when measuring customer
satisfaction.

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 Introduction
• Customer satisfaction is one of the most
studied areas in marketing.

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 TOP 20 Funniest Ratings
1. You can’t cheat in her class because no one knows the answers.
2. His class was like milk, it was good for two weeks.
3. Houston, we have a problem. Space cadet of a teacher, isn’t quite
attached to Earth.
4. I would have been better off using the tuition money to heat my
apartment last winter.
5. Three of my friends got As in his class and my friends are dumb.
6. Emotional scarring may fade away, but that big fat F on your
transcript won’t.
7. Evil computing science teaching robot who crushes humans for
pleasure.
8. BORING! But I learned there are 137 tiles on the ceiling.
9. Not only is the book a better teacher, it also has a better
personality.
10. Very good course, because I only went to one class.

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 The Importance of CS
The importance of customer satisfaction cannot be overstated.
Technical Assistance Research Program (TARP)
• The average business does not hear 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.
Thirteen 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:
• 54-70 percent if resolved at all, and 95 percent if handled
quickly.
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• Based on the TARP figures, a firm that serves 100
customers per week and boasts a 90 percent
customer satisfaction rating will be the object of
thousands of negative stories by the end of a
year.
• For example, if 10 dissatisfied customers per
week tell 10 of their friends of the poor service
received, by the end of the year (52 weeks),
5,200 negative word-of-mouth communications
will have been generated.

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• Firms that effectively respond to customer
complaints generate positive word-of-mouth
communications.
• Although positive news travels at half the rate of
negative news, the positive stories can ultimately
translate into customer loyalty and new
customers.
• Finally, a firm should also learn from the TARP
figures that complainers are the firm’s friends.
• Complainers are a free source of market
information, and the complaints themselves
should be viewed as opportunities for the firm to
improve its delivery systems, not as a source of
irritation.
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 What Is Customer
Satisfaction/Dissatisfaction?

The most popular definition of customer

satisfaction/dissatisfaction is that it is a
comparison of customer expectations to
perceptions regarding the actual service
encounter.

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FIG-11.1 Alternative Satisfaction
Dimensions

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• Expectancy disconfirmation model: Model
proposing that comparing customer
expectations to their perceptions leads
customers to have their expectations
confirmed or disconfirmed.

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• Confirmed expectations: Customer expectations
that match customer perception resulting in
customer satisfaction.
• Disconfirmed expectations: Customer
expectations that do not match customer
perceptions.
• Negative disconfirmation: Customer perceptions
that are lower than customer expectations
resulting in customer dissatisfaction.
• Positive disconfirmation: Customer perceptions
that exceed customer expectations resulting in
delighting customers
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The Benefits of Customer Satisfaction
Meeting and exceeding customer expectations
may reap several valuable benefits for the firm.
• Positive word-of-mouth generated from
existing customers often translates into more
new customers.
• Satisfied current customers often purchase
more products more frequently and are less
likely to be lost to competitors than are
dissatisfied customers.

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FIG-11.2 The Customer
Service Hall of Fame

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FIG-11.3 The Customer
Service Hall of Shame

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 FIG-11.4 Eight Key
Attributes of Reputation

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 The Benefits of Customer Satisfaction Surveys
1. Such surveys provide a formal means for customer
feedback to the firm, which may identify existing and
potential problems.
2. Satisfaction surveys also convey the message to customers
that the firm cares about their wellbeing and values
customer input concerning its operations
3. Satisfaction results are often utilized in evaluating
employee performance for merit and compensation
reviews and for sales management purposes, such as the
development of sales training programs.
4. Survey results are also useful for comparison purposes to
determine how the firm stacks up against the
competition.
5. When ratings are favorable, many firms utilize the results
in their corporate advertising

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Delta Customer Feedback Card

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 Measuring Customer Satisfaction
• Indirect measures: Measures of customer
satisfaction including tracking and monitoring
sales records, profits, and customer
complaints.
• Direct measures: Measures of satisfaction
generally obtained directly from customers via
customer satisfaction surveys.

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Customer satisfaction surveys are not
standardized among firms.
• The scales used to collect the data vary (e.g.,
5-point to 100-point scales), questions asked
of respondents vary (e.g., general to specific
questions), and
• Data collection methods vary (e.g., personal
interviews to self-administered
questionnaires).

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 The Scale of 100 Approach
• Some firms request customers to rate the firm’s performance
on a scale of 100. In essence, the firm is asking customers to
give the firm a grade. However, the problems with this
approach are readily apparent.
• Let’s say that the firm scores an average of 83. What does the
83 mean—the firm received a B-? Does an 83 mean the same
thing to all customers? Not likely.
• More importantly, what should the firm do to improve its
satisfaction rating?
• Although the score of 83 provides us with some general
information, the 83 does not provide specific suggestions for
improvements that would lead to an increased customer
satisfaction rating.

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The “Very Dissatisfied/Very Satisfied” Approach
• An improvement of the “Scale of 100” approach is the use of the
“very dissatisfied/very satisfied” approach.
• This approach presents customers with a 5-point Likert scale.
• This approach provides more meaning to the satisfaction rating
itself, compared to the “Scale of 100” approach, it still lacks the
diagnostic power to indicate specific areas of improvement.
• The interpretive value of the information is restricted by its
quantitative nature.
• firms truly seeking to improve their customer satisfaction should
also collect qualitative information in order to highlight specific
areas of improvement.

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FedEx’s Hierarchy of Horrors

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 The Combined Approach
• The combined approach utilizes the quantitative scores
obtained by the “very dissatisfied/very satisfied”
approach and adds a qualitative analysis of feedback
obtained from respondents who indicated that they
were less than “very satisfied.

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Understanding Customer Satisfaction
Ratings

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Factors Influencing Customer Satisfaction
Ratings
1. Customers Are Genuinely Satisfied
2. Response Bias
3. Data Collection Method
4. Question Form
5. Context of the Question
6. Timing of the Question
7. Social Desirability Bias
8. Mood
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 Customer Satisfaction: How Good
Is Good Enough?
• If a firm currently boasts a 95 percent
customer satisfaction rating, is it worth a
$100,000 investment to improve satisfaction
to 98 percent?
• The answer is…“It depends!”
• Babich develops a customer satisfaction
model that would predict market share
changes over time as they related to customer
satisfaction ratings.

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 FIG-11.10 Customer
Satisfaction Model: Three Scenarios

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• So, should a firm invest $100,000 to improve
customer satisfaction ratings from 95 percent to
98 percent? It depends upon:
1. The satisfaction ratings of the firm’s
competitors;
2. The dollar investment necessary to increase
customer satisfaction relative to the impact of
increasing the firm’s market share;
3. The number of time periods required to recoup
the investment; and
4. The opportunity costs associated with other
uses of the $100,000.

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 Does Customer Satisfaction Translate
into Customer Retention?
• First, satisfaction research focuses on whether current
needs are being met but fails to investigate customers’
future needs.
• A second criticism of customer satisfaction research is that
it tends to focus on registered complaints.
• A third criticism is that customer satisfaction research tends
to focus on global attributes and ignores operational
elements.
• A fourth criticism of customer satisfaction research is that it
often excludes the firm’s employees from the survey
process.
• A fifth criticism is that some firms are convinced that
customers may not know what they want and that
sometimes ignoring the customer is the best strategy to
follow, particularly when it comes to new product
innovation. 32
FIG-11.11 Sheraton Hotels & Resorts
Guest Satisfaction Survey

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 Types of Customer Expectations
1. Predicted service: The level of service quality a
consumer believes is likely to occur.
2. Desired service: The level of service quality a
customer actually wants from a service encounter.
3. Perceived service superiority: A measure of service
quality derived by comparing desired service
expectations and perceived service received.
4. Adequate service: The level of service quality a
customer is willing to accept.
5. Perceived service adequacy: A measure of service
quality derived by comparing adequate service and
perceived service

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Comparison between Customer Evaluation
of Service Quality and Customer
Satisfaction

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 The Zone of Tolerance
• Level of quality ranging from high to low and
reflecting the difference between desired service
and adequate service; expands and contracts
across customers and within the same customer,
depending on the service and the conditions
under which it is provided.
• The zone of tolerance expands and contracts
across customers and within the same customer
depending on the service and the conditions
under which the service is provided.

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• Price, for example, may influence the zone of
tolerance. Typically, as the price increases, the
customer’s zone of tolerance decreases as
desired service needs begin to dominate, and
the customer becomes less forgiving for
sloppy service.
• Another interesting characteristic of the zone
of tolerance is that desired service is less
subject to change than adequate service.

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The Zone of Tolerance

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FIG-11.14 Factors Influencing Expected Service

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 Factors Influencing Service
Expectations: Desired Service
• Enduring service intensifiers. Personal factors that
are stable over time and increase a customer’s
sensitivity to how a service should be best
provided.
• Derived expectations. Expectations appropriated
from and based on the expectations of others.
• Personal service philosophies. A customer’s own
internal views of the meaning of service and the
manner in which service providers should conduct
themselves.
• Personal needs. A customer’s physical, social, and
psychological needs.
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 Factors Influencing Service Expectations:
Desired Service and Predicted Service
• Explicit service promises. Obligations to which the firm
commits itself via its advertising, personal selling,
contracts, and other forms of communication.
• Implicit service promises. Obligations to which the
firm commits itself via the tangibles surrounding the
service and the price of the service.
• Word-of-mouth communications. Unbiased
information from someone who has been through the
service experience, such as friends, family, or
consultants.
• Past experience. The previous service encounters a
consumer has had with a service provider.
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 Factors Influencing Service
Expectations: Adequate Service
• Transitory service intensifiers. Personal, short-
term factors that heighten a customer’s
sensitivity to service.
• Perceived service alternatives. Comparable
services customers believe they can obtain
elsewhere and/or produce themselves.
• Self-perceived service role. The input a customer
believes he or she is required to present in order
to produce a satisfactory service encounter.
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• Situational factors. Circumstances that lower the
service quality but that are beyond the control of
the service provider.
• Predicted Service. The level of service consumers
believe is likely to occur is the fifth and final
factor that influences adequate service
expectations. Predicted service is a function of
the firm’s explicit and implicit service promises,
word-of-mouth communications, and the
customer’s own past experiences.

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 The Link between Expectations, Customer
Satisfaction, and Service Quality
1. The concepts of predicted, adequate, and desired
service.
2. When evaluating the service experience, consumers
compare the three types of expectations (predicted
service, adequate service, and desired service) to the
perceived service delivered.
3. Customer satisfaction is calculated by comparing
predicted service and perceived service.
4. Perceived service adequacy, which compares
adequate service and perceived service.
5. Perceived service superiority, which compares desired
service and perceived service.
6. Measures of service quality

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Thank you

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