Customer Satisfaction Meaning, Determinants, Factors

Table of Contents:-

What is Customer Satisfaction

Customer satisfaction is a business term used to measure how products and services a company supplies meet or surpass customer expectations. It is seen as a key performance indicator within business and is an essential component of the four viewpoints of a balanced scorecard.

In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a critical differentiator and has become an essential element of business strategy. A substantial body of empirical literature establishes the benefits of customer satisfaction for firms.

Customer satisfaction is an overarching concern for all marketing professionals. But, customer satisfaction is how happy a customer is with a product or service, both in the product’s performance and the company’s delivery of the product to the market. One generally used measure of customer satisfaction is the gap model. The following equation defines the gap model:

Customer Satisfaction = Delivery – Expectations

Delivery refers to the customer’s perception of the actual delivery of the service or product. On the other hand, expectations refer to the customer’s expectations about that product or service. Thus customer satisfaction is the difference, or “gap,” between what the consumer expected and received.

For example, if a consumer purchases a product that he expects to last 3 months and it lasts 6 months (the delivery of the product was six months of use), he will be very satisfied with the product. Conversely, if the product only lasts 1 month (the delivery then is 1 month of use), the consumer is likely to be highly dissatisfied. Thus, expectations serve as the base point for the customer’s assessment of satisfaction and delivery.

Determinants of Customer Satisfaction

Specific product or service features and perceptions of quality influence customer satisfaction. Satisfaction is also influenced by customers’ attributions, emotional responses, and perceptions of equity.

Determinants of Customer Satisfaction are as follows:

  1. Consumer Emotions
  2. Product and Service Features
  3. Other Consumers, Family Members, and Co-workers
  4. Attributions for Service Success or Failure
  5. Perceptions of Equity or Fairness

1) Consumer Emotions: Customers’ emotions can also affect their perceived satisfaction with products and services. These emotions can be stable or pre-existing, for example, mood state or life satisfaction. The consumption experience may also induce specific emotions, influencing a consumer’s satisfaction with the service.

2) Product and Service Features: Customer satisfaction with a product or service is significantly influenced by the customer’s evaluation of product or service features. For a service such as a resort hotel, important features might include the restaurants, pool area, room comfort, access to golf facilities, privacy, helpfulness and courtesy of staff,

3) Other Consumers, Family Members, and Co-workers: In addition to product and service features and one’s individual feelings and beliefs, consumer satisfaction is often influenced by other people. For example, satisfaction with a family vacation trip is a dynamic phenomenon, influenced by the reactions and expressions of individual family members throughout the vacation.

4) Attributions for Service Success or Failure: Attributions to the perceived causes of events – influence perceptions of satisfaction as well. When surprised by an outcome (the service is much better or worse than expected), consumers look for the reasons, and their assessments can influence their satisfaction.

5) Perceptions of Equity or Fairness: Perceptions of equity and fairness also influence customer satisfaction. Concepts of fairness are central to customers’ perception of satisfaction with products and services.

Factors Influencing Customer Satisfaction

Factors affecting customer satisfaction are as follows:

  1. Quality
  2. Value for Money
  3. Reliability
  4. Responsiveness
  5. Access
  6. Courtesy
  7. Communication
  8. Credibility

Factors Influencing Customer Satisfaction

1) Quality

The product or service meets customers’ expectations of the degree of quality they need by delivering what was promised. For products, this will refer to such criteria as fitness for reliability, durability, purpose, and low maintenance. For services, it will be concerned with achieving an acceptable level of provision, reliability, and accessibility.

2) Value for Money

The product or service meets customers’ requirements on value for money by giving them at least what they paid for and preferably more. Belief about whether value for money is provided will usually be on a comparative basis, setting off one supplier or manufacturer against others.

3) Reliability

Customers are most likely to be satisfied when the service employee delivers the deal” by achieving a consistent level of performance and dependability.

4) Responsiveness

Increasingly, customers expect their suppliers to be willing and ready to provide prompt service and help at the point of sale and afterwards. Individual attention, flexibility and speed are required.

5) Access

Customers must be able to gain access to the supplier or provider with the minimum of trouble. They have learnt to put up with mechanised answering Services but hate endless delays in getting through while listening to the four seasons and to seemingly insincere assurances that their custom is valued. They like to talk to people who will respond to their queries or complaints.

6) Courtesy

Customers expect respect, politeness, consideration and friendliness from the individuals they contact over the counter, in a call centre or when faced with a service problem.

7) Communication

It is essential to keep customers informed in a language they can understand abo products or services and how they can make quick and easy contracts if they have a problem. It should be evident to them when they make contact that they are listened to so that their query is dealt with quickly.

8) Credibility

Customers are more likely to be satisfied if they find, as a result of their experiences, that the provider or supplier is believable, trustworthy, and honest. This is based on the courtesy and knowledge displayed by staff and their ability to encourage trust and confidence.

When considering how to please customers, it should be remembered that their expectations tend to increase. They expect continually rising service levels and more choices and will be dissatisfied if standards are maintained at a level they once found acceptable. Customers are changing how they purchase especially through the Internet, which gives them more choice and enables them to compare product price attributes. It should also be noted that other organisations improve the services they offer and competition will be lost if these are not matched or preferably exceeded.

Simply seeking satisfaction is not enough. It is necessary to go beyond satisfaction by exceeding expectations a anticipation of what customers will want in the future and what competitors will be doing.

Monitoring and Measuring Customer Satisfaction

Measuring and monitoring customer satisfaction is one way to connect service delivery with its performance. Individual customers influence the wider community’s perception of the supplier, and pragmatic level, customer satisfaction and community perceptions measurement enables organisations to respond to customers’ needs or wants intending to influence customer behaviour. The information she provides is a customer-based measure of an organisation’s performance.

These activities measure the performance of the management system and its related processes and initiate actions to it where needed. These processes are directly related, with one process providing essential inputs in the next.

Once the customer service policy has been established, maintaining its performance and overall customer satisfaction are keys to maintaining customer intimacy and keeping the pulse on the customer. (The great Business failures can be traced to companies losing step with customer requirements.) Customer satisfaction monitoring is a key discipline of customer response organisations.

Monitoring Customer Satisfaction

Monitoring customer satisfaction is one of the most influential objectives of a company, as research studies suggest that customer dissatisfaction is the overwhelming reason why customers leave a company. A monitoring of customer satisfaction is a continuous process. The best way to determine shifts or changes in customer satisfaction as conduct surveys and analyse results regularly.

Other methods that can be used to monitor customer satisfaction include the following:

  • Regularly using focus groups
  • Recording the types and number of complaints made to customer service representatives
  • Opening communications through social networks

While each method helps monitor customer satisfaction levels, combining tools may provide the most well-accurate and rounded results.

Using surveys to monitor customer satisfaction is often the most cost-efficient and accurate method for determining if shifts in satisfaction have occurred. When done correctly, a survey can give the business a precise understanding of customer perceptions and attitudes toward its products or services.

Steps to monitor customer satisfaction

The following four-step approach is used for monitoring customer satisfaction.

Step 1: Identify the factors that are important to customers. These are different from the factors managers think are essential. Qualitative research techniques such as group discussions and in-depth interviews can be helpful here. Depth interviews with the clients of a large accountancy firm showed that partners demonstrating that they cared about the development of the client’s business (showing empathy) were critical to building a long-term relationship.

Step 2: Assess the relative importance of the factors identified and measure customer expectations on those factors. While some customers may expect their problems to be solved immediately, others may have more relaxed expectations. While reliability may be paramount, cost could be more essential for others.

Step 3: Assess the service provider’s performance on the factors critical to the clients. Here, it can be helpful to assess performance relative to expectations directly. Did performance live up to, fall short of, or surpass expectations? A helpful summary of the factors under consideration in a performance-importance matrix can be made at this stage. Here, the factors are plotted regarding their importance to customers and the firm’s performance.

Step 4: The gap between the actual performance and desired performance is analysed by top management to determine what can be done if customer satisfaction is not improving or even declining. This can lead to implementing changes and then monitoring customer satisfaction levels to determine if the changes were successful.

Measuring Customer Satisfaction

Several different methods are available for measuring customer satisfaction. The simplest method uses simple rating scales to measure performance across various factors directly.

For example, a customer might be asked to rate the quality of housekeeping services in a hotel using a ten-point scale ranging from poor to excellent. Although this method is simple and allows the firm to track satisfaction, it is not diagnostic in the sense that it permits the firm to determine how satisfaction varies over time. To do this, the company can measure both performance and expectations at the same time.

The ongoing measurement of customer satisfaction has changed dramatically over the last decade or so. Although most firms track their customer satisfaction ratings over time, firms that are serious about CRM have adopted more robust means of tracking satisfaction based on actual customer behaviour. Advances in technology, which allow firms to track the behaviours of individual customers over time, provide the basis for these new metrics.

Some of these new metrics include the following points:

  1. Lifetime Value of a Customer (LTV)
  2. Average Order Value (AOV) and Customer Acquisition/Retention Costs
  3. Customer Conversion, Retention, and Attrition Rate
  4. Analysing Customer Defections

1) Lifetime Value of a Customer (LTV)

LTV is the net present value of the revenue stream generated by a specific customer over some time. LTV acknowledges that some customers are worth more than others. Companies can better leverage their customer satisfaction programs by focusing on valuable clients, giving poor service, or charging hefty prices to customers with low LTV profiles to encourage them to leave. To compute LCV, all historic net margins are compounded up to today’s value and all future net margins are discounted back to today’s value.

Estimates of LCV potential look only to the future and ignore the past. The focus on net margins rather than gross margins is because a customer that appears to be valuable based on the gross margins generated might seem less profitable once the code customer is taken into account. Companies that do not have the processes in place to allocate co-customers cannot use net margin data. They must work either with sales revenue data or gross margin.

2) Average Order Value (AOV) and Customer Acquisition/Retention Costs

AOV is a customer push dollar divided by the number of orders over some time. The AOV will improve over time as customer satisfaction advances and customers become more loyal. E-commerce companies often use AOV to pinpoint customers who need extra incentives or reminders to stimulate purchases. Average order value is considered a “key” performance indicator by many when combined with revenue per visitor or visit and order conversion rate.

Retaining current customers is typically less expensive than acquiring new ones. As long as holds, a company is better off keeping its current customers satisfied.

3) Customer Conversion, Retention, and Attrition Rate

This is the percentage of visitors or potential customers that buy. Low conversion rates are not necessarily a cause for concern if the number of prospects is high. This is the percentage of those customers who are repeat purchasers. This number should remain stable and increase over time. A declining retention rate is cause for immediate concern. This is the percentage of customers who do not re-purchase (sometimes called the churn rate). This number should remain stable and decline over time. An increasing attrition rate is a cause for primary concern.

4) Analysing Customer Defections

This includes finding out why customers leave the company and intervening when customer behaviour shows that they are going to defect. Analysing customer defection uses defection management, a systematic process that actively attempts to retain customers before they defect. It involves tracking the reasons for defection n using this information to continuously improve service deliveries.

A firm operating in services should move towards zero defection, which is different from the zero defence model in the manufacturing sector. Zero defects mean no defects, whereas zero defects imply that the customer defects to competitors.

Types of Defectors

According to De Souza, A defector can defect due to several reasons.

The various types of defectors areas follows:

i) Price Defectors: Those who switch to competitors for lower-priced goods or services.

ii) Product Defectors: Customers who switch to competitors who offer superior goods and services

iii) Service Defectors: Customers who defect because of poor customer service.

iv) Market Defectors: Customers who exit the market because of relocation or business failure.

v) Technological Defectors: Customers who switch to products outside the industry.

vi) Organisational Defectors: Customers who leave because of political considerations inside the firm such as reciprocal buying arrangements.

Defection rates are measurable and manageable. Analysing information regarding defection can assist companies in reaching the objective of continuous improvements. A service firm should aim at zero defection within the firm, and this must have support at all levels of the organisation. Employees should be trained in defection management. Defection management involves gathering customer information, giving specific instructions about the news, reacting to reports, and responding to communication. A firm should value an attempt that helps in customer retention. It can be by way of rewards or incentives. A firm should also consider entry barriers that discourage defections, e.g., one would prefer to keep one’s doctor the same; defectors can provide valuable information regarding the firm’s operations, employees, and future.

You May Also Like:

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top
Nature of Financial Management