Lesson 4 - CUSTOMER SATISFACTION

1 Introduction to Customer Satisfaction

2 Customers perception of quality
3 Characteristics of Service Quality
4 Determinants of Service Quality
5 Dimensions of Service Quality
6 The Gap Model of Service Quality
7 Indicators for Customer Satisfaction
8 Methods of monitoring customer satisfaction
9 Measures of customer satisfaction
10 Customer satisfaction Model
11 Strategies to enhance customer satisfaction
12 Customer Feedback system
13 Handling Customers Compliant
14 Customer retention
15 Research findings
16 Health Services (Practical Application)

Sample Questions

1. Introduction to Customer Satisfaction

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 One of the most critical quality management concepts is Customer satisfaction. When an
organization produces products & services of quality at economic cost that consistently
meets the customers needs, then the organization is said to be satisfying the customer.
Customer satisfaction, a business term, is a measure of how products and services
supplied by a company meet or surpass customer expectation. It is seen as a competitive
tool for increasing market share, sustaining long-term profitability and survival.

The first and overriding feature of TQM is the companys focus on its customers.
Successful TQM programs begin by defining quality from the customers perspective.

Companies need to continually gather information by means of focus groups, market

surveys, and customer interviews in order to stay in tune with what customers want. They
must always remember that they would not be in business if it were not for their
customers.

2. Customers perception of quality

In an organization there is no acceptable quality level because the customer's needs,
values and expectations are constantly changing and becoming more demanding. An
American Society for Quality (ASQ) survey reveals the following end-user perception of
quality:-

1. Performance This involves fitness for use. Product or service must be ready for
use at the time and point of sale
2. Features-identifiable features or attributes of a product or service are
psychological , time oriented contractual , ethical and technological
3. Service- customer service gives customers an added value. This is intangible
attribute made up of many small things geared to wards changing the customers
perception. Organizations emphasizing on quality never stop in looking for new
ways of serving their customers better
4. WarrantyRepresents the organizations public promise of quality product backed
up by guarantee of customer satisfaction
5. Price- Todays customers are willing to pay more to obtain value. Customers
compare products of competing firms to determine greatest value providers
6. Reputation.-At times we rate organizations by our overall experience with them.

Today customers are ready to pay a higher price to obtain value. Therefore it becomes
increasingly important for an organization to identify, verify, and update each customer's
perception of value against those of its competitors.

3. Characteristics of Service Quality

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 Intangibility - Many services include delivery of intangible products or services
which makes it difficult to set standards and measure them.
Service organizations normally sell direct to the customer or user. The production
and consumption of many services are simultaneous.
Service is a performance that transacts an experience. The service may not be
separate from the person or the seller. It has to be experienced at the same time as it
is rendered.
The service process including staff at the customer interface, becomes integral to
service quality. The person becomes an active participant in the process of delivery
of a service, either by extending physical co-operation or by communicating.
The customers expectation of service may vary each time they receive the service.
The variability of the service from one period to another and from customer to
customer makes quality assurance difficult in the service sector. Hence, service
providers have to rely heavily on the competence and ability of their staff to
understand the requirements of the customer.
Many purchases cannot be stored to meet fluctuations in demand, e.g. doctors time.
Services are not storable, transportable and the benefits are available to the
customers at the rate they are created

4. Determinants of Service Quality

Parasuraman, Zeithaml and Berry (1990) identified the determinants that influence
customers expectations and perceptions of service as follows:
1) Tangibilility: Physical evidence - the physical aspects of the service being provided
such as manufactured goods or medical care.
2) Reliability: Getting it right the first time, honoring promises - the customers
assessment of whether the service can be trusted to perform consistently as per
specifications.
3) Responsiveness: willingness to provide service - the ability of the employees to
respond to the customer in a timely and effective manner.
4) Communication: Keeping customers informed in a language that they can
understand - how customers feel about being updated with relevant developments.
5) Credibility: Honesty, trust worthy - the customers confidence in the service because
of his/her past experience and the providers reputation.
6) Security: Physical and financial confidentiality - the customers confidence in the
services ability to provide a safe environment for business to take place (the term
safe could be used to describe a private cubicle to discuss business, adequate
security for online payments or a secure data protection policy, amongst other things).
7) Competence: Possession of required skills of all employees - how customers view
the employees (or services) role in carrying out the expected task associated with the
service.
8) Courtesy: Politeness, respect, friendliness - the politeness of staff and the presence of
smooth interaction when engaging with the service.

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 9) Understanding: Knowing the customer, his needs and requirements - the services
ability to provide bespoke options to customers in order to meet their individual needs
10) Access: Ease of approach and contact - the availability of the service to the customer.

5. The five dimensions of service quality

These five dimensions are: tangibility, reliability, responsiveness, assurance and empathy.

1) Tangibility - (appearance of a service firms facilities, employees, equipment and

communication materials).

Since services are intangible, customers derive their perception of service quality by
comparing the tangible associated with these services provided. It is the appearance
of the physical facilities, equipment, personnel and communication materials.

2) Reliability - (delivering the promised outputs at the stated level).

It is the ability to perform the promised service dependably and accurately. Reliability
means that the company delivers on its promises-promises about delivery, service
provision, problem resolutions and pricing. Customers want to do business with
companies that keep their promises, particularly their promises about the service
outcomes and core service attributes. All companies need to be aware of customer
expectation of reliability. Firms that do not provide the core service that customers
think they are buying fail their customers in the most direct way.

3) Responsiveness - (providing prompt service and help to customers; the reaction

speed plays a vital role here).

It is the willingness to help customers and provide prompt service. This dimension
emphasizes attentiveness and promptness in dealing with customer's requests,
questions, complaints and problems. Responsiveness is communicated to customers
by length of time they have to wait for assistance, answers to questions or attention to
problems. Responsiveness also captures the notion of flexibility and ability to
customize the service to customer needs.

4) Assurance - Assurance (ability of a service firm to inspire trust and confidence in

the firm through knowledge, politeness and trustworthiness of the employees).

It means to inspire trust and confidence. Assurance is defined as employees'

knowledge of courtesy and the ability of the firm and its employees to inspire trust
and confidence. This dimension is likely to be particularly important for the services
that the customers perceives as involving high rising and/or about which they feel
uncertain about the ability to evaluate. Trust and confidence may be embodied in the
person who links the customer to the company, for example, the marketing
department. Thus, employees are aware of the importance to create trust and

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 confidence from the customers to gain competitive advantage and for customers'
loyalty.

5) Empathy - (willingness and capability to give personalized attention to a

customer).

It means to provide caring individualized attention the firm provide its customers. In
some countries, it is essential to provide individual attention to show to the customer
that the company does best to satisfy his needs. Empathy is an additional plus that the
trust and confidence of the customers and at the same time increase the loyalty. In this
competitive world, the customer's requirements are rising day after day and it is the
companies' duties to their maximum to meet the demands of customers, else
customers who do not receive individual attention will search elsewhere.

6. The Gap Model of Service Quality

The concept of service quality gaps was developed by Zeithaml, Parasuraman and Berry in
1990. It is a useful framework for understanding service quality in an organization. They
defined service quality to be a function of the gap between consumers expectations of a
service and their perceptions of the actual service delivery by the organization. The gap
model consists of 5 gaps (one customer gap and four provider gaps). They suggested that
this gap be influenced by other gaps which may occur in the organization. The most
critical service quality gap is the customer gap the difference between customer
expectations and perceptions. Closing the gap between what customers expect and what
they perceive is critical to delivering quality service.

Cultural differences

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 Cultural differences bring another seasoning to the service quality. Customers
expectations may vary a lot depending on the culture they live in. Also emotions and
moods are feelings that influence customers perceptions and evaluations of their
experiences. Customers behavior may have an effect on other customers as well.

Gap 1: Consumer expectations management perceptions of consumer expectations

The strategies and decisions made by the management must be based on the need to close
the gap between customer expectations and perceptions and to keep it closed.Methods to
capture information about customer expectations must be developed through marketing
research. A lack of upward communication can be one reason to the listening cap.
Frontline employees, who meet the customers, dont bring the information to the
management level.

Gap 2: Management perceptions of consumer expectations service quality

specifications actually set
Accurate perceptions and service design and customer-driven performance standards are
necessary to delivering quality service. Sometimes companies have difficulties in
translating expectations into service quality specifications that employees can understand
and execute. Servicescape is a concept that emphasizes the impact of the physical
environment in which a service process takes place and must meet the customer and
employee needs. Also a language barrier must be taken into account.

Gap 3: Service quality specifications actual service delivery

The service performance gap means a difference between customer-driven service
standards and actual service performance by company employees. The firm must have
systems, processes and people in place to ensure that service delivery actually matches the
design and standards. The standards must be backed up by appropriate resources (people,
systems, technology) and they must be effective. Employees should be measured and
compensated based on their performance. Companies need to take time in selecting
employees and intermediaries.

Gap 4: Actual service delivery externally communication about the service

The communication gap is a gap between delivery and providers external communications
(promises made to customer may be something the company cannot fulfill empty
promises must never be given). If employees who promote the service do not fully
understand the reality of service delivery, the communication fails. Avoid overpromising,
inadequate horizontal communication between sales and operations and inappropriate
prizing - too high price raises expectations (high-level quality is expected based on the
high price).Word-of-mouth communication has a huge impact; what customers tell others
about the service, has effect on existing or potential customers.

Gap 5: 1-4 together contribute to consumers expectations and perceptions of actual

service
A service quality audit based on the gaps model would be a solution to reveal existing
gaps (audit of service performance and capabilities of an organization).

7. Indicators for Customer Satisfaction in an organization

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 Satisfaction may be considered as a customers evaluative reaction to how particular
product performed when compared to how he or she anticipated that it would
perform(Woodruff and Gardial, 1999). Satisfaction is the customers feeling about the
value that they received from a particular product experience.

According to Valarie, Zaithaml and Bitner (2005), satisfaction is the customers

fulfillment response. Its a judgment that a product or service feature, or the product or
service itself, provides a pleasurable level of consumption related fulfillment.

In a competitive marketplace where businesses compete for customers, customer

satisfaction is seen as a key differentiator and increasingly has become a key element of
business strategy.

The following are some of the Indicators for Customer Satisfaction in an organization:-

Frontline (officePersonnel) empowerment

Excellent hiring, training, attitude and morale for front line employees
Proactive customer service system
Proactive management of relationship with customers
Use of all listening channels
Quality requirements of the market segment
Commitment to customers
Understanding customer requirements
Service standards meeting customers requirement(s)

8. Methods of monitoring customer satisfaction

Identifying customer expectations especially the external customer is more difficult and
challenging, however different methods may be used as follows;

a) Regular customer feedback system

The most ideal method of identifying customer expectation is to allow every single
customer to communicate complaints directly to the organization. Such regular
communication can be achieved by giving an address, e-mail, or providing suggestion
boxes at strategic and acceptable points in the organization. Customer complaints are
vital in collecting data on customer satisfaction levels. By taking a positive approach,
complaints can be seen as an opportunity for improvement.

b) Market Research
Organizations carry out occasional market research to understand their customers
better. A few customers are chosen using appropriate sampling techniques and a
detailed study is conducted on their likes and dislikes.

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 Market research may entail preparation of a questionnaire that will help understand a
wide range of customer expectations. Before launching the research, it is useful to
pre-test the questionnaire to evaluate its efficiency. After collecting the information
from survey questionnaire, the data is summarized, analyzed and the findings
reported about the customers and it must be availed to planners in the organization
when they are in need of it.

c) New/lost customer survey

These are useful ways of finding out what attracts customers to the organization and
why they left. Many organizations nowadays conduct exit interviews that involve
management to ensure appropriate access of information and action.

d) Focus Groups
Customer focus groups are among the popular methods to obtain feedback from
customers. It is used to find out what customers are really thinking. A group of
customers is assembled in a meeting to answer a series of questions. These questions
are asked by a skilled moderator who probes into the participants thoughts, ideas,
perceptions or comments. Meeting is designed to focus in current, proposed and
future products and services.

e) Customer Visits
Making visits to customers businesses provides another way to collect information.
An organization can monitor its products and service performance while it is in use
by making impromptu visits to the customers. These visits should involve both senior
managers and operating personnel so they can see firsthand how the product is
performing.
f) Frontline Personnel
Employees who are in direct contact with the customers may be in a better position to
understand customer expectations. However, organizations need to train their
employees to listen effectively and to make immediate steps to correct customers bad
experiences. They also need to have systems in place to capture the information and
pass it along to the rest of the company.

g) Critical Incident Technique

This method attempts to identify the issues that delight the customer and those that
dissatisfy them. Critical incidents are events that contribute significantly to perceived
quality of the product or service performance: for instance, one may ask customers to
think for an instance when they felt very pleased and satisfied with the product or
service they received and, to describe why they felt so happy. The other question
would be to ask customers to think of a time when they were unhappy and dissatisfied
with the service they received and to describe why they felt that way.

h) Mystery Shoppers

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 This method is normally used by several organizations wherein mystery shoppers,
who may be managers acting incognito as customers. Apart from managers, external
agencies may be contracted to carry out the assignment. In most cases an agreed
scoring system to rate the quality of the service or the product developed.

i) Customer Related Information from other Sources

Information can also be gathered from research institutions outside the company.
Such institutions conduct studies on a regular basis about public taste over different
products.

9. Measures of Customer Satisfaction

Generally speaking, customer satisfaction enhances customer loyalty. Customer loyalty is
the feeling of attachment or affection for a companys people, products or services
(Mohanty and Lakhe, 2002). A satisfied customer has a higher tendency to be loyal to the
company. Hence, customer loyalty feelings and by extension customer satisfaction is
manifested in many forms of customer behavior. These forms or measures can be
grouped into three major categories:

a) Intent to purchase
At any time in the customer relationship, it is possible to ask customers about their
future intentions to purchase a given product or service. Although their responses are
simply indications of future behavior and not assurances, they play a key role in
measuring satisfaction levels.

b) Primary Behaviour

There are four categories of activities that show actual repurchasing behavior:
frequency, amount, retention and longevity. Although they are important measures of
actual behavior, they only provide a glimpse of overall share and are most useful as
an indication of changes over time. Frequency and amount of purchase are
significantly better measures of loyalty.

c) Secondary behavior

Customer referrals, endorsements and spreading the word are extremely important
forms of customer behavior for an organization. Word of mouth is perhaps the most
critical factor in acquiring new customers.

10.Customer satisfaction Model

The Kano Model is probably the most widely used model of customer satisfaction. It
describes three levels of customer satisfaction: Expected quality, desired quality (spoken
or not spoken) and excited quality.

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Types of customer satisfaction requirements

Level of customer need Example related to home buyers

Expected quality I assume it meets all federal, state, and local building codes.

Normal qualityspoken Three-car garage, three bedrooms, two baths

Normal quality
I'll know it when I see it!
unspoken

Exciting quality Wow!! A lifetime warranty on the roof!

Customer satisfaction - Kano Model

The Kano model is useful in gaining a thorough understanding of customers needs.

The first level represents the expected basic attributes which could be rated as important,
but they are totally expected. The attributes define the functionality of the products and
established threshold of acceptability. They form the basic requirements that are expected
to be met; hence satisfying customers would be simple if these expectations were met.
Expected quality indices can make or break buying decisions. For example, hotel guests
expect certain things during their visit; they expect the size of the bed to be normal and
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 the towels to be changed daily. If these basic requirements are not fulfilled the customers
become dissatisfied.

The second level represents desired quality which is referred to as one dimensional
attributes. These are articulated needs or more precisely what customers will say they
need. The desired quality is the level of quality the customer hopes to receive the
wished for level of performance (Valerie, Zaithalm, Brinter, 2005). Using the hotel
example, customers desired to be served in the hotel within the shortest time possible, say
within 4 minutes. The shorter the wait, the greater will be the satisfaction; hence, the
better you are at providing the desired features, the greater the satisfaction.

The third level is the expected quality which is characterized by delighted attraction
attributes. These delighted attraction attributes are unexpected, but if offered, generate
delight and perhaps even delight to the customer. Customers are not in expectation of
these features of the product or service and when provided pleasantly surprise the
customer. For instance; receiving a glass of juice while waiting to check into the hotel
may be a pleasant surprise. In most cases this level represents unstated or unspoken
requirements and hence the organization should employ a proactive strategy to be able to
identify what may excite the customers as illustrated.

11.Strategies to Enhance Customer Service

The strategies to enhance customer satisfaction include:

1. Measure and monitor customer satisfaction continuously. Such arrangements are
needed to track trends, identify problems and to link other customer focused
strategies.
2. Establish and maintain contact with customers and develop effective yardsticks to
measure progress at all levels and undertake customer surveys to enable effective
follow-up with customers.
3. Focus on and analyze processes for successful customer orientation.
4. Promote a culture of empowerment, leadership and customer care. A customer
satisfaction strategy requires that the Companys customer focus and quality
values be integrated into day-to-day leadership and management to the extent that
it becomes part of the organizations operations.
5. Develop a commitment of trust, confidence to customers. The success of customer
satisfaction plan requires explicit and real commitment on the part of the
organization to its customers. To promote trust and confidence in its products and
services, the company must show commitment to deal with customer concerns
and also anticipating expectations.
6. Design the product or service delivery system to meet customers needs. This
starts from the definition of the product or the service concept and culminated in
planning the characteristics of the product or service to be supplied. Designing the

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 characteristics if the production delivery system starts from the customers needs
and expectations.
7. Provide education and training for employee. Employee education and training
programs should be designed to impact the necessary knowledge and skills
employees need to achieve customer satisfaction. Employees need appropriate
coping and problem solving skills to handle difficult customers as well as their
own feelings during such encounters.
8. Reward and recognition are the fundamental requirements for motivating people.
With the appreciation of the importance of customer satisfaction, the management
should reward and encourage behavior based on personal initiative and on
enhancing customer satisfaction rather than hierarchy.
9. Honor the promises made to customers. Promising exactly what will ultimately be
delivered would seem logical and the most appropriate strategy to manage
customer satisfaction, hence marketing need to avoid making promises that are
difficult to honor.

12.Customer Feedback
Soliciting and monitoring customer feedback is very important for organizations to
achieve their objectives. Customers continuously change; they change their mind, their
expectations and their suppliers. Customer feedback is an ongoing probing of the
customers mind.

a) Importance of customer feedback

1. To discover customer dissatisfaction
2. To identify customers needs
3. To discover relative priorities of quality
4. To compare performance with the competition
5. To determine opportunities, for improvement

Feedback has become important in services as well and it determines new product
development. Effective organizations listen to the voice of the customers even when the
customers are not complaining.

b) Feedback (information) collecting tools

Listening to the voice of the customer can be accomplished by numerous information

collecting tools

i. Comment card - Low cost method, usually attached to warranty card

ii. Questionnaire - Popular tool, costly and time consuming - by mail or
telephone preferably multiple choice questions or a point rating system (1 to
5) or (1 to 10)
iii. Customer Focus groups - Meeting by a representative of the company with the
group of customers. Imprint analysis is an emerging technique to obtain
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 intrinsic feelings using customer meetings, word associations, discussion,
relaxation techniques etc.
iv. Phone - Toll free Telephone numbers
v. Customer visits - Visit customer's place of business.
vi. Report cards - Usually, send to customer on a quarterly basis.
vii. The internet and computer - It includes newsgroups, electronic bulletin board
mailing lists, Employee feedback.
viii. Employee feedback

13.Handling Customer Complaints:

When a customer pays for a product or service, it is assumed that the product will
work correctly or that the service received is as promised. Ideally, the customer will
be satisfied, and there will be no complaints. If there is a problem, and the customer
complains about it, the organization should quickly answer the complaint and solve
the customers problem.

Steps that an organization can take to solve customer complaints are as follows:-

Investigate customers experiences by actively getting feedback, both positive and

negative, and then acting on it promptly.
Develop procedures for compliant resolution that include empowering front line
personnel
Analyze complaints, but understand that complaints do not always fit into neat
categories
Work to identify process and material variations and then eliminate the route
cause. More inspection is not corrective action.
When a survey response received, a senior manager should contact the customer
and strive to resolve the concern.
Establish customer satisfaction measures and constantly monitor them
Communicate compliant information, as well as the results of all investigations
and solutions, to all people in the organization.
Provide a monthly compliant report to the quality council for their evaluation and,
if needed, the assignment of process improvement teams.
Identify customers expectations beforehand rather than afterward through
previous complaint analysis.

14.Customer Retention
Customer retention is the process of retaining the existing customers. It is obvious that
customer retention is more powerful and effective than customer satisfaction. It means

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 retaining the customer to support the business. For Customer Retention, we need to
have both Customer satisfaction & Customer loyalty.

The following steps are important for customer retention.

1. Top management commitment to the customer satisfaction.
2. Identify and understand the customers what they like and dislike about the
organization.
3. Develop standards of quality service and performance.
4. Recruit, train and reward good staff.
5. Always stay in touch with customer.
6. Work towards continuous improvement of customer service and customer
retention.
7. Reward service accomplishments by the front-line staff.
8. Customer Retention moves customer satisfaction to the next level by determining
what is truly important to the customers.
9. Customer satisfaction is the connection between customer satisfaction and bottom
line.
10. Customer retention really moves the customer satisfaction to the next level called
customer delight.

Loyal customers bring in the following benefits to the company/businesses:

They generate long-term revenue streams (high lifetime values)
They tend to buy more than new customers
They end to increase spending over time
They may be willing to pay premium prices
They provide cost savings since retaining customers is usually significantly
cheaper than attracting new ones.

15.Research findings
The following research findings will enable us to understand the real significance of
customer retention. The important research findings are:

1. Over 60% of an organizations future revenue will come from existing customers.
2. A 2% increase in customer retention has an equivalent impact upon profitability
as a 10% reduction in operating costs.
3. Upto 96% of unhappy customers do not infact complain. But they are three times
more likely to communicate a bad experience to other customers than a good one.
4. 91% of the unhappy customers will never purchase goods and services from you
again.
5. If you make an effort to remedy customers complaints, 82 to 95% of them will
stay on with you.
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 6. It costs 5 times as much to attract a new customer as it costs to keep an old one.

16.Health Services (Practical Application)

Health service is spectacular in increasing the lifespan of people. This can be
possible by setting up numerous quality controls on a wide variety of activities.
In health services the providers of the services are the hospitals, nursing homes
clinics etc while the buyers are the patients or clients who buy this health service.
Buyers must get quality services for which they are paying for.

Acceptable services include

Diagnosis,
medicine,
surgery and
treatment

Indirect operations that may affect the services include

administration,
purchasing which affects the cost of services
Quality of performance related to food,
housing,
safety,
security,
attitude of employees

How to assess quality of service

Patient satisfaction survey

Hospital quality trend survey
Patient quality service report
Error rate survey.

How to Improve Quality in Health Service

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 Implementing acceptable quality health service to patients at affordable price
within reasonable time
Applying zero errors to all patient services
Maintaining continuous error prevention program
Searching for problems and trouble spots and eliminate them
Training employees on medical care, error prevention, delay time, prompt
response to customers needs etc
Training and educating employees on non-medical aspect
Driving out the fear from the minds of employees
Removing barriers to job efficiency and job satisfaction

Revision Questions

1) Give the need for a feedback in an organization?

2) List the tools used for feedback?
3) What are the activities to be done using customer complaints?
4) What are the elements of customer service?
5) Define customer retention?

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