Satisfaction

Lecture Week 3

Learning objectivesAfter this week you should be able to: explain what customer

satisfaction/dissatisfaction (CSD) is and what factors lead to CSD

understand delight measure customer CSD

Satisfaction

The customer’s fulfilment response A judgement that a service or service

provider provided a level of fulfilment – including under or over fulfilment

Involves both cognitive (thinking) and affect (emotion and feeling) elements

Satisfaction & service quality (Oliver 1993)

Satisfaction is experience dependent Quality evaluations are largely cognitive;

evaluations of satisfaction are cognitive & emotive

Satisfaction has a shorter term temporal focus

Satisfaction formation

Satisfaction is related to the variation between a customer’s pre-purchase expectations and perceptions of service performance (D of E paradigm)

Customer Perceptions of Satisfaction

Other influences Attitudes towards the brand Attributions:

Causal attribution (who is to blame?) Control attribution (could the firm control the

event?) Stability attribution (is it a one-off event?)

Equity theory (perceived fairness) Perceived value (quality/price trade-off)

Satisfaction in services

Satisfaction is based on expectations Dissatisfied customer will change suppliers Merely satisfied customers may also change

suppliers A challenge is to delight customers

Satisfaction consequences McColl-Kennedy (2003)

Satisfaction consequences (cont.) McColl-Kennedy (2003)

Link between satisfaction & loyalty & profitability

Satisfaction is linked to loyalty and influences retention of customers

Satisfied customers increase purchasing where purchasing is discretionary

Satisfied customers are more likely to note company communications

Satisfied customers also tolerate lower price elasticity

Relationship between Customer Satisfaction and Loyalty in Competitive Industries

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

Customer delight

Expectations exceeded to a surprising degree

Can make it more difficult to please the customer in the future

Creates dissatisfaction in competing firms

Does delight pay?

Delight is useful if: Satisfaction influences behaviour Future profits receive significant weight The firm is able to capitalise on competitors

dissatisfied customers (e.g. Bendigo Bank) Best results if it is not easily imitated

Measuring satisfaction

Expectations play a key role in CSD Expectations offer standards against which

experiences are evaluated Ideal to measure pre- and post- consumption

Measurement process

1. initial work to determine consumers service expectations (eg focus groups/interviews)

2. measurement of expectations pre-consumption (eg. questionnaire)

3. subsequent post-consumption measurement of performance

4. disconfirmation and satisfaction perceptions.

Summary

Companies want satisfied customers Customer satisfaction involves both cognitive

and affective elements and represents a judgement that a service provider provided a level of fulfilment

There are a range of drivers of satisfaction

Summary (cont.)

Satisfaction is based on expectations Customer delight creates dissatisfaction

among the customers of competitor firms Delight strategies should be difficult to

imitate Satisfaction can & should be measured

Services Marketing: ‘P’ – employees, customers and intermediaries

JM601

Employees’ Roles in Service DeliveryService culture & its importance Identify the challenges inherent in boundary-

spanning roles.Provide examples of strategies for creating

customer-oriented service delivery through: hiring the right people developing employees to deliver service quality, providing needed support systems, and retaining the best service employees.

The Critical Importance of Service EmployeesThey are the service.They are the organization in the customer’s eyes.

They are the brand.They are marketers.Their importance is evident in:

the services marketing mix (people) the service-profit chain the services triangle

The Services Marketing Triangle

Internal Marketing

Interactive Marketing

External Marketing

Company(Management)

CustomersEmployees

“Enabling the promise”

“Delivering the promise”

“Making the promise”

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

The Service Profit Chain

Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger, “Putting the Service-Profit Chain to Work,” Harvard Business Review, March-April 1994, p. 166.

Service Culture

“A functioning service culture requires that providing good service is second nature to everyone within that organisation.”

- Christian Gronroos (2000)

Requirements for a service culture Gronroos, 2000

Developing a service strategy: Business mission & service vision Service concepts (what, where and how?) Human resource management

Developing the organisational structure Relatively flat structure with few heirarchical levels

(decisions made close to the customer) Operational systems, routines & work flows

Traditional Organizational Chart

Manager

Supervisor

Front-lineEmployee

Customers

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Supervisor

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Customer-Focused Organizational Chart

Manager

Supervisor

Front-lineEmployee

Customers

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Supervisor

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Front-lineEmployee

Developing a service culture (cont.) Developing leadership:

Service-oriented leadership Clear and unambiguous Driven by senior management Measurement and monitoring

Service training programs: Technical skills, service skills & communication

Service Employees

Who are they?“boundary spanners”

What are these jobs like?emotional labormany sources of potential conflict

person/role organization/client interclient

quality/productivity tradeoffs

Boundary Spanners Interact with Both Internal and External Constituents

Internal Environment

External Environment

Boundary-Spanning Workers Juggle Many IssuesPerson versus role

Organization versus client

Client versus client

Quality/productivity trade-offs

Human Resource Strategies for Delivering Service Quality through People

Provideneeded support

systems

Hire theright people

Retain thebest

people

Developpeople to

deliverservicequality

Hire for servicecompetencies and

serviceinclinationCompete for

the bestpeople

Measure andreward strong

serviceperformers

Treatemployees

ascustomers

Includeemployees in

the company’s

visionDevelop

service-orientedinternal

processes

Providesupportivetechnology

andequipment

Measureinternal service

quality

Promoteteamwork

Empower employees

Train fortechnical and

interactiveskills

Be the preferredemployer

Customer-OrientedServiceDelivery

Customers’ Roles in Service Delivery

Illustrate the importance of customers in successful service delivery and cocreation of service experiences.

Discuss the variety of roles that service customers play: productive resources for the organization; contributors to quality and satisfaction; competitors.

Explain strategies for involving service customers effectively to increase both quality and productivity.

Levels of Customer Participation across Different Services

Source: Adapted from A. R. Hubbert, “Customer Co-Creation of Service Outcomes: Effects of Locus of Causality Attributions,” doctoral dissertation, Arizona State University, Tempe, Arizona, 1995.

How Customers Widen theService Performance GapLack of understanding of their roles

Not being willing or able to perform their roles

No rewards for “good performance”

Interfering with other customers

Incompatible market segments

Importance of Other (“Fellow”) Customers in Service DeliveryOther customers can detract from satisfaction:

disruptive behaviorsoverly demanding behaviorsexcessive crowding incompatible needs

Other customers can enhance satisfaction:mere presencesocialization/friendshipsroles: assistants, teachers, supporters, mentors

Customer Roles in Service Delivery

Productive Resources

Contributors to Service Quality and Satisfaction

Competitors

Services Production Continuum

1 2 3 4 5 6

Gas Station Illustration1. Customer pumps gas and pays at the pump with automation2. Customer pumps gas and goes inside to pay attendant3. Customer pumps gas and attendant takes payment at the pump4. Attendant pumps gas and customer pays at the pump with automation5. Attendant pumps gas and customer goes inside to pay attendant6. Attendant pumps gas and attendant takes payment at the pump

Customer Production Joint Production Firm Production

Customers as Productive Resourcescustomers can be thought of as “partial employees”contributing effort, time, or other resources to the

production processcustomer inputs can affect organization’s productivity

key issue:should customers’ roles be expanded? reduced?

Customers as Contributors toService Quality and SatisfactionCustomers can contribute to:

their own satisfaction with the service by performing their role effectively by working with the service provider

the quality of the service they receive by asking questions by taking responsibility for their own satisfaction by complaining when there is a service failure

Customers as Competitors

customers may “compete” with the service provider

“internal exchange” vs. “external exchange”internal/external decision often based on:

expertise capacity resources capacity time capacity economic rewards psychic rewards trust control

Strategies for Enhancing Customer Participation

Strategies for EnhancingCustomer ParticipationDefine customers’ jobs

helping oneself helping others promoting the company

Recruit, educate, and reward customers recruit the right customers educate and train customers to perform effectively reward customers for their contributions avoid negative outcomes of inappropriate customer

participation

Manage the customer mix

Sensitivity to customers’ reluctance to change

Develop trust

Understand customer habits

Pre-test new procedures

Publicise benefits

Educate customers

Monitor performance and continue to seek improvement

Role of intermediaries

The Role of Intermediaries

Allow supplementary services to be outsourced

Enhance core service

Make service more readily available to target markets

Reduce investments in fixed costs

+ =

Splitting responsibilities in the distribution channel

Splitting responsibilities in the distribution channel

As created by originating firm As enhanced by

distributor

As experienced by distributor

Figure 9.5 Service concept development

The Challenge of Maintaining Consistency Consistency in service quality may be an

elusive goal. Two strategies to overcome this are:

1. The creation of a professional centralised customer service function

2. The use of internal marketing

The Challenge of Maintaining Consistency Consistency in service quality may be an

elusive goal. Two strategies to overcome this are:

1. The creation of a professional centralised customer service function

2. The use of internal marketing

Customers’ Roles in Service Delivery

Illustrate the importance of customers in successful service delivery and cocreation of service experiences.

Discuss the variety of roles that service customers play: productive resources for the organization; contributors to quality and satisfaction; competitors.

Explain strategies for involving service customers effectively to increase both quality and productivity.

Levels of Customer Participation across Different Services

Source: Adapted from A. R. Hubbert, “Customer Co-Creation of Service Outcomes: Effects of Locus of Causality Attributions,” doctoral dissertation, Arizona State University, Tempe, Arizona, 1995.

How Customers Widen theService Performance GapLack of understanding of their roles

Not being willing or able to perform their roles

No rewards for “good performance”

Interfering with other customers

Incompatible market segments

Importance of Other (“Fellow”) Customers in Service DeliveryOther customers can detract from satisfaction:

disruptive behaviorsoverly demanding behaviorsexcessive crowding incompatible needs

Other customers can enhance satisfaction:mere presencesocialization/friendshipsroles: assistants, teachers, supporters, mentors

Customer Roles in Service Delivery

Productive Resources

Contributors to Service Quality and Satisfaction

Competitors

Services Production Continuum

1 2 3 4 5 6

Gas Station Illustration1. Customer pumps gas and pays at the pump with automation2. Customer pumps gas and goes inside to pay attendant3. Customer pumps gas and attendant takes payment at the pump4. Attendant pumps gas and customer pays at the pump with automation5. Attendant pumps gas and customer goes inside to pay attendant6. Attendant pumps gas and attendant takes payment at the pump

Customer Production Joint Production Firm Production

Customers as Productive Resourcescustomers can be thought of as “partial employees”contributing effort, time, or other resources to the

production processcustomer inputs can affect organization’s productivity

key issue:should customers’ roles be expanded? reduced?

Customers as Contributors toService Quality and SatisfactionCustomers can contribute to:

their own satisfaction with the service by performing their role effectively by working with the service provider

the quality of the service they receive by asking questions by taking responsibility for their own satisfaction by complaining when there is a service failure

Customers as Competitors

customers may “compete” with the service provider

“internal exchange” vs. “external exchange”internal/external decision often based on:

expertise capacity resources capacity time capacity economic rewards psychic rewards trust control

Self Service Technologies

Pervasive: Interactive voice response systems (IVR) Direct online connections & Internet based

interfaces Interactive free standing kiosks Video or CD technologies

Goals of SST

to reduce costs especially labour

To increase customer satisfaction and loyalty Customer demand

To reach new customer segments

What customers like and dislike about SSTs Customers embrace SSTs when:

They bail them out of difficult situations They are better than the interpersonal alternatives They work!

Customers dislike SSTs when: They fail They are poorly designed The customer messes up

Bitner, M., Ostrom, J. and and Meuter , M. Implementing successful self-service technologies in Academy of Management Executive, 2002, Vol. 16, No. 4

Why do customers resist trying SSTs Am I aware of it? Do I feel positively inclined towards it? Do I feel I have the ability to use it? Do I understand my role and what I need to

do? Is there a benefit for changing my behaviour? Will I consider using it again?

Bitner, M., Ostrom, J. and and Meuter , M. Implementing successful self-service technologies in Academy of Management Executive, 2002, Vol. 16, No. 4

Lessons for implementing SSTs Be clear about the strategic purpose of

implementing SSTs Maintain a customer focus Actively promote the use of SSTs Prevent and manage failures Offer choices Be prepared for constant updating and continuous

improvement

Bitner, M., Ostrom, J. and and Meuter , M. Implementing successful self-service technologies in Academy of Management Executive, 2002, Vol. 16, No. 4

Strategies for Enhancing Customer Participation

Strategies for EnhancingCustomer ParticipationDefine customers’ jobs

helping oneself helping others promoting the company

Recruit, educate, and reward customers recruit the right customers educate and train customers to perform effectively reward customers for their contributions avoid negative outcomes of inappropriate customer

participation

Manage the customer mix

Characteristics of Service that Increase the Importance of Compatible Segments

Source: Adapted from C. I. Martin and C. A. Pranter, “Compatibility Management: Customer-to-Customer Relationships in Service Environments,” Journal of Services Marketing, 3, no. 3 (Summer 1989), pp. 5–15.

Delivering Service Through Intermediaries Identify the primary channels through which services are delivered to end

customers.

Provide examples of each of the key service intermediaries.

View delivery of service from two perspectives—the service provider and the service deliverer.

Discuss the benefits and challenges of each method of service delivery.

Outline the strategies that are used to manage service delivery through intermediaries.

Service Provider Participants

service principal (originator)creates the service concept

(like a manufacturer)

service deliverer (intermediary)entity that interacts with the customer in the

execution of the service(like a distributor/wholesaler)

Services Intermediaries

Franchisees service outlets licensed by a principal to deliver a unique

service concept it has created e.g., Jiffy Lube, Blockbuster, McDonald’s

Agents and Brokers representatives who distribute and sell the services of one or

more service suppliers e.g., travel agents, independent insurance agents

Electronic Channels all forms of service provision through electronic means

e.g., ATMs, university video courses, TaxCut software

Benefits and Challenges forFranchisers of ServiceBenefits:

Leveraged business format for greater expansion and revenues

Consistency in outlets Knowledge of local

markets Shared financial risk and

more working capital

Challenges: Difficulty in maintaining

and motivating franchisees Highly publicized disputes

and conflict Inconsistent quality Control of customer

relationship by intermediary

Benefits and Challenges forFranchisees of Service Benefits:

An established business format

National or regional brand marketing

Minimized risk of starting a business

Challenges: Encroachment Disappointing profits and

revenues Lack of perceived control

over operations High fees

Benefits and Challenges in Distributing Services through Agents and BrokersBenefits:

Reduced selling and distribution costs

Intermediary’s possession of special skills and knowledge

Wide representation Knowledge of local

markets Customer choice

Challenges: Loss of control over pricing Representation of multiple

service principals

Benefits and Challenges in Electronic Distribution of ServicesBenefits:

Consistent delivery for standardized services

Low cost Customer convenience Wide distribution Customer choice and

ability to customize Quick customer feedback

Challenges: Price competition Inability to customize with

highly standardized services

Lack of consistency due to customer involvement

Changes in consumer behavior

Security concerns Competition from widening

geographies

Common Issues Involving Intermediariesconflict over objectives and performance

difficulty controlling quality and consistency across outlets

tension between empowerment and control

channel ambiguity

Strategies for Effective Service Delivery Through IntermediariesControl Strategies:

Measurement Review

Partnering Strategies: Alignment of goals Consultation and

cooperation

Empowerment Strategies: Help the intermediary

develop customer-oriented service processes

Provide needed support systems

Develop intermediaries to deliver service quality

Change to a cooperative management structure