{"id":133,"date":"1994-01-01T10:34:46","date_gmt":"1994-01-01T10:34:46","guid":{"rendered":"http:\/\/www.eprdev.com\/jag\/?p=133"},"modified":"2019-02-11T15:02:54","modified_gmt":"2019-02-11T20:02:54","slug":"a-normative-model-of-retaining-customer-satisfaction","status":"publish","type":"post","link":"https:\/\/www.jagsheth.com\/consumer-behavior\/a-normative-model-of-retaining-customer-satisfaction\/","title":{"rendered":"A Normative Model of Retaining Customer Satisfaction"},"content":{"rendered":"
In recent years, there has been considerable managerial interest in defining, measuring and developing customer satisfaction (Lele and Sheth 1987: Davidow and Uttal 1989; Carlzon 1987; Sewell and Brown 1990; Band 1991; Zaithaml, Parsuraman and Berry 1990). The academic interest in the concept of customer satisfaction can be traced back to Howard and Sheth\u2019s theory of buyer behavior (1969). They defined satisfaction as the difference between post purchase experience and prior attitude with respect to the brand choice in question. Customer satisfaction, as a construct, got its due attention when several scholars in consumer research began to focus on consumer complaints and the role of consumerism in marketing practice (Andreasen 1975; Hunt 1977; Hunt and Day 1979; Day and Hunt 1983). Consumer satisfaction\/dissatisfaction became an ongoing research stream as focused annual conferences and special sessions got organized by the Association for Consumer Research under the leadership of David Gardner, Ralph Day and Keith Hunt.<\/p>\n
Parallel to the academic interest and research, there was a growing managerial interest in the marketing concept (Kotler, 1991). The marketing concept forcefully argued that focusing on customer satisfaction was a better way to maximize profits than focusing on sales. Indeed, a number of marketing academics and practitioners wrote extensively contrasting marketing from selling, and market driven from product driven organizations (Levitt 1960; Hanan 1974; McKenna 1991). Indeed, Druker (1954) flatly stated that the purpose of business is to create and retain customers.<\/p>\n
However, the recent interest in defining, measuring and developing customer satisfaction can be directly attributed to the national drive to improve quality of products and services in the United States through the Malcolm Baldridge Award organized by the Department of Commerce. It mandated taking customer viewpoint, developing customer satisfaction measures, and establishing business processes that link quality with customer satisfaction. Indeed, to some extent, Total Quality Management (TQM) and customer satisfaction are perceived to be productivity tools and sources of competitive advantage (Reichheld and Sasser 1990; Magrath 1992).<\/p>\n
Unfortunately, this focus on generating customer satisfaction, however useful it may be, needs to be supplemented by developing business processes that focus on retaining customer satisfaction. There is a presumption that the processes of generating customer satisfaction will assure that satisfied customers will be also automatically retained by the organization. This presumption is more a leap of faith, and empirical observations also point to the contrary. For example, a majority of excellent companies cited by Peters and Waterman (1982) are experiencing loss of market share and customer satisfaction presumably because they stopped investing in continuous improvement processes once they achieved desired levels in quality and customer satisfaction.<\/p>\n
The purpose of this paper is to describe a normative model of retaining customer satisfaction. It is a process-oriented model built on the concept of continuous improvement. Also, It explicitly recognizes that both developing and retaining customer satisfaction is a cross-functional and multilevel phenomenon and cannot be limited to the marketing function and the front-line sales or customer service departments. In other words, retaining customer satisfaction Is too important to be left to the marketing organization.<\/p>\n
There are at least three reasons why retaining customer satisfaction is important to an organization. First, generating customer satisfaction requires significant front-end investment, often not recovered from the margins of a single transaction (Reichheld and Sasser 1990). For example, studies on customer retention economics in the insurance industry suggest that it takes, on the average, eight years of continued premiums to recover the front-end investment, in addition to making the expected ROA on a given policy. Other studies have also demonstrated that it is five times more expensive to create a customer than to retain one (Albrecht and Zumke 1985). Several recent studies out of the PIMS database have also demonstrated that customer loyalty and ROl have a strong positive relationship, even better than market share and ROl (Buzzell and Gale 1987). In short, it pays to retain customer satisfaction.<\/p>\n
A second reason for the growing importance of retaining customer satisfaction is to preempt competitive threats. Compared to price wars, distribution blockades, advertising slugfests and product patents, the ultimate strategy to preempt competition is to reduce market desire for another supplier. In other words, it is creating market monopoly by choice (sole source). For example, Campbell\u2019s Soups, IBM, and Singapore Airlines have demonstrated that through retaining customer satisfaction, customers don\u2019t desire an additional choice, at least in the short run. In short, the greater the market monopoly, the greater the need to retain customer satisfaction (McKenna 1991).<\/p>\n
Finally, and probably most importantly, customer satisfaction is a hierarchical, dynamic phenomenon. In order to understand this fully, first we must define customer satisfaction and its key characteristics. Customer satisfaction means meeting or exceeding customer expectations. Depending on the degree to which expectations are exceeded, it can range from \u201csatisfied\u201d to \u201cvery satisfied\u201d to \u201cdelighted customers.\u201d<\/p>\n
Customer satisfaction has a number of unique properties which are important to recognize for retention purposes. First, it is partly psychological and partly real. Expectations are psychological and experiences are real. Therefore, reality of experiences can and will shape future expectations which are likely to have larger variances (diversity) than experiences. This is due to its psychological nature and diversity of sources of expectations. Therefore, one of the objectives in retaining customer satisfaction is to either reduce the variance in expectations or to customize, by segmentation and differentiation, experiences to individual customers. For example, customers expect different things even in such basic needs as food, clothing and shelter. Furthermore, diversity of expectations is likely to be more with respect to wants and desires as compared to needs.<\/p>\n
Third, if an organization focuses on its most demanding customers and\/or most demanding market expectations, it is likely to exceed all other customers and expectations. Therefore, in retaining customer satisfaction, it is crucial to proactively look for demanding customers and\/or expectations. For example, business travelers tend to be more demanding customers than pleasure travelers. If an airline organizes its processes to meet business customers\u2019 expectations, it is likely to delight pleasure travelers.<\/p>\n
Finally, and most critically for this discussion, expectations rise with satisfaction. The more a customer\u2019s experiences exceed expectations, the greater the rise in his\/her future expectations. Delighting the customer, therefore, requires that retaining customer satisfaction is even more critical. This tendency to expect more with positive experiences suggests that the organization must implement a continuous improvement process (Kaizan) by anticipating what customers will expect next.<\/p>\n
Retaining customer satisfaction is, therefore, at least if not more, important than generating customer satisfaction.<\/p>\n
Both the academic and professional literature review on brand equity, customer loyalty, switching costs and service excellence suggests that there are three underlying dimensions to retaining customer satisfaction. The first relates to psychological comfort associated in an ongoing relationship. The degree to which an organization develops processes to maintain the psychological comfort of satisfied customers, it is likely to create an exit barrier for the customer to break the relationship. This comfort factor has been legendary for IBM, Marriott, Delta Airlines and McDonald\u2019s, as well as for such brand names as Ivory soap, Maytag appliances and Levis clothing.<\/p>\n
A second dimension of retaining customer satisfaction is the functional value inherent in the ongoing relationship with the customers. It includes such things as reliability, quality assurance, economic value and degree of product\/service variety. Examples include AT&T, American Express, Taco Bell and Kellogg\u2019s cereals.<\/p>\n
A third dimension of retaining customer satisfaction is structural linkage with customers on an ongoing basis. This includes organization structure, information systems and reward systems that link up the organization with its customers in a relationship which makes it difficult, if not impossible, for the customer to switch to another supplier. Examples include Federal Express, regulated utilities, as well as professional services, especially medical and financial services.<\/p>\n
In this section, I will propose a normative model of retaining customer satisfaction. The model is based on extensive research on customer retention and satisfaction, and It is integrative in nature. Furthermore, It Is a process model and therefore, more useful for understanding and less for prediction. The model is represented in Figure 1. 1 will discuss each process element designed to increase retention of customer satisfaction.<\/p>\n