CHAPTER – I

1.1 INTRODUCTION

Customer satisfaction is a term frequently used in marketing. It is a measure of how

products and services supplied by a company meet or surpass customer expectation. Customer
satisfaction is defined as "the number of customers, or percentage of total customers, whose
reported experience with a firm, its products, or its services (ratings) exceeds
specified satisfaction goals.” Customer satisfaction provides a leading indicator of consumer
purchase intentions and loyalty." Customer satisfaction data are among the most frequently
collected indicators of market perceptions.
The goal for every company should be to make its customers satisfied. Satisfied customers will
come again and might stay as customers for a longer period. It is important for the company to
actually care and appreciate the customer. It is clear that if the company can make the customer
satisfied the customer will come back again and the customers might tell to some of their friends
about the good service they got. So through satisfied customers it is possible to save in marketing
expenses.
Customer satisfaction is the overall impression of customer about the supplier and the products
and services delivered by the supplier. Following are the important factors that could affect
customer satisfaction:

 Department wise capability of the supplier.

 Technological and engineering or re-engineering aspects of products and services.
 Type and quality of response provided by the supplier.
 Supplier’s capability to commit on deadlines and how efficiently they are met.
 Customer service provided by the supplier.
 Complaint management.
 Cost, quality, performance and efficiency of the product.
 Supplier’s personal facets like etiquettes and friendliness.
 Supplier’s ability to manage whole customer life cycle.
 Service quality defines the future of customer loyalty.
 The key for success of organization depends on how well it makes customer to feel good
 about being with.
 Compatible and hassle free functions and operations.

Measures of Service Quality Measuring service quality and customer satisfaction are difficult
due to its unique characteristics: Intangibility, heterogeneity, inseparability and perishability
(Bateson, 1995). Service quality is linked to the concepts of perceptions and expectations
(Parasuraman et al., 1985, 1988; Lewis and Mitchell, 1990). Customers’ perceptions of service
quality result from a comparison of their before-service expectations with their actualservice
experience. The service will be considered excellent, if perceptions exceed expectations; it will
be regarded as good or adequate, if it only equals the expectations; the service will be classed as
bad, poor or deficient, if it does not meet them (Vázquez et al., 2001). Based on this perspective,
Parasuraman et al. developed a scale for measuring service quality, which is mostly popular
known as SERVQUAL. This scale operationalizes service quality by calculating the difference
between expectations and perceptions, evaluating both in relation to the 22 items that represent
five service quality dimensions known as ‘tangibles’, ‘reliability’, ‘responsiveness’, ‘assurance’
and ‘empathy

The SERVQUAL scale has been tested and/or adapted in a great number of studies conducted in
various service settings, cultural contexts and geographic locations like the quality of service
offered by a hospital (Babakus and Mangold, 1989), a CPA firm (Bojanic, 1991), a dental school
patient clinic, business school placement center, tire store, and acute care hospital (Carman,
1990), pest control, dry cleaning, and fast food (Cronin and Taylor, 1992), banking (Cronin and
Taylor, 1992; Spreng and Singh, 1993; Sharma and Mehta, 2004) and discount and departmental
stores (Finn and Lamb, 1991). All these studies do not support the factor structure proposed by
Parasuraman et al. (1988). The universality of the scale and its dimensions has also been the
subject of criticisms (Lapierre et al., 1996) and it is suggested that they require customization to
the specific service sector in which they are applied.

The above factors could be widely classified under two categories i.e. suppliers behavior and
performance of product and services. The supplier’s behavior mostly depends on the behavior of
its senior subordinates, managers and internal employees. All the functional activities like
customer response, direct product and maintenance services, complaint management etc. are the
factors that rely on how skillful and trained the internal and human resources of the supplier are.
The second category is regarding all the products and services. This depends on the capability of
supplier to how to nurture the products and service efficiently and how skilled the employees
are. It’s all about how the skills are implemented to demonstrate engineering, re-engineering and
technological aspects of the products and services. The quality and efficaciousness of the
products is also an important factor that enables compatible and hassle free functions and
operations. This bears to lower maintenance and higher life of the product, which is highly
admired by the customers. There are three steps to increase customer satisfaction. They are :

1. Justify the Sale with Social Proof

When most sales are made, chances are that the buyer will have to justify the purchase to another
person – a boss, spouse, or anyone that may pass judgment.
To make this go smoothly, you should arm each one of your customers with testimonials from
other people and companies. Alternatively, if you have a low return rate, you might emphasize
how few people returned it.
2. Surprise Customers with a Bonus
When people spend money on a product, the last thing you want them to think is “was this worth
it?” To combat this, you should surprise each one of your customers with a little bonus. To
elaborate, let me share the fascinating experiment that helped waiters – service professionals –
increase their tips by 23%.

3. Offer Free Product Training and Support

This is a clear, business-winning decision. Nothing decreases customer satisfaction more than
being confused with how to make a product work. And free product training and support will be
how you alleviate this customer frustration.
The Bottom Line

Just because you made the sale, it doesn’t mean the work is over. Your job is to turn one-time
buyers into loyal customers. 
Factors affecting customer satisfaction
The counterparts of satisfaction are always expectations and experiences. Level of expectations
level will create a basis and comparison base for experiences. For example, if you have two
hotels, one a five star hotel and the other just a two star hotel, of course your expectations for the
five star hotel are much higher than for the other one. If the service level in both is equal, when a
customer has high expectations like with the five star hotel he might feel disappointed and with
the two star hotel with which the customer had lower expectations he would be positively
surprised. In customer satisfaction leadership when creating satisfaction, it is important that you
can affect both expectations and experiences. Still the expectations are always a starting point
when building action.
EXPECTATIONS
When talking about the relationship between expectations and experiences, expectations are
usually seen as one whole field. In reality, there are several kinds of expectations and one of the
most functional classifications is tripartition of expectations:
1. Ideal expectations
2. Pre-expectations
3. Minimum expectations
Ideal expectations tell about person’s own values and hope for the action that he/she expects
from a company or from a product. Ideal expectations, for example, of a shop’s services can be
included:
- Cheap prices
- Friendly personal service
- Perfect assortments and selection
- High quality products
- Close location
When looking at ideal expectations it is important to see that different persons have different
expectations. Even persons in different segments differ from each other in relation to ideal
expectations. It is impossible for companies to combine all the above-mentioned ideal
expectations features. This is why the company has to choose just some of these features, the
ones that are best for the company and then the company should fulfill these expectations as well
as possible.
Pre-expectations mean the level of expectations the person has on a certain company and/or its
product and its different features. Pre-expectations mean quite the same thing as the company or
product image. This way the customer satisfaction leadership is connected to mental image
marketing. There are several factors affecting pre-expectations, such as experiences, mouth-to-
mouth communication, branch, business idea, basic elements of marketing, marketing
communication and publicity. All these factors are connected to each other, either directly or
indirectly.
Minimum expectations describe the minimum level that customer has set for him/herself, what
he/she requires from the company or from the product. There are four different factors affecting
the minimum expectations. These are:
1. Situational factors (e.g. buying situation, surrounding situation)
2. Customer’s background factors (e.g. values, income level, and personality)
3. Branch factors (e.g. competition situation)
4. Company factors (e.g. business idea, marketing)
And again all these factors influence on each other. When working in a service profession a
customer servant needs to be a good judge of character. All customers cannot be served the same
way. Behavior needs to be changed even a little with every customer. Having a good customer
servant is a huge bonus for a company. Through a good customer servant, the company can win
many competition situations.
EXPERIENCES
Expectations are proportioned to experiences and this creates reaction in the scale of satisfied-
dissatisfied. This satisfaction scale is divided in three basic categories:
 Under expectation situation = positive experience
 Balance situation = match to the expectations
 Over expectation situation = negative experience

In the under expectation situation the service or the product is experienced in a positive way, but
when once positively surprised the level of expectations towards the company rises. In this
positive surprise case, the person is often eager to tell his/her friends about a good service or a
good product. If the company keeps up the good service and/or good products, there is a chance
that a new customer relationship is born. When the customer gets a negative experience and the
company’s image lowers, it is more possible that the customer relationship will break.
Disappointed customers are bad advertisement for the company because they tend to tell their
friends and family about the negative experience.
SATISFACTION LEVELS
The customer satisfaction levels can be divided into different categories according to how
strongly and to which direction the customers have reacted. The first three categories are:
negatively surprised, expectations fulfilled and the last one is positively surprised. The
negatively surprised category can be further divided into two subcategories: great
disappointments and mild disappointments. In addition, the positively surprised category can be
divided in the same way into two subcategories: mild positive surprises and great positive
surprises.
1. Greatly disappointed customers
These customers usually complain right away, they might break the customer relationship and
spread the negative word about the company. The customer relationship breakage and the
negative word of mouth occur most likely if the company does not take action when the
customer complains. The complaint situation should be seen as an opportunity to fix the negative
disappointment and this way to keep the customer.
2. Mildly disappointed customers
This customer type does not react straight away; instead, the next time they go shopping they
choose any other product. If asked about this negatively surprised company, these customers are
also ready to recommend using another company. With these customers, it is very important that
the company has a system for collecting customer feedback. If the company does not have a
feedback system, they might lose a lot of customers.
3. Experience according to expectations
Depending on the customer’s expectations level consequences are slightly different. In high
expectations case the customer relationship is strengthened because the customer had very high
expectations and the company could fulfill these high expectations. In average expectations
situation, even though the company performs according to customer’s expectations it does not
necessarily improve or weaken the customer relationship. In this situation, it is possible for the
competitor to make a better offer for the customer and this way “steal” the customer. However,
without the competitor’s offer there is every chance to continue the customer relationship with
these existing customers. In low expectations situation, when the expectations are fulfilled, you
cannot really describe the customer as satisfied; the customer just found out that the company
answered his/her low expectations. Without any good alternatives, the customer relationship can
continue if the relationship is based on personal acquaintance. In case a better competitor occurs
and is active the customer may start to use this competitor’s services.
4. Mildly positively surprised
These customers do not usually give feedback on their positive experiences. But one way to
experience their satisfaction is that they stay customers and they are ready to recommend this
company or product to their friends. This mildly positively surprised group is the most
committed customer group. The customer relationship keeps on going if the company keeps
surprising the customers in the future as well. The surprises do not have to be very big ones: just
a small positive surprise is enough.
5. Greatly positively surprised customers
Customers feel greatly surprised when:
 They have a very low expectation level and the company performs in an exemplary way.
 Contact situation is exceptional
 Some part of company’s actions or the whole process worked in such a fine level that the
customer is not used to.

Such strongly positively surprises do not happen that often, but when they do happen the
customer will on his own thank for the treatment he got. The customer is very likely to also
spread positive word-of-mouth.