Measuring Customer Satisfaction: Exploring Customer Satisfaction’s Relationship with Purchase Behavior

Introduction

Customer satisfaction is an important strategic issue for every company wishing to increase the value of customer assets and create better business performance. To increase the value of these customer assets, customer satisfaction should be measured and managed, its return on investment calculated and understood. Like other broad corporate strategies, customer satisfaction should be planned and thought out rather than just reported. Too often, it seems, the results of the monthly or quarterly study are reported and compared only to the previous month, and while viewing trends over time is helpful, especially if the cause of a change can be isolated and its impact understood. But this trending information is mostly descriptive, and not prescriptive. Understanding historical data doesn’t tell you how you can improve, or what the expected outcome might be.

Consider for a moment which is more strategic: the firm that cuts costs across the board during an economic downturn, not knowing the impact on customer satisfaction; or the company that confidently spends whatever it takes to keep satisfaction scores high, without an understanding of how satisfaction influences future behavior?

Neither. What firms must do is understand and selectively invest in the particular elements of service that drive customers’ repurchase behavior, carefully monitoring how competitors are satisfying their customers, while simultaneously optimizing its own customers’ satisfaction. The objective should be to link customer satisfaction with sustained profit growth, suggesting the optimal level of satisfaction may not be a ten or excellent in every performance measure.

Companies spend millions of dollars and hundreds of thousands of people hours trying to understand and influence customers – to hold onto them and encourage them to spend more. But to increase customers’ satisfaction, firms must do more than simply track loyalty, satisfaction or defection. Despite all the money invested to promote loyalty among high-value customers, it is increasingly elusive in almost every industry.

How good should an airline meal be? If you are guided by customer satisfaction, the answer is extremely. Airline customers often complain about food, and criticize it heavily in many customer satisfaction questionnaires¹. Inflight meals and beverage service are often identified as the most important key drivers of overall passenger satisfaction. However, passengers do not buy airline meals; they buy airline tickets. These tickets give them a bundle of service features including check-in, cabin service, meals, luggage delivery, and frequent flyer points or in flight entertainment. Some of these service elements are more important to some passengers than others. However, if providing a better meal has little influence on whether the passenger will purchase another ticket from the airline, what is the return in investing in better meals or pursuing higher meal satisfaction ratings?

Thus, a new approach to customer satisfaction must be examined. This book presents a methodology that examines how changes in satisfaction level (across a range of competitors) directly influences customer behavior, and addresses the broader strategic issue of whether customers are prepared to make purchase decisions based on levels of satisfaction.

This book examines the concept of customer satisfaction and defines its linkage to future customer behavior, and started as a white paper that was created ten years ago. It is laid out as follows. First, typical customer satisfaction measurement systems and their shortcomings are examined. This is followed by the introduction of a proposed competitive customer satisfaction model that links satisfaction with future purchase intentions through conjoint. After reviewing the concept of conjoint, the results are analyzed, compared against traditional models of customer satisfaction, and conclusions are drawn.

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¹ There is now even a website dedicated to airline food that allows passengers to play armchair food critics by describing and photographing airline food. This site is http://www.airlinemeals.net/

Chapter 1 - Review of customer satisfaction

The measurement of service quality and customer satisfaction has attracted considerable academic interest over the past quarter century. Peterson and Wilson (1992) report that over 15,000 articles on customer satisfaction had been written between the early 1970s until 1990. This interest in improving the measurement and understanding of satisfaction is not without benefit; some researchers believe that high service quality leads directly to higher customer retention and improved market share.

A large percentage of the published work on customer satisfaction is devoted to establishing the causal linkage between attribute service quality and customer satisfaction (Danaher and Gallagher 1997, Cronin and Taylor 1992, Parasuraman et al 1985, 1988). While this has some importance, often a more practical view is that managers want to find out how to direct