Customers are becoming ever more demanding, and in most markets they have more options to choose from than ever before.. A customer is a person who becomes accustomed to buying from you. Without a strong track record of contact and repeat purchase, this person is NOT your customer; he is a buyer. A true customer is grown over time. The satisfaction a customer gets from the consumption of an organizations product or service pre-empty his or her subsequent decisions on the same products and services.
According to Hankers and Albinos (2004), “satisfaction is an overall customer attitude towards a service provider, or an motional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment of some need, goal or desire”. Customer loyalty, on the other hand, according to Anderson and Jacobsen (2000) “is actually the result of an organization creating a benefit for a customer so that they will maintain or increase their purchases from the organization.
Customer satisfaction Involves an orientation that says, “take care with all parts of the process that develops a good or service for the ultimate customer. ” The process orientation allows an organization to kook at what the contributions of all departments are in satisfying the multiple customers. A well designed customer satisfaction approach can eliminate much of the guesswork regarding how customer satisfaction directly affects business outcomes.
It can provide direct estimates of the bottom line Improvements you would achieve from specific Increases In satisfaction levels. A Customer Satisfaction program helps you determine: Key drivers of satisfaction ; Items that make the greatest contribution to the driver driver that should be Invested In ; Overall level of satisfaction overall satisfaction levels effect on business outcomes ; Components of the According distill Griffin, a consultant and also corporate adviser, the average American company loses 20-40% of its customers each year.
In his Book, Customer Loyalty it was intimated that, in recognizing this pattern and its severe Impact on corporate competitiveness and profitability, a business must move away from the long accepted market share strategy to a radically different, longer term approach to business: building customer loyalty.
Increased loyalty can bring cost savings to a company in at least six areas: reduced marketing costs (customer acquisition costs require more dollars) reduced customer turnover expenses ( fewer lost customers to replace/no churning) ; increased cross selling success leading to larger share of customer ; more positive word of mouth ; reduced failure costs There is a complex relationship between satisfaction and loyalty. Satisfaction is the first tier in the relationship between a customer and the company.
In order for a company to differentiate itself from the competition, it will have to move customers from the first tier of this relationship, satisfaction, to the second tier, loyalty. It is commonly known that there is a positive relationship between customer loyalty and profitability. Richened and Gasser (1990) found that when a company retains Just 5 percent more of its customers, profits increase by 25 percent to 125 percent. Customer satisfaction is a measurement of customer attitudes about products, services and brands.
While it’s always been smart to keep customers happy, the term “customer satisfaction” became popularized in the sass’s with the total quality movement. Kettle (2000) defined satisfaction as: “a person’s feelings of pleasure or exasperations resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations”. Hoer and Manacling (2001) said that satisfaction can be associated with feelings of acceptance, happiness, relief, excitement, and delight. There are many factors that affect customer satisfaction.
According to Hosannas (1995), these factors include friendly employees, courteous employees, knowledgeable employees, helpful employees, accuracy of billing, billing timeliness, competitive pricing, service quality, good value, billing clarity and quick service. When a company becomes customer focused, everything starts to look different. That is because everything in a business can be viewed from a customer perspective. For this reason good customer satisfaction and loyalty programs span the entire organization.
Here are the essential elements of satisfaction and loyalty programs: Linkage to corporate vision, goals and strategies ; Measurement of customer satisfaction and loyalty ; Authorization and completion of relevant improvement projects ; Linkage of metrics to employee rewards and recognition ; Program management to assure the above items are done well Measuring the customer satisfaction Satisfaction is necessary because it reveals the voice of your customer satisfaction measurement when properly done tells you which aspects of your product , service or brand will turn the greatest impact on the OUTCOME called loyalty behavior. Hem. The overall customer satisfaction measurement is however divided into six interactive phases. This phases or process are depicted below in figure 1 Customer Satisfaction Measurement Process Figure 1 In order to achieve customer satisfaction, organizations must be able to satisfy their customers needs and wants (La Barber and Mazurka, 1983). Customers’ needs state the felt deprivation of a customer (Kettle, 2000). Whereas customers’ wants, according to Kettle (2000) refer to “the form taken by human needs as they are shaped by culture and individual personality’.
Customer satisfaction is important because, according to La Barber and Mazurka (1983), “satisfaction influences repurchase intentions whereas dissatisfaction has been seen as a primary reason for customer defection or discontinuation of purchase”. Customer Loyalty According to McElroy and Barnett (2000), “in a business context loyalty has come to scribe a customer’s commitment to do business with a particular organization, purchasing their goods and services repeatedly, and recommending the services and products to friends and associates”.
Anderson and Jacobsen (2000) said customer loyalty is actually the result of an organization creating a benefit for a customer so that they will maintain or increase their purchases from the organization. They said that true customer loyalty is created when the customer becomes an advocate for the organization, without incentive. Two important conditions associated with loyalty are customer retention and total share of customer. A customer retention rate is the percentage of customers who have met a specified number of repurchases over a finite period of time.
Many companies operate under the false impression that a “retained” customer is automatically a loyal customer. A loyal customer is one who: ; Makes regular purchases ; Purchases across product and service lines ; Refers others ; Demonstrates immunity to the pull of the competition. For Banal and Guppy (2001): “Building customer loyalty is not a choice any longer with businesses: it’s the only way of building sustainable competitive advantage. Building loyalty with key customers has become a core marketing objective shared by key players in all industries catering to business customers.
The strategic imperatives for building a loyal customer base are as: ; Focus on key customers ; Proactively generate high level of customer satisfaction with every interaction ; Anticipate customer needs and respond to them before the competition does ; Build ; Create a value perception”. Effect of Customer Satisfaction on Profitability Customer satisfaction does have a positive effect on an organization’s profitability. According to Hoer and Manacling (2001), satisfied customers form the foundation of any successful business as customer satisfaction leads to repeat purchase, brand loyalty, and positive word of mouth.
Caldwell (2001): “Growth Strategies International (GAS’) performed a statistical analysis of Customer Satisfaction data encompassing the findings of over 20,000 customer surveys conducted in 40 countries by Infrequent. The conclusion of the study was: ; A Totally Satisfied Customer contributes 2. 6 times as much revenue to a company as a Somewhat Satisfied Customer. ; A Totally Satisfied Customer nutrients 17 times as much revenue as a Somewhat Dissatisfied Customer. ;A Totally Dissatisfied Customer decreases revenue at a rate equal to 1. 8 times what a Totally Satisfied Customer contributes to a business”.
According Zaire (2000): “There are numerous studies that have looked at the impact of customer satisfaction on repeat purchase, loyalty and retention. They all convey a similar message in that: ; Satisfied customers are most likely to share their experiences with other people to the order of perhaps five or six people. Equally well, dissatisfied customers are ore likely to tell another ten (10) people of their unfortunate experience. Furthermore, it is important to realize that many customers will not complain and this will differ from one industry sector to another. Lastly, if people believe that dealing with customer satisfaction/complaint is costly, they need to realize that it costs as much as 25 percent more to recruit new customers”. Effect of Customer Satisfaction on Customer Loyalty and Retention Customer satisfaction is important because, according to La Barber and Mazurka (1983), “satisfaction influences repurchase intentions whereas dissatisfaction has en seen as a primary reason for customer defection or discontinuation of purchase”. However, Bowen and Chin (2001) said that having satisfied customers is not enough, there has to be extremely satisfied customers.
This is because customer satisfaction must lead to customer loyalty. Siva and Baker-Preterit (2000) said “there is an increasing recognition that the ultimate objective of customer satisfaction measurement should be customer loyalty’. Foretell (1992) said “high customer satisfaction will result in increased loyalty for the firm and that customers will be less prone to overtures from competition”. This view was also shared by Anton (1996) who said that “satisfaction is positively associated with repurchase intentions, likelihood of recommending a product or service, loyalty and profitability’. Commending a departmental store as well as repurchase but has no direct impact on loyalty. Thus satisfaction in itself will not translate into loyalty. However, satisfaction will foster loyalty to the extent that it is a prerequisite for maintaining a favorable relative attitude and for recommending and repurchasing from the store. Clarke (2001) said, “a business that focuses exclusively on customer satisfaction runs he risk of becoming an undifferentiated brand whose customers believe only that it meets the minimum performance criteria for the category.
Long-term customer retention in competitive markets requires the supplier to go beyond mere basic satisfaction and to look for ways of establishing ties of loyalty that will help ward off competitor attack”. Therefore, in order to ensure that customers do not defect, Bowen and Chin are correct to say that customers must to be extremely satisfied. However, customer satisfaction is not necessarily a guarantee of loyalty. They said that in retain industries up to 75% of customers who switch providers say that they were ‘satisfied’ or even Very satisfied’ with the previous provider.
Customers may change providers because of price, or because the competitor is offering new opportunities, or simply because they want some variation (Storybook and Lenient -2001 )
