Customer satisfaction & Relationship marketing

Customer satisfaction
Consumers form judgements about the value of marketing offers and make their buying
decisions based upon these judgements. Customer satisfaction with a purchase depends upon
the product’s performance relative to a buyer’s expectations. A customer might experience
various degrees of satisfaction. If the product’s performance falls short of expectations, the
customer is dissatisfied. If performance matches expectations, the customer is satisfied.
If performance exceeds expectations, the customer is highly satisfied or delighted.
But how do buyers form their expectations? Expectations are based on the customer’s
past buying experiences, the opinions of friends and associates, and marketer and competitor
information and promises. Marketers must be careful to set the right level of expectations.

Relationship marketing

If they set expectations too low, they may satisfy those who buy, but fail to attract enough
buyers. In contrast, if they raise expectations too high, buyers are likely to be disappointed.
For example, Holiday Inn ran a campaign a few years ago called ‘No Surprises’, which
promised consistently trouble-free accommodation and service. However, Holiday Inn
guests still encountered a host of problems and the expectations created by the campaign
only made customers more dissatisfied. Holiday Inn had to withdraw the campaign.
Still, some of today’s most successful companies are raising expectations – and delivering
performance to match. These companies embrace total customer satisfaction. For example,
Honda claims, ‘One reason our customers are so satisfied is that we aren’t’ or, as dan
Technology puts it, ‘We value your business. We want you to buy from us again.’ These
companies aim high because they know that customers who are only satisfied will still find it
easy to switch suppliers when a better offer comes along. In one consumer packaged-goods
category, 44 per cent of consumers reporting satisfaction later switched brands. In contrast,
customers who are highly satisfied are much less ready to switch. One study showed that
75 per cent of Toyota buyers were highly satisfied and about 75 per cent said they intended
to buy a Toyota again. Thus customer delight creates an emotional affinity for a product
or service, not just a rational preference, and this creates high customer loyalty.
Today’s winning companies track their customers’ expectations, perceived company
performance and customer satisfaction. They track this for their competitors as well.
Consider the following:
A company was pleased that it continued to find that 80 per cent of its
customers said they were satisfied with its new product. However, the product
seemed to sell poorly on store shelves next to the leading competitor’s
product. Company researchers soon learned that the competitor’s product
attained a 90 per cent customer satisfaction score. Company management
was further dismayed when it learned that this competitor was aiming for
a 95 per cent satisfaction score.
There are two reasons why historical rates of customer satisfaction do not serve in the long
run. As the example shows, once-acceptable levels of customer satisfaction may be overtaken
by competitors. This is occurring in the car market where Japanese manufacturers are setting
new standards of quality and service. The quality of European cars is better than ever before
but does not come close to those of pace-setting Toyota and Honda. At the same time,
customers learn from the new levels of quality available in the marketplace and so expect
higher standards than before. Unwary companies therefore face ‘backward creep’ in which
their once-acceptable standards fall behind those of the competition and the customers’
increased expectations.6
For customer-centred companies, customer satisfaction is both a goal and an essential
factor in company success. Companies that achieve high customer satisfaction ratings make
sure that their target market knows it. These companies realise that highly satisfied customers
produce several benefits for the company. They are less price sensitive and they remain
customers for a longer period. They buy additional products over time as the company
introduces related products or improvements. And they talk favourably to others about
the company and its products.
Although the customer-centred firm seeks to deliver high customer satisfaction relative to
competitors, it does not attempt to maximise customer satisfaction. A company can always
increase customer satisfaction by lowering its price or increasing its services, but this may
result in lower profits. In addition to customers, the company has many stakeholders,
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including employees, dealers, suppliers and stockholders. Spending more to increase customer
satisfaction might divert funds from increasing the satisfaction of these other ‘partners’. Thus
the purpose of marketing is to generate customer value profitably. Ultimately, the company
must deliver a high level of customer satisfaction, while at the same time delivering at least
acceptable levels of satisfaction to the firm’s other stakeholders. This requires a very delicate
balance: the marketer must continue to generate more customer value and satisfaction,
but not ‘give away the house’. Many of the world’s most successful companies build their
strategies on customer satisfaction, but as Marketing Insights 11.1 shows, you do not have
to be big to succeed.
Tracking customer satisfaction
Successful organisations are aggressive in tracking both customer satisfaction and
dissatisfaction. Several methods are used.
Complaint and suggestion systems
A customer-centred organisation makes it easy for customers to make suggestions or
complaints. Hospitals place suggestion boxes in the corridors, supply comment cards to
existing patients and employ patient advocates to solicit grievances. Some customer-centred
companies may set up free customer hotlines to make it easy for customers to enquire, suggest
or complain. Virgin Trains immediately hand out customer complaint forms as soon as there
is any reason for passengers to complain, such as a train being delayed.