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Journal of Business & Economic Studies, Vol. 15, No.

1, Spring 2009
A Satisfaction-Based Definition of Quality
Angela M. Wicks, Bryant University
Christopher J. Roethlein, Bryant University

No consensus has been reached on a definition for quality; the term is defined differently for
products and services, for different industries, and for different levels of dimensionality. This
study investigates the major definitions of quality and the antecedents of customer retention to
establish a foundation for a new definition of quality based on satisfaction. Quality is defined as
the summation of the affective evaluations by each customer of each attitude object that creates
customer satisfaction.
Keywords: Quality, satisfaction
JEL classification: C10
An intensely competitive global marketplace is driving a quest for excellence through
improved quality practices as evidenced by the increase in applications and the introduction of
new categories associated with the Malcolm Baldrige Quality Award Program and the recent
changes in the ISO 9000:2000 principles (; Kartha 2002). Deming
established many of the foundational principles of quality in 1986; Deming suggested that a
focus on quality can increase demand and price flexibility, which will increase profits on the
demand side, and can increase productivity and decrease scrap and rework, which will increase
profits on the cost side. Demings foundational principles, the Baldrige criteria, and the ISO
standards are the basis today for decision-making practices that lead to sustainability (Rusinko
2005, Bhuiyan and Beghel 2005, and Anderson 2006). A quality focus has also been shown to
create sustainability in the service and e-service sectors (Choi et al. 2006; Chong and Pervan
However, many quality initiatives have failed (Black and Revere 2006, Hays, et al. 2006;
Zbaracki1998). Reasons for such failures include a continued focus on financial returns instead
of customer satisfaction (Hays et al. 2006). Some recent industry declines may be due to
customer satisfaction factors and a focus on quality as it is now narrowly defined.
This article presents the viewpoint that part of the problem may be the lack of a
universally-accepted, satisfaction-based definition of quality. Crosby (2006) stated that: There
are many, many definitions of quality, but according toe Kara et. al (2005) there are no
universal definitions. Every quality expert defines the term differently. Definitions vary
between manufacturing and services, between academicians and practitioners, and between
industries. And definitions vary just because of the intangible nature of the components
associated with quality. Therefore, this article examines why satisfaction is so important,
examines the various definitions of quality and how these definitions of quality are evolving, and


Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
examines the commonalities in the various definitions of quality to determine whether quality or
satisfaction should be the central concept for developing customer retention, which in turn will
determine the focus of a quality definition. Our research resulted in defining quality as the
summation of the affective evaluations by each customer of each attitude object that creates
customer satisfaction, where the term customer is defined as any internal or external stakeholder
of the organization and an attitude object is defined as the particular entity of interest. This
definition addresses aspects of customer satisfaction other than the strict process and service
quality definitions by capturing all aspects that create value for the customer and include cost,
product improvements, technological implementation, and strategic focus.
Customer satisfaction is directly related to customer retention since satisfaction is the
major antecedent of customer loyalty (Oliver 1997; Westlund et al. 2001; Kristensen et al. 2001).
This is a crucial factor since loyalty is the major antecedent of customer retention (Dick and
Basu, 1994; Storbacka et al. 1994), and retention is critical for the long-term financial success of
any organization (Rust et al. 1994 and 1995; Storbacka et al 1994; Reichheld 1996). (See Figure
1 for a diagram of the customer retention chain.) Hoyer and MacInnis (2001) base their
definition of retention on satisfaction and need to develop long-term relationships with
customers. Satisfied customers are less costly to retain (Reichheld and Sasser 1990a and 1990b),
are less sensitive to changes in price (Anderson and Sullivan 1993), and provide positive wordof-mouth advertising. Thus organizations that consistently satisfy their customers enjoy higher
retention levels and greater profitability.
Figure 1. The Customer Retention Chain







Yang (2003) introduces an Importance-Satisfaction model to allow an enterprise to

classify quality attributes in order of importance. The purposes of a customers' satisfaction
survey are not only to learn the actual satisfaction level, but also to highlight the strengths and
the area for improvement. Through the continual improvement actions, the enterprises can
increase customers' satisfaction and raise profits. Due to customers evaluating the quality of
product or service by considering several important quality attributes, firms must take
improvement actions on the important attributes that have a lower satisfaction level. The

Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
Importance-Satisfaction model, based on the importance and satisfaction surveys of the quality
attributes, is a simple and powerful tool for enterprises to find out the excellent attributes and the
"to be improved attributes, which require improvement actions immediately (Yang 2003).
In 2001, Dubrovski wrote that the consumer satisfaction category has the main position in
marketing theory and is based on the premise that the profit is made through the process of
satisfaction of consumers' demands, i.e. achievement of their satisfaction. Researchers
continually confirm a significant correlation between satisfaction and repeated buying, greater
brand loyalty and spreading a positive opinion of the product. A model of consumers' buying
decisions was introduced as consisting of five consecutive phases:1) product perceiving phase
(offered product with all producer's factors of competitiveness from the consumer's point of
view); 2) value estimation phase (weighting benefits and sacrifices); 3) comparing the values of
different products and decision-making phase (comparing alternative options); 4) action phase
(realization of the decision); 5) and consumer's state of mind after buying action phase
(satisfaction with the product). There are several aspects that should be taken into consideration
from the producer's (seller's) point of view in order to implement successfully the concept of
customer satisfaction (Dubrovski 2001).
Customer satisfaction is a primary principle of quality philosophies and quality
management tools. Demings Management Model depicts seven constructs leading to customer
satisfaction, and Deming defines quality in terms of the current and future needs of the customer
(1986). Krawjewski and Ritzman (2002) place customer satisfaction at the center of the TQM
Wheel (p. 243). Quality Functional Deployment provides a framework for translating customer
requirements into the design of the product or service; the key output is customer satisfaction
(Hauser and Clausing 1988).
Evaluation frameworks also focus on customer satisfaction. The revisions to ISO9000
include customer focus as Principle 1 (Kartha 2002). The second core value of the Malcolm
Baldrige Quality Award criteria, immediately following vision leadership, is customer-driven
excellence (National Institute of Standards and Technology 2005, p. 1). And, the major goal of
the European Foundation for Quality Management is customer satisfaction (Brown et al. 2000).
Customer satisfaction should be the central construct in any model developed to measure
customer retention, and the literature supports this premise. The Competing Values Model
addresses customer satisfaction in terms of its compete imperative and includes a 360 degree
evaluation perspective (Quinn 1988; Quinn and Rohrbaugh 1983). The Balanced Scorecard
contains a customer perspective (Kaplan and Norton, 1996). Both frameworks emphasize the
importance of customer satisfaction for organizational competitiveness and sustainability.
Since customer satisfaction is a critical component of organizational success, customer
satisfaction or a customer focus should appear as a common theme among the current definitions
of quality. Other commonalities may appear as well. Therefore, we examined the major
definitions of quality to determine these commonalities.
According to Sower and Fair (2005), every quality expert defines quality somewhat
differently, and there are a variety of perspectives that can be taken in defining quality (p. 8).

Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
This means there are numerous definitions of quality (Crosby 2006). However, no universally
accepted definition of quality exists (Kara et al., 2005); the most widely accepted is the ISO
definition of quality as "the degree to which a set of inherent characteristics fulfils requirements"
(International Organization for Standardization 2004). The reason may be the elusive nature of
the concept (Pfeffer and Coote 1991). The term has been defined from different perspectives and
orientations, according to the person making the definition, the measures applied and the context
within which is it considered (Tapiero 1996).
Quality is derived from the Latin qualis and is defined as essential character or
naturean inherent or distinguishable attribute or property, a character trait and is defined as
superiority of kind and degree or grade of excellence; when quality relates to logic, quality is
the positive or negative character of a proposition (Merriam-Websters 2000, p. 905). Many
definitions of quality in the customer satisfaction and operations management literatures have
aligned with either the development of a set of character traits or a relationship to excellence.
Other definitions have shifted to a focus on conformance to specifications predominately
associated with manufacturing or to a focus on the perceptions and expectations of the customer
predominately associated with services.
One set of definitions is unidimensional. For example, Peters and Waterman (1995)
define quality as excellence in terms of the underlying dictionary definition. Feigenbaum (1991)
defines quality in terms of value, the degree of excellence in relation to price. Crosby (1979 and
1984) focuses more on conformance to specifications and defect avoidance. Garvin (1987)
defines eight dimensions of quality (performance, features, reliability, durability, conformance,
serviceability, aesthetics, and perceived quality) with respect to goods. Juran and Gryna (1988)
introduce a customer focus into manufacturing quality by defining quality as fitness for use, and
Parasuraman, et al. (1985) introduce customers expectations and perceptions into the definition
of service quality.
Another set of definitions focus on the development of a set of characteristics or
categories of quality in multidimensional terms. Garvin (1988) segmented quality into five
categories: (1) Transcendent definitions. These definitions are subjective and personal. They are
eternal but go beyond measurement and logical description. They are related to concepts such as
beauty and love. (2) Product-based definitions. Quality is seen as a measurable variable. The
bases for measurement are objective attributes of the product. (3) User-based definitions.
Quality is a means for customer satisfaction. This makes these definitions individual and partly
subjective. (4) Manufacturing-based definitions. Quality is seen as conformance to requirements
and specifications. (5) Value-based definitions. These definitions define quality in relation to
costs. Quality is seen as providing good value in relation to cost. In this article, Garvin
incorporates all three approaches (excellence or value, conformance to specifications, and
customer focus) into his five definitions of quality.
Harvey and Green (1993) also develop a set of five definitions. Exception is related to
excellence and is defined as distinctive, embodied in excellence, passing a minimum set of
standards (p. 12). Perfection is related to conformance to specifications and is defined as zero
defects, getting things right the first time (focus on process as opposed to inputs and outputs) (p.
12). The customer is included in fitness for purpose, defined as how quality relatesto a
purpose, defined by the provider (p. 13). Value for money, defined as a focus on efficiency
and effectiveness, measuring outputs against inputs is related to Feigenbaums definition (p.

Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
13). Transformation is a new concept for quality and is defined as a qualitative change and
including the concepts of enhancing and empowering (p. 13).
Sahney, et al., (2004) define quality using two perspectives, either as attributed to the
characteristics of a product or service or attributed to the production of a product or delivery of a
service. Sahney, et al., (2004) also include the importance of meeting and exceeding the
expectations of the customers and the need to create customer satisfaction in the goods and
services produced and/or delivered.
These examples illustrate the fundamental similarities and differences in the various
major definitions of quality. The commonalities could be used as a basis for a new definition of
quality. However, the quality concept is evolving, and it is useful first to look at how the
definitions of quality are changing.
Industry-specific differences can be found and, according to Tam (1999), the definitions
of quality are subject to continuous change. Lagrosen (2001) found it important to define quality
by the specific industry characteristics that create customer satisfaction for that specific industry
or for specific situations encountered by the organization. Brooks (2005) found that the
definition would depend on the organizations purpose, customer base and other contextual
factors. And, Sower and Fair (2006) have found that the traditional definitions and dimensions
of quality do not apply to innovative products or paradigm-shifting products or services.
For example, in education, quality is viewed as outcomes assessment (Ewell 1994) but
also includes a strong stakeholder focus (Telford and Masson 2005). The authors found that any
definition of quality in higher education must include the criteria and perspectives of all the
institutions stakeholders, where stakeholders would include students, employers, teaching and
non-teaching staff, government and its funding agencies, accreditors, validators, auditors,
assessors, and the community at large (p. 107). Sanvido, et al. (1992) and Barrett (2000)
defined quality as the fulfillment of expectations of all participants. Fulfillment of expectations
is related directly to customer satisfaction in both studies.
In some instances, quality components vary within the industry. For example, in retail
financial services, in the OLoughlin and Szmigin (2006) study, convenience was the most
important factor. The Wesskirichen et al. (2006) study found easy neighborhood access, a
cheerful setting, and transparent terms and conditions were driving forces for customer
satisfaction. Lewis and Soureli (2006) identified speed of delivery, competence, friendliness,
reliability, responsiveness, and trust as key factors.
And the components of quality may change across cultures. Buda, et al., (2006) found
that the dimensions of quality and the impact of those dimensions change according to cultural
views. Donthu and Yoo (1998) and Furrer, et al. (2000) concur. And, internationally, the type
and weight of the components change across industries and across cultures. Choi and Chu
(2000) found this to be true in the hotel industry, Jiang et al. (2000) in the information service
industry, and Sultan and Simpson (2000) in the airline industry.


Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
The major commonality among all the current definitions of quality is that regardless of
the industry or culture, the definitions of quality are moving more toward a focus on customer
satisfaction. Given the diversity of definitions, twice as many managers (62.4 percent vs. 33.3
percent) define quality in user-based terms (quality is realized when customer satisfaction is
maximized because the product/service fits its intended use) as in transcendent-based terms
(quality is innate excellence) (Tamimi and SebastianellI 1996, p. 8).
The various definitions of quality are created by the characteristics that address a number
of stakeholders, and these stakeholders own quality (Harvey and Green 1993). It is important to
define the needs and expectations of the organizations stakeholders. In fact, organizations must
be responsible to shareholders and all the other stakeholders of the organization: customer,
employees, suppliers, and the community (Allio 2006). The Baldrige Criteria require a focus on
all stakeholders (National Institute of Standards and Technology 2005). Telford and Masson
(2005) identify eleven stakeholders and found that each have a set of criteria and perspectives on
In addition, there is no (longer a clear distinction between a product and a service
(Fitzsimmons and Fitzsimmons 2004). Manufacturing processes contain service segments, those
processes that deal with a customer; and, in turn, service delivery may include facilitating
products (Fitzsimmons and Fitzsimmons 2004). Therefore, a focus on both the technical aspects
of quality and functional aspects of quality as defined in services operations should be adopted
by all organizations. Technical quality refers to what the customer receives (e.g., the product or
delivery of the services) and functional quality refers to how the technical components are
delivered to the customer (Gronroos 1984). According to our research, the importance of a focus
on both the technical and functional aspects of quality is developing. For example, in industries
where processes are highly mechanized and/or are globally traded commodities, such as in the
seafood industry, quality is not just a discursive expression of what people like, nor is it just a
set of physical characteristics of the commodity. Instead, quality itself emerges from the
complex sociomaterial relations of commodity production, trade, and consumption (Mansfield
2003, p. 6). According to Bitner, et al. (1990), quality is measured by conformance to basic
standards and quality is measured by how well these standards are performed and how the
customer views the standards as being high quality. To retain customers and entice new ones, a
company needs to focus on providing value to the customer and that too in a manner that is more
effective than that of its competitors (Kahn 2003, p. 375). Providing value in both
manufacturing and service operations must include technical and functional aspects of quality.
These studies tell us that the definition of quality is evolving, but that the common factor
throughout the evolution process is a focus on both the technical and functional aspects of
quality. In order to become world-class, organizations need a user-based definition that is more
important to the customer, and a process-based definition that is more important to the
manufacturer or service provider. However, the manufacturer or service provider needs to keep
the customer at the center of the design and development of goods or services. Processes need to
be developed that ensure that the goods and services developed are produced or offered in the
manner in which they were designed; that is, the organization needs one focus on the process

Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
perspective. However, process perspective dimensions of quality need to be developed and
designed using the customer perspective; that is, the organizations needs to understand the needs,
wants, and desires of the customer in order to design products and services that satisfy the
customer to ensure that the maximum level of customer satisfaction is achieved.
Therefore, the new definition must include the utility of that which is produced to the
end customer (Raisinghani et al. 2005) and must include the ability to outperform the
competition by satisfying internal specification, or customer, requirements. Most researchers
now agree that a definition of quality must contain both components: objective or that which can
be measured according to specifications and subjective or that which is evaluated by the
customer (Hoyer et al. 2001). Harvey and Green (1993) also found that the different definitions
of quality are not a different perspective on the same thing but different perspectives on
different things with the same label and that the characteristics of quality are discrete but
interrelated (p. 12). In summary, a new definition of quality must be important to the customer
and service provider. The definition must include tangible measurements as well as customer
based subjective elements.
There are 10,000,000 companies that follow the International Organization of
Standardization (ISO) standards. Their standards, recognized in both industry and academia, are
known throughout the world. As such, their definition of quality is currently the most
appropriate definition. The definition, as stated in ISO 8402 and ISO 9001:2000 reads the
totality of features and characteristics of a product or service that bear upon its ability to satisfy
stated or implied needs (Haider, 2001, p. 8). In the new standard, the integration of customer
satisfaction into the guiding principles is further encouraged. The new version encourages the
adoption of the process approach for both the management of the organization and its processes
and as a means of readily identifying and managing opportunities for customer satisfaction with
continuous improvement (Haider 2001, p. 23).
As stated in Section 8.2.1 of ISO 9001:2000: As one of the measurements of the
performance of the quality management system, the organization shall monitor information
relating to customer perception as to whether the organization has met customer requirements.
This method for obtaining and using this information shall be determined (International
Organization for Standardization, 2004).


Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
Figure 2. New Definition of Quality






This widely accepted definition of quality, in a standard that encourages customer

satisfaction, omits one integral factor: the dominance of affective evaluations in the formation of
customer satisfaction. Recognizing the need for evaluations is just the first step to actually
implementing a process to record and interpret customer satisfaction levels. Psychologists as
well as other social scientists agree that responses to an attitude object (i.e., a person, situation,
or inanimate object) require evaluation and establish three classes of evaluations--affective,
cognitive, and behavioral (or conative). The three classes are the basis of the tripartite evaluation
model that is widely accepted today (Forgas 2000). Affective evaluations are the most critical in
the formation of satisfaction (Wicks et al. 2004).
The psychology literature takes the position that attitudes such as satisfaction are formed
by all the emotional evaluations (which consist of affects, feelings, emotions and moods) about
the attitude object (Forgas 2000). When evaluating an emotion, the degree of the positive or
negative reaction to each aspect or characteristic of a product or service process cumulatively
creates an emotional response to such a degree of satisfaction or dissatisfaction (Plutchik 2000).
The psychological concept is closely aligned with the dictionary definition when quality relates
to logic: quality is the positive or negative character of a proposition (Merriam-Websters
2000, p. 905). Thus, the formation of quality as it relates to customer satisfaction can be seen as
the summation of the positive and negative emotional responses created throughout the service
experience or the manufacturing process.


Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
Based on previously discussed definitions of quality, three views from the dictionary
definition of quality can be incorporated into a new definition.
The view can be adopted that quality is a set of characteristics or properties, as supported
by the multidimensional definitions of quality. Quality can focus on excellence. Or, quality can
be viewed as the degree of customer satisfaction attained.
If excellence is defined by customers and is directly related to the degree of customer
satisfaction attained, then quality should be defined as: the summation of the affective
evaluations by each customer of each attitude object that creates customer satisfaction, where
the term customer is defined as any of the internal or external stakeholders of the organization
and the term attitude object is defined as the particular entity of interest for either an internal or
external customer. This definition builds upon the previously mentioned ISO definition (the
totality of features and characteristics of a product or service that bear upon its ability to satisfy
stated or implied needs) by focusing on the affective evaluations of the attitude objects that
create customer satisfaction. A diagram depicting this new definition is shown in Figure 2. We
continue with a discussion of the appropriateness of the new definition for industry and for
Medrad Inc. develops, manufactures, markets and services medical devices that enable
and enhance imaging (commonly called magnetic resonance imaging or MRI) of the human
body. They are a subsidiary of Schering AG in Germany and Medrad employs about 1,200 in
two U.S. locations (its Indianola, PA, headquarters and Pittsburgh) and other locations in Africa,
Asia, Europe and North America. Sales are about $250 million annually. As Medrad is a
provider of both manufacturing products and services, they are a good example of how affective
evaluations are used in industry.
Since 1998, Medrad has consistently met its growth goals, with an average annual
revenue growth rate of 15% and operating income as a percentage of revenue (which
reflects overall profitability) increasing from 16% in 1999 to 20% in 2002 and now
approaching best in class. The Baldrige process gets credit for much of Medrad's
worldwide reputation for the highest quality products, customer satisfaction rates well
above those of its nearest competitor and employee satisfaction rates exceeding best in
class. Medrad uses a seven-step sales process to build customer relationships, acquire
customers, meet their expectations, increase loyalty and repeat business, and gain positive
referrals. Striving to improve customer satisfaction scores, in 1999 Medrad challenged
itself to (longer measure customer satisfaction scores of both four and five as indications
of improvement but to instead count only fives. It received the Baldrige award in 2003,
reporting above average revenue growth as it approaches exceptional overall profitability
levels (Daniels 2004, p. 58).
Since Medrad won the 2003 Malcolm Baldrige National Quality Award, a brief
description of each of the seven phases of their sales process is appropriate because the phases
define a sales process that focuses on customer relationships and satisfaction. The seven phases,
detailed in the 2003 Malcolm Baldrige National Quality Award application, follows:


Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
Earn the Right. The customer trusts the Medrad employee based on perceived
knowledge of the business, products and applications, and trusts in Medrads
commitment to deliver. All front-line employees are trained in communications and
customer handling skills.
Qualify the Opportunity. During this phase, Medrad determines whether there is a
qualified opportunity with the customer by asking questions about timeline, funds
availability, impending event, decision maker identification, buying criteria, need, and
competition or substitutes. Once at least four of these questions are answered positively,
the opportunity is considered to be qualified. Continuous training of Medrads customer
contact employees ensures steady improvement in the companys ability to understand
the customers business situation and needs.
Establish Buying Influences and Criteria. Medrad clarifies the decision makers and
influencers and establishes the criteria that each of them will use to determine their
choice of product. Medrad representatives then create an action plan with the customer
to satisfy their criteria.
Satisfy Buying Criteria. The action plan is executed. Medrad offers its customers proof
sources, reference lists, site visits, and product demonstrations or evaluations as means to
satisfy their criteria. Customer contact employees receive product, service, applications
business, market, and customer training as needed to continuously improve their ability to
offer the best solutions to the customers problems and needs.
Gain Commitment. Medrad obtains verbal commitment, negotiates a deal, provides a
written quote, and obtains a purchase order.
Implement. Upon agreement, Medrads field teams deliver, install, service, and provide
training on the products to ensure defect-free implementation and to continue building
customer relations and satisfaction.
Customer Enhancement. With a large percentage of sales from existing customers,
maintaining customer satisfaction and loyalty is critical to Medrad. Medrad maintains
routine contact through direct customer contact and follow-up satisfaction surveys.
Medrads Opportunity Management Process maps to the Customer Process. The
Opportunity Management Process monitors opportunities with a customer as they
progress from casual interest to a won or lost resolution. A probability of winning is
assigned based on customer interest, satisfaction of buying criteria, and the competitive
situation. Opportunity maps and sales funnels provide input to sales projections and
help guide the sales cycle. Key process performance measures are on-time deliveries,
acceptance rates, and customer satisfaction surveys. Field team members use timely,
comprehensive customer information to implement the Customer Process.
Medrad measures customer satisfaction through a fully independent external customer
survey and third party surveys commissioned by Medrad (Medrad Malcolm Baldrige Application
Summary 2003). Through the independent survey, Medrad rated in the top five in 2000 to third
in 2002 to second in 2003. The affective evaluations used at Medrad, Inc. have not only shown
improvements in customer satisfaction scores, they have contributed to recognized Baldrige

Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
success and exceptional profit levels. Clearly, use of affective evaluations have benefited
Medrads manufacturing and service capabilities.
Services, like manufacturing, have turned to total quality management philosophies,
tools, and techniques (Milakovich 1995) to achieve financial success and stability (Anderson et
al. 1994; Rust et al. 1995). Although quality characteristics in services are as difficult to define
as for manufacturing (Galloway and Ho 1996), here the focus is clearly on the customer
(Galloway and Wearn, 1998). Quality starts with the customers and is defined by the
customers (Sahney et al. 2004). The service operations literature either views satisfaction as the
antecedent of perceived quality (Anderson and Sullivan 1993) or perceived quality as an
antecedent of customer satisfaction (Parasuraman et al. 1988). Whichever view is accepted,
customer satisfaction is still a crucial factor.
In services, it is clearly important to develop and implement processes that address both
the service process and product outcomes since the customer is most often more intimately in
ved in the service process (Field et al. 2004). In fact, customers are often co-producers in the
service delivery process (Field et al. 2004). With services, customer satisfaction is viewed as a
crucial factor of perceived quality, and as a means of measurement between customers
perceptions and expectations. Thus a satisfaction-based definition of quality is as appropriate for
service as for manufacturing organizations.
In industry, whether manufacturing or service, measures of customer satisfaction have
been effectively used to increase profitability, identify attributes important for continual
improvement and to understand consumers buying decisions.
Our research resulted in defining quality as the summation of the affective evaluations by
each customer of each attitude object that creates customer satisfaction, where the term customer
is defined as any internal or external stakeholder of the organization and an attitude object is any
entity of interest. The definition appears appropriate for both manufacturing and services since
the primary objective for both types of organizations is customer retention. Regardless of the
organizational type, customer retention results in profit, growth, and sustainability. Satisfaction
is achieved by providing goods and services that create specific levels of value for the customer
so that the customer remains with the organization.
Customers are assets and create value for all types of organizations. Organizations
should consider the lifetime value of the customer in terms of acquisition versus retention costs,
increased purchasing levels over time, and the benefits of positive word-of-mouth advertising. It
costs five times more to acquire a new customer than to retain an existing one (Babich 1992;
Sheth 1994). Loyalty has more impact on a companys profits than scale, market share, unit
costs, and many other factors usually associated with competitive advantage. As a customers
relationship with the company lengthens, profits rise. And not just a little. Companies can boost
profits by almost 100 percent by retaining just 5 percent more of their customers (Reichheld
1996, p. 106). Dick and Basu (1994) found that customer spending levels increased the longer
the customer stayed with the organization. And Babich (1992) found that dissatisfied customers

Journal of Business & Economic Studies, Vol. 15, No. 1, Spring 2009
tell 8 to 20 other people and that satisfied customers tell 3 to 5. Loyalty and retention, driven by
customer satisfaction, are critical factors in organizational success.
Both production and service operations literatures stress the importance of customer
retention to the long-term sustainability of the organization. Both rely on customer loyalty, and a
consensus exists that customer satisfaction is the major antecedent of customer loyalty.
Therefore any model developed to measure customer retention or customer loyalty should be
based on customer satisfaction, and the definition of what creates quality in the eyes of the
customer should be based on what creates satisfaction in the customer.
Clearly, actual implementation of a plan to record and evaluate customer satisfaction in a
quality definition is more difficult than discussing the need for it. Perhaps evaluation systems,
such as the 360 degree feedback system which is acknowledged as a major component of
relationship management (Garman et al. 2006) or the multi-source feedback system as developed
by Atwater, et al. (2002) would be beneficial. At a minimum, a more open and honest discussion
between customers (or stakeholders) and suppliers is needed in order to develop the measurable
and critical customer satisfaction criteria for each organization. Only after agreement between
these organizations is identified and agreed upon can a truer definition of quality be realized.
However, as indicated in this paper, a new definition of quality is needed that includes a method
for recording and evaluating customer satisfaction. Developing a set of quality criteria from a
customer satisfaction based definition of quality should enable an organization to maintain its
focus on what creates loyalty and retention. With loyalty and retention, increased profits and
sustainability for the organizations involved should be realized.
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