T.C. YEDITEPE UNIVERSITY INSTITUTE OF SOCIAL SCIENCES Ph.D.

PROGRAM IN BUSINESS ADMINISTRATION

CUSTOMER SATISFACTION, a central phenomenon in MARKETING

ADVANCED CONSUMER BEHAVIOR THEORY MKTG 703 Prof. Dr. Zeynep BLGN

Prepared by Ahmet KKOSMANOLU & Ertan ENSOY ISTANBUL, JANUARY 2010

TABLE OF CONTENTS

TABLE OF CONTENTS......................................................................................................................................... 1 INTRODUCTION ................................................................................................................................................ 3 1. SATISFACTION AS A CORE CONCEPT .............................................................................................................. 5 1.1. UNDERSTANDING SATISFACTION VS DISSATISFACTION .......................................................................................... 6 1.2. A BROADER VIEW ON IMPORTANCE OF SATISFACTION .......................................................................................... 6 1.3. PROFIT IMPACT OF DISSATISFACTION ............................................................................................................... 7 2. ANTECEDENTS OF SATISFACTION .................................................................................................................. 7 2.1. EXPECTATION AND PERCEIVED PRODUCT PERFORMANCE ...................................................................................... 8 2.1.2 Contrast Theory ............................................................................................................................... 9 2.1.3 General Negativity Theory ................................................................................................................ 9 2.1.4. Assimilation- Contrast Theory........................................................................................................ 10 2.1.5. An Evaluation on the Expectation Theories .................................................................................... 11 2.2.THE DISCONFIRMATION MODEL .................................................................................................................... 11 2.3. PRODUCT CHARACTERISTICS ........................................................................................................................ 12 2.3.1. Physical and Psychological Atributes............................................................................................. 12 2.3.2. Product Complexity ....................................................................................................................... 14 2.3.3. Durable vs Non-Durable Goods...................................................................................................... 14 2.3. CUSTOMER CHARACTERISTICS ...................................................................................................................... 15 2.3.1. Past Experience & Adaptation ....................................................................................................... 15 2.3.2. Taking Desires Into Consideration.................................................................................................. 16 2.3.3. Effect of Norms ............................................................................................................................. 17 2.4 ROLE OF INFORMATION, COMMITMENT AND EFFORT .......................................................................................... 17 2.5 CONSUMPTION VS DECISION SATISFACTION ...................................................................................................... 17 3. MEASUREMENT OF SATISFACTION LEVEL .................................................................................................... 18 4. CONSEQUENCES OF SATISFACTION ............................................................................................................. 19

4.1. HIGH SATISFACTION / NO DISSATISFACTION .................................................................................................... 19 4.1.1. Retention ...................................................................................................................................... 19 4.1.2. Loyalty .......................................................................................................................................... 21 4.2. DISSATISFACTION ...................................................................................................................................... 23 4.2.1. Switching Brands/Stores................................................................................................................ 23 4.2.2. Complaint Behavior....................................................................................................................... 23 4.2.3. Negative WOM ............................................................................................................................. 25 SELECTED ARTICLES ON SATISFACTION............................................................................................................ 28 LITERATURE ARTICLES ON SATISFACTION ........................................................................................................ 39 REFERENCES ................................................................................................................................................... 52

INTRODUCTION

Consumer satisfaction is a central concept in modern marketing thought and practice. The marketing concept emphasizes delivering satisfaction to consumers and obtaining profits in return. As a result, overall quality of life is expected to be enhanced. Thus, consumer satisfaction is crucial to meeting various needs of consumers, business, and society. The realization of this importance has led to a proliferation of research on consumer satisfaction over the past two decades. Attempts to make significant contributions toward understanding this important area have been made, including numerous studies and annual conferences on consumer satisfaction/dissatisfaction and complaining behavior.

Consumers compare their perceptions of product performance with a set of standards. Confirmation results when the perceived performance matches standards, whereas disconfirmation results from a mismatch. Confirmation and disconfirmation are expected to determine consumer satisfaction or dissatisfaction.

This paper provides a review on consumer satisfaction in four areas: 1) definition and importance of satisfaction, 2) antecedents or determinants, 3) measurement of satisfaction, 4) consequences of consumer satisfaction.

An emphasis is placed on providing a conceptual basis for understanding existing literature in definition part.

We considered the antecedents of satisfaction and defined that satisfaction is closely linked with customer expectations and products perceived performance. If the product meets his expectations, the consumer is satisfied; if it exceeds them the consumer is highly satisfied; but if it falls short the consumer is dissatisfied. Besides, customers having different characteristics can introduce variability in the satisfaction retention relationship.

Measuring the level of customer satisfaction is very important for todays business organizations. Business organizations can use these measurements to improve their business results. methods. Measurement of customer satisaction requires quantitative and qualitative

Consequences of satisfaction come out in two different forms. In case of high satisfaction or at least no dissatisfaction, the customers keep their purchasing. The customers whose experiences exceed their expectations provide a positive word of mouth as well as they continue to be a loyal customer for the company. However, in case of dissatisfaction or defection, customers may complain and stop purchasing. At least, they start distributing negative word of mouth.

Yesterdays big firms focused on mass-marketing to all customers. Todays firms are building deeper, more direct and more lasting relationships. Most marketers realize that they dont want relationship withevery customer. Instead, they now are targeting fewer, more profitable customers. Once they identify profitable customers firms can create attractive offers and capture their customers satisfaction.

1. SATISFACTION AS A CORE CONCEPT

It interesting that consumerism have been in a rise since the last five decades in paralel to a rise of customer satisfaction with a link to profitability and other business results. In order to understand the underlying reasons for consumerism, we believe that a better understanding of consumer satisfaction/dissatisfaction is required. Since consumerism today is such a complex evidence as interrelated with other ecological, social, political, ethical, economic, and technological problems, one who attempts to discover satisfaction is required to discover also the relation to all those aspects one by one. It is the most frequent question being raised about consumerism: What are the sources of consumer dissatisfaction? One may also assume that consumerism is a frustration on the part of consumers who have been promised much and have realized less. This motive can be concluded as a major force to drive consumerism.

The concept of consumer satisfaction have been in a central position in Marketing since 1950s till today with an increasing interest and importance. We can consider satisfaction as a major output of Marketing-activity that links the processes involved in purchase and consumption. It also links postpurchase phenomena such as attitude change, repeat purchase, and brand loyalty. The positioning of the concept in the core of Marketing is reflected by the consideration that profits are generated through the satisfaction of consumer needs and wants.

The appearant need to translate this important Marketing concept into daily operational practice has directed researchers to development and measurement of consumer satisfaction. Consumer satisfaction began to rise up as a legitimate field of inquiry in the early 1970s. We can point out The U.S. Department of Agriculture's Index of Consumer Satisfaction (Pfaff, 1972) as a pioneering study to report direct information on consumer satisfaction to policy makers. Later, it is followed by Swedish National Customer satisfaction Barometer in 1989 (Fornell, 1992)

1.1. Understanding Satisfaction vs Dissatisfaction

Conceptually, satisfaction is an outcome of purchase and use resulting from the buyer's comparison of the rewards and costs of the purchase in relation to the anticipated consequences. Operationally, satisfaction is similar to attitude in that it can be assessed as the sum of the satisfactions with the various attributes of the product or service (Churchill & Suprenant, 1982)

When satisfaction is mentioned it is generally considered a wide of area that includes both high levels of satisfaction and also neutral levels where there is no dissatisfaction. However, it is also suggested that there needs to be a separate consideration for different levels of satisfaction with different ranges of effect and varying imagnitudes of impact on business results. (Best,2009)

The Random House Dictionary states: "dissatisfaction results from contemplating what falls short of one's wishes or expectations. . . ." Consumer dissatisfaction, then, might be measured by the degree of disparity between expectations and perceived product performance. (Anderson 1973)

1.2. A Broader view on Importance of Satisfaction

Customer Satisfaction is today considered as a valuable Marketing performance metric. Customer satisfaction measurement has been getting importance in business practices especially for the last decade. The metric is getting popular since,

Customer satisfaction is a forward looking indicator of business success that measures how well customers will respond to the company in the future. Other measures of market performance, such as sales and market share, are backward looking measures of success. They tell, how well the firm has done in the past, but not how well it will do in the future. (Byrne, 1993) 6

A customer satisfaction index result at average levels around for example 70-80 out of 100 could be considered satisfactory bor the business. However, in real life when we consider the distribution of different satisfaction levels that result such an average index, we may possibly observe that it is made of composite satisfaction levels. This broader view may for example imply us that a significant percent of customers somewhat satisfied and are open to competitors threat. Such insights are helpful for businesses to devi se their strategies in managing their customer portfolio.

1.3. Profit Impact of Dissatisfaction

Dissatisfaction on the other hand has some important implications for the future of a business. A customer centric firm must pay attention to dis-satisfied customers as much as it pays to the ones that are satisfied. Because dissatisfied customers are not expected to discontinue purchasing and exit leaving the company with an erasion or customer portfolio. Yet this is not the nly issue to be considered. Dissa tisfied customer usually dont complain. (TARP, 1986) They usually exit, walk and talk. They start producing negative WOM. Sometimes the situation even gets worse. Dissatisfied customer may become customer terrorists .they try to ease their dissatisfaction by telling to other, trying to affect the other potential customer by destroying the reputation of the firm in market place (Best, 2009).

2. ANTECEDENTS OF SATISFACTION

In literature antecedents of satisfaction are studied from different aspects. The considerations extend from psychological to physical and from normative to positive aspects.

However, in most of the cases the consideration is focused on two basic constructs as customers expectations prior to purchase or use of a product and his relative perception of the performance of that product after the using it. 7

2.1. Expectation and Perceived Product Performance

Expectations of a customer on a product tell us his anticipated performance for that product. As it is suggested in the literature consumers may have various "types" of expectations when forming opinions about a product's anticipated performance. For example, four types of expectations are identified by Miller (1977): ideal, expected, minimum tolerable, and desirable. While, Day (1977) indicated among expectations, the ones that are about the costs, the product nature, the efforts in obtaining benefits and lastly expectations of social values.

Perceived product performance is considered as an important construct due to its ability to allow making comparisons with the expectations. It is considered that customers judge products on a limited set of norms and attributes. Olshavsky and Miller (1972) and Olson and Dover (1976) designed their researches as to manipulate actual product performance, and their aim was to find out how perceived performance ratings were influenced by expectations. These studies took out the discussions about explaining the differences between expectations and perceived performance. Here, we will have an overview of those theories to base a better understanding of the mechanisms that play an important role in satisfaction process.

2.1.1. Assimilation Theory (Cognitive Dissonance)

According to the theory of Festinger (1957), an unmatched expectancy, creates a state of dissonance or "psychological discomfort" because the outcome conflicts with the costumer's original hypothesis. It is suggested by the that an individual has cognitive elements (or "knowledges") about his past behavior, his beliefs and attitudes, and his environments. Receiving various kinds of product information from their own experience, associates, advertisements, and salesmen, the consumers turns them into cognitions and would like them to be consistent with each other. In case an individual receives two ideas which are psychologically dissonant, he relentlesly tries to reduce this mental discomfort by changing or distorting one or both of the cognitions to form them into a more consonant way. When

the cognitive dissonance is stronger, the motivation against reducing the dissonance by changing the cognitive element is also stronger.

In our case, when there is a disparity between expectations for a product and the actual performance of that product, the consumer is driven to reduce the psychological discomfort generated by changing his perception of the product to bring it more into line with his expectations. Implication of this theory is that, the promotional mix for a product should substantially lead expectations above product performance to obtain a higher consumer evaluation or perception of the company's product. A major criticism to this theory is that the individual, instead of learning from his purchasing mistakes, actually increases the probability of making them again through his efforts to reduce post-purchase dissonance by justification and rationalization of his decisions.

2.1.2 Contrast Theory

Even in the studies supporting assimilation theory, some individuals tend to shift their attitudes and evaluations away from expectations aroused by communications if inconsistent with reality (Hovland, Harvey & Sherif 1957). Contrast theory suggests that in case the expectations are not matched by actual product performance, the surprise effect or contrast between expectations and outcome will cause the consumer to exaggerate or magnify the difference.

Here it is implied that a little understatement of the product's qualities in advertising might result in higher customer satisfaction with the offered product.

2.1.3 General Negativity Theory

Another research on the consequences of unmatched confirmations is conducted by Carlsmith and Aronson (1963). They hypothesized that even a pleasant result would be perceived not so pleasant under the circumstances that customer expactions were set to 9

receive an unpleasant one. Likewise an unpleasant result would be perceived as more unpleasant uner the same conditions.

They asked their respondents to taste bitter and sweet solutions, manipulating their expectations regarding the tastes, and recorded their evaluations under the various conditions. When the bitter solution was expected and the sweet solution tasted, an unmatched expectancy resulted in a rating of less sweet which would support contrast theory. Carlsmith and Aronson made an explanation of this confict by suggesting that an unmatched expectancy would end in a hedonically negative state in the emotions of customers which causes them to generalize this negative effect to all other objects.

The theory implies that any unmatched expectation wheter or not it is regardles of being exceeded or left in short, would result in a lower level of perceived performance rating in comparison to actual or objective performance.

2.1.4. Assimilation- Contrast Theory

This theory considered to combined version of the two theories that are Assimilation and Contrat. It suggests that when the difference between expectations and perceived product performance is at an acceptable level to a customer then the customer would assimilate is perception towards hs expectations. However, if the difference arising from an unmatched expectation is falling beyond the customers acceptance limit, then the customer magnify this difference (Anderson, 1973)

The theory implies that expectation of customers should be elevated by the promotional efforts until such a level that it would successfully position below the levelf rejection for the as to benefit the magnifying effect of contrast for the difference.

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2.1.5. An Evaluation on the Expectation Theories

In our thinking Assimilation-Contrast theory was a good attempt to explain the phenomena. We also noticed that Generalized Negativity Theory in fact dealt with an impractical situation where the researchers considered expectations of sweet and bitter solutions. However, in real life nobody makes a buying decision or purchase as to expect a bitter result. There may only be some exceptional cases such as forced purchasing.

2.2. The Disconfirmation Model

The disconfirmation model is based on the comparison of customers expectations and their perceived performance ratings. Spesifically, an individuals expectations are confirmed when a product performs as expected. It is negatively confirmed when a product performs more poorly than expected. The disconfirmation is positive when a product performs over the expectations. (Churchill & Suprenant 1982)

There are four constructs to describe the traditional disconfirmation paradigm metioned as expectations, performance, disconfirmation and satisfaction.

Satisfaction is considered as an outcome of purchase and use, resulting from the buyers comparison of expected rewards and incurred costs of the purchase in relation to the anticipated consequences. In operation, satisfaction is somehow similar to attitude as it can be evaluated as the sum of satisfactions with some features of product.

In the literature, cognitive and affective models of satisfaction are also developed and considered as alternatives. (Pfaff, 1977)

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Churchill and Suprenant in 1982, evaluated various studies in the literature and formed an overview of Disconfirmation process in the following figure:

2.3. Product Characteristics

Product characteristics are an important dimension to consider the Disconfirmation process. There are some studies covering different product characteristics and their effects to Disconfirmation process. We will mention some of those studies in the following context.

2.3.1. Physical and Psychological Atributes

A growing number of studies have analyzed perceived product performance and expectations and their relationships. Swan & Combs (1976) made a study to make clear 12

which general dimensions of product performance are important to the consumer and how these dimensions are related to satisfaction. The researchers looked at the expressive (nonmaterial, psychological) and instrumental (physical) dimensions of a product, in their case clothing, to determine the extent of their influence on consumer satisfaction and dissatisfaction.

They considered the idea that consumers judge products on a limited setof attributes. Some of these set of attributes are relatively important in determining satisfaction and some are not critical to satisfaction but to dissatisfaction. They based their ideas studies conducted by Myers & Alpert (1968) on choice behavior and they extended it to satisfaction with postpurchase performance.

They observed that the relatively important characteristics of a product in satisfaction or dissatisfaction are composed of Salient Attributes which are showing variation in performance ratings from one product to another. They explained this as most of the products are produced today in congruence with customer need and desires, they all have those minimum standard attributes and the point of distinction and differentiation are created by Salient Attributes.

In their study they found out that that mostly failure in instrumental (physical) dimensions of a products performance resulted in customer dissatisfaction. Whereas a success in expressive (psychological) dimensions of a products performance in most cases account to customer satisfaction. So, the physical attributes are mostly recognized as sufficiciency requirement (like hygiene factors) and their insufficiency is responsible for dissatisfaction, while psychological attributes are considered as determinants for satisfaction.

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2.3.2. Product Complexity

There seems to be no commitment yet about the effects of product complexity where some studies suggested that more complex products, where there is considerable ambiguity and uncertainty in making judgments, may yield favorable results for the producers and sellers as consumers may tend to be more dependent on the information provided them (Anderson, 73).

On the other hand a more recent study suggests that complex products also have operations and advantages that are not easily explained, which results in low justifiability. Furthermore, in general, complex products are more difficult to evaluate and lead to higher cognitive costs. In addition, complex products may generate incongruencies between mental conceptions of the products offered and the information available and thus generate negative affective reactions. (Heitmann, Lehrmann & Hermann, 2007)

2.3.3. Durable vs Non-Durable Goods

The study of Churcill & Suprenant (1982) supplied important information about the difference between durable and non-durable goods in disconfirmation process. As suggested in preivous studies non-durable goods exhibited compliance with traditional disconfirmation process.

However for durable goods neither the disconfirmation experience nor subjects' initial expectations affected subjects' satisfaction. Rather, subjectss satisfaction was determined solely by the performance of the durable good. (In this case a video disc player) Expectations did combine with performance to affect disconfirmation, though the magnitude of the disconfirmation experience did not translate into an impact on

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satisfaction. Most importantly, the direct performance-satisfaction relationship accounts for most of the variation in satisfaction.

2.3. Customer Characteristics

Customer characteristics mostly discussed with their shaping effects on expectation, perceived performance and evaluation of disconfirmation. Some of the aspects that are studied in previous research are mentioned at the following sections

2.3.1. Past Experience & Adaptation

A different perspective on satisfaction considers accumulation of past experiences and results of previous disconfirmation processes as an additive combination to determine satisfaction. In this sense customers with different experience backgrounds would have different evaluation on the same performance. Expectation is proposed as an adaptative mechanism for satisfaction. (Oliver, 1980) The following model taking disconfirmation as independent of expectation is suggested:

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Figure 2: Oliver, Richard L. 1980. "A Cognitive Model of the Antecedents and Consequences of Satisfaction Decisions." Journal of Marketing Research (JMR) 17, no. 4: 460-469.

2.3.2. Taking Desires Into Consideration

Although, satisfying the ends and desires of consumer is central to marketing traditional disconfirmation process in relation to satisfaction did not mention about desires of customers explicitly. Starting from this point, Spreng, Mckenzie & Olshavski (1993) suggested the inclusion of desires into the model.

The model proposes that feelings of satisfaction arise when consumers compare their perceptions of the performance of a product or service to both their desires and expectations. This comparison process produces the feelings of satisfaction with the product or service on which their expectations and desires are based.

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2.3.3. Effect of Norms

Once the process of satisfaction proposed as an additive accumulation of past experiences and disconfirmation results, some rearchers (Woodruff, Cadotte & Jenkins,1983) further developed this perspective to add performance norms into the process. They defined performance norms as the subjective measures of individual customer depending on his own experiences with the product and brand. Performance norms are supposed as direct inputs to disconfirmation process.

2.4 Role of Information, Commitment and Effort

Personal involvement and commitment to the product and effort spent for the product are suggested as determinants of the level of disparity necessary to produce maximum perceptual change in different studies in the literature. (Anderson, 1973 and Cardozo, 1965)

Given strong level of commitment, the customers evaluation becomes more favorable. However, even a small shortcoming of product performance in comparison to expectations may cause the produts to fall outside of the consumer's range of acceptance.

When product is accurately described in comparison to no information or little information given to customers, a more favorable evaluation is obtained.

Effort spent to gather the product also shapes the perceived performance in a positive way.

2.5 Consumption vs Decision Satisfaction

The traditional disconfirmation process is imlicitly founded on consumption satisfaction. Some researchers propose to consider consumers experience satisfaction and dissatisfaction 17

not only with the selected product but also with the purchase decision process itself. (Heitmann, Lehmann & Hermann, 2007)

The decision satisfaction is defined to depend on the characteristics of a choice set, such as the availability of options and the alignability of an assortment. Furthermore, Fitzsimons, Greenleaf, and Lehmann (1997) found a positive correlation between decision and consumption satisfaction.

3. MEASUREMENT OF SATISFACTION LEVEL

There are some practices are customer satisfaction measurements. Even on a national scale consumer satisfaction indexes are developed as in the case of Swedish National Customer Satisfaction Barometer and The American Customer Satisfaction Index (Fornell, 1992 and Fornell & Anderson 1996). Also business practices are developed to measure customer satisfaction. One of the many ways of measuring customer satisfaction is to compute a Customer Satisfaction Index (CSI) based on customers ratings of their satisf action. A CSI can be derived from a six point scale that ranges from very dissatisfied to very satisfied. Some practical information about formation of such a customer satisfaction index is described by Roger Best (2009).

Evaluation of a costumer satisfaction index is also an important issue. A wide view evaluation may reveal the most strategic information to the firm about its customer portfolio. In such an evaluation, for example somewhat satisfied or somewhat disssatisfied customer segments will be considered as vulnerable to competitor attacks. dissatisfied and very dissatisfied customer segments should be futher investgated to protect the company against a negative WOM and customer losses.

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4. CONSEQUENCES OF SATISFACTION
Between 1960s and 1980s, researches focused on which general dimensions of product performance are important to the consumer and how these dimensions are related to satisfaction. They provided a direct link between perceived performance and satisfaction and later on, they derived empirical support for previous studies of expectation. In this part, consequenses of satisfaction is addressed.

4.1. High Satisfaction / No Dissatisfaction

4.1.1. Retention
Customer satisfaction and retention are important linkages. The ultimate goal of any marketing strategy should be attract, satisfy and retain target customers. The longer a customer stays with an organization the more utility the customer generates. This utility is an outcome of a number of factors relating to the time the customer spends with the organization, including the higher initial costs of introducing and attracting a new customer; an increase in the value of purchases; an increase in the number of purchases; the customer's better understanding of the organization and positive word-of-mouth promotion.

Apart from the benefits that longevity of customers creates, it is suggest that the costs of customer retention activities are less than the costs of acquiring new customers. For example, the financial implications of attracting new customers may be five times as costly as keeping existing customers (Rust and Zahorik, 1993). However, maintaining high levels of satisfaction does not ensure all customers remain loyal.

Customer satisfaction has for many years been a key determinant in explaining why customers leave or stay with an organization. Every organization needs to know how to retain their customers, even if they appear to be satisfied.

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It is argued that some unsatisfied customers may choose not to defect, because they do not expect to receive better service elsewhere and that some satisfied customers may look for other providers if they believe they can get better services elsewhere (Reichheld, 1996). Customer satisfaction is viewed an important indicator of customer retention but customer satisfaction is not always an assurance of customer retention. Retaining customers is also dependent on a number of other factors such as choices, conveniences, prices, and incomes (Reichheld, 1996).

Next, we consider how retention is related to profitability by examining how retaining a customer benefits a firm. Higher customer retention means a base of customers who buy more frequently, in greater volumes, and are more prone to try other offerings by the firms, thus increasing revenues while lowering the cost of Marketing and sales by engaging in positive word of mouth (Reichheld, 1996). Therefore, retained customers are a revenueproducing asset for the firm. Note, however, that revenue from retained customers comes at a cost. Profit may be negative in the first period due to the cost of acquiring the customer. Customers may only become profitable to serve over time. Customer retention is therefore a net present value proposition.

Although many models have been developed to assess customer value, their basic logic is the same: A firm must first spend resources to acquire customers (acquisition cost) and then to cultivate them (maintenance cost). Balancing these is the revenue stream (revenues) produced by a customer. The contribution to the bottom line then is [revenue (acquisition cost + maintenance cost)]. However, whereas the acquisition cost is an up-front expenditure, the revenue comes over a long period of time.

Firms that keep acquiring new customers but are unable to retain them are unlikely to see positive bottom-line results. The revenue stream from a retained customer is lost to the firm

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when the customer leaves. The firm not only loses sales but also the benefits of retained customers such as lower service and Marketing costs.

The loyal customer has to be replaced (at a high acquisition premium) by a new customer who buys less frequently and in smaller quantities (lower revenues), requires more service (higher service cost), and is less likely to recruit new customers (higher Marketing costs). Consequently, to make the same level of sales, a firm with a low retention rate must incur higher costs. Hence, the deleterious impact of customer defection can be much larger than the benefit reaped from retaining a customer.

4.1.2. Loyalty
Customer retention is thought to improve profitability, principally by reducing costs incurred in acquiring new customers; the prime objective being zero defections of profitable customers (Reichheld, 1996). There is, however, a distinction between customers who are retained and those who are loyal. Customers may be retained but may not necessarily be loyal. True loyal customers are usually portrayed as being less price-sensitive and more inclined to increase the number and/or frequency of purchases. They may become advocates of the organization concerned and either directly or indirectly influence the decision making of their peers or family.

The links between customer loyalty and organizational profitability have been also demonstrated, suggesting that an organization with loyal customers enjoys considerable competitive advantage (Reichheld, 1996). Loyal customers have a positive effect on customer retention but customer loyalty is not customer retention. Loyalty is only a valid concept in situations where customers have options to choose from. The main issue is that retention should not be taken as a substitute for loyalty.

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Similarly, repurchase alone is not an indicator of loyalty. Continued customer support, which might even include extending the range of purchases, can often be an indication of inertia. Behavioral patterns form only one component of loyalty and if the consumer does not demonstrate a favorable attitude towards a brand or company, there is an increased chance of switching.

Considering customer loyalty, firms customer relationship management and loyalty programs should also be mentioned. As an important component of firms customer relationship management strategy, loyalty programs aim to increase customer loyalty by rewarding customers for doing business with the firm. Through these programs, firms can potentially gain more repeat business and, at the same time, obtain rich consumer data that aid future CRM efforts.

Despite the prevalent use of loyalty programs, their effectiveness is not well understood. Some researchers question the value of loyalty programs. For example, loyalty programs do not necessarily foster loyalty and are not cost effective and that the proliferation of loyalty programs is a hype or a me-too scheme (Dowling, 2002). Conversely, some researchers believe that loyalty programs have a positive impact on consumers repatronage decisions. It seems that the debate on whether loyalty programs are truly effective will continue.

Even though there is a debate on loyalty programs, it can be said that given a wide variety of choices and a low switching barrier, it is easy for todays consumers to switch among different firms. This poses significant threats to customer relationships because consumers are not likely to commit to a single brand or firm. We think that loyalty programs can alleviate this lack of commitment and reduce customer defection by raising switching costs. Because loyalty programs reward customers for their repeated patronage, consumers tend to focus their purchases in one program to maximize the benefits they receive.

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4.2. Dissatisfaction
Dissatisfied customers may react in various ways. Consumers first decide whether to convey an expression of dissatisfaction (action) or to take no action. The second-level decision concerns whether the response taken is public or private. Public actions include seeking redress directly from the organization, taking legal action, or complaining to public or private agencies. Private actions include boycotting the seller or manufacturer (brand switching) and/or engaging in negative word-of-mouth.

Most organizations, particularly those involved in services, recognize that consumer dissatisfaction can and will occur from time to time. Consumer response involves at least three distinct activities:

(a) Switching brands/store (that is exit), (b) Making a complaint to the seller (that is voice), and (c) Telling others about the unsatisfactory experience (that is negative word-of-mouth) (Richins, 1983).

4.2.1. Switching Brands/Stores

The main behavior in exit is to leave the shop and start being a customer in another shop. This behavior has costs and gains. The exit costs are related to access to alternatives and to the degree of loyalty. Exit costs are higher in those cases where there is no alternative shop. If the customer is convinced that complaining will be effective that could delay exit.

4.2.2. Complaint Behavior

Studies on consumer complaint behavior have focused on behavioral responses, that is, those consumer actions that directly convey an expression of dissatisfaction. These 23

behaviors include complaints directed to second parties (manufacturers and retailers), complaints to third parties (public consumer protection agencies, voluntary organizations, ombudsman or court) and telling friends and family (Singh, 1988).

Although many researchers would agree with the central concept that dissatisfaction is a fundamental determinant for complaining behavior, some of them would qualify this proposition to include additional variables beyond satisfaction to fully explain consumer complaint behavior.

The incidence and likelihood of complaining has been found to vary based on individual consumer demographic characteristics. Complainers tend to hold professional jobs, earn higher incomes, are well educated, and younger than non-complainers (Singh, 1988).

Consumers personality traits and psychological characteristics might play an important role in complaining behavior. Consumers differ in self-confidence and in their degree of aggressiveness or submissiveness. Complainers have been found to be more assertive, selfconfident and in personal control of their life experiences (internal control) relative to noncomplainers (Singh 1988). However, it should be pointed out that researchers have found that most demographic variables and underlying personality traits provide very little explanatory power in explaining differences in consumer complaining behaviour (Richins, 1987).

If it is impossible to avoid service failures and dissatisfaction, then it becomes increasingly important for organizations to understand how to manage complaint behaviors and minimize their adverse effects.

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Complaints, as an outcome of dissatisfaction, are in many cases perceived in a negative manner. However, complaints reveal problems that, in many cases are significant and deserve the attention of retailers and manufacturers.

In conclusion, we consider complaints as informative tool for retailers and manufacturers about consumers existing needs and provide the opportunity for discussion about future needs. Viewed in this manner, complaining may be very useful for the retailer and manufacturer in discovering and correcting product problems, increasing consumer satisfaction, retaining the consumer as an active purchaser and increasing market place efficiency, rather than simply pacifying unhappy consumers or providing an excuse and/or appropriate form of redress.

4.2.3. Negative WOM

The marketing literature agrees on the claim that word of mouth communication has a substantial influence on consumer purchase decisions. Word of mouth (WOM) is a message about an organizations products or services or about the organization itself. Usually WOM involves comments about product performance, service quality, trustworthiness, and passed on from one person to another. The person who has personal experience with products or services from a particular organization is considered objective sources of information by the person who listens to. The information communicated by senders can be positive, negative, or a mixture of both.

Negative WOM behavior to other consumers represents another form of dissatisfied consumer behavior that is expected to increase in the face of a dissatisfying experience. This effect is especially likely when the product or service failure is severe, attributions for the failure are external, or high levels of social activity characterize the disappointed consumer (Richins, 1983).

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Negative WOM offers consumers a mechanism for releasing tension, getting back at the entity by informing others of disappointing encounters, regaining control over a distressing situation, gaining sympathy from others, and conveying to others that the consumer has high standards (Nyer, 1997). These motivations for telling potential buyers about a particularly dissatisfying experience, in turn, suggest that negative WOM and satisfaction would be inversely related on average.

It is found that only one third of dissatisfied customers complain directly to the organization concerned (Day, Grabicke, Schaetzle and Staubach, 1981). Regardless of the exact figure, the general consensus is that those customers who do complain are in the minority.

Complaint rates not only underestimate the number of dissatisfied customers, but they fail to indicate the extent to which negative WOM may adversely affect business. For example, it is found that 85% of customers dissatisfied with a clothing item told an average of five others (Richins, 1983). This example is an evidence to support the views that consumers place more weight on negative information in making product evaluations.

Another example is that customers dissatisfied with a product spread negative WOM to eleven acquaintances, while satisfied customers may spread positive WOM to only three (Kotler&Gary, 2010).

Similarly, those with memories of poor service tell approximately 11 people while those with pleasant recollections tell only six (Hart, Heskett, and Sasser, 1990). This ratio of positive to negative WOM is supported by previous research findings which suggest consumers engage in about twice as much WOM when they are dissatisfied compared to when they are satisfied.

26

Conclusion of all of these finding, we can say that it is important for a firm to be aware of negative WOM about its products. Recognizing the influence of WOM is important to marketers' decisions on customer service, especially in regard to justifying expenditure on complaint handling, customer retention, and service recovery.

27

SELECTED ARTICLES ON SATISFACTION

Article: 1
A Longitudinal Analysis of Customer Satisfaction and Share of Wallet: Investigating the Moderating Effect of Customer Characteristics. Cooil, Bruce; Keiningham, Timothy L.; Aksoy, Lerzan; Hsu, Michael. Journal of Marketing, Jan2007, Vol. 71 Issue 1, p67-83, 17p, 4 charts, 1 diagram. Keywords: marketing research, consumer satisfaction, research, customer loyalty programs, customer loyalty, customer retention, customer relations, brand choice, income, customer services, consumer behavior, customer satisfaction, demographics, loyalty, share of wallet Abstract: Customer loyalty is an important strategic objective for all managers. Research has investigated the relationship between customer satisfaction and loyalty in various contexts. However, these predominantly cross-sectional studies have focused on customer retention as the primary measure of loyalty. There has been little investigation into the impact on share of wallet. Using data from the Canadian banking industry, this research aims to (1) provide the first longitudinal examination of the impact of changes in customer satisfaction on changes in share of wallet and (2) determine the moderating effects of customer age, income, education, expertise, and length of relationship. Data from 4319 households using 12,249 observations over a five-year period indicate a positive relationship between changes in satisfaction and share of wallet. In particular, the initial satisfaction level and the conditional percentile of change in satisfaction significantly correspond to changes in share of wallet. Two variables, income and length of the relationship, negatively moderate this relationship. Other demographic and situational characteristics have no impact.

Article: 2
An integrative model of consumer satisfaction in the context of e-services. Hong-Youl Ha. International Journal of Consumer Studies, Mar2006, Vol. 30 Issue 2, p137149, 13p, 4 charts, 1 diagram. 28

Keywords: consumer satisfaction, consumer behavior, marketing strategy, electronic commerce, customer services, consumers, attribution, disconfirmation, e-service Abstract: This research examines how customer satisfaction affects its antecedent and outcome variables such as expectation, performance, disconfirmation, word-of-mouth, brand loyalty, attribution and repurchase. This research also takes the important integrative step of understanding the consumer behavioural constructs of consumer satisfaction. Although researchers have focused on the antecedents of consumer satisfaction, our integrative model has extended the outcomes of consumer behaviour on consumer satisfaction. Furthermore, this model strongly suggests a positive view of the interrelationships between the antecedent variables and outcome variables of satisfaction. In particular, our model is not consistent with Oliver's attribution models in which satisfaction is a consequence of attribution processing. All hypothesized variables were supported by our empirical study. The findings present a variety of guides to formulating marketing strategies for both practitioners and academics.

Article: 3
Are Women More Loyal Customers Than Men? Gender Differences in Loyalty to Firms and Individual Service Providers. Melnyk, Valentyna; van Osselaer, Stijn M.J; Bijmolt, Tammo H.A. Journal of Marketing, Jul2009, Vol. 73 Issue 4, p82-96, 15p, 4 charts. Keywords: customer loyalty, consumer behavior, customer relations management, gender, women, sex differences, customer loyalty, gender, loyalty to company, loyalty to employee, self-construal Abstract: Prevailing wisdom assumes that female consumers are more loyal than male consumers. The authors report conditions under which the reverse is found, depending on the object of customer loyalty. For example, whereas female consumers tend to be more loyal than male consumers to individuals, such as individual service providers, this difference is reversed when the object of loyalty is a group of people. The authors find a similar 29

crossover interaction effect for loyalty to individual employees versus loyalty to companies. This effect is mediated by self-construal in terms of relational versus collective interdependence. The authors discuss the managerial and theoretical implications of these gender differences.

Article: 4
Choice Goal Attainment and Decision and Consumption Satisfaction. Heitmann, Mark; Lehmann, Donald R; Herrmann, Andreas. Journal of Marketing Research (JMR), May2007, Vol. 44 Issue 2, p234-250, 17p, 8 charts, 2 diagrams. Keywords: consumer satisfaction, consumption (economics), household electronics industry, consumer behavior, consumers attitudes, marketing research, choice goals, consumer electronics, consumption satisfaction, decision satisfaction, satisfaction, word of mouth Abstract: Several individual, social-setting, and choice-set factors have been shown to be related to satisfaction. This article argues that these factors operate through a set of choice goals. Using panel data on purchasers of consumer electronics, the authors examine how five goals (justifiability, confidence, anticipated regret, evaluation costs, and final negative affect) drive decision and consumption satisfaction, which in turn determine loyalty, product recommendations, and the amount and valence of word of mouth.

Article: 5
Measuring customer value and satisfaction in services transactions, scale development, validation and cross-cultural comparison. Huber, Frank; Herrmann, Andreas; Henneberg, Stephan C.. International Journal of Consumer Studies, Nov2007, Vol. 31 Issue 6, p554-564, 11p, 8 charts, 1 diagram. Keywords: consumer satisfaction, customer lifetime value, customer services, quality of service, marketing theory, consumers' preferences, brand loyalty, commercial products, 30

consumers attitudes, mtmm, scale development, service satisfaction, service value, validation Abstract: Customer value and customer satisfaction are pivotal but at the same time elusive concepts in services marketing theory. This paper focuses on discussing the relationship between these two concepts. We propose operationalization by developing and testing scales, especially operational indicators, for important dimensions and drivers of the services-value construct. A multitrait-multimethod design is used to test the robustness of the operationalization. Furthermore, a cross-cultural data set is used to explore country influences using confirmatory factor analysis and structural equation models. Results indicate that the measurement construct is robust and useful in country-comparative studies.

Article: 6
Satisfaction Strength and Customer Loyalty. Chandrashekaran, Murali; Rotte, Kristin; Tax, Stephen S; Grewal, Rajdeep. Journal of Marketing Research (JMR), Feb2007, Vol. 44 Issue 1, p153-163, 11p, 3 charts. Keywords: consumer satisfaction, customer services, service industries, consumers attitudes, brand loyalty, consumer behavior, business enterprises, customer satisfaction, customer uncertainty, defection, loyalty Abstract: Evidence reveals that many customers who state that they are satisfied with a service provider nevertheless defect. In this article, the authors focus on identifying which customers are vulnerable to defection despite their stated high levels of satisfaction. Building on the recently developed Judgment Uncertainty and Magnitude Parameters (JUMP) model, the authors decompose customers' stated satisfaction into two related but independent facetssatisfaction level and satisfaction strengthand then examine the role of satisfaction strength in the translation of satisfaction into loyalty. Using data from an ongoing customer satisfaction tracking study being conducted by a large U.S.-based service organization, Study 1 examines the role of satisfaction strength in shaping the satisfaction 31

loyalty link in a business-to-business setting. Study 2, a conceptual replication in a businessto-consumer context, examines the hypothesized relationships in a service failure/recovery situation. The studies strongly demonstrate that satisfaction strength plays a central role in the translation of stated satisfaction into loyalty. A key finding is that though satisfaction translates into loyalty when satisfaction is strongly held (i.e., low uncertainty), the translation is significantly lowered, on average, by approximately 60% when the same satisfaction is more weakly held (i.e., high uncertainty). The studies also indicate that prior relationship aspects (length of relationship, volume of business, and favorability of prior experiences) result in even greater vulnerability.

Article: 7
Satisfaction, Repurchase Intent, and Repurchase Behavior: Investigating the Moderating Effect of Customer Characteristics. Mittal, Vikas; Kamakura, Wagner A.. Journal of Marketing Research (JMR), Feb2001, Vol. 38 Issue 1, p131-142, 12p, 3 graphs. Keywords: consumer satisfaction, redemption (law), consumers, customer retention, customer services, empirical research, consumer education, behavior, satisfaction, characters & characteristics Abstract: Despite the claim that satisfaction ratings are linked to repurchase behavior, few attempts can be found that relate satisfaction ratings to actual repurchase behavior. This article fills this void by presenting a conceptual model for relating satisfaction ratings and repurchase behavior. The model is based on the premise that ratings observed in a typical customer satisfaction survey are error-prone measures of the customer's true satisfaction, and they may vary systematically on the basis of consumer characteristics. The authors apply the model to a large-scale study of 100,040 automotive customers. Results show that consumers with different characteristics have different thresholds such that, at the same level of rated satisfaction, repurchase rates are systematically different among different customer groups. The authors also find that the nature and extent of response bias in satisfaction ratings varies by customer characteristics. In one group, the response bias is so 32

high that rated satisfaction is completely uncorrelated to repurchase behavior (r = 0). Furthermore, the authors find that, though nonlinear, the functional form relating rated satisfaction to repurchase intent is different from the one relating it to repurchase behavior. Although the functional form exhibits decreasing returns in the case of repurchase intent, it exhibits monotonically increasing returns in the case of repurchase behavior.

Article: 8
The Effect of Stating Expectations on Customer Satisfaction and Shopping Experience. Ofir, Chezy; Simonson, Itamar. Journal of Marketing Research (JMR), Feb2007, Vol. 44 Issue 1, p164-174, 11p, 1 chart, 1 graph. Keywords: consumer behavior, consumers attitudes, consumer profiling, customer loyalty, brand choice, marketing strategy, consumption (economics), customer expectations, negativity, satisfaction, surveys Abstract: Customers' expectations are key determinants of their consumption experiences, satisfaction, and loyalty. The authors examine alternative theoretical predictions about the impact of stating expectations before purchase on postpurchase perceptions of the shopping experience and the firm. In particular, the authors suggest that asking customers to articulate their expectations can backfire and lead to lower postpurchase evaluations of the shopping and consumption experience. A series of field experiments indicate that compared with a control group, stating prepurchase expectations leads customers to focus on negative aspects of the shopping experience and perceive the same performance more negatively. The tendency for consumers to rate their shopping experiences less favorably after stating prepurchase expectations is inconsistent with confirmation bias as well as assimilation, contrast, and positivity effects. The final study contrasts the impact of stating expectations about the next store shopping experience with the impact of evaluating the store's past performance. The results show that though (prepurchase) expectations are indistinguishable from evaluations of the store's past performance, the former leads to lower postpurchase than prepurchase evaluations, whereas the latter tends to generate higher postpurchase

33

evaluations. The article concludes with a discussion of the theoretical and practical implications of this research.

Article: 9
The Long-Term Impact of Loyalty Programs on Consumer Purchase Behavior and Loyalty. Liu, Yuping. Journal of Marketing, Oct2007, Vol. 71 Issue 4, p19-35, 17p, 2 charts, 2 graphs. Keywords: marketing research, customer loyalty programs, customer loyalty, consumer behavior, convenience stores, research, franchises (retail trade), chain stores, marketing, convenience store, customer relationship management, loyalty programs, purchase behavior, relationship marketing Abstract: Despite the prevalent use of loyalty programs, there is limited evidence on the long-term effects of such programs, and their effectiveness is not well established. The current research examines the long-term impact of a loyalty program on consumers' usage levels and their exclusive loyalty to the firm. Using longitudinal data from a convenience store franchise, the study shows that consumers who were heavy buyers at the beginning of a loyalty program were most likely to claim their qualified rewards, but the program did not prompt them to change their purchase behavior. In contrast, consumers whose initial patronage levels were low or moderate gradually purchased more and became more loyal to the firm. For light buyers, the loyalty program broadened their relationship with the firm into other business areas. The findings suggest a need to consider consumer idiosyncrasies when studying loyalty programs and illustrate consumers' cocreation of value in the marketing process.

Article: 10
The royalty of loyalty: CRM, quality and retention. Zineldin, Mosad. Journal of Consumer Marketing, 2006, Vol. 23 Issue 7, p430-437, 8p.

34

Keywords: marketing, customer relations, customer loyalty, competitive advantage, customer relations management, consumer behavior, relationship marketing, brand choice, competitive advantage, customer loyalty, customer relations, relationship marketing Abstract: Purpose--The purpose of the study is to examine and develop a better understanding of triangle relationship between quality, customer relationship management (CRM) and customer loyalty (CL) which might lead to companies' competitiveness (CC), Design/methodology/approach--A research model (5Qs) was designed to measure satisfaction and loyalty. This model is based on two conditions: the customer database and CRM strategy are well structured; and that management control systems have the capacity to produce required data for the analysis. Findings--Changing in quality over time within various segments or related to specific products or categories of products/services can be used as an indicator the level of loyalty. By linking infrastructure, interaction and atmosphere indicators to the quality of object and processes, researchers and managers can document which changes in CRM strategy improve the overall satisfaction and loyalty, hence the ultimate outcomes. Practical implications--Key ways to build a strong competitive position are through customer relationship management (CRM) and product/service quality. A company has to create customer relationships that deliver value beyond the provided by the core products, This involves added tangible and intangible elements to the core products thus creating and enhancing the "product surrounding". One necessary expecting result of the creation of value added is customer loyalty. This is an important function to ensure the fulfillment of given customer requirements and companies profits, survival and competitive positioning. Originality/value--In this study a new technical-functional 5 qualities model (5Qs) is created and utilized to measure the quality and loyalty. The paper suggests how to incorporate the infrastructure, interaction and atmosphere indicators into the quality of object and processes to identify changes and improvement in CRM strategies.

Article: 11
Understanding the Customer Base of Service Providers: An Examination of the Differences Between Switchers and Stayers.

35

Ganesh, Jaishankar; Arnold, Mark J.; Reynolds, Kristy E.. Journal of Marketing, Jul2000, Vol. 64 Issue 3, p65-87, 23p, 12 charts. Keywords: customer loyalty, consumer behavior, consumer satisfaction, customer retention, consumers attitudes, customer relations, consumers' preferences, customer services, quality of service Abstract: Creating and maintaining customer loyalty has become a strategic mandate in today's service markets. Recent research suggests that customers differ in their value to a firm, and therefore customer retention and loyalty-building efforts should not necessarily be targeted to all customers of a firm. Given these sentiments, it is becoming increasingly necessary for firms to have a thorough understanding of their customer base. Yet current knowledge is limited in providing insights to firms regarding the differences within their customer base. This research comprises two studies in which the authors examine the differences among internal customer groups in a service industry. As theory suggests and as is empirically validated here, customers who have switched service providers because of dissatisfaction seem to differ significantly from other customer groups in their satisfaction and loyalty behaviors. The findings offer some interesting implications for both marketing theory and practice.

Article: 12
When Customer Love Turns into Lasting Hate:The Effects of Relationship Strength and Time on Customer Revenge and Avoidance. Grgoire, Yany; Tripp, Thomas M; Legoux, Renaud. Journal of Marketing, Nov2009, Vol. 73 Issue 6, p18-32, 15p, 1 chart, 2 diagrams, 4 graphs. Keywords: consumer satisfaction, consumers attitudes, customer loyalty, consumer behavior, relationship marketing, research, brand choice, marketing, psychological aspects, customer avoidance, customer relationships, customer revenge, online public complaining, service failure recovery, time effect

36

Abstract: This article explores the effects of time and relationship strength on the evolution of customer revenge and avoidance in online public complaining contexts. First, the authors examine whether online complainers hold a grudgein terms of revenge and avoidance desiresover time. They find that time affects the two desires differently: Although revenge decreases over time, avoidance increases over time, indicating that customers indeed hold a grudge. Second, the authors examine the moderation effect of a strong relationship on how customers hold this grudge. They find that firms' best customers have the longest unfavorable reactions (i.e., a longitudinal love-becomes-hate effect). Specifically, over time, the revenge of strong-relationship customers decreases more slowly and their avoidance increases more rapidly than that of weak-relationship customers. Third, the authors explore a solution to attenuate this damaging effectnamely, the firm offering an apology and compensation after the online complaint. Overall, they find that strong-relationship customers are more amenable to any level of recovery attempt. The authors test the first two issues with a longitudinal survey and the third issue with a follow-up experiment.

Article: 13
Why Don't Some People Complain? A Cognitive-Emotive Process Model of Consumer Complaint Behavior. Stephens, Nancy; Gwinner, Kevin P.. Journal of the Academy of Marketing Science, Summer98, Vol. 26 Issue 3, p172-189, 18p, 2 charts, 1 diagram. Keywords: consumer complaints, consumer behavior, psychology, consumers research, marketing, women consumers, human behavior, emotions, adjustment (psychology) Abstract: This article reports the development of a theoretical model of consumer complaint behavior by using cognitive appraisal theory as its foundation. Because of its importance to management and lack of attention in the marketing literature, specific emphasis is placed on the phenomenon of noncomplaining and the role of consumer emotion in dissatisfying marketplace experiences. The model presents cognitive appraisal as the key element in the evaluation of consumer threat and harm, which subsequently may result in psychological stress. Stressful appraisal outcomes are suggested to elicit emotive reactions that, in 37

conjunction with cognitive appraisal, influence the type of coping strategy used by the consumer. Three coping strategies (problem focused, emotion focused, and avoidance) are identified and discussed. Key propositions are illustrated by using in-depth interview data from a sample of older female consumers.

38

LITERATURE ARTICLES ON SATISFACTION

Article: 1
A Cognitive Model of the Antecedents and Consequences of Satisfaction Decisions. Oliver Richard L.. Journal of Marketing Research (JMR), Nov80, Vol. 17 Issue 4, p460-469, Keywords: consumer satisfaction, research, consumers attitudes, customer services, consumer behavior, decision making, quality of products, consumers' preferences, attitude change, social psychology, satisfaction, judgment, choice (psychology) Abstract: A model is proposed which expresses consumer satisfaction as a function of expectation and expectancy disconfirmation. Satisfaction, in turn, is believed to influence attitude change and purchase intention. Results from a two-stage field study support the scheme for consumers and nonconsumers of a flu inoculation.

Article: 2
A National Customer Satisfaction Barometer: The Swedish Experience. Fornell, Claes. Journal of Marketing, Jan92, Vol. 56 Issue 1, p6-21, 16p. Keywords: consumer satisfaction, research, market share, quality of products, consumption, demand, competitive advantage, marketing strategy, sweden, economic conditions 1945. Abstract: Many individual companies and some industries monitor customer satisfaction on a continual basis, but Sweden is the first country to do so on a national level. The annual Customer Satisfaction Barometer (CSB) measures customer satisfaction in more than 30 industries and for more than 100 corporations. The new index is intended to be complementary to productivity measures. Whereas productivity basically reflects quantity of output, CSB measures quality of output (as experienced by the buyer). The author reports the results of a large-scale Swedish effort to measure quality of the total consumption process as customer satisfaction. The significance of customer satisfaction and its place within the overall strategy of the firm are discussed. An implication from examining the 39

relationship between market share and customer satisfaction by a location model is that satisfaction should be lower in industries where supply is homogeneous and demand heterogeneous. Satisfaction should be higher when the heterogeneity/homogeneity of demand is matched by the supply. Empirical support is found for that proposition in monopolies as well as in competitive market structures. Likewise, industries in general are found to have a high level of customer satisfaction if they are highly dependent on satisfaction for repeat business. The opposite is found for industries in which companies have more captive markets. For Sweden, the 1991 results show a slight increase in CSB, which should have a positive effect on the general economic climate.

Article: 3
A reexamination of the determinants of consumer satisfaction. Spreng, Richard A.; MacKenzie, Scoff B.; Olshavsky, Richard W.. Journal of Marketing, Jul96, Vol. 60 Issue 3, p15, 18p. Keywords: consumer satisfaction, consumers attitudes, marketing, consumer goods, consumer confidence, marketing research, customer loyalty, customer retention, consumers Abstract: Although the "disconfirmation of expectations" model continues to dominate research and managerial practice, several limitations indicate that it is not a complete picture of satisfaction formation. The authors propose a new model of the satisfaction formation process that builds on the disconfirmation paradigm by specifying a more comprehensive model that includes two standards in a single model and specifically incorporates the impact of marketing communication. An empirical test of the model provides support for the hypothesized relationships and a better understanding of the mechanisms that produce satisfaction.

Article: 4
An Experimental Study of Customer Effort, Expectation, and Satisfaction. 40

Cardozo, Richard N.. Journal of Marketing Research (JMR), Aug65, Vol. 2 Issue 3, p244-249, 6p. Keywords: customer services, consumer satisfaction, laboratories, manufactures, research, consumers, product usage, product management, marketing research, science experiments Abstract: Results of a laboratory experiment indicate that customer satisfaction with a product is influenced by the effort expended to acquire the product and the expectations concerning the product. Specifically, the experiment suggests that satisfaction with the product may be higher when customers expend considerable effort to obtain the product than when they use only modest effort. This finding is opposed to usual notions of marketing efficiency and customer convenience. The research also suggests that customer satisfaction is lower when the product does not come up to expectations than when the product meets expectations.

Article: 5
An Investigation Into the Determinants of Customer Satisfaction. Churchill Jr., Gilbert A.; Surprenant, Carol. Journal of Marketing Research (JMR), Nov82, Vol. 19 Issue 4, p491-504, 14p. Keywords: consumers research, consumer satisfaction, brand choice, marketing, mathematical models, consumers' preferences, consumers attitudes, marketing research, brand loyalty, consumption (economics), purchasing, consumer behavior, determinants Abstract: The authors investigate whether it is necessary to include disconfirmation as an intervening variable affecting satisfaction as is commonly argued, or whether the effect of disconfirmation is adequately captured by expectation and perceived performance. Further, they model the process for two types of products, a durable and a nondurable good, using experimental procedures in which three levels of expectations and three levels of performance are manipulated for each product in a factorial design. Each subject's perceived expectations, performance evaluations, disconfirmation, and satisfaction are subsequently measured by using multiple measures far each construct. The results suggest the effects are 41

different for the two products. For the nondurable good, the relationships are as typically hypothesized. The results for the durable good are different in important respects. First, neither the disconfirmation experience nor subjects' initial expectations affected subjects' satisfaction with it. Rather, their satisfaction was determined solely by the performance of the durable good. Expectations did combine with performance to affect disconfirmation, though the magnitude of the disconfirmation experience did not translate into an impact on satisfaction. Finally, the direct performance-satisfaction link accounts for most of the variation in satisfaction.

Article: 6
Cognitive, Affective, and Attribute Bases of the Satisfaction Response. Oliver, Richard L.. Journal of Consumer Research, Dec93, Vol. 20 Issue 3, p418-430, 13p. Keywords: consumer satisfaction, customer retention, consumer behavior, brand loyalty, consumers research, customer relations, consumers attitudes, decision making, customer loyalty, shopping, consumption, consumers' preferences Abstract: An attempt to extend current thinking on postpurchase response to include attribute satisfaction and dissatisfaction as separate determinants not fully reflected in either cognitive (i.e., expectancy disconfirmation) or affective paradigms is presented. In separate studies of automobile satisfaction and satisfaction with course instruction, respondents provided the nature of emotional experience, disconfirmation perceptions, and separate attribute satisfaction and dissatisfaction judgments. Analysis confirmed the disconfirmation effect and the effects of separate dimensions of positive and negative affect and also suggested a multidimensional structure to the affect dimensions. Additionally, attribute satisfaction and dissatisfaction were significantly related to positive and negative affect, respectively, and to overall satisfaction. It is suggested that all dimensions tested are needed for a full accounting of postpurchase responses in usage

42

Article: 7
Consumer Dissatisfaction: The Effect of Disconfirmed Expectancy on Perceived Product Performance. Anderson, Rolph E.. Journal of Marketing Research (JMR), Feb73, Vol. 10 Issue 1, p38-44. Keywords: expectation, consumer satisfaction, quality function deployment, brand choice, consumers attitudes, research, brand evaluation, quality of products, product acceptance, consumers' preferences, psychological aspects, perception Abstract: Four psychological theories are considered in determining the effects of disconfirmed expectations on perceived product performance and consumer satisfaction. Results reveal that too great a gap between high consumer expectations and actual product performance may cause a less favorable evaluation of a product than a somewhat lower level of disparity.

Article: 8
Customer Satisfaction, Customer Retention, and Market Share. Rust, Roland T.; Zaborik, Anthony J.. Journal of Retailing, Summer93, Vol. 69 Issue 2, p193. Keywords: consumer satisfaction, customer loyalty, customer retention, customer relations, market share, consumers attitudes, business, profit, brand loyalty Abstract: We provide a mathematical framework for assessing the value of customer satisfaction. The framework enables managers to determine which customer satisfaction elements have the greatest impact, and how much money should be spent to improve particular customer satisfaction elements. This makes it possible to hold customer satisfaction programs accountable, in the way that other business programs are held accountable, by forcing them to demonstrate their benefits with respect to bottom-line profitability. We use an individual-level model of loyalty and retention, and then build up to market share by aggregation. We demonstrate the application of our approach in a pilot study of a city's retail banking market. 43

Article: 9
Customer Satisfaction, Market Share, and Profitability: Findings From Sweden. Anderson, Eugene W.; Fornell, Claes; Lehmann, Donald R.. Journal of Marketing, Jul94, Vol. 58 Issue 3, p53. Keywords: consumer satisfaction, financial performance, economic forecasting, consumers attitudes, customer retention, profitability, quality of service, market share, research, rate of return, rational expectations, economic aspects, client satisfaction Abstract: Are there economics benefits to improving customer satisfaction? Many firms that are frustrated in their efforts to improve quality and customer satisfaction are beginning to question the link between customer satisfaction and economic returns. The authors investigate the nature and strength of this link. They discuss how expectations, quality, and price should affect customer satisfaction and why customer satisfaction, in turn, should affect profitability; this results in a set of hypotheses that are tested using a national customer satisfaction index and traditional accounting measures of economic returns, such as return on investment. The findings support a positive impact of quality on customer satisfaction, and, in turn, profitability. The authors demonstrates the economic benefits of increasing customer satisfaction using both an empirical forecast and a new analytical model. In addition, they discuss why increasing market share actually might lead to lower customer satisfaction and provide preliminary empirical support for this hypothesis. Finally, two new findings emerge: First, the market's expectations of the quality of a firm's output positively affects customers' overall satisfaction with the firm; and second, these expectations are largely rational, albeit with a small adaptive component

Article: 10
Customer Satisfaction: A Meta-Analysis of the Empirical Evidence.

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Szymanski, David M.; Henard, David H.. Journal of the Academy of Marketing Science, Winter2001, Vol. 29 Issue 1, p16, 20p. Keywords: consumer satisfaction, customer services, executives, educators, meta-analysis, evidence Abstract: The growing number of academic studies on customer satisfaction and the mixed findings they report complicate efforts among managers and academics to identify the antecedents to, and outcomes of, businesses having more-versus less-satisfied customers. These mixed findings and the growing emphasis by managers on having satisfied customers point to the value of empirically synthesizing the evidence on customer satisfaction to assess current knowledge. To this end, the authors conduct a meta-analysis of the reported findings on customer satisfaction. They document that equity and disconfirmation are most strongly related to customer satisfaction on average. They also find that measurement and method factors that characterize the research often moderate relationship strength between satisfaction and its antecedents and outcomes. The authors discuss the implications surrounding these effects and offer several directions for future research.

Article: 11
Modeling Consumer Satisfaction Processes Using Experience-Based Norms. Woodruff, Robert B.; Cadotte, Ernest R.; Jenkins, Roger L.. Journal of Marketing Research (JMR), Aug83, Vol. 20 Issue 3, p296-304, 9p. Keywords: consumer satisfaction, research, consumers' preferences, research, consumer behavior, brand name products, product management, brand loyalty, expectation, brand choice, marketing research, confirmation & disconfirmation, choice Abstract: The authors propose to modify the basic confirmation/disconfirmation paradigm in two ways. First, expectations are replaced with experience-based norms as the standard for comparison of a brand's performance. Second, a zone of indifference is postulated as a mediator between confirmation/disconfirmation and satisfaction. Implications for future research are also presented. 45

Article: 12
Modeling the Determinants of Customer Satisfaction for Business -to-Business Professional Services. Patterson, Paul G.; Johnson, Lester W.; Spreng, Richard A.. Journal of the Academy of Marketing Science, Winter97, Vol. 25 Issue 1, p4-17, 14p. Keywords: consumer satisfaction, advertising, industrial, mathematical models, customer services, industrial publicity, consumers attitudes, fairness Abstract: This research empirically examines for the first time the determinants of customer satisfaction or dissatisfaction (CS/D) in the context of business professional services. The simultaneous effect of key CS/D constructs (expectations, performance, and disconfirmation) and several variables-fairness (equity), purchase situation (novelty, importance, and complexity)-and individual-level variables (decision uncertainty and stakeholding) are examined in a causal path framework. Data were obtained from a twostage longitudinal survey of client organizations. The results indicated substantial support for the hypothesized model. The effect of purchase situation and individual-level variables (via their indirect affects) rivals that of disconfirmation and expectations in explaining CS/D. Performance was found to affect CS/D directly but not as powerfully as disconfirmation.

Article: 13
Models of Consumer Satisfaction Formation: An Extensive. Tse, David K.; Wilton, Peter C.. Journal of Marketing Research (JMR), May88, Vol. 25 Issue 2, p204-212, 9p. Keywords: consumer satisfaction, consumers attitudes, cus tomer loyalty, brand loyalty, expectancy theories, marketing models, marketing research, marketing, mathematical models, consumption, cognitive dissonance

46

Abstract: The authors extend consumer satisfaction literature by theoretically and empirically (1) examining the effect of perceived performance using a model first proposed by Churchill and Surprenant, (2) investigating how alternative conceptualizations of comparison standards and disconfirmation capture the satisfaction formation process, and (3) exploring possible multiple comparison processes in satisfaction formation. Results of a laboratory experiment suggest that perceived performance exerts direct significant influence on satisfaction in addition to those influences from expected performance and subjective disconfirmation. Expectation and subjective disconfirmation seem to be the best conceptualizations in capturing satisfaction formation. The results suggest multiple comparison processes in satisfaction formation.

Article: 14
Product Performance and Consumer Satisfaction: A New Concept," Swan, John E.; Combs, Linda J.. Journal of Marketing, Apr76, Vol. 40 Issue 2, p25-33, 8p. Keywords: perceived performance, satisfaction, expectation, dissatisfaction Abstract: Even though knowledge of the processes that may determine consumer satisfaction should be of interest to both marketing theorists and practitioners, the topic has received little attention in the literature. A growing number of studies have analyzed perceived product performance and expectations, but they have not considered the relationships between expectations, performance, and satisfaction.' In addition, it is seldom clear which general dimensions of product performance are important to the consumer and how these dimensions are related to satisfaction. The study reported in this article was designed to examine one aspect of the relationship between expectations, performance, and satisfaction. In particular, the authors look at the expressive (nonmaterial, psychological) and instrumental (physical) dimensions of a product, in this case clothing, to determine the extent of their influence on consumer satisfaction and dissatisfaction. Implications are given for the study of consumer behavior and for marketing decision making.

47

Article: 15
Response Determinants in Satisfaction Judgments. Oliver, Richard L.; DeSarbo, Wayne S.. Journal of Consumer Research, Mar88, Vol. 14 Issue 4, p495-507, 13p. Keywords: consumers attitudes, research, investments, consumers' preferences, behavioral research, research, consumer satisfaction, satisfaction, social sciences, manipulative behavior, difference, individual differences Abstract: The effects of five determinants of satisfaction are tested as well as individual differences in satisfaction formation. Manipulations of attribution, expectancy, performance, disconfirmation, and equity are written into stock market trading scenarios in full factorial design. Results show that all main effects and four ordinal two-way interactions are significant. Then, an individual-level analysis is performed on the repeated measures data. Three clusters of subjects sharing similar response tendencies (disconfirmation, performance, and equity) are identified and related to investment attitudes, outcome attitudes, and demographics. No consistent relationships are discovered, suggesting that the response differences reflect deeper behavioral tendencies. Implications of this approach for satisfaction paradigms, satisfaction theory, and individual satisfaction response orientations are presented.

Article: 16
Selected Determinants of Consumer Satisfaction and Complaint Reports. Bearden, William O.; Teel, Jesse E.. Journal of Marketing Research (JMR), Feb83, Vol. 20 Issue 1, p21-28, 8p. Keywords: consumer satisfaction, research, consumers attitudes, consumer complaints, management, consumer behavior, consumer research, customer services, automobiles, maintenance & repair, marketing research, industrial, complaints & complaining

48

Abstract: Data obtained from 375 members of a consumer panel in a two-phase study of consumer experiences with automobile repairs and services were used to examine the antecedents and consequences of consumer satisfaction. The results support previous findings that expectations and disconfirmation are plausible determinants of satisfaction, and suggest that complaint activity may be included in satisfaction/dissatisfaction research as suggested by earlier descriptions of consumer complaining behavior.

Article: 17
Strengthening the Satisfaction-Profit Chain. Anderson, Eugene W.; Mittal, Vikas. Journal of Service Research, Nov2000, Vol. 3 Issue 2, p107, 14p; Keywords: consumer satisfaction, customer services Abstract: Argues against abandoning so-called customer satisfaction measurement as a means of optimizing customer retention and profitability. Discussion of ways in which significant value can be added to a firm's understanding of the satisfaction-profit chain.

Article: 18
The American Customer Satisfaction Index: Nature, Purpose, and Findings. Fornell, Claes; Johnson, Michael D.; Anderson, Eugene W.; Jaesung Cha; Bryant, Barbara Everitt. Journal of Marketing, Oct96, Vol. 60 Issue 4, p7-18, 12p. Keywords: consumer satisfaction, customer services, economic sectors, business enterprises, economics, statistical methods, consumer behavior, customer retention, consumers attitudes, econometrics, customization, united states, ratings & rankings Abstract: The American Customer Satisfaction Index (ACSI) is a new type of market-based performance measure for firms, industries, economic sectors, and national economies. The authors discuss the nature and purpose of ACSI and explain the theory underlying the ACSI 49

model, the nation-wide survey methodology used to collect the data, and the econometric approach employed to estimate the indices. They also illustrate the use of ACSI in conducting benchmarking studies, both cross-sectionally and over time. The authors find customer satisfaction to be greater for goods than for services and, in turn, greater for services than for government agencies, as well as find cause for concern in the observation that customer satisfaction in the United States is declining, primarily because of decreasing satisfaction with services. The authors estimate the model for the seven major economic sectors for which data are collected. Highlights of the findings include that (1) customization is more important than reliability in determining customer satisfaction, (2) customer expectations play a greater role in sectors in which variance in production and consumption is relatively low, and (3) customer satisfaction is more quality-driven than value- or price-driven. The authors conclude with a discussion of the implications of ACSI for public policymakers, managers, consumers, and marketing in general.

Article: 19
The Antecedents and consequences of Customer Satisfaction fo Firms. Anderson, Eugene W.; Sullivan, Mary W.. Marketing Science, Spring93, Vol. 12 Issue 2, p125143, 19p. Keywords: consumer satisfaction, business enterprises, marketing research, marketing, quality of products, elasticity, purchasing, Sweden Abstract: This research investigates the antecedents and consequences of customer satisfaction. We develop a model to link explicitly the antecedents and consequences of satisfaction in a utility-oriented framework. We estimate and test the model against alternative hypotheses from the satisfaction literature. In the process, a unique database is analyzed: a nationally representative survey of 22,300 customers of a variety of major products and services m Sweden in 1989-1990. Several well-known experimental findings of satisfaction research are tested in a field setting of national scope. For example, we find that satisfaction is best specified as a function of perceived quality and "disconfirmation"--the extent to which perceived quality fails to match prepurchase expectations. Surprisingly, 50

expectations do not directly affect satisfaction, as is often suggested in the satisfaction literature. In addition, we find quality which falls short of expectations has a greater impact on satisfaction and repurchase intentions than quality which exceeds expectations. Moreover, we find that disconfirmation is more likely to occur when quality is easy to evaluate. Finally, in terms of systematic variation across firms, we find the elasticity of repurchase intentions with respect to satisfaction to be lower for firms that provide high satisfaction. This implies a long-run reputation effect insulating firms which consistently provide high satisfaction.

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