Republic of the Philippines

CAVITE STATE UNIVERSITY

Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

The Importance of Customer Satisfaction in

Relation to Customer Loyalty and Retention.

By

Harkiranpal Singh

May 2006
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

CONCLUSION:
• Customer satisfaction is very important.
• Though customer satisfaction does not guarantee repurchase on the
part of the customers.
• “Customer satisfaction is a direct determining factor in customer
loyalty, which, in turn, is a central determinant of customer retention”
Gerpott et al. (2001).
• Organizations should always strive to ensure that their customers are
very satisfied.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

INTRODUCTION:
• “Customers are the purpose of what we do and rather than
them depending on us, we very much depend on them. The
customer is not the source of a problem, we shouldn’t
perhaps make a wish that customers ‘should go away’
because our future and our security will be put in jeopardy”
Zairi (2000).
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

• “satisfaction is an overall customer attitude towards a

service provider, or an emotional reaction to the difference
between what customers anticipate and what they receive,
regarding the fulfilment of some need, goal or desire”
Hansemark and Albinsson (2004).
• “is actually the result of an organisation creating a benefit for
a customer so that they will maintain or increase their
purchases from the organization” Anderson and Jacobsen
(2000).
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

• “a deeply held commitment to re-buy or re-patronise a preferred

product or service consistently in the future despite situational
influences and marketing efforts having the potential to cause
switching behaviour” Oliver (1997) .
• customer retention is “the practice of working to satisfy customers
with the intention of developing long-term relationships with them”
Hoyer and MacInnis (2001).
• “a commitment to continue to do business or exchange with a
particular company on an ongoing basis” Zineldin (2000).
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

BACKGROUND:
• The paper is a systematic review of studies that shows how customer
satisfaction affects loyalty and retention.
• The study focused on the studies that show how customer
satisfaction affects organization’s profitability. Moreover, it reviewed
studies considering the consequences of customer satisfaction and
dissatisfaction as supporting data.
• The study also showed how customer satisfaction has positive
connection between customer satisfaction, loyalty and retention.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

RESULTS:

Hokanson (1995) Aaker (1995)

Factors that Affect Customer Performance Measures Reflecting Long-Term
Satisfaction Profitability
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

Coldwell (2001)
A statistical analysis of Customer Satisfaction

• • A Totally Satisfied Customer contributes 2.6 times as much revenue

to a company as a Somewhat Satisfied Customer.
• • A Totally Satisfied Customer contributes 17 times as much revenue
as a Somewhat Dissatisfied Customer.
• • A Totally Dissatisfied Customer decreases revenue at a rate equal to
1.8 times what a Totally Satisfied Customer contributes to a business”.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

METHODOLOGY:
• The study is a Peer Review and Systematic Review,
is the evaluation of work by one or more people with similar
competences as the producers of the work. It functions as a
form of self-regulation by qualified members of a profession
within the relevant field.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

ANALYSIS:
• The author cited numerous studies that shows the factors that affects
the customer satisfaction that led to the review of studies that proves
the positive connection of high customer satisfaction to high profit of a
business firm.
• There were statistical studies that were shown how integral customer
satisfaction affects profitability.
• In addition to, supporting the positive connection of customer
satisfaction to profitability, the author presented reviews on the
negative consequences of customer dissatisfaction from Hoyer and
Maclinis (2001) on a business which also emphasized its negative effect
to profitability.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

• The author also presented studies in how satisfaction affects

the loyalty and retention of the customers.
• The author presented the key strategies of having customer
loyalty, from Bansal and Gupta (2001), which also greatly
relates to value customer satisfaction.
• In addition to, numerous studies were also cited that
generates the same conclusion that customer satisfaction
leads and greatly influence customer loyalty.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

• On the other hand, there were also studies cited that customer
satisfaction is not enough prerequisite of loyal customer. The studies
show that satisfaction does not guarantee loyalty and retention but,
still, does not remove its effect on it.
• Numbers of 60% to 75% of customers, from Reichheld (1996) and
Storbacka and Lentinen (2001), are satisfied but do not remain loyal
in a single firm.
• On the other point of view, the author also presented studies that see
customer loyalty as a measure of customer satisfaction which still
shows the relation of satisfaction and loyalty.
 Republic of the Philippines
CAVITE STATE UNIVERSITY
Don Severino delas Alas
Indang, Cavite
(046) 4150-010 / (046) 4150-013 loc 206
www.cvsu.edu.ph
Philippine Association of Students in Office Administration - PASOA

The Importance of Customer Satisfaction in

Relation to Customer Loyalty and Retention.

By

Harkiranpal Singh

May 2006