Building customer satisfaction, value, and retention: Customer Satisfaction | Management Optional Notes for UPSC PDF Download

Introduction

• From a marketing standpoint, satisfaction is defined as an individual's sense of contentment or dissatisfaction arising from the comparison of a product's perceived performance with their expectations. Consumer satisfaction stands as a fundamental concept in modern marketing strategies, highlighting the significance of catering to consumer needs for substantial financial gains. It is recommended that, to optimize satisfaction, one should avoid exaggerating product or service capabilities during advertising campaigns or other forms of communication. 
• The satisfaction of customers with a product can directly contribute to profitability, allowing companies to enhance the likelihood of repeat sales while concurrently reducing sales and marketing costs. Customer satisfaction plays a pivotal role in fostering customer loyalty, diminishing the necessity to allocate marketing budgets towards acquiring new customers. Satisfied customers may also act as advocates by recommending the company's products or services to potential consumers, thereby amplifying opportunities for additional revenue and profit. Undoubtedly, the significance of customer satisfaction cannot be overstated. As Henry Ford aptly put it, sustained profitability is achievable only through the establishment of customer value and satisfaction, with profits being an outcome of creating enduring customer value.

The Dynamics of Expectations and Performance

• Customer satisfaction is closely tied to the expectations of purchasers. When customers make a purchase, they assess the actual performance of the product against their anticipated outcomes. Satisfaction is achieved when the product aligns with expectations, while dissatisfaction arises when it falls short. Exceeding expectations results in customers being highly pleased. Expectations are formed from diverse sources such as friends, past experiences, competitors, and the promises made by marketers.
• This underscores the idea that customers evaluate product performance against specific standards. Confirmation occurs when perceived performance aligns with these standards, while disconfirmation arises when a disparity exists. In the contemporary business landscape, measuring satisfaction is imperative. Organizations can utilize these measurements to optimize their business outcomes. The assessment of customer satisfaction involves both quantitative and qualitative methods. Theoretically, satisfaction emerges from the comparison of the rewards and costs of a purchase in relation to anticipated outcomes.
• Operationally, satisfaction is akin to attitude, evaluated by the level of contentment with various attributes of a product or service (Churchill and Suprenant, 1982). Organizations gauge customer satisfaction through indicators like the number of problem calls, complaints via email or phone, and product returns (Werth, 2002). At times, managers need to assess customer dissatisfaction to foster healthy relationships. Collecting and analyzing relevant data is the company's primary responsibility for obtaining precise information about customer satisfaction.

Exploring Customer Satisfaction

• Customer satisfaction measurement is a critical aspect of management research, often centered on two primary constructs: customers' expectations before purchasing or using a product and their comparative perception of the product's performance after usage.
• Customer expectations encompass various types, including ideal, expected, minimum tolerable, and desirable, as identified by Miller (1977). Day (1977) further distinguishes expectations related to costs, product nature, efforts in obtaining benefits, and social values. The perceived product performance is crucial for making comparisons with expectations, with theorists such as Olshavsky and Miller (1972) highlighting the differences between expectations and perceived performance.
• The correlation between customer expectations and satisfaction, as per Ingrid Feelikaova (2004), is influenced by psychological theories. Festinger's (1957) theory suggests that unmet expectations lead to psychological discomfort, motivating individuals to adjust their cognitions. Contrast theory proposes that discrepancies between expectations and actual performance result in an exaggeration of differences. Carlsmith and Aronson (1963) studied the consequences of unmatched confirmations, finding that even a pleasant outcome would be perceived negatively if it deviated from expectations.
• The Disconfirmation Model involves comparing customers' expectations with perceived performance ratings. It categorizes disconfirmation as positive when performance exceeds expectations and negative when it falls short. Product characteristics play a significant role in this process, with complex products potentially causing dissatisfaction due to cognitive costs and difficulty in appraisal.
• Churcill and Suprenant (1982) distinguish between durable and non-durable goods in the disconfirmation process. They found that non-durable goods align with traditional disconfirmation processes, while for durable goods, disconfirmation experiences and initial expectations do not affect satisfaction.
• Service quality is another crucial element influencing customer satisfaction, defined as the difference between customer expectations and perceptions of service. Customer satisfaction, in turn, depends on a product's performance relative to expectations.
• In summary, customer satisfaction hinges on a product's performance compared to customer expectations. Building customer relationships is a crucial component of Relationship Marketing to achieve customer satisfaction.