Customer Satisfaction
Introduction
Customer satisfaction is a term frequently used in marketing. It is a measure of how the products and services supplied by a company meet or exceed customer expectations. Customer satisfaction is defined as "the number of customers, or the percentage of total customers, whose report of their experience with a company, its products, or its services (rating indices) exceeds established satisfaction levels."[1] In a survey of nearly 200 marketing managers, 71 percent responded that they found the customer satisfaction metric very useful in the management and control of their businesses.[1].
According to Philip Kotler and Kevin Lane Keller, authors of the book Marketing Management, "satisfaction means: A feeling of pleasure or disappointment resulting from comparing the expected performance of the product (or result) in relation to the person's expectations" (Kotler, Keller).[2].
It is seen as a key performance indicator within businesses and is often part of a Balanced Scorecard. In a competitive market where companies compete for customers, customer satisfaction is seen as a key differentiator and increasingly becoming a key element of business strategy.[3].
"Within organizations, customer satisfaction indices can have far-reaching effects. By focusing employees on the importance of meeting customer expectations. Additionally, when these indicators are decreasing, they warn the company about problems that can affect sales and profitability.... These metrics quantify an important dynamic. When a brand has loyal customers, it obtains word-of-mouth marketing, which is free and highly effective."[1]
Therefore, it is essential for companies to effectively manage consumer satisfaction. To be able to achieve this, companies need reliable and representative measures of satisfaction.
"In satisfaction research, companies generally ask their customers whether their product or service has met or exceeded expectations. Therefore, expectations are a key factor behind satisfaction. When customers have high expectations and reality falls short, they will be disappointed and are likely to rate their experience below satisfactory. A luxury hotel, for example, may receive a lower or lower satisfaction rating than a motel—even though its facilities and service are considered superior in terms of satisfaction. 'absolute'."[1].
The importance of customer satisfaction decreases when a company has increased negotiating capacity. For example, cell phone plan providers, such as AT&T and Verizon, participate in an oligopolistic industry, where only a few providers of a product or service exist. As such, many cell phone plan contracts have a lot of fine print preventing them from ever going away. For example, providers of 100 cell phone plans, because customer satisfaction will be too low, such that customers could easily shop around for a better deal.