Customer satisfaction
Satisfaction is an emotional state arising from the favorable disconfirmation of expectations. The link between satisfaction and loyalty has received a great deal of attention from theorists. Heskett et ah (1994) claim that satisfaction is one of the most important prerequisites of loyalty, whilst Liljander and Strandvik (1995) offer empirical evidence that satisfaction is a reliable predictor of a consumer’s intentions to re-buy. The measurement of customer satisfaction levels is commonly used to monitor relationship quality (see for example, Gummesson, 1999). Satisfaction is a relatively short-lived and subjective state, and customers often find it difficult to make reliable judgements about their own satisfaction levels, particularly in retrospect. To combat this, organizations should take a structured approach to measuring satisfaction. For example, Hewlett Packard measures satisfaction with a six-minute telephone survey in which several different questions test satisfaction on each of nine dimensions, including communication skills, competence of staff, reliability and responsiveness. Satisfaction ratings are given on a scale of 1-100. An average rating for each dimension can then be derived from the various questions (Shaw and Reed, 1999).
Employee satisfaction
Given the importance of employees in the implementation of RM programmes, there is a strong case for measuring employee satisfaction. In their model of the virtuous circle Reichheld et al. (2000) claim that the relationship between satisfaction and loyalty works in the same way for internal customers as for external – staff satisfaction leads to staff loyalty and retention, lowering training costs and increasing experience, skills, motivation and productivity. Similarly, in their model of the service-profit chain, Heskett et al. (1994) recommend measuring staff satisfaction with internal service quality.
The virtuous circle approach, however, considers staff satisfaction arising from the internal service quality created by the organization; with pay, recognition, reward systems and other terms and conditions of employment. The implementation of RM implies the additional need to monitor staff satisfaction with the state of customer relationships. Given that relationship success depends on interpersonal bonds between the individual members of staff and customers, the emotions of employees concerning the relationship are of critical importance. The relationship is unlikely to endure if employees in the supplier organization do not derive satisfaction from it.
Drawbacks of satisfaction monitoring
Satisfaction is frequently used to measure relationship quality: according to Shaw and Reed (1999), 73 per cent of senior managers cite satisfaction as a key business performance indicator. However, the practice has a growing number of critics. Reichheld et al. (2000) cite evidence from the automobile industry that throws doubt on the link between satisfaction and loyalty. Having linked customer satisfaction scores to dealer incentives and bonuses, car manufacturers have found that average satisfaction scores have risen to 90 per cent, whilst repurchase rates have remained constant at 50 per cent. Reichheld et al. attributes this to dealers ‘playing the system’ by putting emotional pressure on customers to return high satisfaction scores, and the fact that satisfaction is an inherently unstable state. Hence 60-80 per cent of customers who defected to a competitor said they were satisfied or very satisfied on the survey just prior to their defection.
It seems, therefore, that satisfaction surveys are a poor quantitative measure of relationship performance. The role of expectations in determining satisfaction means that customer satisfaction levels may change without any influence from the supplier. Add to this the practical difficulties in conducting reliable and valid satisfaction surveys, and the practice becomes even less useful. Nevertheless, such surveys can provide useful qualitative feedback, identifying problems or major shifts in customer expectations.
Complaints data and satisfaction monitoring
It should be stressed that satisfaction monitoring need not take the form of formal, quantitative surveys. Useful indications of customer satisfaction can be gained by monitoring customer complaints, particularly at the individual relationship level..