The Customer Satisfaction Model

This chapter will provide a description of how the dependent variable customer satisfaction is linked to the independent variables perceived quality, perceived value and customer expectations. The definitions of the abovementioned variables will also be discussed.

Conceptual Model

The Customer Satisfaction Model (Figure 1) is a set of causal equations that link perceived quality, perceived value and customer expectations to customer satisfaction. The customer satisfaction model is linked, in turn, to its consequences in terms of customer complaints and customer loyalty. This model is based on the American Customer Satisfaction Index (ACSI), which is one of the best-in-breed solutions for customer satisfaction measurement that is tied directly to financial performance. The American Customer Satisfaction Index (ACSI) is the leading national indicator of customer satisfaction with goods and services in the U.S. economy. The ACSI was developed by the University of Michigan’s Stephen M. Ross School of Business. The dependent variable in this conceptual model is customer satisfaction, while the independent variables are perceived quality, perceived value and customer expectations. Customer complaints and customer loyalty are the results (consequences) of this conceptual framework (Angelova & Zekiri, 2011).

Customer satisfaction

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Figure . Customer satisfaction (Source: SIT MBA 2010)

Perceived quality is the first determinant of customer satisfaction, which is the served market’s evaluation of recent consumption experience, and is expected to have a direct and positive effect on customer satisfaction.

Perceived value is the second determinant of customer satisfaction, or the perceived level of product quality relative to the price paid. Perceived value is a measure of quality relative to price paid. Although price is often very important to the customer’s first purchase, it usually has a somewhat smaller impact on customer satisfaction for repeat purchases.

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Customer expectations are the third determinant of customer satisfaction, which measures the customer’s anticipation of the quality of a company’s products or services. Expectations represent both prior consumption experience, which includes some no experiential information like advertising and word-of mouth, and a forecast of the company’s ability to deliver quality in the future (Angelova & Zekiri, 2011).

Customer Satisfaction

In the context of this study it is important to make clear what is meant by ‘customer satisfaction”. There are different conceptualizations of customer satisfaction, but the two more popular approaches are: transaction-specific and cumulative or overall satisfaction (Anderson, Fornell & Lehmann, 1994).

From the transaction-specific approach, customer satisfaction is viewed as a post choice evaluative judgment of a specific purchase occasion (Anderson et al., 1994). This approach defines customer satisfaction as an emotional response by the customer to the most recent transactional experience with an organization. The associated response occurs at a specific time following consumption, after the choice process has been completed. The affective response differs in intensity depending upon the situational variables that are present (Peterson & Yang, 2004).

According to Andaleeb and Carolyn (2006) it is a judgment that a product or service feature, or the product or service itself, provides a pleasurable level of consumption related ful¬llment. In other words, it is the overall level of contentment with a service/product experience.

The cumulative customer satisfaction is an overall evaluation based on the total purchase and consumption experience with a good or service over time (Anderson et al., 1994). This approach views customer satisfaction in a cumulative evaluation fashion that requires summing the satisfaction associated with specific products or services.

Whereas transaction-specific satisfaction may provide specific diagnostic information about a particular product or services encounter, cumulative satisfaction is a more fundamental indicator of the firm’s past, current, and future performance.

According to Barve (2011) customer satisfaction is the customer’s reaction to the value received from the purchase or utilization of the offering. Customer satisfaction represents the customer’s reaction to his or her perception of the value received as a result of using a particular product or service. That reaction will be influenced by the desired value (ideal standard) as well as by the perceived value of competitive offerings (industry norms, expectations based on use of competitor products). Thus customer satisfaction is influenced by the perception of the value delivered as well as by the perception of the value offered by competition.

Customer satisfaction is a post-consumption judgment that compares an offering’s evaluated aggregate quality with its quality disconfirmation.

Quality disconfirmation is the aggregation across attributes of an offering’s perceived attribute performance relative to a customer’s ‘should’ expectation. For universal attributes, quality disconfirmation is positive when perceived attribute performance exceeds a ‘should’ expectation and negative when perceived attribute performance falls below a ‘should’ expectation. For example, if the ‘should’ expectation for legroom is 15 inches, legroom above (below) 15 inches will result in positive (negative) quality disconfirmation, while 15 inches will have no quality disconfirmation (Golder, Mitra & Moorman, 2012).

We use ‘should’ expectations as the reference level for determining quality disconfirmation because ‘should’ expectations capture additional norms such as perceived equity and fairness. These norms are important to customer satisfaction and extend beyond the product-based norms in ‘will’ and ‘ideal’ expectations. Moreover, ‘should’ expectations enhance the impact of quality disconfirmation on customer satisfaction because an offering’s attribute’s performance is more likely to deviate from ‘should’ expectations of competing offerings in a category than from an offering specific ‘will’ expectation.

Thus, customer satisfaction is a comparison between quality (i.e., evaluated aggregate quality) and a quality standard (i.e., quality disconfirmation), whereas each quality state is a comparison of attribute performance with a performance standard (i.e., attribute design or ‘ideal’ expectations). A customer’s aggregation level for quality disconfirmation will match the aggregation level for evaluated aggregate quality, so these two concepts can be compared easily in forming customer satisfaction (Golder, Mitra & Moorman, 2012). However, attribute importance weights used in these aggregations do not need to be the same. Positive quality disconfirmation increases satisfaction; negative quality disconfirmation decreases satisfaction. When perceived attributes equal ‘should’ expectations, there is no change in customer satisfaction beyond the effect of the quality level that already exists (Oliver, 2009).

Perceived Quality

Quality is perhaps the most important and complex component of business strategy. Firms compete on quality, customers search for quality, and markets are transformed by quality. It is a key force leading to delighted customers, firm profitability, and the economic growth of nations (Deming, 1982; Rust, Zahorik, & Keiningham, 1995). Quality has its roots in business practice and in many disciplines including marketing, management, economics, engineering, operations, strategy, and consumer research. In business practice, views of quality have evolved over the past 30 years through programs such as Total Quality Management, the Baldrige Awards, and Six Sigma, all of which have helped firms improve quality, particularly in manufactured goods (Deming, 1982; Powell, 1995).

Academic research has also contributed to our understanding of quality. For example, marketing’s explanation of service quality has enhanced our understanding of perceived quality, customer expectations, and satisfaction (e.g., Boulding et al., 1993; Parasuraman, Zeithaml, & Berry, 1985). Quality continues to be a frequent focus of research in marketing and other disciplines. In fact, over the last five years, 79 articles on quality have been published in Journal of Marketing and Management Science.

As one example, scholars have proposed alternative quality frameworks for goods or services but not an integrated view of both (Brady & Cronin, 2001; Brucks, Zeithaml, & Naylor, 2000). In another example, quality has been made operational as or used interchangeably with customer satisfaction even though these concepts are distinct (Oliver 2009).

We define quality as a set of three distinct states of an offering’s attributes’ relative performance generated while producing, experiencing, and evaluating the offering. We do not combine these states into an overall concept of quality. Each state of quality is a comparative assessment of an offering’s attribute’s performance relative to a reference standard desired by either firms or customers. Here we build on a key idea in the gaps model of service quality (Parasuraman, Zeithaml, and Berry 1985) namely, that quality is not simply an attribute’s performance but rather an assessment of performance relative to a reference standard.

Each quality process relates to the other two processes through contemporaneous links and dynamic links and described in subsequent sections. Contemporaneous links occur in the current time period, whereas dynamic links either draw on information from a previous period or feed information to the next period.

The quality production process occurs when firms use attribute design and process design specifications to convert their resource inputs and those from customers into produced attributes. Attribute design specifies the resource inputs (from firms, customers, or both), attribute performance, and attribute reliability that an offering must deliver. Process design implements the attribute design by specifying how resource inputs are converted into produced attributes.

Within this process, the state of produced attribute quality is an offering’s produced attribute performance relative to the firm’s attribute design specification. The quality production process receives multiple sources of feedback, which firms can use to improve attribute design.

The quality experience process occurs when firms (alone or with customers) deliver attributes for customers to experience and customers perceive these attributes through the lens of their measurement knowledge and motivation, emotions, and expectations. In this process, there is translation from what the customer experiences (delivered attributes) to what the customer perceives (Hoch & Deighton, 1989). Customers will not perceive accurately all attributes they experience and will overlook some attributes entirely. Within this process, the state of experienced attribute quality is an offering’s delivered attribute performance relative to a customer’s ‘ideal’ expectation. Although customers and firms can both measure experienced attribute quality, we argue that firms are more able and motivated to do so.

The quality evaluation process occurs when customers compare an offering’s perceived attributes with their expectations to form summary judgments of quality and then satisfaction.

These expectations are determined by accumulated information consisting of stored customer knowledge accrued from a customer’s own experiences, other customers’ experiences, firm strategies (e.g., customer relationship and brand strategies), media reports, and quality signals associated with each attribute (Kirmani & Rao, 2000). Within this process, the state of evaluated aggregate quality is the aggregation across attributes of an offering’s perceived attribute performance relative to a customer’s ‘ideal’ expectation (Zeithaml, 1988). Although this state resides in customers, firms benefit from measuring it.

According to Tsiotsou (2005) perceived quality and satisfaction differ in two ways: perceived quality is a more specific concept based on product and service features, whilst satisfaction can result from any dimension (e.g. loyalty, expectations).

In addition, perceived quality can be controlled to a certain degree by a company whilst satisfaction cannot. Thus, it is suggested that when perceived quality and satisfaction are regarded as overall assessments, perceived quality is understood as an antecedent of satisfaction and therefore precedes it (Llusar, Zornoza & Tena, 2001).

The outcome of the research conducted by Caruana (2002) in order to verify if perceived quality had the preceding role was that he suggested that there is a direct effect of perceived quality on consumer satisfaction. Thus, it is expected that the higher the perceived quality of a product, the higher the consumer satisfaction.

However, quality production is primarily the domain of firms; quality evaluation is primarily the domain of customers; and quality experience is the domain in which firms and customers interact.

Frank and Enkawa, (2007) revealed that customer satisfaction can be raised in two ways: either by delivering higher customer perceived quality at the same price or by delivering the same quality at a lower price, which indicates for the relationship between perceived value and customer satisfaction, but also the interrelationship between perceived quality and perceived value. According to Turel and Serenko (2004) there is a interrelationship between the two constructs as perceived value includes the price dimension to perceived quality and, therefore, it is the perception of quality for money (Turel & Serenko, 2004).

Perceived Value

Definitions of perceived value have been collected from different authors. These definitions are summarized in a chronological in the below table (1).

Definitions of perceived value

Author(s)

The customers overall assessment of the utility of a product based on perceptions of what is received and what is given.

Zeithaml, 1988. pp. 14.

A trade-off between the quality or benefits they perceive in the product relative to the sacrifice the perceive by paying the price.

Monroe, 1990. pp. 46.

Consumer choice is a function of multiple consumption values. These are functional, social, emotional, epistemic and conditional value. The consumption values make different contributions in any given choice situation. The consumption values are independent.

Sheth et al., 1991. pp. 160

A costumer’s perceived preferences for evolution of those products attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the costumer’s goal and purposes in use situations.

Woodruff, 1997. pp. 142.

The consumers overall assessment of the utility of a product based perceptions of what is received and what is given.

Sweeney, 1999.

The consumer’s assessment of the value that has been created for them by a supplier given the trade-off between all relevant benefit and sacrifices in a specific use situation

Flint et al, 2002. pp. 171.

Table . Definitions of the perceived value (Source: Ercsey, 2000)

Ercsey (2000) stated that perceived value is an abstract concept with meanings that vary according to context. In marketing the perceived value is typically defined from the consumer’s perspective. The customer perceived value is usually defined in services marketing literature as the customer’s overall assessment of the utility of a product based on perceptions of what is received and what is given. According to the definition, the perceived value is based on the customers’ experiences and seen as a trade-off between benefits and sacrifices or between the quality and the sacrifices, which can be divided into the monetary and the psychological sacrifices. The sacrifices have originally included primarily the monetary sacrifices such as price and acquisition costs, but they have been extended to include also perceived non-monetary price and the risk of the poor performance. Moreover, such definitions are developed according to the changes in the consumers’ behavior. Cravens & Piercy (2003) argue that perceived value consists of the benefits and costs resulting from the purchase and use of the products. Another definition of the perceived value, suggest that perceived value represents an exchange of what is received and what is given (Iglesias & Guillen, 2004). Keller (1998) is of the opinion that consumers combine quality perception with cost perception to arrive at an assessment of the perceived value.

The two main approaches to the conceptualization of the perceived value are as follows. The first one defines the perceived value as a construct divided two parts, one of the received benefits (economic, social and relational) and another of the sacrifices made (price, time, effort, risk and convenience) by the consumer (Grewal, Monroe & Krishnan; 1998, Cronin, Brady & Hult, 2000).

According to the definition by Zeithaml (1988) the perceived value arises from the personal comparison of the obtained benefits and the made sacrifices. Consequently this concept is highly subjective and personal one (Parasuraman, Zeithaml & Barry, 1985). Besides it is a utilitarian perception which contains the components of the benefits and the sacrifices of the consumers.

The benefit component that a consumer receives from the purchase includes the perceived service quality and the psychological benefits (Zeithaml, 1988). The sacrifices are the monetary and the non monetary components: price, time, energy, effort, inconvenience. Thus for the consumer to purchase the service or to purchase it again it has to be delivered with value either by incorporating benefits or by reducing the sacrifices. The second approach is based on a multidimensional construct of the perceived value (Woodruff, 1997, Sweeney & Soutar, 2001, Sánchez, Callarisa, Rodriquez & Moliner, 2006). This concept includes the functional dimension and the affective dimension, examining the consumer’s purchasing behavior. The functional value is determined by the rational and economic valuations of the consumers, and the service quality forms this dimension. The affective dimension is divided into an emotional dimension and a social dimension. Authors (Sheth, Newman & Gross, 1991) deal with the multidimensionality of the perceived value and recognize the cognitive and affective aspects. Sheth et al. (1991) identified five dimensions of the value concept: social, emotional, functional, conditional and epistemic. They defined the functional value as a perceived utility of the service attributes. The emotional value consists of the feelings or the affective states generated from the experience of the consumption. The social value is the acceptability at the level of the individual’s relationships with his social environment. The epistemic value is the capacity of the service to surprise arouses curiosity or satisfies the desire for knowledge. Finally, the conditional value refers to the situational factors such as illness or specific social situations (Sheth et al., 1991).

Consequently the perceived value scale comprised four dimensions: quality – performance, price-value for money, emotional value and social value. This scale was tested based on the consumers’ perceptions of consumer durable goods in a retail purchase situation to determine what consumption values drive purchase attitude and behavior. In different choice situations the researchers can investigate the consumers’ decision relating specifically to the perceived utility of a choice at buy level (buy or not buy), product level (product type A or product type B) or brand level (brand A or brand B).

According to Petrick (2002) the dimensions of what the consumers receive from the purchasing services include the quality, the emotional response, the reputation obtained from the services, the monetary price and the behavioral price.

In addition many studies have concluded that service quality positively affects the perceived value (Cronin et al., 2000; Petrick, 2002; Sanchez et al., 2006). The connection between the perceived value and the consumer satisfaction or future intentions debated in the service marketing literature. The literature seems to suggest that satisfaction depends on the perceived value (Anderson et al., 1994), and the future intentions are determined in part by perceived value. Also Sanchez et al., (2006), Sweeney and Soutar (2001) argue that perceived value is a positive predictor of the consumer satisfaction.

Customer Expectations

Expectations play an important role in the satisfaction formation. The extent to which a product or service fulfills a customer’s need and desire may play an important role in forming feelings of satisfaction because of the impact of confirmation or disconfirmation they have on satisfaction.

Consumers expect to be delivered quality products and services; therefore companies try to offer quality products and services. The term expectations really matters to companies because they want to know what customers’ expectations are. The term “expectations” has different uses, in the satisfaction literature, it is viewed as a prediction made by a consumer about what is likely to happen during an exchange or transaction. According to Oliver (1981) expectations are consumer-defined probabilities of the occurrence of positive and negative events if the consumer engages in some behavior.

In the contrast, in the service quality literature it is defined as desires and wants, what a service provider should offer rather than would offer. Customers form their expectations from their past experience, friends’ advice, and marketers’ and competitors’ information and promises (Kotler, 2000). Therefore, perceived service quality is viewed as the difference between consumers’ perceptions and expectations for the service provided. Organizations in order to keep expectations from rising, they have to perform services properly from the first time (Parasuraman et al., 1988). Thus, customer expectations for the service are likely to rise when the service is not performed as promised. Expectations serve as reference points in customer’s assessment of performance (Cronin & Taylor, 1992). Thus, retailers can increase customer satisfaction by decreasing customer expectations.

The level of customer service is also a factor, and a customer might expect to encounter efficiency, helpfulness, reliability, confidence in the staff, and a personal interest in his or her patronage. If the product or services meets the customer expectations, then the customer will be satisfied.

The contribution of expectations to customer satisfaction should be mainly in the form of predicting future quality. Unless there is uncertainty with regard to future quality, the contribution of expectations to overall customer satisfaction should be minimal (Anderson et al., 1994).

Expectation is the results of prior experience with the company’s products (Turkylmaz & O Zkan, 2007), it represents both prior consumption experience, which includes some non-experiential information, and a forecast of the company’s ability to deliver quality in the future. Knowing what the customer expects is the first and possible most critical step in the whole process of delivering products and service to the customers, because being wrong with what customer expectation is, may cause lose the customers or expending money and time that do not count to the customers.

According to Nasser, Salleh and Gelaidan (2012) the pertinent question is how and to what extent are providers of products and services charging their customers and provide value to them. All customers expect benefits in terms of value.

Expectations are the consequences of previous experience with the company’s products or services. This raises customer expectations for overall quality, in product and service quality, and for fulfillment of personal needs. Customer expectations’ construct is anticipated to have a direct and positive relationship with customer satisfaction (Anderson et al., 1994; Anderson & Fornell, 2000). On the other hand, Nasser et al., (2012), reported that the relationship between customer expectation and customer satisfaction had a weak and non-significant relationship in some other previous CSI Customer satisfaction studies.

Conclusion

There are a range of differing opinions about the relationship between the various constructs outlined above, and these need to be resolved. This study is an attempt to contribute to this process. The purpose of this study is to investigate the relationship between customer satisfaction and customer expectations, perceived quality and perceived value.