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Customer satisfaction in business studies
Satisfaction can be characterized as an evaluation post-purchase of a product quality in comparison to the expectations before the purchase (Kotler 1991). The difference of the pre-purchase expectation is evaluated during post-purchase that can either be satisfactory or unsatisfactory. The role of satisfaction represents a crucial cornerstone between the provider-customer relationship. This relationship has its starting point even before the customers purchase the products and services.
Speng et al. (1993) proposed that an important influence on overall satisfaction judgments is that the customers’ satisfaction starts with the availability of product information when comparing different product options. Satisfaction is also defined as a result of the purchase process and satisfaction with the purchase outcome. Purchase process refers to product comparisons and interactions with the sales team while purchase outcome is the actual product or service purchased.
The stages of the consumer-provider relationship include formation search, comparison of alternatives, and the sales team interaction. Once the consumer finds satisfaction or is able to meet his or her expectation then the more likely it will yield satisfaction with other stages. The purchase process and purchase outcome is similar to the pre-purchase and post-purchase evaluation that either leaves the customer satisfied or not satisfied. The purpose of the literature review is to provide extensive reviews on the impacts of pricing on customer satisfaction related to the purchasing behavior.
It is equally important to managers to have a better understanding of the link between satisfaction and the duration of the provider-consumer relationship to help determine the purchasing behavior of its market to increase profitability as well as customer retention. 2. The impact of customer satisfaction on business profitability. Numerous researches have been done to determine the relationship between customer satisfaction and loyalty, retention and economic performance (Kristensen & Martensen, 1996; Rucci et al. , 1998; Duboff & Heaton, 1999; Edvardsson et al. , 2000; Bernhardt et al.
, 2000) including the structure of the framework (Eskildsen et al. , 2004). The success of business entities significantly relies on how customers are satisfied with the products and services. The role of satisfaction within the context of business is that it favors retention of customers hence “repeat” business will likely occur. A relationship of customer satisfaction and retention, along with identified specific actions, can boost retention and profitability in the long run (Boston 1998). Customer loyalty Customer satisfaction and customer loyalty has turned into an increasingly significant in a study on modern retailing (Juhl, H.
, Kristensen, K. & Ostergaard, P. 2002). The stiff competition in the market demands an increase in differentiation consequently increasing customer loyalty. The true loyalty of customers is a powerful influence especially when customer’s intention to favorable recommends the brand or company to others (Getty and Thompson, 1994), horizontal communication or the mouth-to-mouth communication (Gremler & Brown, 1999; Reynolds and Arnold, 2000; Srinivasan et al. , 2002), customer’s resistance to the offerings of the competitors (Gundlach et al.
, 1995) and persuasive tactics to attract new customers (Dick & Basu, 1994). Customer Retention As has already been noted, satisfaction has been concern for a number of years and is generally recognised as a post purchase construct related to how much consumers like or dislikes a product or a service during the post-purchase period. It can be defined as an evaluation that an “experience was at least as good as it was supposed to be” (Hunt, 1997). Satisfaction is a response to a perceived discrepancy between prior expectations and perceived performance after consumption.
Consequently, managers need to understand how expectations are created and how these expectations are influenced by people’s consumption experiences. Customers are assumed to have developed expectations prior to consumption, later on the perceived performance is compared to these expectations in a same way as a “better than” or “worse than” model. Oliver (1981) defined satisfaction as a “summary psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with the consumer’s prior feelings about the consumption experience” (p. 27).
Oliver (1997) pointed out that satisfaction encompasses more than mere fulfillment. It describes a consumer’s experiences, which is the end state of a psychological process. Satisfaction has become a central concept in modern marketing thought and practice. Many studies have made significant contributions to better understanding this complex phenomenon (Bearden and Teel 1983; Oliver 1980, 1989; Spreng et al. 1996; Williams 1988). Achieving visitor satisfaction is one of important goals for most tourism service businesses and organizations today (Jones and Sasser 1995).
Increasing customer satisfaction and customer retention generates more profits, positive word-of-mouth, and lower marketing expenditures (Reichheld 1996; Heskett et al. 1990). Satisfaction is a visitor’s affective and evaluative response to the overall product or service experience (Oliver 1997). What visitors received from the investment money, time and other resources on a trip or a visit) are psychological benefits. Thus, it is an experience that tourists receive from a visit with tangible goods (Mathieson and Wall 1982).
It is also more likely that satisfied visitors will return and say positive things about a service (Tian-Cole et al. 2000). Improving the quality of service attributes as well as improving the emotional and psychological reactions that visitors obtain from service experiences are considered important to commercial and public tourism businesses and organizations. As Otto and Ritchie (1996) stated, the intimate, hands-on nature of the service encounter itself affords many opportunities for affective response.
It has long been acknowledged that human interaction itself is an emotionally charged process that applies in the context of business as well. There has been a considerable controversy about the link between customer satisfaction and retention. The strength of the relationship between the duration times and levels of satisfaction relies on the length of customer’s prior experience with the organization (1998:45) It means that when customers received what they paid for with failures during the service transaction then the business relationship will likely be very short-lived.
The management belief’s rests that higher levels of satisfaction increase retention rate, enhances consumption, thereby allowing firms to charge a premium or decrease costs of products and service offered. Satisfaction levels lies on several factors namely duration of service provider-customer relationship, competitive prices, quality of products, marketing efforts, maintenance or enhanced customer relationships. Each individual can be a potential customer, thus when pricing strategy and quality evaluation met his or her expectations will later on, become a part of the market or population directly proportional to the revenue of companies.
The changes in customer satisfaction can spell out the financial implications for the organization. High customer satisfaction ratings are the best indicator of the future profit of the company (Kotler 1991, p. 19) The total purchasing process takes into account each stage where the consumer is being introduced to the product or service in the forms such as promotional marketing, word of mouth, and advertisements to the time when a purchase decision has been made.