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Advanced Social humanities and Mangement 3(2) 2016:1-12

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ABSTRACT

Customer satisfaction is one of the essential factors for the success of a company.

To achieve the high customer satisfaction, companies must know when and how

their customers are satisfied about the products and services.

Satisfaction is a vague and complex term, when we constrain ourselves to the

domain of user product relationships. The literature is equipped with numerous

diverse definitions for satisfaction.

Customer satisfaction is a compelling issue because in the service industry

customer retention is more important than attracting new customers. Retaining

customers has a stronger impact on company profit than does attracting new

customers. Therefore, companies, so as to maximize profits in the long term,

should strive for zero defection through customer satisfaction. The key terms for

this study are customer satisfaction, service quality, and consumer behaviour.

Key words: Service Quality, Customer Satisfaction, Consumer behavior

INTRODUCTION

For decades, it has been a common belief that success in the marketplace was dependent upon organizations‟

ability to create satisfied customers (Arnold et al., 2005; Parasuraman et al.,1985; Reichheld and Sasser, 1990;

Rust and Zahorik, 1992, 1993). In fact, early scholars argued that the creation of a satisfied customer was the

fundamental core of businesses (Drucker, 1973).

Consistent with this argument is the fact that one of the central themes of the marketing concept is delivering

products and services that satisfy customer needs (Howard and Sheth, 1969; Kohli and Jaworski, 1990). In

return, satisfied customers are expected to exhibit behaviors that are favorable to the company, such as future

patronage and making recommendations to others.

Because of the recognized importance of customer satisfaction, it has been a topic that has generated substantial

attention among academicians. Emphasis on customer satisfaction often stems from the thought that keeping

current customers is much less expensive than attempting to attract new customers. Evidence of this appears in

a study of the financial service industry which suggests that increasing customer retention rates by just 5

percent may increase profits from 25 to 80 percent (Reichheld and Sasser, 1990).

In addition to customer retention (Bolton, 1998), scholars have produced impressive evidence of the favorable

effects of customer satisfaction on various behavioral intention indicators, such as repeat purchase (Szymanski

and Henard, 2001), willingness to recommend to others (Homburg et al., 2005), loyalty (Anderson and

Sullivan, 1993), and profitability (Anderson et al., 1994; Bernhardt et al., 2000).

Despite strong evidence for the positive effects of customer satisfaction on behavioral intentions (Anderson and

Sullivan 1993; Bolton 1998; Szymanski and Henard 2001), researchers also identified situations in which the

correspondence was found to be low (Jones and Sasser, 1995; Mittal and Kamakura, 2001; Reichheld, 1996;

Strauss and Neuhaus, 1997). Numerous studies have shown that many customers who switch are often satisfied

with their prior brand experience, with overall switching among satisfied customers across many industries

A LITERATURE REVIEW OF SERVICE QUALITY AND

CUSTOMER SATISFACTION

Akram Jashireh Department of Management and Accounting, College of Humanities , Islamic Azad university of Hamedan Branch ,Hamedan, Iran

[email protected]

Alireza Slambolchi Faculty Member of Management and Accounting, Islamic Azad University Hamedan Branch , Hamedan,Iran

[email protected]

Houshang Mobarakabadi Faculty Member of Management and Accounting, Islamic Azad University Hamedan Branch , Hamedan,Iran

[email protected]

mailto:[email protected]




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approaching 80% (Jones and Sasser, 1995; Keaveney, 1995; Oliver, 1999; Reichheld, 1996). For example,

Jones and Sasser (1995) found that a “satisfied” customer may switch because he or she tends to be indifferent,

holding no special preference or commitment to the provider of the service. Likewise, Reichheld (1996) pointed

out that car manufacturers in the USA consistently report levels of customer satisfaction in excess of 90%,

however repurchase intentions are about 35%. Blackwell, Miniard, and Engel (2006) captured the tone of

practitioners‟ explanation of the contradictory findings, stating “…businesses have begun to realize that simply

satisfying customers may not be enough…rather, they should strive for „customer delight‟…” (p. 214).

Corporate America, in particular, has begun to embrace this new philosophy, which suggests that merely

satisfying customers is inadequate (Keiningham and Vavra, 2001; Kumar and Iyer, 2001; McNeilly and Barr,

2006; Oliver et al., 1997). Organizations are now aiming their attention, as well as their resources, to

understanding how they can move beyond simply satisfying their customers, to delighting them. Recent

attention in the satisfaction literature has focused on the delight construct for its potential to influence

behavioral intentions (Chitturi et al., 2008; Loureiro and Kastenholz, 2010; Oliver et al., 1997).

LITERATURE REVIEW

Customer satisfaction

Customer satisfaction, as noted by Tahir, Waggett and Hoffman (2013), is “a customer's perspective based on

expectation and then subsequent post purchase experience”. In other words, it is an evaluation of products or

services‟ quality level that meets or exceeds the customer expectations. The term customer satisfaction has been

on the markets for a long time. In fact, many researchers and academicians emphasized that it is a key element

for a company‟s success in the market as well as a crucial factor for company‟ssurvival as it has a positive

effect on company‟s profitability. (Novikova, 2009; Angelova and Zekiri, 2011) It cannot be denied that a

satisfied consumer has a tendency to buy more than a less satisfied one. In a highly competitive market,

customer satisfaction is, indeed, a crucial key that builds strong and long-term relationships between the

customers and the firm. The measure of customer satisfaction, therefore, has become a vital concern for many

companies and services providers to achieve such success. (Mohammad, 2012)

Customer satisfaction is thought to be a precursor to behavioral intentions. Scholars have produced impressive

evidence of the favorable effects of customer satisfaction on various behavioral intention indicators, such as

repeat purchase (Szymanski and Henard, 2001), retention (Bolton, 1998), willingness to recommend to others

(Homburg et al., 2005), loyalty (Anderson and Sullivan, 1993), and profitability (Anderson et al., 1994;

Bernhardt et al., 2000). Equally impressive results have also been found in healthcare research. Satisfied

patients are more likely to comply with medical treatment regimens (Williams, 1994; Ahorny and Strasser,

1993) heal faster (Kincey et al., 1975) and are more likely to utilize services in the future (Baker, 1990). It is

therefore an important business success strategy (Anderson et al., 2004; Yoon and Uysal, 2005).

Satisfaction is considered to be a global evaluation of a consumer‟s experience with a product or service

offering. Global evaluations of service experiences has been described as a cognitive evaluation of the sum total

of satisfactions with the individual elements or attributes of all the products and services that make up the

experience (Tse and Wilton, 1988; Pizam and Ellis,1999). Oliver (1980) described satisfaction as a cognitive

state resulting from cognitive evaluations between expectations and perceived performance.

One of the most important goals of any organization is retaining and satisfying current and past customers

(Pizam & Ellis 1999, 326-339). If environmentally friendly products need to be considered or purchased by the

customers then they have to perform satisfactorily compared to conventional products and achieve consumer

satisfaction on key attributes such as functional performance, quality and price (Ottman 1995, 29;

Schlegelmilch at all. 1996, 35-56; Wong, Turner & Stoneman 1996, 263- 281.; Roy 1999). Customers purchase

goods and services with prepurchase expectations about anticipated performance (Oliver 1980, 460-469).

There is an increasing tendency to view satisfying customer as going beyond providing just a technically

superior product or service, i.e., defect reduction and continuous improvement programs. Quality is also as such

defined by the customer‟s perception, not by the service provider. However, it should also be born in mind that

even if the first person who is considered as a customer is the buyer (end user), there are several other people

who need to be considered as customer for the reason that their involvement in the production and distribution


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of the service or product, or project (LR Ireland, 1992, 123-124) affects the quality of the service. Generally,

customers may be of:

Product/service end users- users expectations such as ease of use, safe operation, reliable products,

durable goods, and easily maintained products, etc. which all together enhances better functional performance

and or greater ease of use compared to other competing products/services.

Boss (senior management) - the project director expects the project manager to effectively and

efficiently undertake the work, including keeping informed every stakeholder as to its progress and potentials

that could affect its success and relationship with customers, etc.

Project team members- the team expects professional leadership of the project manager, safe work

environment, clear directions pertaining to work, training for new works, and appropriate rewards for superior

performance. Of course, the team members also expect loyalty from the project manager to shield them from

outside interference with their work.

Functional organization-involves an expectation of efficient use of assigned resources (human,

material, financial, information, etc.)

Vendors/suppliers- Vendors and suppliers have a vested interest in providing parts, components, and

materials to the project meeting the quality requirements. These customers have expectations of proper

specification practices by project personnel and prompt payment upon delivery.

Society- a special interest groups and is the guardian of such general areas as the environment and

public safety. The issues addressed by society include environmental pollution of rivers and streams,

maintenance of a natural habitat, etc.

How well a company addresses each and every requirement of these groups of customers determines the new

product/service‟s success in the market. Therefore, companies should consider customers as their important part

of gaining improved quality of service.

Consumer behavior: Customer decision-making

An individual‟s behaviour is not independent from other‟s thoughts. Indeed, people are influenced by many

opinions as well as attitude of people around them. (Eroglu, 2014). Solomon et al. (2013) defines the term

consumer behavior as a study of individuals or groups and products that help to shape their identities. Another

definition of consumer behavior is “the dynamic interaction of affect and cognition, behaviour, and

environmental events by which human beings conduct the exchange aspects of their lives”. (Bennett

1995).Consumer decision-making goes through three stages, including the prepurchase stage, the service

encounter stage, and post-purchase stage(Lovelock, Wirtz and Chew, 2008; Tsiotsou and Wirtz, 2014). Figure 1

shows each stage of the model.


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Figure 1. The Three-Stage Model of Service Consumption (Content adopted from Lovelock, Wirtz and Chew,

2008; and Tsiotsou and Wirtz, 2014)

The pre-purchase phase comprises a set of factors and activities (Tsiotsou and Wirtz, 2014). In this phase, the

four steps of behaviour are listed, beginning with awareness of need, information search, evaluation of

alternatives, to make a decision on whether to buy a service. Consumers are triggered by a need arousal. They

are then motivated to start searching information to find solutions for the need. There are several ways for

consumers to gather information, such as seeking information from friends, family or using the Internet to

compare services, reading reviews and ratings from trusted or good reputation websites,etc. (Boshoff, 2002;

Lovelock and Wirtz, 2008;Tsiotsou and Wirtz, 2014). Several alternatives may come to consumers mind and

they evaluate these alternatives. After the process of evaluating, customers ready to make a final purchase

decision and move on to the next phase: the service encounter.


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The service encounter stage is a period of time when consumers interacts directly with a service company

(Lovelock and Wirtz, 2008). As stated by Tsiotsou and Wirtz (2014), “service encountersare complex process”

that can shape customers‟ expectations (Coye, 2004), satisfaction, loyalty, repurchase intentions and word-of-

mouth behavior (Bitner, Brown and Meuter, 2000). After service encounter stage, the next stage is post-

purchase, or the postencounter stage. In this stage of the service consumption process, customers evaluate the

service performance they have experienced and compare it with their prior expectations. On one hand, if their

expectations are not met or exceed, the customers are likely to be dissatisfied with the service. On the other

hand, they are likely to be satisfied when the expectations are met. In addition, customers‟ behavioural

responses of a satisfied customer are different from a dissatisfied one. When customers are satisfied, they may

purchase the service again, remain loyal or make recommendations to their friends, etc. Conversely, when

customers are less satisfied, they may complain about poor service quality, lose trust, exhibit negative word-of-

mouth, switch service provider, etc. (Lovelock and Wirtz, 2008)

Consumer behavior is the study of how individual customers, groups or organizations select, buy, use and

dispose ideas, goods, and services to satisfy their needs and wants. The company that really understands how

consumers will respond to different product features, prices and advertising appeal has a great advantage over

its competitors. There-fore, companies and academics have researched heavily the relationship between

marketing stimuli and consumer response. Their starting point is the stimulus–response model of buyer

behavior shown in Figure 2. This shows that marketing and other stimuli enter the consumer‟s „black box‟ and

produce certain responses. Marketers must figure out what is in the buyer‟s black box. Marketing stimuli

consist of the four Ps: product, price, place and promotion. Other stimuli include significant forces and events in

the buyer‟s environment: economic, technological, political, and cultural.

Figure 2. Black Box model of consumer buying behavior.

Figure 3. Factors influencing behavior.

Consumer purchases are influenced strongly by cultural, social, personal, and psychological characteristics, as

shown above in Figure 3. For the most part, marketers cannot control such factors but they must take them into


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account. Cultural factors exert the broadest and deepest influence on consumer behavior. The marketer needs to

understand the role played by the buyer‟s culture, subculture, and social class.

A consumer‟s behavior is also influenced by social factors, such as the consumer‟s small groups, family, and

social roles and status. Because these social factors can strongly affect consumer responses, companies must

take them into account when designing their marketing strategies. A buyer‟s decisions are also influenced by

personal characteristics such as the buyer‟s age and life-cycle stage, occupation, economic situation, lifestyle,

and personality and self-concept. Finally a person‟s buying choices are further influenced by four important

psychological factors: motivation, perception, learning, and beliefs and attitudes.

Service quality

In today‟s constantly changing business environment, providing a superior service quality, through an adequate

and a strong focus on customer (Chiara G., 2007), is one of the key factors enabling firms to gain a lasting

competitive advantage in winning the market. For this, nowadays marketers, according to R. Ladhari (2011),

are trying to focus more on a continuous monitoring and evaluation of service quality, involving various

innovative offerings and service developments, which have a direct influence on customers‟ service

experiences. Because, for instance, better service quality increases perceived service value and satisfaction;

improves the service provider's customer retention and financial performance; and also enhances a firm's

corporate image. (Nguyen and Leblanc, 1998)

Service Quality: refers to (Patrick P. et. al 1996, pp. 62), the „„difference between customers‟ expectations for

service performance prior to the service encounter and their perceptions of the service received. Service quality

theory (Oliver, 1980) predicts that clients will judge that quality is low if performance does not meet their

expectations and quality increases as performance exceeds expectations. Accordingly, customers‟ expectations

serve as the foundation on which service quality will be evaluated by customer. In addition, as service quality

increases, satisfaction with the service and intentions to reuse the service increases.‟‟

Quality has become a part of our daily lives. It has received high attention by many firms and customers. While

customers keep looking and expressing their desires for quality products or services, firms consider quality as a

key strategy to develop products and services in order to gain competitive advantages (Ali,2013).

Service quality is antecedent to customer satisfaction (Parasuraman, Berry & Zeithaml 1994, 111-125; Caruana

2002, 811-830). Perceived service quality is a result of individual service encounter between the service

provider and the customer, during which the customer evaluates quality and develops satisfaction or

dissatisfaction (Bitner et al. 1990, 71-84). The pre-purchase expactations formed by the customers are

influenced by intrinsic and extrinsic cues related to a practicular experience of previous experiences and other

related information sources (Gould-Williams 1999, 97-118). It is difficult to reassure the customers regarding

the functional performance of the environmentally friendly products due to the past failure of many of these

products (Davis 1993; Ottman 1999, 21).

Customers‟ perceived service quality varies from one to another due to different aspects of service quality.

Service quality is judged by the customers, and it depends on how the customers approach the service, because

the starting point of using a service is the basis of their perceptions. Quality of a service is achieved when a

service provider satisfies or exceeds their consumers expected service, which consequently leads to customer

satisfaction. Early conceptualization of service quality was developed and popularized by Christiaan Grönroos

(1982). In his model, the overall perception of service quality is presented as the final result of an evaluation

process, in which the consumer compared their expectations of quality and their experiences of quality. The

Grönroos‟s model of functional and technical quality is illustrated in Figure 4.


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Figure4. Technical and functional quality mode (Grönroos, 1984)

Grönroos (1982) argues that service quality, as recognized by consumers has three dimensions; they are a

functional dimension, a technical dimension and company image. Functional quality answers the question

“how” the service is provided to its customers, while technical quality focuses on “what” service is delivered to

its customers. “How” can be referred in terms of process quality, which means the evaluation during the service

performance, and “what” is related to output quality, meaning the evaluation after the service performance. The

third factor, image, is formed by technical and functional quality and is likewise affected by some external

factors, such as word-of-mouth, marketing communication, pricing, and customer needs, etc. Moreover, it

creates favorable attitudes to the service providers. Accordingly, measuring service quality should include these

attributes in order to attain high predictive validity of service quality. (Rahma, Khan, and Haque, 2012)

Generally, the different literatures define service quality in the following ways:

An outcome of evaluation process (Grönroos, 1984), and differences in that customers make

comparison (Parasuraman et. al, 1988) of their expectation with their perception of the service received;

The overall impression of consumers towards the superiority or inferiority of an organization and its

services (Bitner, 1990).

Service quality can be both (Grönroos, 1982) technical quality- involves what the customer is actually receiving

from the service, and functional quality- involves the manner in which the service is delivered.

Marketing research studies resulted in a general agreement that firms providing high service quality have a

competitive advantage, and often are more profitable .

Customer value

Customer value is broadly defined by Zeithaml (1990) as ”the customers overall assessment of the utility of a

product based on perception of what is received and what is given”. Perceived value is a direct consequence of

perceived quality as well as of price based transaction and acquisition utilities (Jayanti & Ghosh 1996, 5-25;

Zeithaml 1990). Perceived is a direct antecedent of a purchase decision (Zeithaml 1988).


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Customore value is formed during the service experience or process due to the inseparable characteristic of the

service product (Lemmink, Ruyter & Wetzels 1998, 159-177). The value model consists of three dimensions

(Mattson 1991), extrinsic (where use of articular service can be used as a means to a specific end) (Halbrook

1994, 21-71), insrinsic (the emotional evaluation of a service) and systemic (relationship between what one

wants and what one gets) (Hirschman & Halbrook 1994, 21-71).

Price

Customer satisfaction is directly proportional to price, with higher levels of customer satisfaction increasing

acceptance by the customer for higher prices (Anderson 1996, 265-274). If a customer is satisfied with a

product then a slight increase in price will not affect their level of satisfaction (Kalwani & Yim 1992, 90-100).

Sometimes the quality of service may be good but the net or marginal value may be rated poor if the price of the

service is perceived to be too high, otherwise knows as value for money approach. (Rust & Oliver 1994, 1-19).

Perceived price has a significant positive effect on perceived value in the lodging industry . Perceived price

exerted a significant negative influence on perceived customer value (Oh 1999, 67-82.). Perceived prices are

generally based on imperfect and incorrect information, especially in the early stage of an evaluation process

(Erickson & Johansson 1985, 195-200).

Customers’ Behavior and Marketing Strategies

Fishbein developed a „„multiattribute attitude model‟‟ to better explain and understand the way customers

behave in relation to the introduction of new product. The model is used to predict the behavior and attitude of

customers by focusing on their beliefs towards multiple products and/or brand attributes. It is understood that

that the „evaluations of salient beliefs cause over all attitude‟, i.e., customers prefer to like products with „good‟

attributes and dislike products with „bad‟ attributes.

The model further explains that the strength of the customers‟ brand or product belief is affected by customers‟

past experiences where belief about product attributes/consequences to be stronger when based on actual uses

of the product. Therefore, beliefs based on direct experience tend to have greater impact on the overall attitudes

toward a product thus marketers try to induce potential customers to actually use the products (eg. Providing

free trials of prepayment meter…). Whereas, unlike to experience based beliefs, beliefs from mass advertising

or conversations with sales person tend to be weaker.

Generally, the model, (Peter and Olson 2008, pp.139), helps in exploring customer behavior and is also much

easier to be used in research. Marketers can use the model to understand their customers, indentifying which

attributes are the most important-salient, diagnosis their marketing strategies for the subsequent change and

adjustment in strategies, and understanding situational influences for the reason that situational factors can

affect the type of beliefs to be activated from memory and make purchase decision in those particular

situational settings.

CONCLUSION

The goal of this study was to gain more knowledge about decision making processes and Customer

satisfaction.Consumers are actors on the marketplace stage. Consumers, in general, can be referred as

individuals who purchase or consume products and services.

A product is anything that can be offered to satisfy a need or want which includes experiences, persons, places,

organizations, information and ideas (Kotler, 1997). Customer‟s choice of product depends on a combination of

product attributes that best meets their needs based on dimensions of cost, value and prior satisfaction (Kotler

1997)

.

Customer satisfaction or dissatisfaction is a judgment made after considering the qualities and benefits of the

product as well as the price and efforts borne by the customer to obtain them. Every customer does not have the


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same level of satisfaction out of the same hospitality experience since each customer has different needs,

objectives and past experience.

Customer satisfaction is a frequent term and most studied areas in marketing, and the importance of it has been

proven by many researchers over the years. Customer satisfaction has been bringing many undeniable benefits

for firms and organizations, such as positive worth-of-mouth advertising or referrals, increased sales volume

from repeated purchases, failure cost reduction, sustainable advantages from customer loyalty and repeat

patronage, competitor isolation and many more.

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