IMPORTANCE OF CUSTOMER SATISFACTION IN AN ORGANIZATION
Importance of Customer Satisfaction in an Organization
Customers are one of the most important people in any organization. Customers are a key resource that significantly determines the success of an organization. Customers refer to the individuals who purchase an organization's products. Therefore, customers have to be at the center of every decision that is made by an organization. For an organization to have any hope of prospering, it must ensure that its customers are satisfied. This is the reason why many business organizations place customer satisfaction at the helm of their goals and objectives. Customer satisfaction in simple terms is a measure of how the products supplied by a company meet or even surpass the expectations of the customers. This measure is of great importance as it provides business owners and marketers with a metric that can be used to manage as well as improve business. Because of its enormous importance to business organizations, customer satisfaction has been subjected to intensive research over the years. Many researchers have sought to find out the impact of this element and the role that it plays in business organizations. Some of the studies have concentrated on demystifying what exactly customer satisfaction entails. Other studies have concentrated on how to improve customer satisfaction in business organizations. All in all, there is a great amount of information available from various academic sources that exhaustively discuss the element of customer satisfaction. This paper aims to explore the element of customer satisfaction and its importance in business organizations by looking at some of the literature articulated over the years by various authors. The paper will discuss how various authors have defined customer satisfaction and how they have explained its importance to business organizations.
In broader terms, customer satisfaction refers to the positive emotional state that the customers reach after purchasing a product. Customers become satisfied when they get the feeling that they have received at least as much as the effort they gave in the buying experience and also when they conclude that their purchase experience was as good as they conceived or hoped it would be (Bloemer & Lemmink, 1992). Customers buy an organization’s services and products for either personal use, industrial use, resale, manufacturing, or production. The expectation of all customers is to get the full value of what is at offer and also be cared for in the best possible way by an organization (Reichheld., 2003). Consequently, it is the mandate of all business organizations to do everything in their power to ensure that customers are happy and to also make sure that customers get the best possible value for their money (Bloemer & Lemmink, 1992). Doing this will ensure that business organizations experience customer patronage growth and in fact, the number of customers is likely to increase since the already existing customers who are satisfied will introduce other potential customers to the organization and their product (Bloemer & Lemmink, 1992).
In the path towards maximum customer satisfaction, a business organization has to put in place various machineries. One of the tools or machineries which has been used since time immemorial to facilitate customer satisfaction is quality customer service (McDougall & Levesque, 2000). This tool is also used as a product differentiation means because of the existence of many customers in the market. Quality customer service can be dissected into several components that include offering or providing the best quality when it comes to tangible products, high quality interactions when transacting with customers, providing the best quality in terms of intangible products and finally building long-lasting profitable relations between the business organization and customers (Ranaweera, 2007). Therefore, one of the most efficient means towards ensuring customer satisfaction in business organization is by offering exemplary and high quality product as well as customer services that they want, expect or hope for.
As one of the facilitators of customer satisfaction, the significance of offering high-quality product and customer services to the customer cannot be overemphasized. It can be used as a tool of advertising the offerings of the business organizations to both new as well as potential customers. It is indeed this great importance that has resulted in the creation and development of customer care divisions in many business enterprises (Meuter et al., 2000). These departments are meant to look after the welfare and wellbeing of customers. In addition, the amount of expenditure and stress that could be incurred in attempting to attract new customers is huge and also demanding and therefore, modern businesses cannot afford to lose any of their existing customers to competitors. This is why many business organizations are increasingly concentrating their efforts as well as resources on both the care and satisfaction of their existing customers so as to get a lifetime value from these customers and at the same time attract new ones (McDougall & Levesque, 2000).
The significance and importance of customer satisfaction in business organizations has reached a new level whereby technology has now become involved (Meuter et al., 2000). Some of the elements of technology incorporated into modern business organizations include enterprise resource planning and customer relationship management softwares. These comprise just a few of the many technical investments that modern business organizations are embarking on so as to satisfy their diverse customers.
As it was briefly mentioned earlier customer satisfaction is also used as gauge or point of differentiation in business operations. This is one again an element that has been exposed to extensive research and studies. One of the strategies of modern business is differentiation. Organizations are constantly attempting to differentiate themselves from their competitors as a way of gaining an edge in the widely competitive market of today. Differentiate can occur in many forms. Customer satisfaction is seen as a key differentiator. Organizations that are able to succeed in highly competitive environments are those that make customer satisfaction a key component of their overall business strategy. It is not merely enough to push out products and services in high numbers and expect customers expect customers to buy them even when there are other firms that are, for example, that are availing similar products and services.
Research shows that many customers tend to share their buying experience with those that they associate with (Ranaweera, C., & Prabhu, 2003). These include family members, peers, and friends. This is the case for both positive and negative buying experiences. If customers perceives a certain buying experience to be negative, there is a high likelihood that they are going to share this experience with their peers and friends (Ranaweera, C., & Prabhu, 2003). This may, for example, include a product that does not meet the customer’s expected value, negative customer relations during the transaction process and other negative aspects or features. This is what customer satisfaction aims to avoid. Research shows that that customer satisfaction reduces the ‘bad-mouthing” of the organization and its products and services by customers (Ranaweera, C., & Prabhu, 2003). Studies indicate that the average customers usually tells between ten to fifteen people about their buying experience (Ranaweera, C., & Prabhu, 2003). When this experience is negative, this number may rise as high as 20. This obviously affects the reputation of the organization. Lack of customer satisfaction leads to the dissemination of this un-satisfaction to other potential and future customers who become discouraged to the organizational products (Keiningham et al., 2007). This is why customer satisfaction is of great importance to an organization, Customer satisfaction is linked to repeat purchase and therefore increased revenue and these two aspects are obviously put off by satisfaction the customer’s part (Johnson. and Claes Fornell, 1991). To eliminate the “bad-mouthing” of an organization and its products, business managers need to measure satisfaction on a continuous and ongoing basis (Anderson, 1998). Tracking any changes in the satisfaction levels of customers will help the organization to determine whether customers are satisfied and happy with the products and services on offer (Ranaweera, C., & Prabhu, 2003).
Retaining customers is cheaper that acquiring new ones (Hennig‐Thurau & Klee, 1997). There are many authors who have explored on the authenticity of this concept, and many have found it is indeed true. At the beginning of an organizations’ life cycle, its strategies are aimed at acquiring new customers. However, as times proceed, and the market becomes saturated, many organizations re-adjust their strategies and attempt to retain the customers that they have already gained (Hennig‐Thurau & Klee, 1997). This is because as mentioned earlier, retaining customers becomes cheaper than attempting to acquire new ones. In fact, this one of the statistics of customer satisfaction that has received much publication. It has been shown that acquiring new customers is almost five times more expensive than retaining new ones (Rust, R. T., & Zahorik, 1993). Here, customer satisfaction becomes of crucial importance. Exceptional customer satisfaction translates into retaining customers (Rust, R. T., & Zahorik, 1993). This is a tactic that is common with many modern organizations that have realized that attempting to acquire new customers in cutthroat environments characterized by extreme competition is an irrelevant and an ultimately expensive venture (Hennig‐Thurau & Klee, 1997). This is why many have alternatively built their strategies around customer satisfaction.
Customer satisfaction is closely associated with customer loyalty. By definition, customer loyalty refers to a deeply held commitment by the customer to re-buy or en to re-patronize a preferred good or service consistently in the future (Dick & Basu, 1994). This is in spite of various situation influences as well as marketing efforts that have the potential to cause or prompt switching behaviors. Customers are considered to be loyal when they consistently purchase an organization's products and services irrespective of Porter’s five forces (Oliver, 1997). The antecedent or precursor of customer loyalty. In the same way, the consequence of customer loyalty is great organization performance in terms of profit, revenue and growth (Hallowell, 1996).
As mentioned previously, there has been an incredulous amount of research conducted on customer satisfaction. However, recent years have seen a shift in modern business organizations whereby many have shifted the focus and emphasis of their marketing strategies towards customer loyalty from customer satisfaction (Bowen, 2001). However, in spite of this shift in focus, studies by various authors reveal that customer satisfaction and customer loyalty are mutually exclusive (Hallowell, 1996). As it was mentioned earlier, improvement in a firm’s performance directly results from customer loyalty but customer loyalty is almost impossible without customer satisfaction.
Researchers have shown that vast improvements in customer satisfaction essentially translate to increased customer loyalty which in turn leads to increased organization’s marketplace performance, as well as financial performance. It also leads to the creation of shareholder wealth.
However, one deficiency in research related to the association between customer loyalty and customer satisfaction is that the positive association between the two is not generalizable. This is because some studies have seemed to suggest that customer satisfaction does not generally translate into customer loyalty (Neal, 1996). In fact, studies on customer satisfaction and loyalty have failed to fully expound on the number of satisfied customers who do not consistently ascribe to a firm’s products and services as well as the number of unsatisfied customers who actually remain loyal to a firm’s products and services (Ganesh, Arnold and Reynolds, 2000).
Some researchers such as Oliver (1999) and Seiders et al. (2005) suggest that high customer satisfaction does not necessarily translate into high customer loyalty. Other studies suggest that keeping customers satisfied is not by itself enough to guarantee their loyalty. This is because even if customers are satisfied, they may still defect.
It is because of this that Kamakura et al (2002) suggest that business managers and marketers must attempt to both have customer satisfaction and convert this satisfaction and positive attitude into repurchase behavior as well as attitudinal and behavioral loyalty.
Therefore, it appears that the positive relationship that is conceived to exist between customer satisfaction, customer loyalty and repurchase behavior applies in some situations while it does not in others (Szymanski & Henard, 2001). Some few authors have attempted to explore this issue, but research is inconsistent. It is not clear on the exact situations where exceptional customer satisfaction translates into customer loyalty, repurchase behavior and attitude and consequently improved organization or firm’s performance. In the same vein, research on the situations whereby great customer satisfaction does not result in customer loyalty and repurchase behavior is not conclusive (Szymanski & Henard, 2001). This is one area of research whereby future studies should concentrate on. In fact, future studies should attempt to show how customer satisfaction can be designed to ensure that it is results in improved firm’s performance since this is indeed the intention of the element itself. If firms only wanted to make a one-time offer of products and services to singular customers, then customer satisfaction would not be an issue since these firms would not require the customers to come back for more purchases. But business organizations are continuous in terms of operation; they require customer satisfaction that in turn prompts loyalty and re-purchase behavior which as mentioned previously is the single most important consequence of customer satisfaction. Therefore, in addition to defining and exploring the elements that make up customer satisfaction and its importance in business operations, future studies should concentrate on how customer satisfaction can be designed to ensure that this importance (loyalty and improved performance) is realized.
As observed, there is a vast amount of literature that touches on the importance of customer satisfaction in modern business organizations. This literature shows that customer satisfaction is one of the most important elements in modern business organizations. It has been shown that customer satisfaction leads to customer loyalty, repeat purchase behavior and other positive attributes that translate into improved firm’s performance in terms of revenue, profit and also facilitates growth. It has however been shown that customer satisfaction does not always guarantee repeat purchase and customer loyalty. In fact, this is an area where research is not conclusive. However, the consensus is that managers must attempt to both ensure customer satisfaction and convert this satisfaction and positive attitude into repurchase behavior as well as attitudinal and behavioral loyalty in customers.
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