Published in The Beacon--NIQR Bangalore Newsletter, July-Sep 2005

Customer Satisfaction Management in Service Industry

M. Madhukar Reddy, Quality, Progeon Ltd

Introduction
st
In this 21 century the digital revolution has transformed the economy in to a new economy which
empowered the customer with new set of capabilities such as; 1.Access to greater amount of
information, 2. Wider variety of available good and services, 3. Greater ease of interacting with
the service provider.

This new capability in the new economy led the customer to market the marketing and plays a
very vital role in the growth of the market. It is essential in the service industry in particular, place
greater emphasis on the enablers leading to customer satisfaction and customer retention. It is in
this context is very important to understand the customer requirements to provide value-(QSP -
Quality, Service and Price) and track and manage the customer satisfaction for retention and
creation of new customers.

In Service industry it is not enough if the product meets the functional requirements of the
customer, it should also meet certain other customer expectations like the behaviour/attitude of
the person who provides service. The customer satisfaction is the combination of both technical
features & human behavioural aspects. The quality management only addresses the systems and
processes; service addresses the customer service independently. In today’s new economy, it is
essential to address the enablers for customer satisfaction for business growth with utmost
importance as they are interdependent in nature.

Customer satisfaction
Customer satisfaction can be represented as follows.
Customer satisfaction=Performance Features + Behavioural Features + Price.

Performance features address the issues on Conformance to the standards and Variability and
the behavioural aspects of service provider deals with the following components of service which
is a major enabler for the growth of the business as indicated in the research publications.

1. Responsiveness - Readiness of employee to provide service.

2. Courtesy - Respect, Friendliness of contact personnel.
3. Timeliness - Delivery on Time, First Contact Resolution.
4. Complete Resolution - Listening to Customers.
5. Communication (Empathy) - Speaking to the Customers in their language
6. Credibility - Taking Ownership in Resolving the Complaints.

If customer experience matches customer expectations, leads to customer satisfaction and if

customer experience doesn’t match Customer Expectation, leads to Customer dissatisfaction.
On similar lines if it exceeds expectation leads to Customer Delight.

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Why a business losses customers?
According to the US news and world report market research on lost customers by major
companies shows that 14% for better product, 9% for cheaper product, 68% left because of poor
service (service provider’s attitude) which can be easily avoided by designing effective customer
service process which enables the company to respond . The study clearly demonstrates the
significance of soft service quality in relation to product quality.

Reason Percentage Die

Percentage

Dissatisfied with the 68% Move Dissatisfied with the

Personnel’s attitude
Disappointed with the
Adopt new habits Personnel’s attitude
Disappointed with the
14% Find the price too high
Quality of the Product

Quality of the Product Find the price too high

Find the price too high 9% Disappointed w ith the Adopt new habits
Quality of the Product
Adopt new habits 5%
Move
Move 3%
Dissatisfied w ith the
Die 1% Personnel’s attitude Die

It is in this context we need to stress on the service quality part as 68% of the customers desert
the service provider. The behavioural/attitude component of service is major determining factor
on the growth of the company which complements the performance for complete customer
satisfaction.

Performance/Perception:
The performance/perception grid helps us evaluate the organization where it stands with respect
to the customer expectations.

Low Perception High

Customer
Advantage –
High Needs to Improve Customer
Customer Service Retention
Business growth

Performance

Additions of
Customer
Product Features
Deception-
Low Shrinkage
– Short Term
Sales

1. Product with low performance and low perception (L/L): The product doesn’t provide basic
features and the customer service is poor- leads to the customer drain. This calls for
improvement on two dimensions of performance and perception or exit from the business.

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2. Product with high performance and low perception (H/L): The product provides basic features
and meets the expectations of the customer but with poor customer service. This type of situation
calls for effective marketing with focus on target groups. This suggests the focus on improvement
of customer service.

3. Product with high perception and low performance (L/H): The product provides basic features
with superior customer service .The product needs to be improved with addition of new features
which develops edge over the competitor.

4. Product with high perception and high performance (H/H): The product meets the stated and
un-stated features with superior customer service. The organization need to be constantly
innovative and exploit the strengths of the product and service to improve the customer retention
rate and creation of new customers.

The organization needs to focus on customer satisfaction management and strategically plan to
be in the fourth quarter to ensure its sustained and continued growth.

Customer satisfaction and retention:

Customer satisfaction and retention results from meeting and exceeding the customer
expectations. The focus should shift from the quality of product to the optimization of three
enablers QSP (quality, service and quality) to meet and exceed expectations.

Customer satisfaction/retention demands the continuous improvement in organization capability

in terms of QSP (quality, service and productivity)
This process should be customer centric and includes following capabilities

1. Capturing the voice of customer and understanding complete requirements includes

stated needs and also other value adding requirements which would delight the
customers..
2. Benchmarking and re-designing of processes to meet the customer expectations.
Encourage innovation to add facilitating features.
3. Training and development: Good customer relationship management largely depends on
communication. Training on customer service skills helps the service providers to
address the emotional needs. It also ensures the consistent approach production and
effective resolution of problems that enriches the customer experience – leading to
customer loyalty. The focus on people skills improves the organizational capability to
address the challenges.
4. Develop customer retention process: The organization needs to develop a framework
which measures and tracks the customer satisfaction and to address the customer issues
from time to time and improve the degree of satisfaction which leads to customer
retention and new customer creation.
5. Continuous improvement: Various quality improvement tools like Six sigma, Business
process re-engineering, Business process management system, value chain analysis
and various lean tools would help the organization to address the challenges related to
effectiveness and efficiency.

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What do we focus on?
As the degree of satisfaction increases the retention value rate increases. Thus it is important to
increase the rate of delighted customers – as this leads to loyal customers and the profits
increases as illustrated in the table below.
No.of No.of
Custome Custome
No.of Probabilit Scenario- rs in Scenario- rs in
Type of Custome y of Scenario- 2: scenario- 3: scenario-
Customer rs retention 1: As Is Improved 2 Improved 3
Delighted 15 0.9 13.5 60 54 80 72
Satisfied 60 0.5 30 30 15 15 7.5
Dissatisfied 25 0.05 1.25 10 0.5 5 0.25
Total 100 44.75 100 69.5 100 79.75
Revenue
@Avg
customer
value 1000 100000 44750 69500 79750

This illustrates the need of improving the degree of satisfaction from one level to the other
ensures the increase in the profits and the loyal customer base and continued market leadership

Conclusion:
Nowadays any firm offering service loses their customers because of the poor customer service.
Studies have shown that firms can boost their profits by almost 100% by retaining 15% more of
their customers than their competitors retain. This is because the cost of acquiring new
customers is much higher than the costs associated with retaining customers. Firms with loyal,
long time customers can financially out perform competitors with higher customer turnover, even
when their costs in limit.

It is not enough to attract new customer, it is like adding water to a leaking bucket. The top
management need to focus on customer satisfaction management which calls for focus on
enhancing organizational capability to address service(human behavioural) related issues which
is a significant factor in customer retention and creation of new customers(business growth) and
would enable the organization to establish clear differentiation with the competitor.

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