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7.3.2 Customer Satisfaction as a Key Element

7.3.2.1 The Concept of Customer Satisfaction

Customer satisfaction occurs when customers compare their current experience in using a product or service (actual performance) with their expectations (target performance). If actual performance corresponds with the target performance, the result is a confirmation of expectations. This can lead to satisfaction among customers. If actual performance exceeds the target performance (positive disconfirmation), it can lead to a particularly large degree of satisfaction among customers (enthusiasm). The opposite case, when actual performance is beneath the target performance, is known as negative disconfirmation (Nerdinger and Neumann 2007,p. 128 f.). Satisfaction therefore occurs in the event of confirmation or positive

Fig. 7.3 The origin of customer satisfaction (Source Own illustration, based on Nerdinger and Neumann 2007, p. 129)

disconfirmation.[1] The boundary between satisfaction and dissatisfaction is often interpreted as the tolerance zone and not as a point value (Fig. 7.3).

Actual performance is the level of performance as perceived subjectively by the customer. This actual performance is the standard against which the customer's expectations are compared. It can be interpreted as the individual level of expectation of the customer, which is fed by experience, the promises of the company, or recommendations from others.[2]

When customers are dissatisfied, they are likely to break off the relationship with the bank, unless they are prevented from doing so by other restrictions such as longterm mortgages, complacency. If they are satisfied, the bank then has a chance of providing further services to the customer and of being recommended. But this does not rule out the possibility that competing banks will also be considered as potential service providers. However, if a bank manages to enthuse its customers, then it has reached its goal and can expect a certain degree of customer loyalty.

Analysing customer groups is part of the strategic positioning of the bank. Yet the bank cannot influence the customer's individual level of expectation in a negative sense (leading to the reduction in customers' expectations). If customers' expectations are not met, they are likely to switch to another provider, who they assume will meet their expectations. However, banks can define the customer groups whose level of expectation converge with their level of service.

7.3.2.2 Influencing Factors for Customer Satisfaction

The satisfaction of the customer depends primarily on how they define the expected target performance. The performance provided can differ from that perceived by the customer. Banks can steer this difference to an extent with expectation management—for example with their positioning on the market and the implied association of the performance promise with the brand in question.

Customer satisfaction is multidimensional. The demands placed by customers on a product, a service or a certain technology can be divided into basic, performance and enthusiasm demands. Their fulfilment has a different effect on customer satisfaction (see Fig. 7.4 and Huber et al. 2006).

• In this context, basic factors are service attributes, the lack of which leads to dissatisfaction. They can be seen as must-attributes and are comparable with the hygiene factors. Customers demand that these service attributes or characteristics are present.

Fig. 7.4 Kano model of customer satisfaction (Source Kano 1984 cited from Matzerl et al. 2006, p. 20)

• With performance factors, customer satisfaction increases in proportion with the fulfilment of these factors. The greater the extent of the performance fulfilment, the more likely it is that the customer will be satisfied. These factors are usually actively demanded and communicated by customers.

• Enthusiasm factors are characteristics of services that the customer did not expect. If they are present, they increase the perceived benefit of a key service, causing enthusiasm.

To increase customer satisfaction, the basic and performance factors must be provided at all costs, but that is not enough. In addition, an increase in the perceived benefit of the key service—and thus the enthusiasm factor—is also necessary. This can be achieved by tailoring key services to certain customer groups or by offering additional unexpected and benefit-increasing services. For banks this means that the classification of customer needs in line with these three categories provides indicators for the design of the services and the prioritisation of individual service elements.[3]

In the long term, enthusiasm factors automatically become basic factors. Whereas only a few years ago electronic banking tended to be an enthusiasm factor, it is now a basic factor. This reflects the typical problem for first movers with new technological developments. They soon become technological standards, thus turning from an enthusiasm factor to a basic one. Account must be taken of this effect when developing new technologies and it should be discussed critically whether and/or how the first mover advantage can be protected. It might be worthwhile to distribute the development expense among a number of companies.

By analysing competitors banks can identify the fields in which they differ from their competitors and display greater competence in terms of enthusiasm factors. These areas provide the opportunity for differentiation based on enthusiasm factors. It should be checked beforehand, however, whether the cost of the identified enthusiasm factor can actually be covered. A typical consideration for a possible enthusiasm factor, for example, would be to offer mortgages not only domestically, but also worldwide to wealthy private customers who might wish to finance their geographically widespread real estate ownership. Yet if there is a lack of international know-how, it is worth checking whether this service could be provided with network cooperations with local mortgage banks. Alternatively, the realisation of this identified enthusiasm factor must be forgone, reverting to offering mortgages on the domestic market only.

This concept of basic, performance and enthusiasm factors also provides pointers for service development that go beyond the existing offer. If it is not possible to develop all of the desired characteristics of a desired service for cost reasons, then those solutions that are most important for customer satisfaction should be implemented or developed.

7.3.2.3 Measuring Customer Satisfaction

Customer satisfaction can be measured using objective and subjective methods. With objective methods, customer satisfaction is measured on observable behaviour—such as turnover or market share. With subjective methods, on the other hand, the perception of the customer is key.

There are three types of subjective measurement:

• Event-oriented methods are aimed at the satisfaction of the customer with an experience at the customer interface.

• Feature-oriented methods examine certain features of the service or product.

• Problem-oriented methods attempt to determine the difficulties or causes of errors that are crucial to satisfaction. This can be done, for example, by analysing complaints (Fig. 7.5).

When existing customers are satisfied, they develop trust in the bank. The bank can exert influence on customer satisfaction via all aspects of financial services as perceived by the customer. These include the transparency of fees structures as well as the quality (characteristics), price and innovative character of the existing financial services. Improvements to product and service quality can also lead to an increase in customer satisfaction (Fornell et al. 1996). As a result, a reputation can also be gained by means of recommendations.

Fig. 7.5 Methods of measuring customer satisfaction (Source Bruhn 2006 cited from Nerdinger and Neumann 2007, p. 136)

  • [1] Some authors also assume that satisfaction only occurs with positive disconfirmation (Hill 1986).
  • [2] The disconfirmation paradigm can be refined in some aspects of the model by a series of psychological theories. These include the assimilation contract theory, which explains how customers change in hindsight their chosen benchmarks or the perceived performance. Furthermore, the attribution theory and the two-factor theory attempt to explain the connections between expectation-fulfilment and the degree of customer satisfaction (For an overview see Nerdinger and Neumann 2007, p. 131 ff.).
  • [3] Thus it is not recommendable, for example, to strive for an almost complete fulfilment of basic demands with comprehensive measures, if it means overlooking the satisfaction of possible performance and enthusiasm factors (Huber et al. 2006).
 
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