Relationship between Customer Satisfaction and Customer Loyalty - Essay Example

INTERNATIONAL RESORT AND SPA MANAGEMENTANALYSIS OF THE RELATIONSHIP BETWEEN SATISFACTION AND LOYALTY BASED ON THE SERVICE-PROFIT CHAIN By: (Name) Presented to (Lecturer, Course) (Institution, Location) Date: Introduction Highly ranked executives of various well performing service organizations no longer spend much of their time concentrating on the market share or establishing profit goals as previously done in these types of organizations. Instead, such executives have developed a clear understanding of the current economics of service, which require customers and frontline workers to be considered as the central concern of the management. As such, successful managers have directed attention towards the various factors that define profitability within the new paradigm of service, including acquiring technology that enhances frontline workers, investing increasingly in people, revamping the training and recruiting practices, and performance based compensation. Such approaches enhance employee satisfaction, productivity and loyalty in line with the value of services and products delivers, thus promoting customersatisfaction and loyalty, which in turn enhances the profitability and growth of the organization. It is with no doubt that a loyal customer’s lifetime value is astronomical, particularly upon addition of referrals to the repeatpurchases and customer retention economics (Al-alak & El-refae, 2012, p. 199). The service-profit chain allows managers to focus on new investments that would allow for establishment of levels of service and satisfaction that would facilitate higher competitive impact. Various arguments have been established concerning the relationship between consumer satisfaction and consumer loyalty, with some individuals believing that satisfaction fosters loyalty while others refuting this idea. It is evident that a level of consumersatisfaction is highly likely to facilitate repeat purchases and recommendations among consumers, but does not guarantee such loyalty to the organization. The resort and spa industry is increasingly growing with news players being introduced each instance. As such, organizations within this industry are faced with highly competitive markets, which call for highly effective strategic approaches that would allow for attraction and retention of consumers. Managers within thisindustry are faced with contrasting takes on the kind of approaches that would facilitate such retention, with one facet of perspectives suggesting that consumer satisfaction would facilitate loyalty, while the other suggesting that consumer loyalty is not necessarily guaranteed by consumer satisfaction and thus other approaches should be employed. This paper reviews the relationship between consumer satisfaction and consumer loyalty in the resort and spa industry and the contrasting views of such a relationship, and establishes the managerial implications of the relationship. Findings and Discussion In order to establish the relationship between satisfaction and loyalty, it is important to start by defining the meaning of consumer satisfaction. In his research in 1965, Cardozo was the first individual to suggest that consumer satisfaction increases the chances of repeat purchases of services and productsamongcustomers (Chiu, et al., 2011, p. 9781). Different researchers developed and contributed towards the same perspective, an aspect that made consumer satisfaction an entirely independent research topic in business literature. It is clear that any service or product or their features provide a level of pleasure towards consumption related fulfilment. Considering this take, it is evident that customer satisfaction is the evaluation of the service or the product by the customer in relation to whether such a service or product has met the expectations and needs of the customer. Failure of meeting of such expectations and needs leads to dissatisfaction. Satisfaction can also be defined as the feeling of disappointment or pleasure by the customer as a result of comparison of the perceived performance of the product or service in relation to the expectations of the customer (Aaker, et al., 2004, p. 113). Thus, the satisfaction of a customer is directly connected to the expectancy level, whereas the level of expectancy varies among different consumers. Customer satisfaction is only marked by services that surpass consumer expectations (Bitner & Zeithaml, 2003, p. 207). In order to have a better understanding of the link created between customer satisfaction and customer loyalty, it is important to observe the definition of customer loyalty. Customer loyalty refers to the degree by which customers of a given product or services are willing to repeat a purchase of the product or recommend the product, service, or organization to a different individual (Buswell & Williams, 2003, p. 61). It refers to the likelihood of a customer to defect to an organization’s competitor. Customer loyalty is important for businesses as it determines the market share and the long-term profitability of the organization. As such, most organizational competitive strategiesare aimed at promoting loyalty to the brand of the organization in order to establish a sustainable consumer base (Caceres & Paparoidamis, 2007, p. 837). Various factors have been established, through research, as vital in influencing the repurchase intention of certain services or products by customers. Customer satisfaction is among the factors thathave been directly linked with consumer loyalty and thus retention of customers is thought to be achievable by influencing satisfaction levels (Darke, et al., 2010, p. 349). When reviewing repurchase intensions, satisfaction has increasingly been observed as a reliable predictor. In this vein, it is argued that customers who are well impressed by the quality of the services receivedin a spa or a resort are more likely to visit the same spa or resort or even recommend it to another individual(Kim & Lee, 2010, p. 237). As such, when purchasing products or services, consumers are more interested in getting performance that meets or exceeds their expectations and needs. Thus, when their needs are well met, such consumers tend to prefer repurchasing such services or products from the same organization because of the developed trust. On the other hand, customers who are dissatisfied are less likely to establish a commitment to the organization and thus are less likely to be loyal to the products or services, or the involved organization (Farris, et al., 2010, p. 78). As such, individuals are less likely to repurchase services that initially failed to meet their needs and expectations. In the spa setting, customers that enjoy the positive experiences that accompany the provided services are highly likely to form a stable consumer base as they often establish positive social interactions with the providers of the services. Satisfaction of the needs of these customers enhances their revisit intentions (Joby, 2003, p. 256). The link that has been established between customer satisfaction and customer loyalty has been difficult to quantify traditionally. Most of the researchers in the market agree that even customers who are satisfied by the eservices offered by a given company may still defect to a competitor (Kanning & Bergmann, 2009, p. 340). This has facilitated inaction among companies without clearly outlining the benefits that such companies can gain from customer satisfaction. The major problem that has led to such a one-dimensional take of the impact of satisfaction on loyalty is that the former is mostly defined in financial terms. As such, most organizations categorize satisfaction measurements under marketing intelligence and not as a tool of management that can be employed in quality building towards increasing profitability (Kralj & Solnet, 2010, p. 712). Due to this, most of the companies acknowledge the cost of offering god services but their fail to recognize the cost that is incurred if bad services are provided. It is evident that companies are more likely to experience decreased customer loyalty because of customer dissatisfaction in different ways that may not be directly recognized. To start with, it is important to note that customer dissatisfaction could be linked to various problems within a company. For instance, in the spa business the use of a product that reacts negatively with the skin of a client could lead to other problems including increased costs of treatment, litigation, and lawsuits (Al-alak & El-refae, 2012, p. 200). These problems drive away customers, both the loyal and the seasonal customers. As such, problems that may arise with the services or products provided by a given company due to reduced investment in consumer satisfaction could greatly have an impact on the consumer loyalty especially in the highly competitive markets. It is important to note that I cases of low consumer satisfaction, more of the customers may be experiencing problems than perceived by the company. Most of the organizations establish a complaints department from which they receive feedback from the clients (Aaker, et al., 2004, p. 64). Not all the clients report problems and thus some of them remain with such problems. With a repetition of problems, most of the clients are likely to seek the services from a different company that would meet their needs. It is important to note that any business products may experience problems and thus lead to complaints among the customers. As such, customer satisfaction includes a framework through which such problems are properly solved and future problems averted. This may lead to development of loyalty among a consumer after a problem has been solved due to the fulfilled need. However, when problems are not well solved and the customer needs remain unmet, the likelihood of such customers defecting to another company is high. It is also important to note that customers who are unhappy with the services they receive from a given organization spread the word to other individuals and thus reduce the chances of expanding the customer base or retaining the customers (Chiu, et al., 2011, p. 9782). Most customers would tell more of a bad experience than they would of a good one. This has an impact on the general loyalty not only of the affected client but also of other clients who “do not want” to experience the same problem. Contrary to the established take, some researchers suggest that customer satisfaction does not necessarily lead to customer loyalty. In this vein, some of the customers may not be satisfied with some of the aspects of the services or products they receive from a given organization yet they continue purchasing from the same organization regardless of availability of other competitors (Darke, et al., 2010, p. 354). In this case, the customer remains loyal to the company yet not satisfied entirely by the services. On the other hand, a customer may be fully satisfied by the services offered by a given company yet they still purchase services from other competitors. As such, such customers are not loyal to a single company yet their needs are fully met by the company. In the service profit chain, the link established between the satisfaction and loyalty of the customers is weak and their relationship is not constant. In some cases, the factors that lead to consumer satisfaction do not necessarily create loyalty of such consumers to the organization (Joby, 2003, p. 157). This take remains highly refutable as the satisfaction of needs form a key determinant among customers when selecting a service provider. Most of the customers would prefer a service provider that would provide for most if not all of their needs including needs for reduced price, personalized attention, and high confidentiality, among others. When such needs are met, customers are more likely to repurchase such services from the same organization instead of establishing new relationships with a mew organization. This is especially a common trend in the resort and spa industry where the customers are more interested in establishing a long-lasting relationship with the service providers in order to enjoy benefits of such a relationship such as earlier booking of sessions and discounts (Al-alak & El-refae, 2012, p. 201). As such, the relationship between customer satisfaction and loyalty within service industries is stronger than most of the researchers portray it. Managerial Implications The service-profit chain defines the relationship that exists between customer loyalty, profitability, employee loyalty, satisfaction, and productivity (Heskett, et al., 2008). According to the chain, the growth and profits of an organization are determined by consumer loyalty. On the other hand, loyalty results from customer satisfaction. Satisfaction is determined by the service value as offered to the customers. Only loyal, satisfied, and productive workers can promote such value. The satisfaction of the employees, in turn, is as a result of high quality policies and support services, which allow employees to efficiently deliver customers with desirable results (Heskett, et al., 2008, p. 13). In light of the increasing emphasis on the importance of customers and employees by various executives from different companies, the service-profit chain provides a proper framework through which organizations can establish managerial strategies that would enhance customer satisfaction and loyalty. In promoting such consumer retention, the employment of employees with the appropriate attitude is highly important. This would ensure that the level of employee commitment to the objectives and course of business is upheld and increased performance and value are promoted (Heskett, et al., 2003, p. 82). This reveals the importance of shifting from focusing on quantifiable factors to considering the people, who form the heart of any business. Proper consideration of employee satisfaction would ensure that they increase their loyalty to the organization and thus performance in line with creating value. Proper training of the employees is also important in developing them towards attaining flexibility in handling different customers with different needs using personalized approaches. Different approaches including proper allocation of tasks, scheduling, and adopting transformational leadershipshould be upheld in order to ensure that the employees are satisfied with their roles in the company (Kusluvan, 2003, p. 36). In addition, it is important to ensure that proper motivation of the employees is upheld through compensation and development programs, as this would promote commitment and increased effort towards meeting the organizational goals of improving service value (Yee, et al., 2011, p. 238). In the modern market, customers are value oriented. In this case, value refers to the results received as compared to cost. In the resort and spa industry, companies can only satisfy the customers through providing them with high quality services that meet the established cost. The consumer expectations concerning the various services including accommodation, quality resources, and timely rectification of problems ought to be well catered for in order to facilitate proper stay of the customers. It is important to note that customer satisfaction is likely to be driven by the level of satisfaction of the employee. As such, through enhancinghigh value services, the level of satisfaction of the employees is likely to be enhanced and thus chances of retention are increased (Evanschitzky, et al., 2012, p. 358). On the contrary, dissatisfied customers are even more likely to discourage acquaintances when it comes to trying a product or services. Lastly, it is important to note that leadership forms the core of the service-profit chain. It is important for any leaders to establish and maintain an organizational culture that is centered on service to fellow employees and primarily to customers. Such leaders spend most of their time with the employees and customers in order to listen to any suggestions that may improve the service to the customers. Conclusion Over the past few years, a rapid growth has been experienced in the service industry and there has been a continuous increase in terms of demand for high quality services. As such, it is important to understand and adequately measure customer satisfaction while assessing their expectations and perceptions within the tourism industry and particularly I the spa or wellness sector. It is evident that customers who are satisfied by the services they are offered are likely to share their positive experience with other individuals and are highly likely to visit the spa again. Assessment of the perception and expectations of the spa hotel and resort customers allows managers within the tourism sector to adjust their strategies towards increasing satisfaction. Thus, managers in the spa and resort industry need to develop focused destination marketing, programs for quality improvement, and management strategies through measuring consumer satisfaction, identifying the various service related problems, and establishing appropriate solutions to such problems. References Aaker, D., Kumar, V. & Days, G., 2004. Marketing Research. New York: John Wiley & Sons. Al-alak, B. A. & El-refae, G. A., 2012. The Relationships between Service Quality, Satisfaction and Behavioral Intentions of Malaysian Spa Center Customers. International Journal of Business and Social Sciences, 3(1), pp. 198-205. Bitner, M. J. & Zeithaml, V. A., 2003. Service Marketing. 3rd ed. New Delhi: Tata McGraw Hill. Buswell, J. & Williams, C., 2003. Service Quality in Leisure and Tourism. London: CAB International. Caceres, R. C. & Paparoidamis, N. G., 2007. Service Quality, Relationship Satisfaction, Trust, Commitment and Business-to-Business Loyalty. European Journal of Marketing, Volume 41, pp. 836-867. Chiu, S., Cheng, C., Yen, M. T. & Hud, Y., 2011. Preliminary research on customer satisfaction models in Taiwan: A case study from the automobile industry. Expert Systems with Applications, 38(8), pp. 9780-9787. Darke, P. R., Ashworth, L. & Main, K. J., 2010. Great Expectations and Broken Promises: misleading claims, product failure, expectancy disconfirmation, and consumer distrust. Journal of Academy of Marketing Science, 38(3), pp. 347-362. Evanschitzky, H., Wangenheim, F. v. & Wünderlich, N. V., 2012. Perils of Managing the Service Profit Chain: The Role of Time Lags and Feedback Loops. Journal of Retailing, 88(3), p. 356–366. Farris, P. W., Bendle, N. T., Pfeifer, E. P. & Reibstein, J. D., 2010. Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc.. Heskett, J. L. et al., 2008. Putting the Service-Profit Chain to Work. [Online] Available at: https://hbr.org/2008/07/putting-the-service-profit-chain-to-work [Accessed 15 May 2015]. Heskett, J. L., Sasser, W. E. & Schlesinger, L. A., 2003. The Value Profit Chain: Treat Employees Like Customers and Customers Like Employees. New York: The Free Press. Heskett, J. L., Sasser, W. E. & Wheeler, J., 2008. The Ownership Quotient: Putting the Service Profit Chain to Work for Unbeatable Competitive Advantage. Boston: Havard Business School Publishing Corporation. Joby, J., 2003. Fundamentals of Customer-Focused Management: Competing Through Service. Westport: Praeger. Kanning, U. & Bergmann, N., 2009. Predictors of Customer Satisfaction: Testing the Classical Paradigms. Managing Service Quality, 19(4), pp. 337-390. Kim, K. U. & Lee, R. H., 2010. Customer satisfaction using low cost carriers. Tourism management, Volume 32, pp. 235-243. Kralj, A. & Solnet, D., 2010. Service climate and customer satisfaction in a casino hotel: an exploratory case study. International Journal of Hospitality Management, 29(4), pp. 711-719. Kusluvan, S., 2003. Managing Employee Attitudes and Behaviors in the Tourism and Hospitality. New York: Nova Publishers. Yee, R. W., Yeung, A. C. & Cheng, T., 2011. The service-profit chain: An empirical analysis in high-contact service industries. International Journal of Production Economics, 130(2), p. 236–245. Read More