Customer Satisfaction

This article provides an overview of some of the key scholarly developments in the area of customer satisfaction with services over the last 25 years. The service sector now dominates employment and gross domestic product figures for the United States and, more broadly, the economically developed world. However, this overview applies beyond the service sector, as some have argued that all firms are service businesses because manufactured goods are typically augmented by related services. Furthermore, increasing numbers of high-profile manufacturers, such as General Electric and ABB, aspire to increase their percentage of revenues from services.

Services as an Area of Study: A Multidisciplinary Evolution

Contemporary academic interest in services— conceptualizing services and related theory building, as well as how to measure customer satisfaction with services—blossomed during the late 1970s (as opposed to much earlier definitions and commentary on service in organizational sociology and economics). The emergent interest focused on how goods differed from services and grew out of a multidisciplinary perspective comprising marketing, organizational behavior, industrial and organizational psychology, and operations management. This multidisciplinary approach underscores how all functions in an organization must work together to satisfy a customer.

The three disciplines contributed to a specification of how the prototypical “pure” service (such as education in the classroom) differs from the prototypical “pure” good (such as a television set) in production, consumption, and consumer evaluation processes. Compared with goods, services are typically described as possessing relative intangibility, heterogeneity, perishability, inseparability of production and consumption, and customer participation in coproducing the services consumed. Each discipline has addressed how the nature of services should influence both theory and practice in their field.


The academic field of marketing not only helped to pioneer the specification of how services differ from goods; it also drove the assessment of service quality and customer satisfaction from a technical approach to what has been labeled a user-based approach. The technical approach bases quality assessment on conformance to objective and readily measured standards set for the attributes of the output, and thus it is best suited to measuring the quality of mass-produced standardized goods.

The user-based approach assumes that quality is more subjective and therefore more appropriately measured from the perspective of the user or customer. This better fits the intangible, experiential nature of many services. Specifically, goods and services vary in their search, experience, and credence qualities. Prototypical services possess few easily observed search qualities (e.g., color and hardness) but instead are characterized more by experience qualities (e.g., taste) and difficult-to-evaluate credence qualities (e.g., characteristics that customers may need to accept on faith, such as the adequacy of a will). In turn, experience-based intangibility provides limited objective reference points for assessing the value of services, makes it difficult to quantitatively measure output and service quality, and makes it difficult to set specific, clear goals for employees.

The earliest model—and arguably the most visible measure of quality from the user’s perspective—SERVQUAL, was developed by three pioneering services marketing researchers, A. Parasuraman, Valarie Zeithaml, and Leonard Berry. This model and survey of service quality assesses five dimensions— reliability, empathy, assurance, responsiveness, and tangibles—using a gap model that measures both expectations of how the service should occur and perceptions of what actually happened. These same five dimensions have not always emerged in studies done by other researchers; indeed, the original authors themselves stated that SERVQUAL and its factors may not be unconditionally applicable for all types of service situations.

Service Quality, Customer Satisfaction, and Customer Loyalty

The marketing literature conceptualizes service quality and customer satisfaction as different but interrelated constructs. The consensus is that service quality is a judgment about a service’s overall excellence (more descriptively and factually assessed), whereas satisfaction is a summary assessment of how the service emotionally affected the customer (more evaluative). There has been debate about the causality between the two; the consensus view is that service quality is an antecedent of satisfaction.

Measurement issues have blurred the distinction between the two constructs because SERVQUAL uses the unmet expectations gap model that originated in the customer satisfaction literature. There is also debate about which expectations standard is most appropriate; the predictive standard of “most likely to happen” tends to be used for satisfaction, and the excellence standard tends to be used for service quality. Finally, the measurement issues associated with difference scores (e.g., poor reliability, weak discriminant validity, and restricted variance) are relevant to measures of both constructs because both use the gap model.

Customer satisfaction with services appears to have only weak to modest relationships with other business outcomes of interest, such as customer retention and profitability. It appears, for example, that satisfied customers may defect anyway. This has led researchers—and practitioners in particular—to focus on the conceptualization and measurement of customer loyalty as the construct that relates most strongly to profitability. However, the strength of the relationship between loyalty and profits has also been questioned. Finally, for a brief period, service researchers attempted to specify more emotional and needs-based assessments of service using the construct of customer delight, which was of keen interest to practitioners for a while, as well as customer outrage. Overall, more research on the relationship among dependent variables in services is needed.

Organizational Behavior and Industrial/Organizational Psychology

A principal contribution to the area of services and customer satisfaction is the construct climate for service, which evolved from Benjamin Schneider’s study of the organizational climate in banks some 30 years ago. Climate for service is the shared perception of policies, practices, procedures, and the behaviors that get rewarded, supported, and expected with regard to customer service and customer service quality. Service climate represents the degree to which the internal functioning of an organization is experienced as one that is focused on service quality.

The climate for service “shows” to both service employees and customers, given the commonplace physical and psychological closeness between the two. Early research on this phenomenon found strong, significant relationships between employee experiences of service climate and customer perceptions of service quality. This was a departure from previous management thought and practice, which had divorced internal climate from customer experiences. In contrast, these results demonstrated that customer perceptions could be another criterion for validating employee perceptions of the workplace. One example of an application of this is the use of customer data (e.g., customer perceptions of service quality or customer satisfaction) to determine which human resource management practices (e.g., training, hiring, or compensation), as evaluated by employees, correlate most strongly with customer outcomes or dimensions of the climate for service (as perceived by customers). These findings were advanced further by the development of the service profit chain by researchers at the Harvard Business School. This work documented the relationships between employee satisfaction with internal service and those employees’ productivity in creating service value for customers, customer satisfaction and loyalty, and firm profitability and growth.

This work on shared employee and customer climate-based perceptions has continued in a program of research termed linkage research, which has benefited from ongoing contributions from Schneider and his colleagues and others. A common focus in linkage research is the boundary conditions that moderate the strength of relationships between employee and customer outcomes (i.e., determining when linkages between employee and customer outcomes are strongest). For example, the frequency of contact between employees and customers and the length of employee or customer tenure with the organization are variables that might be positively associated with strong employee-customer linkages.

Linkage researchers have also had to resolve methodological and data analytical issues. Because the unit of analysis is typically an organizational subunit rather than the individual, it is necessary to appropriately match employees and customers by unit and then apply the appropriate aggregation statistics (see Schneider and White, 2004, for a review of alternatives).

Finally, there is the issue of causality between employee and customer outcomes. Early conceptualizations tended to assume that causality flows from the employee to the customer—that is, employee attitudes are formed in the workplace in response to the perceived climate for service and spill over to customers. However, it also seems possible that customer attitudes could shape employee attitudes. For example, a popular adage holds that it is more enjoyable to serve a satisfied customer than a dissatisfied customer. The causality question has received little attention, though one study that specifically tested for this using a cross-lagged panel analysis found support for a reciprocal relationship between employee climate perceptions and customer perceptions of service quality.

Operations Management

Operations management, in theory and in practice, contends with how organizations make choices in the apparent trade-off between marketing effectiveness (meeting customer demands in ways that meet customer expectations of responsiveness and empathy and also influence customer perceptions of service quality and customer satisfaction) and operations efficiency (meeting demand in a cost-effective way that provides customers with the prices they expect and the margins the firm needs).

Ironically, it is customer contact with the service operation—customer presence in the service facility and customer participation in coproducing the services they receive—that is a principal source of tension surrounding these choices. Customer contact enhances the firm’s ability to leverage marketing opportunities, but on the other hand, customer contact can also introduce input uncertainty and variance into the operations of the core technology.

This trade-off can be resolved in a win-win manner (marketing effectiveness and operational efficiency) if customer participation can be managed in a way that customers perform their coproduction roles as expected. This challenge can be met if service firms enhance the same individual-level variables in coproducing customers that influence the performance of employees: role clarity, motivation, and ability. In other words, coproducing customers must understand what tasks they are expected to perform in service production and be willing and able to do so. Finally, it also appears that when customers perform their roles well, their overall satisfaction level is higher.

Looking Ahead

Many advances have been made in the area of service in the last 25 years, but today, the scholars who led those advances are calling for a new paradigm to guide future theory building and research. Much of the work to date has been stimulated by a specification of the unique characteristics of service and their implications for theory and practice, and it has relied on certain models and methods such as the gap model of service quality and linkage research. One concern is that the alleged differences between goods and services seem overstated, and consequently, the associated implications overdrawn or tired.

This new services paradigm remains unstated or at least unsettled. The possibilities are most visible in the marketing discipline, in which recent research has argued that it is time for the discipline to embrace a service-dominant foundation. In the fields of organizational behavior and industrial and organizational psychology, there seems to be less visible and focused effort to set a new paradigm for services and customer satisfaction, and thus there are ample opportunities for researchers in this area to join and direct future services research.


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