Using customer satisfaction research for ... - Semantic Scholar

CHARLES E. GENGLER PETER T. L. POPKOWSKI LESZCZYC

Using Customer Satisfaction Research for Relationship Marketing: A Direct Marketing Approach CHARLES E. GENGLER is an Assistant Professor of Marketing at Rutgers University in Camden, New Jersey. He received his PhD in Marketing in 1991 from the University of Texas–Dallas. Dr. Gengler has research and consulting interests in positioning strategy, advertising and promotions, persuasion and motivation. He has published in a variety of academic journals including Journal of Consumer Research, Journal of Advertising Research, and International Journal of Research in Marketing. PETER T. L. POPKOWSKI LESZCZYC is Assistant Professor at the Department of Marketing and Business Economics and Law, University of Alberta. He received his BS from State University of New York, Geneseo, an MBA from SUNY Buffalo, and a PhD in Marketing from the University of Texas at Dallas. He is a member of the American Marketing Association, College on Marketing, INFORMS, and Canadian Institute for Retail and Services Studies. His research interests include empirical and theoretical issues of consumer brand and store choice behavior, price promotions, pricing and advertising issues, and short- and long-run effectiveness of marketing mix variables. His research has appeared in Marketing Letters, Environment and Planning A, and Canadian Journal of Economics.

CHARLES E. GENGLER

PETER T. L. POPKOWSKI LESZCZYC

ABSTRACT Relationship marketing has become an important and necessary concept in today’s business world. Due to the importance of repeat business, it is in particular vital for retail businesses to focus on longer-term relationships with customers. In this paper we demonstrate that customer satisfaction research is not only a tool to measure consumer attitudes, but can also be a proactive tool for managing customer relations. q 1997 John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc. CCC 0892-0591/97/01023-07

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Few companies have realized the opportunity to improve the relationship with a customer while performing marketing research. Any direct contact, including customer satisfaction surveys, is an important opportunity to improve the relationship with customers. In our paper we show that consumer research and relationship marketing are integrated components of an overall customer orientation, and that marketing research can be used as a tool to perform relationship marketing. A direct marketing approach is used, contacting customers by telephone. Our results show an increase in repeat business for automobile repair services with customers contacted by phone in a customer satisfaction survey.

marketing organizations and transaction-oriented organizations is the content and maintenance of a customer information system (12). In a relationship marketing environment, the whole corporate culture must be devoted to serving the customer. Every customer contact is an opportunity to enhance (or damage) a customer’s perception of the firm. Although this concept is broadly acknowledged by many firms, it is regularly forgotten when performing customer survey research. A properly executed customer survey interaction not only provides management with valuable information, but can leave customers with the sense that the company really cares about them. This both increases the loyalty of ‘‘happy’’ customers and can make the difference in keeping disgruntled customers from switching to another brand. On the other hand, a cold, impersonal market research interview can leave a customer feeling alienated and even defensive. This can have disastrous effects on customer loyalty (14,27). As trade barriers are lowered, consumer choices and brand competition will multiply. In this environment, no organization can afford to miss any opportunity to strengthen relationships with customers. In this paper, we briefly review the use of relationship marketing. Then, a study of whether customer satisfaction research through telephone calls has an impact on subsequent repurchase behavior (loyalty) is presented. The main emphasis of this paper is to demonstrate how customer satisfaction research can become a proactive tool for relationship marketing.

‘‘Personal relations are the important thing for ever and ever, and not this outer life of telegrams and anger.’’ (E. M. Forster, Howards End, 1910)

Over the last decade, competitive forces have prompted corporations to take an increased focus on knowing their customers better through improved consumer research (21). Better understanding of what consumers perceive as ‘‘quality’’ and ‘‘value’’ has been the key to the development of successful corporate strategies for the 1980s and early 1990s. In an age when competition has increased, consumer research, and more specifically, customer satisfaction research has become essential for a company’s survival (12). In many product categories, where consumer research was once thought to be simply a source of competitive advantage, it has now become a necessity (7). Concurrent with this intensified focus on the consumer, a relationship marketing orientation is emerging as central to designing organizational structure and strategy. Relationship marketing is becoming pervasive in both industrial and consumer markets (11,16,17,22), including automotive (15,25), banking (6,18,20,24,28), and a multitude of others (26). Under the relationship marketing perspective, firms view themselves as having an ongoing relationship with their customers, aimed at delivering extra value and generating multiple transactions over time. This is in contrast with a transaction orientation—focusing on a single sale at a time (9,29). Consumer research and relationship marketing are inseparably intertwined aspects of an overall customer orientation. However, it is seldom recognized that research is part of the relationship. In fact, a major difference between relationship-oriented

RELATIONSHIP MARKETING The term relationship marketing was introduced by Berry (1). Relationship marketing is simply an orientation of treating all customer interactions as part of an ongoing stream of interactions, rather than treating each customer interaction as an isolated incident. Relationship marketing focuses on a long-term relationship and series of transactions with the customer. Many feel that this is so important that it redefines the marketing concept itself (19). Gro¨nroos (10:53) states: ‘‘The most important issue in

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marketing is to establish, strengthen, and develop customer relations where they can be commercialized at a profit and where individual and organizational objectives are met.’’ The relationship marketing concept has continued to develop (2). Calonius (5) dicusses the ‘‘promise’’ concept in terms of relationship marketing. Unlike transaction orientation, which would focus on making promises, relationship marketing must focus not only on making but on keeping promises made to the customer, ideally developing trust and loyalty between customer and supplier. Loyal customers are of obvious benefit to sellers (3,22,23). The trust in a relationship has value to the buyer in terms of reduced risk, reduced stress, reduced search costs, and a generally simpler life (2,4). This component of relationship marketing is particularly important to direct marketers. Implementation of a successful relationship marketing orientation requires that personnel working within the firm are sold on the concept themselves (11,13). Service quality cannot be treated as just a ‘‘program’’ or ‘‘special campaign’’ (6). It requires a continuous commitment from the entire organization. Furthermore, it requires a commitment from all of the third-party vendors who support the organization (30). In an age where firms are increasing their use of outside services for many functions, they must continuously take measures to ensure that these firms share a common vision of customer relationships. Anything less can cause serious damage to the firm’s reputation (30). Therefore, many firms are placing an intensified focus on the implementation of full relationship marketing programs both within their firms and within the service firms they employ.

Lexus stresses that telephone follow-ups be made by sales staff shortly after delivery, by the service department after service visits, and even by employees at corporate headquarters. Illingsworth comments, ‘‘Every employee, from the newest secretary to the vice-president, calls one owner a week, just to touch base and see if there’s anything the company can do for them.’’ (15:51)

Alamo’s ‘‘Best Friends’’ Program In another example, Alamo Rent-A-Car implemented what it refers to as a ‘‘Best Friends Program.’’ Chairman Michael Egan described the program as follows (25:43): ‘‘Make your customers your best friends; treat them that way all the time, and they will always be your customers. And, they will always be your best friends. Extend this concept to your fellow Alamo family members. Make each one with whom you come in contact your best friend. What happens then? Our work environment becomes a happy place with a caring, family atmosphere. It becomes a pleasure to come to work every day. Moreover, because you have a caring attitude, because you have created a family atmosphere, the customer senses it and responds accordingly.’’ The program results were impressive and immediate (25). Between 1989 and 1990, business transactions increased 30 percent. At the same time sales complaints went down 15 percent and rudeness complaints went down 50 percent. These examples illustrate that companies are adopting relationship marketing philosophies based on interpersonal contact. Furthermore, the Alamo example cites increased business transactions and reduced complaint behavior, attributing this activity to the relationship marketing program they have adopted. Asking customers what can be done for them or how they can be helped are ways of letting customers know the company cares, and they are also informal forms of customer satisfaction research. If communication techniques can be incorporated into traditional customer satisfaction research to achieve the same ‘‘caring’’ effect, then two important research issues must be addressed. First, it is important to know if this interaction translates into customer behavior, i.e., whether customer satisfaction surveys conducted by telephone have an impact on

The Lexus ‘‘Customer First’’ Program For example, in the auto industry Toyota’s Lexus operation prides itself on customer-relationship management according to J. D. Illingsworth, group vice president of Toyota Motor Division in the U.S. (15). Toyota’s creed is ‘‘customer first, dealer second, and Toyota third.’’ This illustrates Toyota’s observation that all members of the channel must be involved and committed to the relationship orientation. Illingsworth (15) states that the company went through a very careful dealer selection process, initially allowing only about 7 percent of the candidates that applied to actually become dealers. In addition,


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customer behavior. Secondly, it is important to assess whether interacting with customers to maintain a relationship will bias responses to customer satisfaction survey data. Basically we are looking at the extent to which a direct marketing approach can be used to perform relationship marketing while collecting survey data.

Sample In this study, only customers who had visited a dealer for service in the first quarter of 1992 were included in the sample. A total of 124,195 subjects were identified nationwide. Telephone contact was made within two weeks after a service visit. A total of 64% of the subjects were contacted, and the remainder were used as a control group. At the end of the year, customers were then cross-referenced with service visits made throughout the rest of the year to assess postcontact behavior and determine the impact of telephone contact. It is to be expected that some of the 36% who were not contacted may have moved during the time period between service and contact, thereby impacting their ability to return for future service. Analysis of demographic and model ownership data indicated no significant difference between those contacted and not contacted. Although within the not-contacted group there may have been some sample attrition from those who had a service visit in the first quarter of the year, this could not reasonably account for the large differences found between the groups. According to DeAre (8), 18.1% of the population moved residences between March 1985 and March 1986. Using this figure, and assuming a uniform distribution of moves across the year, we estimate that 0.70% of the population may move within a given two-week period. (After the two-week period, we expect that those who were surveyed and those that were not would move at the same rate.) Adjusting the 36% figure by 99.3% gives us a control group size of 35.74% of the population. Hence, comparisons of behavior are based upon a 64% group that was contacted, a 35.74% group that was not contacted, and a 0.26% group of the population that could not repurchase because they had moved. If anything, this adjustment is overly cautious, since many of these moves may have been local rather than inhibiting the individuals from revisiting the dealer.

STUDY: DOES CUSTOMER SATISFACTION RESEARCH AFFECT REPURCHASE? A Study of Automobile Dealer Service Repurchases Here, we analyze the effects of a telephone customer satisfaction survey upon subsequent customer repurchase behavior for automobile dealer service. It must be emphasized that the telephone survey was conducted by professional interviewers specifically trained in relationship marketing techniques. As with Lexus and Alamo, the techniques are designed to communicate the perception of caring about the customer. This means that rather than maintaining a strict script in the interview process, which can seem cold and uncaring to customers, the interviewers are trained to respond sympathetically and reassuringly to customer concerns and complaints. For example, when customers responded particularly negatively to any of the questions, the interviewer would respond with apologetic comments such as ‘‘I am sorry to hear that,’’ or other similar statements as appropriate. At the end of the survey, separate closing statements were used for satisfied and dissatisfied customers. Satisfied customers were simply told, ‘‘. . . thank you for your answers and for coming to [dealership name]. Goodbye.’’ Dissatisfied customers were told, ‘‘. . . let me apologize for the problem(s) you’ve had and the inconvenience you’ve been caused. I’ll make sure this information gets back to the dealership management.’’ In cases of a serious complaint, subjects are asked for their daytime phone number so that the dealership can contact them. There was no corporate policy of incentives to promote repurchases for dissatisfied customers. Each individual dealership handled customer problems individually as appropriate to the level of severity.

Results Table 1 shows that telephone contact significantly improved customer loyalty; 55.6% of those who were contacted after their first visit returned for additional service visits, whereas only 48.7% of those not contacted returned for visits. A chi-square test of whether the patterns in Table 1 differed from what would be expected as random chance was signifi-


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with greater frequency; however, for both those with and without warranty coverage, contact by telephone substantially increased the likelihood of subsequent visits. The increase for those not on warranty is especially important, since these customers will naturally be the most profitable segment. The bottom line in this study is how the increased customer repurchase frequency translated into increased profits. According to the research firm, annual parts profit was $21.17 higher for contacted customers than for noncontacted customers. Annual service profit was $38.11 higher for contacted customers than for noncontacted customers. Given that the telephone contacts cost $8 per year (for two service visit follow-ups), this is approximately a 741% return on investment!

TABLE 1 Impact of Customer Contact on Repurchase Behavior for Dealer Automobile Service Total Number of Customers

Customers Who Repurchased

Average Number of Repeat Visits

100% satisfied customers

48,779 (39.8%)

28,077 (57.6%)

1.14

MediumSatisfied Customers

18,755 (15.3%)

9,582 (51.1%)

0.94

‘‘At-risk’’ or dissatisfied customers

10,309 (8.4%)

5,599 (54.3%)

1.04

Total contacted

77,843 (63.5%)

43,258 (55.6%)

1.08

Not contacted

44,757 (36.5%)

21,785 (48.7%)

0.93

SUMMARY Relationship marketing is one of the most important competitive trends in business today. It requires a commitment to delivering quality to the customer from the entire organization, not just from the sales staff or customer phone representatives. Carrying this philosophy through, it also requires that a firm ensure that other service firms which interact with customers also keep the same commitment. This includes marketing research firms. In this paper we have demonstrated that telephone surveys are more than just data collection, they are opportunities to strengthen relationships with customers. Therefore, customer satisfaction research is one area where this philosophy can be successfully employed to turn a mundane data collection process into a proactive promotional tool. All customer contacts are opportunities to make an impression on the customer, and are part of the relationship with that customer. The important point is not merely that contacting customers after the purchase has a positive effect, but that this effect can be achieved simultaneously with customer satisfaction data collection. The fastest-growing companies of the next decade will be those who establish and maintain a loyal base of customers. Any company that only focuses on new customers may lose customers as fast as it gains them. Relationship management firms are a new form of specialized business destined to grow in the future. Research firms that emphasize quality

cant at the .001 level. Further analysis broke the surveyed customers down into three categories based upon their satisfaction level. The majority of customers surveyed (63%) were 100% satisfied with the service visit, 24% were not 100% satisfied, but were not strongly dissatisfied either, and the remaining 13% were dissatisfied and designated as at risk of taking their business elsewhere. For the atrisk customers, an alert notice was sent to the dealer so that any corrective action necessary could be taken. After being contacted by telephone, the 100% satisfied customers returned at a rate of 57.6%, the midrange satisfied customers returned at a rate of 51.1%, and the at-risk customers returned at a rate of 54.3%. It seems that the contact with the at-risk customers was particularly effective, since one would a priori expect them to be least likely to return, yet they returned at a rate significantly larger than the uncontacted group’s rate of 48.7%. Another issue analyzed was whether there was a difference in response between customers whose purchases were in warranty and those not on warranty. For those on warranty who were contacted, 62.9% returned for additional service, whereas those on warranty who were not contacted returned at a rate of only 55.7%. For those not on warranty, 51.5% of those contacted returned for a second visit, compared with only 44.8% of those not contacted. As one would expect, customers on warranty return


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customer contact and support will displace those firms which do not. This is not only true for consumer product firms, but also for the third-party service firms working for them. Any customer contact is perceived as reflecting on the original firm, whether it is marketing research, an outside firm managing frequent-flyer programs, a data processing firm responsible for issuing monthly statements to customers, or even the landscape service hired to maintain the exterior of a retail location. A strong commitment to customer orientation means one thing: the relationship comes first—always. The first plateau of customer orientation is caring about the firm’s customers and their needs. The second plateau can be characterized as the market research era, when companies put a focus on gathering information about their customers. Yet, caring only through marketing research may often seem to customers like the attention a small fish receives as a larger predator eyes it over carefully. To avoid creating this sensation, the third plateau takes the customer orientation one step further, putting a focus on a two-way ongoing communication process between the customer and the firm: i.e., the relationship. Companies must still care about their customers’ needs. They must still use marketing research to track and understand those needs. But they must recognize that a relationship is more than just mechanically collecting data, diagnosing it, and gradually responding. A relationship means putting a focus on caring about customers and letting them know it. It means establishing and maintaining channels of ongoing two-way communication. Future research can progress in several directions. The study presents evidence that customer survey research can enhance repurchase behavior, but does not address whether telephone or mail or a combination of the two is best for relationship marketing. This is an important topic for future research. An investigation of the optimal timing and frequency of customer contact would benefit management decision-making. Qualitative research on how customers perceive marketing research, or particularly customer satisfaction research, is needed to understand the effects of this activity more fully. Furthermore, future research needs to understand what activities have effects on the firm’s image, and how negative effects can be avoided. Finally, a study of the variation in responses across market

segments would significantly improve relationship management. j

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