Managing Customer Satisfaction

Abstract

Firms invest in customer satisfaction (CS) because customers are the biggest source of cash flow for a company (Gruca and Rego 2005). A customer base with high levels of satisfaction provides many long-term benefits for the firm. Satisfied customers are likely to continue repurchasing a firm’s offerings (Bolton 1998), purchase more from the firm (Anderson 1994), engage in more cross-buying (Verhoef et al. 2001), and have lower service and retention costs (Borle et al. 2007). Satisfied customers help a firm to lower the cost of customer acquisition through positive word of mouth and recommendations to friends and family (Anderson 1998). They also have lower price elasticity (Anderson 1994), that is, are less likely to defect when competitors offer lower prices. Finally, they are also more forgiving: when there is an occasional good or service failure, highly satisfied customers may attribute it to external causes and stay loyal to the firm (Tsiros et al. 2004). No wonder smart firms incorporate customer satisfaction within their overall strategic framework.