REVIEW OF LITERATURE The field of Customer Satisfaction is large and traverses many academic disciplines. In this chapter, a review of the published literature upon which this study rests is presented. The search for a workable definition of Customer satisfaction is explored. The concepts regarding the theoretical nature of Customer satisfaction is investigated and some of the major techniques used to measure are discussed. Definition of Customer Satisfaction An analysis of the literature concerned with Customer satisfaction in 1992 revealed a large and ever growing body of research with some 15,000 trade and academic articles, which had been written on the topic over the previous two decades (Peterson and Wilson, 1992). Despite the many studies on Customer satisfaction, there appeared to be no overall agreement over important issues such as concepts, constructs, definitions, measurements, methodologies and various interrelationships (Yi, 1990; Brooks, 1995). Currently the constructs of Customer satisfaction are built upon concepts such as individual wants, needs and expectations. These concepts emerged from theories about customer choice for goods and services, which are sought to meet needs and wants. Issues such as prices, convenience, appeal and quality were seen as moderating the choices. The concept of satisfaction itself needs to be defined. The Shorter Oxford English Dictionary (1944, p. 1792) defined satisfaction as 1 being satisfied, 2 thing that satisfies desire or gratifies feeling. It describes satisfy as 1 meeting wishes of content, 2 be accepted as adequate 3 to fulfil, 4 comply with, 5 come up to expectations. Customer is defied as a person who buys a product or uses a service. Hence using these definitions, Customer satisfaction can be thought of as a user or purchaser having their needs and expectations fulfilled. The concept of Customer satisfaction has been defined in various ways. Zeithaml, Berry and Parasuraman (1993) suggested that Customer satisfaction is a function of the Customers assessment of service quality, product quality and price. Oliva, Oliver and Bearden (1995) suggested that satisfaction is a function of product performance relative to customer expectations. Bachelet (1995) considered satisfaction to be an emotional reaction by the customer in response to an experience with a product or service. He believed that this definition included the last contact with a product or service, the satisfaction experience since the time of purchase as well as the general satisfaction experienced by regular users. Hill (1996) defined Customer satisfaction as the Customers perceptions that a supplier has met or exceeded their expectations. Jones and Sasser (1995) defined Customer satisfaction by identifying four factors they postulated affected it. The factors were: (1) essential elements of the product or service that Customers expected all rivals to deliver, (2) basic support services such as Customer assistance, (3) a recovery process to make up for bad experiences and (4) customisation which were factors that met Customers personal preferences, values, or needs. Ostrom and Iacobucci (1995) examined a number of definitions from other researchers and distinguished between the concept of customer value and Customer satisfaction. They stated that Customer satisfaction was best judged after purchase, was experiential and took into account the qualities and benefits as well as the costs and efforts associated with a purchase. Gerson (1996) suggested that a Customer was satisfied whenever his or her needs, real or perceived were met or exceeded. He put it succinctly as Customer Satisfaction is simply whatever the Customer says it is(p. 24). A new paradigm of Customer satisfaction has evolved from this multifarious body of knowledge. Johnson and Fornell, (1991) proposed an econometric model where satisfaction was viewed as a cumulative abstract construct that describes Customers total consumption experience with a product or service(p. 271). They stated this was not a transient perception of how happy a Customer was with the product at any given point in time. It was the overall experience with the purchase and use of a product or service to that point in time. This concept is consistent with the economic notion where satisfaction embraces post-purchase consumption utility as well as expected utility (Meeks, 1984). Johnson and Fornells (1991) view also conformed to the economic psychological theory where satisfaction was compared with the notion of subjective wellbeing (Wärneryd, 1988). The Johnson and Fornell (1991) model evolved into the American Customer Satisfaction Index (ACSI). The ACSI model rests on the relationships between the Customers evaluated characteristics such as perceived quality, perceived value, price tolerance, willingness to repurchase and recommendation of the product or service to others (Fornell et al., 1996). Put simply by Fornell et al (1996, p. 10), Customer satisfaction is when your Customers come back and your products dont.Importance of Customer satisfaction The significance of Customer satisfaction to the business world is the concept that a satisfied Customer will be a positive asset for the company through reuse of the service, repurchase of the product or positive word of mouth, which should lead to increased profit. The converse of this is that a dissatisfied Customer will tell more people of their dissatisfaction, possibly complain to the company and if sufficiently disenfranchised, change to another company for their product or service, or totally withdraw from the market (Anderson and Sullivan, 1993; Fornell, Ittner and Larcker, 1995; Oliva, Oliverand Bearden, 1995).Perception of Customer satisfaction Customer satisfaction studies tend follow two different models. These models have been dubbed the Customer concerns and the organisational concerns approach. There are also an infinite number of shades of grey in-between the two extremes (Wittingslow and Markham, 1999). The model of Customer satisfaction chosen in a study reflects the culture of the organisation conducting the study. The type of model chosen has consequences for defining Customer satisfaction. A company that is driven by the importance of what it believes it is doing and the importance of its market approach, tends to interpret Customer satisfaction as what the Customer should want, against these organizational and marketing needs (Yi, 1990; Dutka, 1994). If however the organisation has a culture where the Customer is seen as being an independent entity who has his/her own motives beliefs and needs, then Customer satisfaction will be defined as being based upon Customer thinking (Wittingslow and Markham, 1999). Wittingslow and Markham, (1999) suggest that we perceive the world around us in an egocentric and selective way. Because we cant take in all the images, sensation and feelings that are experiencing continually, we select those that are the most important. A result of this filtering process is we can not evaluate, with any accuracy, a thing we have either consciously or unconsciously selected out. The sequela of this, for Customer satisfaction research, is that asking questions on an issue that the respondent has selected out or not experienced produces problems for the data set produced. Either the respondent chooses an answer at random (inducing noise into the data set) (Andrews, 1984) or replies with a Dont Know / Not applicable (resulting in missing data). To minimise this problem, the respondent must be asked question that draw from their experience and are in language that they understand (Wittingslow and Markham, 1999). The Nature of Customer Satisfaction Before Customer satisfaction can be measured, the nature of satisfaction itself must be determined. As Johnson, Anderson and Fornell, (1995) stated, The modelling of Customer satisfaction depends critically on how satisfaction is conceptualised. This aspect however is controversial. Some of the disputed characteristics of Customer satisfaction are, the nature of satisfaction, whether satisfaction is cumulative, or transaction specific, and the merits of measurement at the individual compared to the market level.Social Sciences theories of the nature of satisfaction There have been many approaches in defining the customer satisfaction/ dissatisfaction construct and how the various Customer factors such as cost or product performance impact on satisfaction.Equity Theory. – According to equity theory, satisfaction occurs when a given party feels that the ratio of their outcomes of a process is in some way in balance with their inputs such as cost, time and effort (Brooks, 1995).Attribution Theory – in this theory the outcome of a purchase is thought of in terms of success or failure. The cause of the satisfaction is either attributed to factors that are internal such as the buyers perceived buying abilities or external such as difficulty of the buying task, other peoples efforts or luck (Brooks, 1995). Performance Theory – Customer satisfaction is directly related to the product or services perceived performance characteristics (Brooks, 1995). Performance is defined as the Customers perceived level of product quality relative to the price they pay. That is satisfaction is equated with value, where value equals perceived quality divided by the price paid (Johnson, Anderson and Fornell, 1995). Expectancy Disconfirmation Theory – Brooks (1995) stated that Expectancy Disconfirmation Theory, at the time of the publication of his research, was the most popular of all the social science theories. In this theory, Customers form expectations of product performance characteristics prior to purchase. When the product is bought and used, the expectations are compared with actual performance using a better-than, worse-than heuristic. Positive disconfirmation results if the product is better than expected while worse than expected performance results in negative disconfirmation. Simple confirmation results when a product or service performs as expected. Satisfaction is expected to increase as positive disconfirmation increases (Liljander and Strandvik, 1995). Statistical History of Customer satisfaction The first work in the area that would become mathematically based Customer satisfaction was carried out in the 1920s by sociologists studying mass behaviour using primarily percentage analysis. By the 1940s, scaling and ratings were at the cutting edge of customer science. The jump from correlation to equations was the major development in the 1950s. The first generation of multivariate analysis occurred in the 1960s. These methods however were limited in their ability to bring together theory and data. They also were restricted in processing behavioural data by their failure to incorporate auxiliary measurement theories, i.e. the theoretical assumptions made during measurement, that, if excluded from the empirical model, would bias estimates and confound results (Blalock 1982, Fornell, 1988). The increasing availability of computer technology in the late 1960s and early 1970s enabled the widespread use of multivariate analysis in marketing (Sheth, 1971). The new methods of simultaneous analysis of multiple variables displaced the older techniques of univariate and bivariate analysis. The new processes included multiple regression, multiple discriminant analysis, factor analysis, principal components, multidimensional scaling and cluster analysis. The multivariate revolution of the early 1970s became established within academia by 1980 and became commonly used in commercial marketing research by 1982 (Bateson and Greyser, 1982). Around 1982 a new multivariate technique appeared which was claimed brought together the areas of psychometrics, econometrics, quantitative sociology, statistics, biometrics, education, philosophy of science, numerical analysis and computer science (Fornell, 1988). This technique was dubbed the Swedish Satisfaction Barometer (Fornell, 1988). Claimed advantages of this methodology were that it corrected for measurement imprecision, isolated effects, modelled a system of relationships and provided a basis for cause-and-effects interpretation. By the 1990s the method had developed by researchers such as Fornell, Anderson, Johnson, Cha and Bryant at the National Center for Quality Research (NCQR) into the American Customer Satisfaction Index (ACSI), an aggregate, prospective, predictive Customer satisfaction measure.Concepts of Satisfaction PerformanceGap theory Parasuraman, Zeithaml and Berry (1988) suggested that expectations in the satisfaction literature have been used as predictions of service performance, while expectations in the service quality literature were viewed in terms of what the service provider should offer. Later Zeithaml, Berry and Parasuraman (1993) modified this distinction, introducing two different levels of expectations and proposing the existence of a zone of tolerance between these levels. They argued that satisfaction is the function of the difference or gap between predicted service and perceived service, while perceived service quality is the function of the comparison of adequate or desired service with perceived service performance.Catastrophe theory / fuzzy logic Most models of Customer satisfaction assume a linear relationship between the effect of various causes such as expectancy disconfirmation on the customers reaction to a product or service. Oliva, Oliver and Bearden (1995) put forward the concept of involvement with a product or service. They suggested that at a low level of involvement the traditional linear assumptions hold true. However, at high levels of involvement the relationship becomes sticky. That is, the customers do not shift preferences over a range of reported performance. Instead, the perceived performance level declined until it reaches a cusp where the customer suddenly abandoned the product in favour of a competitor. Later when the perceived performance of a product improves, the customer will not re-purchase until there is large advantage in doing so. Transaction-specific satisfaction and cumulative satisfaction Johnson, Anderson and Fornell (1995) suggested there were two concepts of Customer satisfaction in the literature: transaction-specific satisfaction and cumulative satisfaction. Transaction specific Customer satisfaction focuses on individual customer responses to individual products and services while the cumulative one describes the total consumption experience of a Customer with a product or service (Anderson and Fornell, 1993; Boulding et al., 1993). Some disagreement exists in transaction-specific satisfaction. Parasuraman, Zeithaml and Berry (1988) suggested that perceived service quality was an antecedent to transaction-specific satisfaction while Bitner (1990) and Bolton and Drew (1991) believed that transaction-specific satisfaction is an antecedent to perceived service quality. Johnson, Anderson and Fornell (1995) argued that while enterprises had a practical need to conduct transaction specific research on Customer satisfaction, this action did not contribute to the generation of empirically generalised theories and models on satisfaction. They suggested that a market level or aggregate approach to Customer satisfaction was more likely to overcome problems in reconciling the variation of findings at the individual level.Individual (disaggregate) satisfaction A large amount of Customer satisfaction literature is based on the model of disaggregate (individual level) satisfaction with services or goods (Yi 1991). These disaggregate studies show the scope of human behaviour. However, Yi (1991) and Anderson and Sullivan (1993) have reported problems with the empirical generalizability of these studies. Johnson, Anderson and Fornell (1995) argued that the attitudes and behaviour of individuals might be so unique that reliable generalisations cannot be determined from individual level studies. As a solution to this problem, they suggested the aggregation of individuals to produce a market level satisfaction.Market level (aggregate) satisfaction Little work has been done on aggregate or market level Customer satisfaction. Market level satisfaction is the aggregate satisfaction of all those who purchase and consume a particular product. Johnson, Anderson and Fornell (1995) reported that the aggregation of individual responses served to improve the power of the measurement by reducing the error in measurement of satisfaction variables and increasing the verification of coherent relationships with other variables. They suggested that the aggregation might also increase the sensitivity to relationships between customer attitudes and subsequent purchase behaviour. Market level satisfaction has been found to be reasonably stable over time (Johnson, Anderson and Fornell 1995). Market performance expectations have a large rational component yet remain adaptive to changing market conditions. Johnson, Anderson and Fornell (1995) identified three antecedents of their market model: performance (perceived product quality relative to price), expectation (attitudes or beliefs about the degree of performance) and disconfirmation (the degree to which perceived performance confirms performance expectations). They suggested that disconfirmation has an important role in developing transactional models of satisfaction although it is a problematic concept.