CHAPTER – IV

CONCEPTUAL BACKGROUND ON CUSTOMERS PERCEPTION

In this chapter an overview of customer perception and its associate

contribution to the customers satisfaction has been given in a brief form.

Perception is a process by which an individual select, organize and

Interpret stimuli in a meaningful picture of the world. Also, we can describe
as “how we see the world around us”. Perception is the process of selecting,
organizing and interpreting or attaching meaning to events happening in
environment. Our perception is an approximation of reality. Our brain
attempts to make sense out of the stimuli to which we are exposed. This
works well when we are about to perceive familiar facts. However, our
perception is sometimes “off” when we are not clear about concepts.

Perception is one of the objects studied by the science of consumer

behaviour. Analyzing the work of scientists studying the consumer
behaviour, it is possible to make a conclusion that perception is presented as
one of personal factors, determining consumer behaviour.

Personal factors mean the closest environment of a human, including

everything what is inside the person, his head and soul, characterizing him
as a personality. Using his sensory receptors and being influenced by
external factors, the person receives information, accepts and adapts it,
forms his personal attitude, aptitude, opinion, and motive, which can be

119
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 defined as factors that will influence his further activity and behaviour.
Perception within this context is considered as one of the principal personal
factors, conditioning the nature and direction of remaining variables.

Authors J.C. Mowen (1987), D.L. Loudon and A.J. Della Bitta (1993)
determine perception as a phase of information processing, while C.G.
Walters and B.J. Bergiel (1989), F.G. Crane and T.K. Klarke (1994), G.D.
Harrell, G.L. Frazier (1998), M.R. Solomon (1999), B. Dubois (2000) define
perception as a separate variable of consumer behaviour having features of
the process and including separate phases of the process. C.G. Walters and
B.J. Bergiel (1989) characterize perception as a solid process during which
an individual acquires knowledge about the environment and interprets the
information according to his/her needs, requirements and attitudes.

The works of F.G. Crane and T.K. Klarke (1994), G.D. Harrell, G.L.
Frazier (1998), characterize perception as a solid process during which an
individual acquires knowledge about the environment and interprets the
information according to his/her needs, requirements and attitudes.

The works of F.G. Crane and T.K. Klarke (1994), G.D. Harrell, G.L.
Frazier (1998), M.R.Solomon (1999), B. Dubois (2000) present perception
as a more complicated process, during which sensory receptors of a
consumer capture a message sent by external signals and the information
received is interpreted, organized and saved, providing a meaning for it and
using it in a decision making process.

120
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 DIAGRAM 4.1
ELEMENTS OF THE PERCEPTUAL PROCESS

M.R. Solomon Schiffman-Kanuk

(1999) (2000)
Sensation Selection
Attention Organization
Interpretation Interpretation

B. Dubois J.C. Mowen

(2000) (1987)
Sensation PERCEPTION Organization
Interpretation Understanding

Crane-Klarke Harrell-Frazier
(1994) (1998)
Sensation Reaction
Attention Attention
Understanding Understanding
Retention Retention

Summarizing the studies of the perception concept provided in the

scientific literature, it can be concluded that perception has characteristics of
a process and is constituted by separate elementary elements with an
appropriate sequence. This process is influenced by subjective features of an
individual and has distinctive individual characteristics. Diagram 4.1 shows
the elements of perception as a process, provided by various authors.

121
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 Analyzing classifications proposed by marketing specialists, it can be
stated that sensation, attention, interpretation and retention are the important
dominating elements of the perceptual process. The interaction of these
elements is presented in Diagram 4.2.

DIAGRAM 4.2
THE ELEMENTS OF PERCEPTUAL PROCESS
Sensation Attention Interpretation Retention

4.1 ELEMENT OF PERCEPTUAL PROCESS

(i) Sensation

Sensation is a stimulation of a consumer‟s sensory receptors and

transmission of the information to the brain and the spinal cord with a help
of nerve cells. In theoretical works on consumer behaviour sensation is
usually considered as a physiological mechanism that helps a human, using
his sensory receptors (eyes, ears, nose, mouth and skin) to react to external
stimuli (image, sound, scent, taste and texture). Sensation, activated by
external stimuli, can be of three types: passive, active and selective. The
intensity of sensory input depends on the sensitivity of receptors and the
intensity of signals that are limited by the absolute threshold that refers to
the minimum amount of stimulation that can be detected on a sensory
channel and the ability of an individual to adapt the margin, depending on
circumstances. In addition to this, every sensation is conditioned by the
variation of environmental energy, defined by the differential threshold. It
refers to the ability of a sensory system to detect changes of differences
between two stimuli.

122
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 (ii) Attention

Attention is another element of the perceptual process. Attention as a

filtering mechanism of the information provided by a stimuls. The
researchers claim that attention is expressed as a processing scope of the
quantity of stimuls information. The bigger the scope of the stimuls
processing, the more of the stimuls information a consumer realizes and
conceives. Attention is a direction and focus of a mental activity to particular
objects and it is distinguished into two types of attention; voluntary and
involuntary. Voluntary attention occurs in such circumstances when a
stimuls absolutely meets a consumers demand and situation. Involuntary
attention appears when a consumer faces a new and unexpected stimuls,
interesting and attractive, though irrelevant at the time being.

(iii) Interpretation

Interpretation is the element of the perceptual process as a process of

sensation decoding. The authors are very particular to note that during this
process feeling are turned into symbols such as words, numbers or images
and other. Symbols are also used for information storage and further
analysis. The interpretation is rending of a meaning for the signal received.
The understanding and decoding of a stimulus depends on the several factors
such as sensibility of an individual, his motivation and opportunities (time
and other). Consequently, the interpretation of a stimulus is an especially
individual process during which the stimulus is provided with a subjective
and personal meaning. Two people hearing or seeing the same thing
interpret the signal received differently due to their expectations of the signal
two stages for a stimulus interpretation:

123
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
  The analysis of a stimulus features, where a consumer identifies the
main features of a stimulus and evaluates the peculiarities of a feature
set.
 The stage of synthesis, where the evaluated elements of a stimulus are
combined with available external and internal information.

(iv) Retention

Retention places a significant emphasis on the last element of the

perceptual process known as retention in his works. The consumer
memorizes better and retains those signals and their meanings that are close
to his attitudes.

4.2 IMPORTANCE OF CUSTOMER PERCEPTION

Customer perception is an important component of our relationship

with our customers. Customer‟s satisfaction is a mental state which results
from the customer‟s comparison of expectations prior to a purchase with
performance perceptions after a purchase. A customer may make such
comparisons for each and every part of an offer called “domain-specific
satisfaction” or for the offer in total called “global satisfaction”. Moreover,
this mental state, which we view as a cognitive judgement, is conceived of
as falling somewhere on a bipolar continuum bounded at the lower end by a
low level of satisfaction where expectations exceed performance perceptions
and at the higher end by a high level of satisfaction where performance
perceptions exceed expectations.

124
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 The lowest level at which an individual can experience a sensation is
called the absolute threshold. In other words, the point at which an
individual senses a difference between something and nothing is referred as
absolute threshold for example notice of bill board while driving car, Point
at which you notice vibrating sound of tongs, point at which you feel cold
etc., As our exposure to the stimulus increases we notice it less for example
taking bath cold water everyday no shivering / cold as “getting used to”. In
the field of perception the term adaption refers specially to “getting used to”
certain sensations.

4.3 CLASSIFICATION OF PERCEPTION

There are two type of perception

 Supraliminal perception
 Subliminal perception

4.3.1 Subliminal Perception

The process of change of weak perception into strong perception is

termed as subliminal perception through stimulus. Subliminal perception is
use to describe something that is below the level of perception. People can
get stimulated below their conscious awareness level. Such person can
perceive stimuli without being consciously aware that they are doing so.

4.3.2 Supraliminal Perception

Perception of the stimulus that is above the level of conscious

awareness is called supraliminal perception.

125
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 4.4 CUSTOMER PERCEPTION INFLUENCES THE CUSTOMER
SATISFACTION

Customer satisfaction is the state of mind that customers have about a

company when their expectations have been met or exceeded over the
lifetime of the product or service. The achievement of customer satisfaction
leads to company loyalty and product purchase. Satisfaction comprises three
basic components, a response pertaining to a particular focus determined at a
particular time.

As markets shrink, companies are scrambling to boost customer

satisfaction and keep their current customers rather than devoting additional
resources to chase potential new customers. When examined as a whole,
three general components can be identified which are given as follows.

1. Customer satisfaction is a response (emotional or cognitive);

2. The response pertains to a particular focus (expectations,
product, consumption experience, etc.); and
3. The response occurs at a particular time (after consumption,
after choice, based on accumulated experience, etc).

4.4.1 Customer Perception and Customer Dissatisfaction

Consumer dissatisfaction is portrayed as the bipolar opposite of

satisfaction; or consumer satisfaction and dissatisfaction are viewed as two
different dimensions. Everyone recognizes good service when they see it or
experience it or so we would like to think. Yet for many people, good
service may simply be expected and thus taken into account for granted.
What stands out in the customer‟s mind is excellent service that exceeds

126
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 their expectations – and poor or inferior service that fails to meet them. So
how does an organization know whether its service is meeting or exceeding
these expectations? How should it determine whether the customer was
overwhelmed with good service or “under-whelmed?” with poor service?
One way to do this is to measure customer perception on service provided
and how much the customers are satisfied with the service.

The service profit chain analyzes how customer satisfaction leads to

profitability. Measuring customer satisfaction process will enables
management to minor whether this key performance metric is in line with
acceptable levels. Customer satisfaction measurement system must provide
actionable information. In other words, the focus is on measuring what can
be controlled, modified and also improved. An effective measurement
system should help to evaluate service improvement initiatives.

Businesses survive because they have customers who are willing to

buy their product or service. However, many times businesses fail to “check
in” with their customers to determine whether they are happy or not and
what it will take to make or keep them happy here comes the perception.
Finding the reasons for customer defections and doing something about
them is especially important. Measuring customer perception is a sound
business strategy due to be following reasons.

2. It is expensive to win new customers, and customer retention is

critical for success of the business concern.
3. It is less expensive to sell additional products and services to existing
satisfied category customers (so we should listen to what is important
to them).

127
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 4. Problems encountered by customers negatively impact their loyalty (if
we disappoint them, they may start looking for alternatives and many
alternatives are also available in the present world).
5. The customer contact center has significant impact on customer.

While it seems clear that to increase customer satisfaction

understanding customer‟s perception would be beneficial to a marketing
executive, but how to measure it is less clear. Customer satisfaction has been
studied from the perspective of the individual customer and what drives their
satisfaction can be studied by the impact of customer perception.

4.5 IMPORTANT COMPONENTS OF PERCEPTION

The characteristics of service also make service in the form of unique

and different from goods as described below.

4.5.1 Intangibility

Unlike manufactured goods that are tangible, a service is intangible in

nature. The products from service are purely a performance. The customer in
a position to see, taste, smell, hear, feel or touch the product before it
produced.

4.5.2 Heterogeneity

A service is difficult to produce consistently and exactly over time.

Service performance varies from producer to producer, from customer to
customer, and from time to time. This characteristic of service makes it very
difficult to standardize the quality of various service products.

128
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 4.5.3 Inseparability

In service industries, usually the producer performs the service at the

time the consumption of the service takes place. Therefore, it is difficult for
the service producer to hide mistakes or quality shortfalls of the service. In
comparison the goods producers, have a buffer between production and
customers‟ consumption.

4.5.4 Perishability

Unlike manufactured goods, services, cannot be stored for later as

well as consumption. This makes it impossible to have a quality check
before the producers send it to the customers. The service providers then
only have one path, to provide service right the first time and every time.

4.5.5 Non-returnable

A service is not returnable as in the case of products. On the other

hand, in many services, customers may be fully refunded if the service is not
satisfactory.

4.5.6 Needs-match uncertainty

Service attributes are more uncertain nature than the product. This
yield to higher variance of making a match between perceived needs and
service is greater than perceived need and product match.

129
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 4.5.7 Interpersonal

Service tends to be more interpersonal than products. It means for

example compare buying a vacuum cleaner to contracting for the cleaning of
a carpet. While customers will judge the quality of the vacuum cleaner by
how if contribute the mechanical application to clean the carpet is,
customers will tend to judge the quality of the carpet cleaning service on
both the appearance of the carpet and the attitude of the technician.

4.5.8 Personal

Customers often view services to be more personal than products. For

example, a customer may perceive the service of her can (balancing the
tires) as more personal than purchasing a new one. If the same customer has
problems later with the tires, the defect in the tires would be less personal
than if the tires were never balanced.

Even though the food at a restaurant might not be as much as

delicious as other famous restaurants, the customers will recognize the
respective restaurant and tend to be satisfactions if the service of the
restaurant is excellent. Another example is when a flight is delayed, and
people tend to be upset with this poor service. However, if the gate agent is
very helpful and friendly, people tend to still be pleased with the service.

Like other industries, banking and financial services providers have

reached the conclusion that the relationship with the customer should not
(metaphorically and literally) end at the bank door. Customer access after
the transaction adds value to the transaction.

130
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 4.6 CONCEPTUAL ROOTS FOR SERVICE QUALITY

Within the framework of the task of measuring and evaluating service

quality firstly basic concepts related to service and service quality will be
explained. Even though a consensus is not reached regarding the common
definition of service the following definitions largely overlap:

 Service being various form of immaterial product produced to satisfy

consumer needs is carried out for someone else.
 Not having material personality, inseparableness of production from
consumption, variability, heterogeneity and flimsiness are
characteristics features that separate services from goods.
 Services are activities or benefits provided to group which ends up
with non-ownership. The production of service may or may not be
related to materialized product.
 Services were termed as: “Those economic activities that typically
produce an intangible nature of various products such as education,
entertainment, food and lodging, transportation, insurance, trade,
government, financial, real estate, medical repair and maintenance
like occupations”.

The working of the customer‟s mind is a mystery which is very

difficult to overcome the problems and understanding the nuances of what
customer satisfaction is a challenging task. This exercise in the context of
sector will give us an insight into the parameters of customer satisfaction,
customer perception and their measurement. This vital information will help
us to build satisfaction amongst the customers and customer loyalty in the
long run which is an integral part of each and every business. The

131
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 customer‟s requirements must be translated and quantified into measurable
targets. This provides an easy way to monitor improvements, and deciding
upon the attributes that need to be concentrated on in order to improve
customer satisfaction. It can be recognized where we need to make changes
to create improvements and determine if these changes, after implemented,
have led to increased customer satisfaction.

4.7 MEASUREMENT OF CUSTOMER PERCEPTION

Banking operations are becoming increasingly customer dictated. The

demand for 'banking super malls' offering one-shop integrated financial
services is well on the rise. The ability of banks to offer clients access to
several markets for different classes of financial instruments has become a
valuable competitive edge. Convergence in the sector to cater to the
changing demographic expectations is now more than evident. Bank assures
and other forms of cross selling and strategic alliances will soon alter the
business dynamics of banks and fuel the process of consolidation for
increased scope of business and revenue. The thrust on farm sector, health
sector and services offers several forms of investment linkages. In short, the
domestic economy is an increasing pie which offers extensive economies of
scale that only large banks will be in a position to tap. With the phenomenal
increase in the population of the country and the increased demand for
banking services; speed, service quality and customer satisfaction are going
to be key differentiators for each bank's future success. Thus it is imperative
for banks to get useful as well as valuable feedback on their actual response
time and customer service quality aspects of retail banking, which in turn
will help them to take positive steps to maintain a competitive edge.

132
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 The working pattern of the customer's mind is a mystery which is
difficult to solve and understanding the nuances of what perception the
customer has to attain the level of satisfaction is, a challenging task. This
exercise in the context of the banking industry will give us an insight into
the parameters of customer satisfaction and their measurement. This vital
information will help us to build and promote satisfaction amongst the
customers and the customer loyalty in the long run which is an integral part
of any business. The customer's requirements must be translated and
quantified into measurable targets. This provides an easy way to monitor
improvements, and deciding upon the attributes that need to be concentrated
on in order to improve customer satisfaction. It can recognize where we need
to make changes to create improvements and determine if these changes,
after implemented, have led to increased customer satisfaction.

4.8 SIGNIFICANCE OF CUSTOMER PERCEPTION

Satisfied customers are central to optimal performance and financial

returns. In many places in the world, business organizations have been
elevating the role of the customer to that of a key stakeholder over the past
two decades. Customers are viewed as a group whose satisfaction with their
respective enterprise must be incorporated in strategic planning efforts.
Forward-looking companies are finding value in directly measuring and
tracking customer satisfaction as an important strategic success indicator.
Evidence is mounting that placing a high priority on customer satisfaction is
very critical to improve the organizational performance in a global
marketplace.

133
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 With better understanding of customers' perceptions, companies can
determine the needed actions required to meet the customers' needs. They
can identify their own strengths and weaknesses, where they stand in
comparison to their competitors in the same field, chart out path future
progress and improvement. Customer satisfaction measurement helps to
promote an increased focus on customer outcomes and stimulate
improvements in the work practices and processes used within the company.

When buyers are more powerful, the health and strength of the
company's relationship with its customers – its most critical economic asset
and is its best predictor of the future. Assets on the balance sheet – basically
assets of production – are good predictors only when buyers are weak. So it
is no wonder that the relationship between those assets and future income is
becoming more and more tenuous. As buyers become empowered, sellers
have no choice as well as money to adapt. Focusing on various aspectives of
competition has its place, but with buyer power on the rise, it is more
important to pay attention to the customer.

Customer satisfaction is very difficult as well as quite complex issue

and there is a lot of debate and confusion about what exactly is required and
how to go about it. An attempt has been made to review the necessary
requirements, and discuss the steps that need to be taken in order to measure
and track customer satisfaction.

134
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 4.9 COMPOSITION OF CUSTOMER SATISFACTION

The word "satisfied" itself had a number of different meanings for

respondents, which can be split into the broad themes of contentment/
happiness, relief, achieving aims, achieving aims and happy with outcome,
safe and the fact that they did not encounter any hassles.

(i) Happiness

 Content
 Happy, pretty happy, quite happy
 Pleased
 Walked out of there feeling good
 Walk out of there chuffed
 Grateful the service has been OK

(ii) Relief

 Thank God for that

 Phew
 At ease
 Can relax
 Stress reduction
 Secure

(iii) Achieving aims

 Achieving your aim or goal

 Getting what you went in for

135
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
  Achieve whatever it is you wanted to achieve
 Come away with a proportion of what you want
 Got what wanted in the end
 Got what you went down for
 Everything went according to plan, the way it should have done
 Met expectations
 To be unsatisfied is when you come out and you are still on the same
level as you were before

(iv) Achieving aims, and happy with outcome

 Happy with the results

 Happy with what you've got
 When you walk out you're happy they've sorted everything out and
quickly
 Happy with outcome
 Pleased with what's happened
 Content with what's been done for you
 A feeling of happiness having achieved your goal
 You go in there feeling down and the only way you are going to come
out satisfied is if they have been good to you

(v) Safe

 Go to the bank with a troubled mind and they sort it out for you
 Sleep at night without worrying what's going to go on
 Everything is sorted out in your mind and you're happy
 Secure, you know the money has been sorted out
 Knowing the money's going to be there

136
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 (vi) No hassle

 Not frustrated
 Everything goes smooth
 No hassle
 No problems
 No hassle getting there

Clearly then there is some variation in understanding of the term.

Some of the interpretations fit with the definitions used in much of the
service quality and satisfaction literature, where satisfaction is viewed as a
zero state, merely an assessment that the service is adequate, as opposed to
"delight" which reflects a service that exceeds expectations. However, most
respondents have more positive interpretations of the term. These questions
allow us to identify priorities for improvement by comparing satisfaction
with stated (overt) importance, comparing satisfaction with modeled (covert)
importance (from identifying key drivers of overall satisfaction), as well as
respondents' own stated priorities.

4.10 PERCEPTION ON SERVICE QUALITY WHICH INFLUENCE

BETTER CUSTOMER SATISFACTION

There is a great deal of discussion and disagreement in the literature

about the distinction between service quality and satisfaction. The service
quality school view satisfaction as an antecedent of service quality -
satisfaction with a number of individual transactions "decay" into an overall
attitude towards service quality. The satisfaction school holds the opposite
view that assessments of service quality lead to an overall attitude towards

137
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 the service that they call satisfaction. There is obviously a strong link
between customer satisfaction and customer retention. Customer's
perception of Service and quality of product will determine the success of
the product or service in the market.

If experience of the service greatly exceeds the expectations clients

had of the service then satisfaction will be high, and vice versa. In the
service quality literature, perceptions of service delivery are measured
separately from customer expectations, and the gap between the two
provides a measure of service quality.

4.11 PERCEPTION ON EXPECTATIONS AND CUSTOMER

SATISFACTION

Expectations have a central role in influencing satisfaction with

services, and these in turn are determined by a very wide range of factors
lower expectations will result in higher satisfaction ratings for any given
level of service quality. This would seem sensible; for example, poor
previous experience with the service or other similar services is likely to
result in it being easier to pleasantly surprise customers. However, there are
clearly circumstances where negative preconceptions of a service provider
will lead to lower expectations, but will also make it harder to achieve high
satisfaction ratings - and where positive preconceptions and high
expectations make positive ratings more likely. The expectations theory in
much of the literature therefore seems to be an over-simplification.

It is far more difficult to measure the level of performance and

satisfaction when it comes to the intangible expectations. One of the ways to

138
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 help obtain loyal customers is by having products and services that are so
good that there is very little chance that the customer requirements will not
be met. Of course one of the difficulties in understanding the true customer
requirements is that the customer can and will change them without notice or
excuse. Having a good recovery process for a dissatisfied customer is a very
vital process for any service organization.

4.12 MODELS ON CUSTOMERS PERCEPTION AND

SATISFACTION

4.12.1 The KANO Model

The customer satisfaction model from N. Kano is a quality

management and marketing technique that can be used for measuring client
happiness. KANO's model of customer satisfaction distinguishes six
categories of quality attributes, from which the first three actually influence
customer satisfaction:

(i) Basic Factors - The minimum requirements which will cause

dissatisfaction if they are not fulfilled, but do not cause customer satisfaction
if they are fulfilled (or are exceeded). The customer regards these as
prerequisites and takes these for granted. Basic factors establish a market
entry 'threshold'.

(ii) Excitement Factors - The factors that increase customer satisfaction if

delivered but do not cause dissatisfaction if they are not delivered. These
factors surprise the customer and generate 'delight'. Using these factors, a
company can really distinguish itself from its competitors in a positive way.

139
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 (iii) Performance Factors - The factors that cause satisfaction if the
performance is high, and they cause dissatisfaction if the performance is
low. Here, the attribute performance-overall satisfaction is linear and
symmetric. Typically these factors are directly connected to customers'
explicit needs and desires and a company should try to be competitive here.

Important attributes of personal factors.

Indifferent attributes. The customer does not care about this feature.
Questionable attributes. It is unclear whether this attribute is expected by
the customer.
Reverse attributes. The reverse of this product feature was expected by the
customer.

4.12.2 Steps in the Customer Satisfaction Model

Kano developed a questionnaire to identify the basic, performance and

excitement factors as well as the other three additional factors.

1. For each product feature a pair of questions is formulated to which the

customer can answer in one of five different ways.
2. The first question concerns the reaction of the customer if the product
shows that feature (functional question);
3. The second question concerns the reaction of the customer if the
product does NOT show this feature (dysfunctional question).
4. By combining the answers all attributes can be classified into the six
factors.

140
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 4.13 THE PROFIT – CHAIN MODEL

Research has shown that organizational subunits where employee

perceptions are favourable enjoy superior business performance. The service
profit chain model of business performance has identified customer
satisfaction as a critical intervening variable in this relationship (profit-chain
model). A number of researchers have found that revenue-based measures of
business unit performance, for example, sales and profitability, are
significantly correlated with employees' work-related perceptions. The
evidence suggests that business units in which employees' collective
perceptions are relatively favourable perform better.

Stated simply, the service profit chain asserts that satisfied and
motivated employees produce satisfied customers and satisfied customers
tend to purchase more, increasing the revenue and profits of the
organization. The service profit chain as involving direct and strong
relationships between profit; growth; customer loyalty; customer
satisfaction; the value of goods and services delivered to customers; and
employee capability, satisfaction, loyalty and productivity. These authors
recommend the service profit chain as a framework for constructing a
strategic organizational vision, and suggest that, provided service profit
chain concepts are carefully interpreted and adapted to an organization's
specific situation, they are capable of delivering remarkable results.

The second crucial element of the service profit chain is the link
between customer satisfaction and financial performance. Management
theorists and chief executives have often argued that superior business
performance depends critically on satisfying the customer.

141
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 Consumer researchers have established that customers who are
satisfied with a supplier report stronger intentions to purchase from that
supplier than do dissatisfied customers. However, the link between customer
satisfaction and actual, as opposed to intended, purchase behavior is less
well established. Indeed, the results are mixed, with both positive findings.

4.14 THE SERVICE EXPECTATION MODEL

Customer satisfaction with a service/product (p/s) can be measured

through a survey of the actual perception of the users or otherwise
comparing their actual perception with their expectations. More
appropriately in the first case "quality" is considered, in the second
“Customer Satisfaction” (CS). Therefore to measure the CS we have to
compare the evaluations of the user with his expectations connected to an
ideal p/s. For some kinds of p/s such expectations are typically "subjective",
they have to be gathered ad hoc; for others they can be suggested by the
provider the p/s referring to an optimum p/s; in this way the expectations are
collected in an "objective" way.

4.15 VARIABILITY IN THE SERVICE PROCESS MODEL

(WHARTON)

Service quality has become an essential part of organizational success

due to increased customer expectations and customization of services in
many markets. In fact, even the definition of service quality is changing.
Good service quality used to mean that the output was made to conform to
the specifications set by the process designers. Today, the concept of service
quality is evolving to mean uniformity of the service output around an ideal

142
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 (target) value determined by the customer. However, when the dimensions
or performance of a service output exceed allowable limits, the variation
needs to be identified so the problem can be corrected.

Four factors represent major explanations for the existence of process

variation in services: heterogeneous customers with different service
expectations; lack of rigorous policies and processes; high employee
turnover; and nature of customization. The financial performance of a
financial service institution is driven to a large extent by its ability to attract
and retain customers. Customers increasingly have alternatives from which
they can choose. We are interested in whether a customer's decision whether
to stay with her current service provider might be more sensitive to
variability of service than the level of service quality.

While there is a significant body of theoretical and anecdotal evidence

on the importance of process management, there is very little statistical
evidence that process management matters with respect to the 'bottom line'
of the institution. The model shows that, while no individual process is
correlated with firm performance, the aggregate measure of process
performance affects firm performance. More importantly, the most
significant finding is that while aggregate process performance is correlated
with financial performance, it is not correlated with customer satisfaction.
The process performance measure associated with both firm financial
performance and customer satisfaction is the measure of variation across
processes. We have found that if processes are managed in a consistent way,
then both financial performance and customer satisfaction are improved. By
consistent process management, we mean that the performance of individual

143
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 processes within a firm are similar to one another and thus provide a
consistent service offered to the consumer. Consumers' desire consistency
and thus, the bank must align its various delivery processes to meet the
consumer's needs. Therefore, we define process variation as the variation in
performance across the eleven individual process performance scores for
each bank. It is the variation that we have found to be the best predictor of
overall firm performance.

4.16 THE COMMON MEASUREMENTS TOOL (CMT)

The CMT is the result of an extensive study by researchers at the

Canadian Centre for Management Development and others, which examined
a number of approaches to standardising measurement of customer
satisfaction with public services. The model they have developed provides a
useful example of how elements of different approaches can be combined to
improve our understanding of satisfaction and highlight priorities for
improvement. It incorporates five main questioning approaches, measuring:

 expectations of a number of service factors;

 perceptions of the service experience by the customer on these
factors;
 level of importance attached to each of a number of service
elements;
 level of satisfaction with these elements;
 respondents' own priorities for improvement.

The approach is therefore made up of three distinct strands. The

measures of expectations and perceptions of the service experience tend to

144
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
 focus on a relatively small number of very specific factors, such as how long
customers wait to be served etc. This allows the gap analysis approach
through comparing expected service quality with experience gained.

The second strand involves asking levels of satisfaction with a more

extensive list of elements, followed by asking how important each of these
aspects are to respondents. This allows the comparison of satisfaction and
importance that asking people to think about what should be provided by an
ideal or excellent service. As noted above, this approach has also been taken
by Berry in later studies.

4.17 PERCEPTION ON THE CUSTOMER SATISFACTION INDEX

(CSI)

The Customer Satisfaction Index represents the overall satisfaction

level of the customer as one number, usually as a percentage. Plotting this
Satisfaction Index of the customer against a time scale shows exactly how
well the service providers is accomplishing the task of customer satisfaction
over a period of time.

Hence, in order to understand customer perception it is an important

aspects to understand customer behaviour, customer satisfaction, the
importance of perception and the related attributes which describes about
customer perception.

145
Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.