Measuring Customer Satisfaction in this study

The importance of CS as one of the outputs of marketing strategy is unquestionable, and the more competitive the market the more important it is to maintain a high level of CS (Jones and Sasser Jr 1995; Gomez, McLaughlin et al. 2004). Some marketers (e.g. Kotler and Keller, 2006) consider CS as the best indicator of a company’s profitability. So, countries, industries, and individual

companies, are trying to measure and track CS and then use the ratings to evaluate performance of different business units, of different levels – region, territory, employee - of the organizational structure and of different management practices – training, motivation, compensation - within the organization.

In 1989 Sweden became the first country to introduce a national economic indicator for CS. The Swedish Customer Satisfaction Barometer (SCSB) is an annual index that measures CS in 30 industries and for more than 100 corporations. In 1994, we had the development of the American Customer Satisfaction Index (ACSI). The ACSI is a similar index to the SCSB. It measures overall CS in the U.S on a national level. Based on the experience from Sweden and U.S, a European Customer Satisfaction Index (ECSI) was introduced. In 1999 a pilot study was conducted in 12 European countries aimed at measuring CS and loyalty in European retailing. Overall, these indices measure CS on a macroeconomic level and they provide valuable information on how customers perceive the quality of products and services in a whole industry (Fornell 1992; Fornell, Johnson et al. 1996; Kristensen, Juhl et al. 2001).

In measuring CS, we need to determine the type of satisfaction that we are referring to. Is it transaction-specific or cumulative? Is it manifest or latent? We also need to determine whether we are measuring satisfaction with a product, an attribute, a consumption experience, a purchase decision, and/or pre-purchase experience with the store or the salesperson (Yi, 1990). Also, we need to determine how we will measure it; what items and what number of items we will use; what type of scale we will use etc.

We can measure CS directly by simply asking consumers or indirectly by collecting data on consumer complaints and or repeat purchases. Each method has different strengths and weaknesses. The major disadvantages of the indirect measurement method are: (a) it is a post-hoc approach and thus does not

provide the opportunity to adjust the marketing strategy and to fix the problem in time, (b) it indicates a possible sales increase or decline but not the reasons for these fluctuations (Bloemer and Poiesz 1989). Due to these disadvantages the direct survey methods are the most commonly used, and the indirect measures are typically seen as complementary (Bloemer and Poiesz 1989; Yi 1990; Peterson and Wilson 1992). In terms of measurement scales, there are three categories. The performance scales such as “poor”, “fair”, “good” and “excellent”; the disconfirmation scales such as “worse than expected” to “better than expected”; and the satisfaction scales such as “very satisfied” to “very dissatisfied” (Danaher and Haddrell 1996). In terms of the number of items,

customer satisfaction surveys use either the single-item or the multi-item scale. In a single-item scale respondents are asked to rate their level of satisfaction or dissatisfaction, from “very satisfied” to “very dissatisfied”, using a scale usually of

four to seven points. Single-item scales are used because of their simplicity but they lack validity and reliability and fail to capture the multidimensionality of the CS concept (Yi, 1990). Danaher and Haddrell (1996) reported that in a multi- item scale, “survey respondents are not asked to give an overall evaluation of

their satisfaction with the service but are also asked to rate the key components of the service process”. Studies show that using multi-item scales provide more reliable measurements of CS. Recent studies tend to use multi-item scales to measure CS (Danaher and Haddrell, 1996; Yi, 1990). Westbrook and Oliver (1981) found that among the different multi-item scales, the semantic differential and the Likert scale have the highest reliability.

Managers must try to achieve a high level of CS and then maintain it. Oliver (1981) suggests that retailers have a greater need for CS programs than manufacturers because of their unique position in the distribution channel. Retailers act both as sellers and as service providers and come into direct contact with consumers; they are the first recipients of customer complaints and the first to be blamed when things go wrong. So, they need to measure their customers’ overall satisfaction and in order to do that they have to identify the

determinants of CS in their specific retail context. They must try to identify the attributes that are maintaining, and those that are enhancing, CS. Specifically, they need to identify the important product quality attributes, measure the degree of satisfaction with each attribute, determine the weight of each attribute and then compile their overall CS score. In retailing these attributes are related to the store. It was found that each store type - food discounters versus full-service retailers - has a different set of attributes (Hansen and Deutscher 1977; Mitchell and Kiral 1998). So, in order to increase CS in an efficient way, retailers must identify the attributes for their type of store and then invest in the improvement of the satisfaction enhancing attributes (Gomez, McLaughlin et al. 2004).

As CS is a complex construct and consists of many components, it was decided to use multi-item measures to capture the different dimensions of CS. It was believed that with multi-item measures one could more accurately describe the various dimensions from which CS is derived and thus provide a more accurate and managerially actionable measure. The literature review has revealed a direct positive relationship between perceived quality and CS

(Churchill Jr and Surprenant 1982; Cronin Jr and Taylor 1992; Selnes 1993; Sivadas and Baker-Prewitt 2000; McGoldrick 2002; Gomez, McLaughlin et al. 2004). CS is measured through thirteen specific and measurable attributes that were expected to influence overall customer satisfaction with the store, see Table 3.1. These multiple measures are grouped into three satisfaction factors to accommodate commonality and to minimize multicollinearity. The three service quality dimensions identified by Rust and Oliver (1994) were used to group the thirteen measures into three satisfaction factors. These satisfaction factors (latent variables), and their definition, were as follows: (a) the Service Environment, the influence of the service environment in the formation of service quality perceptions, (b) the Service Delivery, the “how” it is being offered, the

functional quality, the customer-employee interaction and (c) the Service Product, the “what” is being offered, the technical quality. The primary research

will collect consumer ratings of these attributes, and overall CS is modeled as a linear function of these latent variables (Bolton and Drew 1991; Fornell, Johnson et al. 1996; Gomez, McLaughlin et al. 2004). Evaluation is based on experiences with the retailer over time.

In terms of the scale, the satisfaction scale was selected. Consumers were asked to provide their ratings from “very satisfied” to “not at all” using a

four-point scale (see section 4.4.1 for the justification of the scale). It should be noted that these measures express customer perceptions and according to Dabholar, Shepherd and Thorpe (2000) perception measures are superior to

computed disconfirmation and perform better than measured disconfirmation (Dabholkar, Shepherd et al. 2000).

Table 3.1: Customer Satisfaction measurements

# Specific attributes Satisfaction factors

1 The cleanliness of the space

Service Environment 2 The signs on the aisles of the store

3 The music inside the store

4 Available employees for help/service

Service Delivery 5 The prices are visible on the shelves

6 The prices are the same on the shelves and at the cashier 7 Frequency of expired products

8 Frequency of out of stocks 9 The size of the store

Service Product 10 The distance from the house/work

11 The parking

12 Level of satisfaction with the width 13 Level of satisfaction with the depth

To summarize, cumulative customer satisfaction with the identified grocery store was measured by directly asking those responsible for household purchases. CS was conceptualized as a latent variable and thirteen attributes grouped into three satisfaction factors were used to measure the respondents overall CS with their primary grocery store.