Murali Chandrashekaran, Kristin Rotte, Stephen S. Tax, and Rajdeep Grewal
Executive Summary
Although empirical research indicates that satisfaction is intimately linked to loyalty, anecdotal evidence reveals that many customers who state that they are satisfied with a service provider nevertheless subsequently defect. In this article, the authors focus on identifying which customers are vulnerable to defection, despite stating high levels of satisfaction. Drawing on the emerging perspective of modeling individual judgments that recognizes that people differ in the strength (i.e., conviction, certainty) with which they profess judgments, the authors first decompose a customer’s stated satisfaction into two related but independent facets: satisfaction level and satisfaction strength. Then, they examine the role of satisfaction strength in the translation of satisfaction into loyalty. They report the results from two studies.
In the first study, which is set in a business-to-business service context, the authors analyze data obtained from an ongoing customer satisfaction tracking study being conducted by a large service organization in the United States. They use data from more than 25,000 customers to calibrate the satisfaction model and to examine the effect of satisfaction strength on the translation of satisfaction into loyalty. In the second study, which is a conceptual replication set in a business-to-consumer context, the authors examine decision making following a failed service encounter and a recovery attempt by the service provider. They study the impact of perceptions of service recovery on the level and strength of the stated satisfaction with the service recovery, and then they focus on the effect of satisfaction strength in the translation of stated satisfaction into loyalty.
The two studies strongly demonstrate that covert satisfaction strength plays a central role in the translation of satisfaction into loyalty. A key finding that is uncovered and replicated in this research is that though satisfaction indeed translates into loyalty when the satisfaction judgment is strongly held (i.e., with low uncertainty), the translation is significantly lowered (on average, by nearly 60%) when the same stated satisfaction is more weakly held (i.e., fraught with uncertainty). As a result of this research, it is possible to detect better which customers are more likely to be loyal. Specifically, when confronted with two customers with identical revealed satisfaction, the authors can differentiate between the customer who is more likely to be secure and loyal and the one who is more likely to be vulnerable to defection (i.e., bearing a greater potential to switch service providers if the opportunity presented itself, despite having professed the highest levels of satisfaction). The authors also found that prior relational experience (length of relationship, volume of business, and favorability of prior experiences) does not mitigate the effect of weakly held satisfaction; rather, the most vulnerable customers are those who evidence weakly held satisfaction judgments, are long standing, are responsible for large volume of business, and had prior positive experiences.
These results indicate that a practitioner who is focusing on average satisfaction is likely to be "blindsided" by the finding that customers who had prior positive experiences and professed high levels of satisfaction were the ones who switched when an opportunity arose. This is the essence of customer vulnerability, and it illuminates the satisfaction–loyalty conundrum. The satisfaction uncertainty that the authors have unveiled is akin to uncovering termites that flourish within the walls of a house that otherwise appears solid but is actually vulnerable, and when push comes to shove, the seemingly solid house comes tumbling down. Uncertainty and weakly held judgments promote vulnerability, and practitioners will be wise to assess simultaneously the level and the strength of stated customer judgments. Therefore, it may be premature to abandon satisfaction programs, as Reichheld (2003) advocates, simply because satisfaction does not always have a strong main effect on loyalty; the answer lies in more comprehensive analysis of satisfaction scores.
Overall, the findings illuminate mechanisms that may govern the translation of satisfaction into loyalty and contribute to a better understanding of the satisfaction–loyalty conundrum. The results also indicate that (1) there is a lot more information in what is being measured and (2) decomposing satisfaction scores into level and strength increases the validity of satisfaction scores.
Biography
Murali Chandrashekaran is Professor of Marketing and Head of the Marketing Cluster at the Australian Graduate School of Management. Previously, he was at the University of Cincinnati, where he was Ronald J. Dornoff Fellow of Teaching Excellence, a research fellow, and director of the PhD program. He earned his PhD in Marketing from Arizona State University and his B Tech in Electrical Engineering from the Indian Institute of Technology, Madras, India. Professor Chandrashekaran’s current research interests focus on modeling customer satisfaction, defection, and loyalty; consumer judgmental uncertainty; customer migration across channels and service platforms; product and brand management; and innovation generation and diffusion. His research on these topics has appeared in leading marketing journals, including Journal of Marketing Research, Journal of Marketing, and Journal of Consumer Research. His research on customer evaluations of service failures won the Best Paper in Services Marketing Award, presented by the American Marketing Association. He teaches Marketing Management to full-time MBA program, Product Management in the Hong Kong MBA program, and Marketing Strategy in the executive MBA program, as well as Marketing Models to doctoral students. Professor Chandrashekaran has consulted extensively for firms in the telecommunications and business-to-business service industries and in the areas of product management and customer satisfaction.
Kristin Rotte is Assistant Professor of Marketing in the Australian Graduate School of Management at the University of New South Wales. Dr. Rotte’s research interests lie within the domain of product and service management, with a particular emphasis on customer migration across service platforms and customer satisfaction, loyalty, and defection. Her research is forthcoming in leading marketing journals, including Journal of Marketing Research and Journal of Consumer Psychology. She is a winner of the Alden G. Clayton Doctoral Dissertation Proposal award, given by the Marketing Science Institute. In addition, Dr. Rotte was awarded the First Annual Best Doctoral Dissertation Award by the American Marketing Association’s Technology and Marketing Shared Interest Group, was a finalist in the ISBM doctoral dissertation competition, and was a runner-up in the Academy of Marketing Science dissertation competition. Dr. Rotte teaches MBA courses in Services Marketing and Product Management and is the course leader for Marketing Principles in the executive MBA program. Dr. Rotte’s industry experience includes holding several positions with Fidelity Investments, a large U.S.-based financial services firm, as well as facilitating the buying and selling of real estate.
Stephen S. Tax is Associate Professor of Service Management at the University of Victoria in Canada. His research interests include service failure and recovery, customer performance, service design, and service networks. His research has been published in Journal of Marketing, Journal of Operations Management, Journal of Consumer Psychology, Sloan Management Review, and Journal of Retailing. Steve has served on the editorial board of the Journal of Marketing and currently serves on the board of Journal of the Academy of Marketing Science.
Rajdeep Grewal is Dean’s Faculty Fellow and Associate Professor of Marketing in the Smeal College of Business at Pennsylvania State University. He is also the associate research director of the Institute for the Study of Business Markets in the Smeal College of Business at Pennsylvania State University. His research focuses on empirically modeling strategic marketing issues and has appeared in prestigious journals, such as Journal of Marketing, Journal of Marketing Research, Marketing Science, Management Science, Journal of Consumer Psychology, MIS Quarterly, and Strategic Management Journal, among others. Currently, he serves on the editorial boards of Journal of Marketing and Decision Sciences. He has received several awards for his research, including a doctoral dissertation award from the Procter & Gamble Market Innovation Research Fund; his research also received the Honorable Mention Award in the prestigious Marketing Science Institute/Journal of Marketing competition on "Linking Marketing to Financial Performance and Firm Value" and the 2003 Young Contributor Award from the Society of Consumer Psychology for his article in Journal of Consumer Psychology. In 2003, he was on the Marketing Science Institute’s Young Scholars list (people with PhD after 1995 selected on the basis of research productivity in top-tier marketing journals).
Journal of Marketing Research, Vol. XLIV, No. 1, February 2007
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