In developing a marketing strategy, few elements are as important as generating customer satisfaction. Satisfied customers return to buy more products and services from you and they recommend your products and services to people in their social network. They might even make your job easier by helping other customers find products in your stores, navigate your website, help other customers get more from owning your products or using your service. We call these customers partial employees or evangelists and they greatly impact your success.

customer satisfaction and revenue

Customer satisfaction is the overall evaluation of a product or service. Importantly, customer satisfaction is generally related to the “appropriateness” of the product and its ability to solve a customer’s problem. Because appropriateness is individualistic, there are variations across consumers, such that some consumers may evaluate a product as satisfying and others might not.

Understanding what builds customer satisfaction then taking steps that meet or exceed customer needs translates to success. Delivering a product bundle that doesn’t meet customer needs translates to failure while building a bundle with extra elements not demanded by customers results in additional (wasted) expense.

The critical question for all businesses is how to satisfy customers.

To an extent, that depends on the nature of the product.

Customer satisfaction by product type

Utilitarian products

Utilitarian products are those we use every day but aren’t really excited about — toothpaste, paper bags, light bulbs. They serve a purpose, but we don’t invest a lot of time thinking about them and don’t invest much effort exploring options and making detailed comparisons to ensure we buy the “best” product.

Risk is a big part of what gives us such a cavalier attitude toward these products. A bad decision regarding a utilitarian product doesn’t involve much risk for most people.

For utilitarian products, it’s necessary to perform reliably — to do the job it was assigned well and do it every time.

Hedonic products and Customer Satisfaction

Hedonic products are the exact opposite — we get very excited about hedonic products. Hedonic products serve many purposes in addition to the job they perform in our lives. In the extreme, they provide our reason for living and without hedonic products, our lives are simple existence not a bricolage of experiences.

Hedonic products may be universals — things all people agree give meaning to their lives, like a vacation, that special black dress that always makes you look just right, the little shoes worn by your infant, or the baseball you caught at a major league game that is signed by all the players.

Other hedonic products are individualistic, meaning they are special to you but are not necessarily something others might recognize as valuable. For instance, you might save a token to pay for transportation or it might represent a very special event in your life.

The strategy for utilitarian products is relatively straightforward — make them work every time. Making them a great value also helps. This strategy doesn’t work with hedonic products. A successful strategy for hedonic products relies on giving them qualities of “specialness”. Aspects of design, functionality, innovativeness, etc. make hedonic products successful to provide customer satisfaction.

For example, think of the Apple iPod. Functionally, there’s not much to recommend it over the Zune or other MP3 players from a performance standpoint. But, iPod dominated the market because it featured an interesting shape and was intuitively designed so it’s easy to use. It also had a great marketing campaign behind it to create a strong brand personality. Thus, the iPod blew the Zune out of the market.

Products versus services in building customer satisfaction

The distinction between goods and services is really illusionary and often we simply refer to both goods and services as products in developing a marketing strategy. However, when speaking of customer satisfaction, there’s a chasm between them when it comes to factors impacting satisfaction.

Goods and services exist along a continuum of tangibility (physical qualities that give shape and substance to a product); with some products, like toasters, existing more solidly in the tangible end of the continuum and others, such as banking, existing more within the intangible realm. Most products consist of both tangible and intangible elements, which is why marketing them is similar.

For instance, the toaster comes with a warranty, which is a service (intangible) element while the banking service also consists of physical elements such as a passbook, debit card, and the bank structure. Brands consisting primarily of goods form customer satisfaction based on whether they’re hedonic or utilitarian goods, while services use a very different means for generating customer satisfaction based on the unique nature of services as well as their personal nature involving interactions between customers and service providers.

The nature of services

Services exist in 3 general types: 1) professional services, such as those provided by physicians, attorneys, and financial planners; 2) skilled services, such as those provided by hairdressers, plumbers, and other tradespeople; and 3) unskilled services, such as housekeepers, lawn service, and dry cleaning. Each type of service has unique elements that impact how customers form satisfaction but let’s first discuss what makes all types of services uniquely different than goods.

Differences between products and services

Intangibility – this is the ephemeral quality of services that means we can’t see them, touch them, smell them, taste them. In other words, our senses can’t detect their existence.

Perishability – services expire at a defined point. For instance, no one is willing to buy a plane ticket for an aircraft that has already left the gate or a hotel room for last night.

Inseparability – services can’t be separated from those providing the service. This means that, when customers evaluate a service, they also evaluate the person who performed the service.

Inconsistency – unlike goods, services are produced “on-demand”, thus a company can’t inventory them so they are ready when customers demand them nor can they perform quality control so that only services with “zero defects” are sold to the consumer. Thus, we talk about “the moment of truth” as the delivery of a service and its impact on customer satisfaction

Achieving customer satisfaction for services

For the most part, marketing services involves addressing the differences listed above, in many cases marketing them in a way that reduces these distinctions, making them more like goods.

Strategies based on intangibility

Strategies related to marketing intangibles relate to making them appear more tangible. A brand might do this physically, like giving you a passbook to represent the money you deposited in the bank or by linking some tangible element to its intangible services, such as linking a rock to insurance emphasizing the permanence by a slogan like “own a piece of the rock” used by Prudential.

Strategies based on perishability

marketing analytics that drive ROI

Image courtesy of RevDev Europe

Since services have an expiration date, marketing strategies to combat this revolve around pricing issues — something we call yield management [shown on the right]. Travel involves perishability and companies like Hotwire and Priceline implement pricing strategies in marketing travel services such as reduced fees for airlines, hotels, and rental cars, as they approach expiration — close to departure time or the date of hotel usage. This is especially valuable in industries with high fixed costs relative to variable costs. In these service businesses, whatever they get for an unfilled seat or hotel room is mostly profit, which is a great incentive to drop the price as time goes on. Thus, a hotel might offer a room at a deep discount at midnight since something is better than nothing when it comes to revenue.

In addition to pricing market strategies, service firms may use promotional marketing strategies to drive demand to fill unused services. Hence a firm might advertise heavily as the time for a concert nears to sell remaining tickets. If the concert sells out early, the company may do little or no advertising.

Strategies based on inseparability

Inseparability recognizes that businesses perform services in front of the customer so that how the service is performed is equally important as how well the service is performed, in most cases. For instance, on the inaugural cruise of the Norwegian Epic, a number of problems occurred ranging from minor, such as publicizing events that didn’t take place, to technological, such as booking fee-based entertainment, then not admitting paid guests due to a computer glitch, to mechanical failures, such as raw sewage backing up into a passenger cabin. Most of these market failures are aggravations guests don’t expect to deal with on their much-anticipated vacation, but often occur, especially in a new ship. Certainly, part of marketing strategy is to minimize such events, but strategy requires that companies MUST train their employees to handle service failures and empower them to make the situation right.

Recovery from service failure involves making the customer whole again, communicating openly, and solving problems quickly. During a service failure, employees must have the freedom to quickly enact changes that ensure customer satisfaction without going through layers of bureaucracy. Customers who don’t get satisfaction often raise a fuss that negatively impacts the satisfaction of other customers or resort to minor acts that make things worse for everyone, such as spilling food or slowing down checkout lines. These actions result in a cycle of dissatisfaction spreading among customers.

Strategies based on lack of permanence

You can’t inventory services. Because consumers form dissatisfaction when they can’t obtain desired services or have to wait for them, companies need to develop capabilities that reduce wait times and/ or manipulate demand. Hence a bank might assign additional staff to handle the increased volume they experience at lunchtime or on Fridays so that customers don’t experience excessive lines.

Disney and other theme parks developed instruments such as “Fast Passes” that help reduce waits for popular rides by allowing customers to wait somewhere else, thus reducing perceived wait time. Not only does this system create customer satisfaction through shorter lines, but allows customers to spend money rather than waiting.

Brands might also reduce perceived wait time by giving customers something to occupy themselves while standing in line. For instance, Disney World created movies and theme-based queues that make waiting appear part of the attraction. Stores might use screens to reduce perceived wait time while increasing sales through ads carried on the screen.

Services also can’t undergo quality testing prior to the customer experience. This guarantees there will be failures in service delivery. Marketing strategies for dealing with this are twofold. First, companies need to develop marketing processes and procedures that reduce service failure and train employees thoroughly on these processes. Second, they need to develop contingency plans for how to handle the inevitable service failure that inevitably occurs occasionally.

For instance, airlines consistently experience service failure — either due to bad weather, mechanical failure, or traffic interruptions. They must develop marketing procedures to deal with those failures they can control. Foremost among these is communication that is honest and complete. How long do they expect the event to last? What are they doing to fix the problem? How will disruption affect the passenger with respect to connecting flights? What are travelers’ options?

Unfortunately, airlines have not sufficiently developed marketing strategies to address service failures and congress is now in the process of instituting policies for their industry. Not only is it undesirable to have the federal government involved in policing the industry from a publicity standpoint, it likely involves more extensive and expensive restrictions than if the industry developed internal marketing strategies to address these issues themselves.

Customer satisfaction for different services

Recall when I introduced service marketing strategies earlier, I mentioned 3 types

  • Services based on unskilled labor, such as gardeners and housekeepers
  • Services based on skilled labor, such as interior designers and auto mechanics
  • Professional services, such as physicians and attorneys

Because of basic differences in customer expectations and service environments, marketing strategies differ across these three service types.

Unskilled services

In many ways, customer expectations for unskilled services look a lot like utilitarian products and the marketing strategies are similar. Among customer expectations are:

  • Low price
  • Convenience
  • Availability

Customers are not going to go out of their way to search for unskilled services, in part because they view them as commodities. Also, since consumers can likely do the service themselves, creating credibility for the firm might be problematic and consumers might resist efforts to pursue a particular path regarding the service. For instance, a consumer might want a particular lawn service even though it might damage their landscaping or they might resist efforts by the lawn service to make improvements. When the results don’t match customer expectations, the customer likely blames the lawn service, even though the service recommended against the course of action leading to dissatisfaction.

Prospective customers look for convenience in hiring unskilled service firms. Hence, anything the firm can do to make ordering and obtaining service easier will help the firm’s marketing strategy succeed. Service providers should also be able to give customers a definite arrival time, arrive on time, and communicate delays with the customer promptly. For instance, a recent advertising campaign centered on the convenience provided by a 2-hour window for arrival introduced by Cox Communications to compete with a rival, Verizon, which told customers they would be at their homes anytime on a given day. Of course, if Cox fails to deliver on this promise, the strategy will backfire and create a strong negative attitude toward the firm and negative word of mouth.

Satisfaction may be somewhat elusive, but this marketing strategy is the fundamental driver of repeat business in unskilled services.

Skilled services

Expectations for skilled services may look very different, requiring different market strategies.

The impact of pricing on skilled services is more complex and relies on generating value — benefit less cost — as opposed to being “cheap”. Sometimes the price is used as a surrogate for quality because customers how no basis for evaluating these services. Hence, customers may view a hairdresser who is inexpensive as poor quality, while a more expensive hairdresser is seen as higher quality.

Convenience may also have a strange impact on customer evaluations of the service. For instance, I once made a reservation at a five-star restaurant for a friend visiting from out of town. I called back to say booked the restaurant. He then canceled the reservation, stating that they must not be a very good restaurant if they had that much availability.

Evaluating skilled services often relies heavily on the prior experiences of the customer. Hence, marketing strategy involves developing a deep understanding of customers and providing services they desire. It also may mean providing different services to different segments of the market. For instance, the restaurant I mentioned earlier found many customers loved their desserts so much they opened a dessert restaurant a block away from their main restaurant to capture this market, leaving their restaurant free to focus on serving dessert to those who wanted a full meal.

Professional services

Professional services are further complicated, making their marketing strategy even more complex. Evaluating professional services is difficult because, not only do consumers lack any knowledge about the service, they may lack a gauge for whether the service was good or not. For instance, an attorney who loses your case may do so because you were guilty or because the other side had overwhelming evidence against you. Did the attorney do a good job? A bad job? Alternatively, the attorney may win the case, but you found them difficult to reach, standoffish, and sometimes hostile in conversations. Did the attorney do a good job? Would you recommend them?

Marketing strategy in terms of pricing becomes even more complex. Do you really want the cheapest CPA representing you when you go to an IRS audit? With physicians and dentists, the situation is further complicated by third-party payers who absorb most of the cost.

Successful marketing strategy for professional services revolves around ensuring the credibility of the service provider. This may involve displaying diplomas or law books or having plush offices that say you are successful.

An important aspect of a marketing strategy for professional services is providing the human element in contacts with clients/ patients. For instance, my kids went to an orthodontist who made a point of knowing each patient’s name, telling them how beautiful they were, giving them choices in band colors, even hosting their birthday parties in the media room of the office. He held contests for iPods and other desired items for patients submitting pictures of themselves wearing his t-shirts in exotic locations. He paid for and displayed pictures of patients who completed treatment. He gave patients an ice cream cone when they earned points for keeping appointments, taking care of their braces, and wearing their t-shirts during visits. Even though he was one of the more expensive orthodontists in the area, his offices were packed and his patients loved him.

Maybe these things would only work for kids, but adults like to feel as if they’re something more than a number to professional service providers. For instance, hospitals behave more like hotels when they deliver newspapers to patient rooms. Physicians who listen to patients, introduce themselves and shake hands, show they care about their patients, and display other socially dictated behaviors not only get more loyal patients and more recommendations, their patients are more likely to share openly about their health and take their doctor’s advice.

Final thoughts

I know this post was huge and packed in a lot of information about driving customer satisfaction. If you have questions, feel free to ask or to suggest ideas for future posts.

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