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  1. 1. Abstract:The working of the customers mind is a mystery which is difficult to solve and understanding the nuancesof what customer satisfaction is, a challenging task. This exercise in the context of the banking industrywill give us an insight into the parameters of customer satisfaction and their measurement. This vitalinformation will help us to build satisfaction amongst the customers and customer loyalty in the long runwhich is an integral part of any business. The customers requirements must be translated and quantifiedinto measurable targets. This provides an easy way to monitor improvements, and deciding upon theattributes that need to be concentrated on in order to improve customer satisfaction. We can recognizewhere we need to make changes to create improvements and determine if these changes, afterimplemented, have led to increased customer satisfaction. "If you cannot measure it, you cannotimprove it." - Lord William Thomson Kelvin (1824-1907).This study takes a look at the models for measuring customer satisfaction and suggests areas for furtherresearch.MEASURING CUSTOMER SATISFACTION IN THE BANKING INDUSTRYIntroduction:Banking operations are becoming increasingly customer dictated. The demand for banking supermallsoffering one-stop integrated financial services is well on the rise. The ability of banks to offer clientsaccess to several markets for different classes of financial instruments has become a valuable competitiveedge. Convergence in the industry to cater to the changing demographic expectations is now more thanevident. Bancassurance and other forms of cross selling and strategic alliances will soon alter the businessdynamics of banks and fuel the process of consolidation for increased scope of business and revenue. Thethrust on farm sector, health sector and services offers several investment linkages. In short, thedomestic economy is an increasing pie which offers extensive economies of scale that only large banks willbe in a position to tap.With the phenomenal increase in the countrys population and theincreased demand for banking services; speed, service quality and customer satisfaction aregoing to be key differentiators for each banks future success. Thus it is imperative for banks to getuseful feedback on their actual response time and customer service quality aspects of retail banking,which in turn will help them take positive steps to maintain a competitive edge.The working of the customers mind is a mystery which is difficult to solve and understanding the nuancesof what customer satisfaction is, a challenging task. This exercise in the context of the banking industrywill give us an insight into the parameters of customer satisfaction and their measurement. This vitalinformation will help us to build satisfaction amongst the customers and customer loyalty in the long runwhich is an integral part of any business. The customers requirements must be translated and quantifiedinto measurable targets. This provides an easy way to monitor improvements, and deciding upon theattributes that need to be concentrated on in order to improve customer satisfaction. We can recognizewhere we need to make changes to create improvements and determine if these changes, afterimplemented, have led to increased customer satisfaction. "If you cannot measure it, you cannotimprove it." - Lord William Thomson Kelvin (1824-1907).The Need to Measure Customer Satisfaction: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 thepast twenty years. Customers are viewed as a group whose satisfaction with the enterprise must beincorporated in strategic planning efforts. Forward-looking companies are finding value in directlymeasuring and tracking customer satisfaction (CS) as an important strategic success indicator. Evidence is
  2. 2. mounting that placing a high priority on CS is critical to improved organizational performance in a globalmarketplace.With better understanding of customers perceptions, companies can determine the actions required tomeet the customers needs. They can identify their own strengths and weaknesses, where they stand incomparison to their competitors, chart out path future progress and improvement. Customer satisfactionmeasurement helps to promote an increased focus on customer outcomes and stimulate improvements inthe work practices and processes used within the company. When buyers are powerful, the health and strength of the companys relationship with its customers – itsmost critical economic asset – is its best predictor of the future. Assets on the balance sheet – basicallyassets of production – are good predictors only when buyers are weak. So it is no wonder that therelationship between those assets and future income is becoming more and more tenuous. As buyersbecome empowered, sellers have no choice but to adapt. Focusing on competition has its place, but withbuyer power on the rise, it is more important to pay attention to the customer.Customer satisfaction is quite a complex issue and there is a lot of debate and confusion about whatexactly is required and how to go about it. This article is an attempt to review the necessaryrequirements, and discuss the steps that need to be taken in order to measure and track customersatisfaction.What constitutes Satisfaction?The meaning of satisfaction: "Satisfied" has a range of meanings to individuals, but it generallyseems to be a positive assessment of the service.The word "satisfied" itself had a number of different meanings for respondents, which can besplit into the broad themes of contentment/happiness, relief, achieving aims, achieving aimsand happy with outcome and the fact that they did not encounter any hassle:Happy- Content- Happy, pretty happy, quite happy- Pleased- Walked out of there feeling good- Walk out of there chuffed- Grateful the service has been OKRelieved- Thank God for that- Phew- At ease- Can relax- Stress reduction- Secure- Safe- Go to the bank with a troubled mind and they sort it out for you- Sleep at night without worrying whats going to go on- Everything is sorted out in your mind and youre happy
  3. 3. - Secure, you know the money has been sorted out- Knowing the moneys going to be thereAchieving aims- Achieving your aim or goal- Getting what you went in for- 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 beforeAchieving aims, and happy with outcome- Happy with the results- Happy with what youve got- When you walk out youre happy theyve sorted everything out and quickly- Happy with outcome- Pleased with whats happened- Content with whats 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 beengood to youNo hassle- Not frustrated- Everything goes smooth- No hassle- No problems- No hassle getting there- StraightforwardClearly then there is some variation in understanding of the term. Some of the interpretations fit with thedefinitions used in much of the service quality and satisfaction literature, where satisfaction is viewedas a zero state, merely an assessment that the service is adequate, as opposed to "delight" whichreflects a service that exceeds expectations. However, most respondents have more positiveinterpretations of the term. These questions allow us to identify priorities for improvement by comparingsatisfaction with stated (overt) importance, comparing satisfaction with modeled (covert) importance(from identifying key drivers of overall satisfaction), as well as respondents own stated priorities.Service Quality and Customer Satisfaction:There is a great deal of discussion and disagreement in the literature about the distinction betweenservice quality and satisfaction. The service quality school view satisfaction as an antecedent of servicequality - satisfaction with a number of individual transactions "decay" into an overall attitude towardsservice quality. The satisfaction school holds the opposite view that assessments of service quality lead toan overall attitude towards the service that they call satisfaction. There is obviously a strong link between
  4. 4. customer satisfaction and customer retention. Customers perception of Service and Quality of product willdetermine 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 satisfactionwill be high, and vice versa.. In the service quality literature, perceptions of service delivery are measuredseparately from customer expectations, and the gap between the two provides a measure of servicequality.Expectations and Customer Satisfaction:Expectations have a central role in influencing satisfaction with services, and these in turn are determinedby a very wide range of factors lower expectations will result in higher satisfaction ratings for any givenlevel of service quality. This would seem sensible; for example, poor previous experience with the serviceor 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 lowerexpectations, but will also make it harder to achieve high satisfaction ratings - and where positivepreconceptions and high expectations make positive ratings more likely. The expectations theory in muchof the literature therefore seems to be an over-simplification.The ISO Guideline:Measurement of Customer Satisfaction is a new and significant addition to the new ISO9000: 2000standard. Organizations certified to this standard are now required to identify parameters that causecustomer satisfaction or dissatisfaction and consciously measure them. We cannot create customersatisfaction just by meeting customers requirements fully because these have to be met in any case.However falling short is certain to create dissatisfaction.Clause 8.2.1 in ISO9000: 2000 states:"As one of the measurements of the performance of the Quality Management System, the organizationsshall monitor information relating to customer perception as to whether the organization has metcustomer requirements. The methods for obtaining and using this information shall be determined".The requirement has been there in the QS9000 standard clause 4.1.6 which says:"... Trends in customer satisfaction and key indicators of customer dissatisfaction shall bedocumented and supported by objective information. These trends shall be compared to thoseof competitors, or appropriate benchmarks, and reviewed by senior management."Attributes of customer satisfaction can be summarized as:* Product Quality* Product Packaging* Keeping delivery commitments* Price* Responsiveness and ability to resolve complaints and reject reports* Overall communication, accessibility and attitudeWe cannot begin to address the customer satisfaction issue until we define the parameters and measuresclearly.
  5. 5. Major overall satisfaction measure, consisting of four subscales: general satisfaction (e.g. Youfeel happy recommending the bank to a friend); Trust (e.g. You trust the staff at your branch todo what is best for you); Reliability (e.g. Requests are carried out right first time); andprofessionalism (e.g. Staff have the knowledge to deal with any queries you have).It is far more difficult to measure the level of performance and satisfaction when it comes to the intangibleexpectations. One of the ways to help obtain loyal customers is by having products and services that areso good that there is very little chance that the customer requirements will not be met. Of course one ofthe difficulties in understanding the true customer requirements is that the customer can and will changethem without notice or excuse. Having a good recovery process for a dissatisfied customer is a very vitalprocess for any service organization.The MODELS OF customer satisfactionThe KANO Model: The customer satisfaction model from N. Kano is a quality management andmarketing technique that can be used for measuring client happiness.Kanos model of customer satisfaction distinguishes six categories of quality attributes, from whichthe first three actually influence customer satisfaction:1. Basic Factors. (Dissatisfiers. Must have.) - The minimum requirements which will cause dissatisfactionif they are not fulfilled, but do not cause customer satisfaction if they are fulfilled (or are exceeded). Thecustomer regards these as prerequisites and takes these for granted. Basic factors establish a marketentry threshold.2. Excitement Factors. (Satisfiers. Attractive.) - The factors that increase customer satisfaction ifdelivered but do not cause dissatisfaction if they are not delivered. These factors surprise the customerand generate delight. Using these factors, a company can really distinguish itself from its competitors ina positive way.3. Performance Factors. The factors that cause satisfaction if the performance is high, and they causedissatisfaction if the performance is low. Here, the attribute performance-overall satisfaction is linear andsymmetric. Typically these factors are directly connected to customers explicit needs and desires and acompany should try to be competitive here.The additional three attributes which Kano mentions are:4. Indifferent attributes . The customer does not care about this feature.5. Questionable attributes. It is unclear whether this attribute is expected by the customer.6. Reverse attributes . The reverse of this product feature was expected by the customer.Steps in the customer satisfaction model. ProcessKano developed a questionnaire to identify the basic, performance and excitement factors as well as theother three additional factors.1. For each product feature a pair of questions is formulated to which the customer can answer in one offive different ways.2. The first question concerns the reaction of the customer if the product shows that feature (functional
  6. 6. 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.The Profit –Chain Model:Research has shown that organizational subunits where employee perceptions are favourable enjoysuperior business performance. The service profit chain model of business performance (Heskett,Sasser, & Schlesinger, 1997) has identified customer satisfaction as a critical intervening variable in thisrelationship.(profit-chain model) A number of researchers have found that revenue-based measures ofbusiness unit performance, for example, sales and profitability, are significantly correlated withemployees work-related perceptions. The evidence suggests that business units in which employeescollective perceptions are relatively favourable perform better.Stated simply, the service profit chain asserts that satisfied and motivated employees producesatisfied customers and satisfied customers tend to purchase more, increasing the revenue andprofits of the organization. Heskett et al. (1997), for example, define the service profit chain asinvolving 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 andproductivity. (p. 11). These authors recommend the service profit chain as a framework for constructing astrategic organizational vision, and suggest that, provided service profit chain concepts are carefullyinterpreted and adapted to an organizations specific situation, they are capable of delivering remarkableresults (p. 18).The second crucial element of the service profit chain is the link between customer satisfaction andfinancial performance. Management theorists and chief executives have often argued that superiorbusiness performance depends critically on satisfying the customer (e.g. Heskett et al., 1997; Peters &Waterman, 1982; Watson, 1963).Consumer researchers have established that customers who are satisfied with a supplier report strongerintentions to purchase from that supplier than do dissatisfied customers (e.g. Anderson & Sullivan, 1993;Mittal, Kumar, & Tsiros, 1999; Zeithaml, Berry, & Parasuraman, 1996). However, as noted by Verhoef,Franses, and Hoekstra (2001), 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 (e.g.Bolton, 1998; Bolton & Lemon, 1999) and null findings (e.g. Hennig-Thurau & Klee, 1997; Verhoef et al.,2001).The Service Expectation Model:Customer satisfaction with a service/product (p/s) can be measured through a survey of the actualperception of the users or otherwise comparing their actual perception with their expectations. Moreappropriately in the first case "quality" is considered, in the second "customer satisfaction" (CS) (Cronin etal.1992,1994). Therefore to measure the CS we have to compare the evaluations of the user with hisexpectations 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 anoptimum p/s; in this way the expectations are collected in an "objective" way.(degree course)
  7. 7. Variability in the Service Process Model(Wharton):Service quality has become an essential part of organizational success due to increased customerexpectations and customization of services in many markets. In fact, even the definition of service qualityis changing. Good service quality used to mean that the output was made to conform to the specificationsset by the process designers. Today, the concept of service quality is evolving to mean uniformity of theservice output around an ideal (target) value determined by the customer. However, when the dimensionsor performance of a service output exceed allowable limits, the variation needs to be identified so theproblem 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; highemployee turnover; and nature of customization. The financial performance of a financial serviceinstitution is driven to a large extent by its ability to attract and retain customers. Customers increasinglyhave alternatives from which they can choose. We are interested in whether a customers decisionwhether to stay with her current service provider might be more sensitive to variability of service than thelevel of service quality.While there is a significant body of theoretical (Morroni, 1992) and anecdotal (Davenport and Short, 1990)evidence on the importance of process management, there is very little statistical evidence that processmanagement matters with respect to the bottom line of the institution.The model shows that, while no individual process is correlated with firm performance, the aggregatemeasure of process performance affects firm performance. More importantly, the most significant findingis that while aggregate process performance is correlated with financial performance, it is not correlatedwith customer satisfaction. The process performance measure associated with both firm financialperformance and customer satisfaction is the measure of variation across processes. We have found thatif processes are managed in a consistent way, then both financial performance and customer satisfactionare improved. By consistent process management, we mean that the performance of individual processeswithin 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 theconsumers needs. Therefore, we define process variation as the variation in performance across theeleven individual process performance scores for each bank. It is the variation that we have found to bethe best predictor of overall firm performance.The Common Measurements Tool (CMT):CMT is the result of an extensive study by researchers at the Canadian Centre for ManagementDevelopment and others, which examined a number of approaches to standardising measurement ofcustomer satisfaction with public services. The model they have developed provides a useful example ofhow elements of different approaches can be combined to improve our understanding of satisfaction andhighlight priorities for improvement. It incorporates five main questioning approaches, measuring:- expectations of a number of service factors;- perceptions of the service experience 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 andperceptions of the service experience tend to focus on a relatively small number of very specific factors,
  8. 8. such as how long customers wait to be served etc. This allows the gap analysis approach throughcomparing expected service quality with experience.The second strand involves asking levels of satisfaction with a more extensive list of elements, followed byasking how important each of these aspects are to respondents. This allows the comparison of satisfactionand importance that asking people to think about what should be provided by an ideal or excellentservice. As noted above, this approach has also been taken by Berry in later studies.The Customer Satisfaction Index (CSI)The Customer Satisfaction Index represents the overall satisfaction level of that customer as one number,usually as a percentage. Plotting this Satisfaction Index of the customer against a time scale showsexactly how well the supplier is accomplishing the task of customer satisfaction over a period of time.Since the survey feedback comes from many respondents in one organization, the bias due to individualperception needs to be accounted for. This can be achieved by calculating the Satisfaction Index using animportance weighting based on an average of 1.Calculate the average of all the weightings given by the customer. Divide the individual weightings by thisaverage to arrive at the weighting on the basis of average of 1. Customers higher priorities are weightedmore than 1 and lower priorities less than 1. The averages of the Customers Importance Scores arecalculated and each individual score is expressed as a factor of that average. Thus Customer Satisfactioncan be expressed as a single number that tells the supplier where he stands today and an Improvementplan can be chalked out to further improve his performance so as to get a loyal customer.Conclusion:SCPR conducted a qualitative project for the Department of Social Securitywhich looked at the factors that affect satisfaction with local Benefit Agencyoffices. This followed up respondents to the National Customer Surveyconducted by the department among Benefit Agency users. The SCPR studyincluded an attempt to explore in more detail what "satisfaction" actually meansto customers.BIBILOGRAPHY:There has been less research on satisfied customers to determine what it takes for a satisfied customer tochange. Why take a chance on mere satisfaction? Loyal customers dont leave even for an attractiveoffer elsewhere. At the very minimum they will give you the opportunity to meet or beat the other offer.Maintaining loyal customers is an integral part of any business. Dr. Manoj Kumar Dash Asst. Professor Galgotia College of Engineering & Technology Greater Noida
  9. 9. The Operations Research ProcessOperations Research is "the use of mathematical models, statistics and algorithms to aid in decision-making. It is most often used to analyze complex real-world systems, typically with the goal of improvingor optimizing performance. It is one form of applied mathematics." (Wikipedia)The quest for improvement has been a continual one and operations research has been one of the areasthat has been traditionally focused on improving operations across the company, particularly inproduction, operation, scheduling and physical systems. As such, there is a wide body of knowledgeupon which can draw to improve procurement and sourcing operations when properly applied andmodified. Even Six Sigmas (Strategic Sourcing) toolbox makes extensive use of techniques andprocesses that have their foundations in operations research.But today we are going to talk about the basic process. There are many good overviews of operationsresearch on the internet, but one of the best sites I have found is the "Operations Research Models andMethods" site(athttp://www.me.utexas.edu/~jensen/ORMM/) maintained by Dr. Paul Jensen at theUniversity of Texas. On the site, he overviews the basic Operations Research Process, which, simplyput, is:(1) Recognize the Problem(2) Formulate the Problem(3) Construct a Model(4) Find a Solution(5) Define the Process(6) Implement the Solution(7) Repeat and RefineEssentially, the operations research process is your basic problem solving process, like the introductoryproblem solving process you might encounter if you were studying (cognitive) psychology, the art ofmathematics, or (classical) engineering. Furthermore, it neatly captures the key steps you will have towork through as you attempt to improve and evolutionize your sourcing process.(1) You first have to define what your primary problem is and what your key goals are. Are you spendingtoo much money? If so, where. Are you spending too much time on the process? If so, why? Etc.(2) Then you have to formulate and frame the key problem. For example, you believe youre spendingtoo much on your high volume direct materials or you are spending too much time in your data collectionprocess.(3) Once you have precisely formulated the problem to solve, you need to model what you believe thesolution should look like. Many individuals and organizations skip this step and go straight to the solutionidentification step. However, if you dont know what the solution should look like, you risk selecting thewrong solution. For example, if you believe you are spending too much, you might select a (reverse) e-Auction platform. However, if current raw commodity prices are high, this might not save you any money.Conversely, if you instead sought out a strategic supplier who would work with you to improve processesand component reusability, you might save a bundle. Always understand what the solution should looklike and what it should accomplish before selecting a solution.(4) Often this step will be accomplished in practice by selecting a readily available technology,methodology, process, or model from the public domain or commercial marketplace. Dont try to reinventthe wheel, chances are your problem is not unique and someone else has already solved it for you. Forexample, the inventor and followers of TRIZ (an innovative problem solving methodology that we willdiscuss at a later time) have collectively reviewed over 2 million patents and discovered that less then 4%contained a new concept and only 1% contained a revolutionary discovery. The rest were merelyimprovements on existing solutions and processes. In other words, there is at least a 95% chance that a
  10. 10. solution to your problem already exists, and at least a 99% chance that a solution to a similar problemexists that can be adapted to your problem.(5) Once you have a selected a solution - be it a technology or a new methodology, you need to definehow it is going to be integrated into your current operational processes. This step is easy to overlook, butif the introduction of a new process or technology disrupts your daily operations, you will not realize thefull benefits.(6) Once you have identified the right solution and determined how to successfully integrate it into youroperational processes, you need to implement it and reap the rewards.(7) Finally, you need to monitor the process, measure the improvements, and look for ways to continuallyimprove it. Innovation is a continual activity. Theres always room for improvement, but if you do not lookfor it, I guarantee you will not find it.Well discuss other problem solving methodologies in the future, including some from psychology,innovation, and the Six Sigma toolbox, but first we are going to review the core executable parts of thesourcing cycle where technology solutions can have the greatest impacts to set the stage for what is tocome.