Consumer Satisfaction, Dissatisfaction and Complaining Behavior As Indicators of Market Performance

E. Laird Landon, Jr., University of Houston
ABSTRACT - Measures of consumer satisfaction may potentially be good, concurrent, and leading predictors of sales, but empirical research needs to be done. Measures of consumer satisfaction are most likely to correlate well with sales in competitive markets than in less competitive markets. Also, measures of consumer satisfaction may be good measures of societal performance of the firm. Measures of consumer complaint behavior may be particularly useful for firms to identify and correct problems in the marketing process. An example of one firm's complaint information system is presented in this paper.
[ to cite ]:
E. Laird Landon, Jr. (1980) ,"Consumer Satisfaction, Dissatisfaction and Complaining Behavior As Indicators of Market Performance", in NA - Advances in Consumer Research Volume 07, eds. Jerry C. Olson, Ann Abor, MI : Association for Consumer Research, Pages: 186-191.

Advances in Consumer Research Volume 7, 1980     Pages 186-191

CONSUMER SATISFACTION, DISSATISFACTION AND COMPLAINING BEHAVIOR AS INDICATORS OF MARKET PERFORMANCE

E. Laird Landon, Jr., University of Houston

ABSTRACT -

Measures of consumer satisfaction may potentially be good, concurrent, and leading predictors of sales, but empirical research needs to be done. Measures of consumer satisfaction are most likely to correlate well with sales in competitive markets than in less competitive markets. Also, measures of consumer satisfaction may be good measures of societal performance of the firm. Measures of consumer complaint behavior may be particularly useful for firms to identify and correct problems in the marketing process. An example of one firm's complaint information system is presented in this paper.

INTRODUCTION

Measures of consumer satisfaction and trends in consumer complaint behavior can be used by many large firms for this purpose. This paper will briefly present the rationale for the use of these measures as indicators of market performance. Second, an example of how one large firm uses information on complaint behavior to assess its performance will be provided.

Satisfaction As An Indicator Of Market Performance

Two important reasons can be given for the potential value of satisfaction measures as indicators of market performance. First, satisfaction may be positively correlated with sales. Second, satisfaction may represent an independent measure of the performance of the firm.

Satisfaction Related to Sales

If measures of consumer satisfaction correlate positively with company sales, the measures may be good, concurrent and/or leading indicators of sales. Interestingly satisfaction is usually postulated as both a result of sales and a cause of sales. After consumers purchase a product, they are said to compare the actual performance of the product with the consumer's expectations. If expectations are reasonably met, the consumer is said to be satisfied. Therefore, satisfaction is the result of an evaluation process which takes place after sales. Assuming a firm produces and markets useful products, it is logical to find measures of satisfaction varying with sales, where increases in sales lead to increasing consumer satisfaction. Using this paradigm, one would expect that measures of consumer satisfaction would relate positively to levels of sales within the same time horizon. Some lag effect may be appropriate, but consumers are likely to evaluate product performance continually after purchase.

On the other hand, satisfaction is often posited to be an important determiner of sales. Satisfied consumers are more likely to repurchase a product than are dissatisfied consumers. Theories of consumer choice suggest that consumers may continue with one brand and ignore product information about other brands, as long as they remain reasonable satisfied with their existing choices. This paradigm suggests that measures of consumer satisfaction will be positively related with future sales. Therefore, satisfied consumers in this period may auger for increasing sales in future periods. One can see that measures of consumer satisfaction may both be concurrent (or perhaps slightly lag) and lead indicators of sales.

Whereas it is logical to assume that a positive relationship exists with present and future sales, it would be wrongheaded to assume that the relationship is unity. In fact, there are possible conditions under which increasing satisfaction may coexist with declining sales. Figure 1 illustrates the four combinations possible between increasing and decreasing levels of consumer satisfaction and increasing and decreasing sales. The most commonly expected cells of this figure correspond to a positive relationship between satisfaction and sales. When measures of satisfaction are increasing, it is expected that sales will increase and even that market share may increase. Similarly when consumer satisfaction measures indicate less satisfied consumers, sales and/or market share may decline.

FIGURE 1

POSSIBLE RELATIONSHIPS BETWEEN CONSUMER SATISFACTION AND SALES

However, the off diagonal cells are also possible. Satisfaction may increase while sales are decreasing. In the declining stage of a product's life, as competitors take more and more of the market, a few consumers will remain staunchly loyal to the product. In this condition, it would be likely to find that these loyal consumers have higher average levels of satisfaction for the product than the consumers who previously purchased it but now have shifted.

A similar possibility exists in the opposite cell. It is plausible that satisfaction may decline while sales increase. Suppose a manufacturer enters a market using a concentrated segmentation strategy. By concentrating on a small homogeneous market for whom the product is ideally suited, it is reasonable that satisfaction levels and brand loyalty measures will be quite favorable. As the firm expands production and marketing efforts, new and more heterogeneous markets may be entered. As the marketing strategy shifts from concentration to undifferentiated, sales are likely to increase while average levels of consumer satisfaction may decrease, because the product does not fit as exactly to consumer's expectations in these diverse markets.

Taking Figure 1 as a whole, it would certainly be unwise to presume that measures of consumer satisfaction are precise, sufficient predictors of future market sales. Using the relationships in Figure l, it would be extremely useful to evaluate these relationships with empirical data. Unfortunately, this paper is unable to discuss any empirical data bearing on the relationship between levels of satisfaction and sales.

Satisfaction As An Independent Measure of Market Performance

In addition to the potential value of satisfaction as a leading indicator for sales, firms find that satisfaction is a useful independent measure of market performance. From a societal point of view, the organization is given special status because it both provides profit to its ownership and useful services to its markets. Measures of profit are only theoretically

related to satisfaction of markets. Certainly the courts and government do not consider return on investment as the sole measure of a firm's performance in the marketplace. The social effects of a firm on its market may be better measured by consumer satisfaction scales. These scales may provide insight into the efficiency of the market. Dissatisfaction may indicate an inefficiency in the process: either consumers have unrealistic expectations or firms are failing to deliver adequate products, or a combination of these two. Therefore, measures of consumer satisfaction may represent useful indicators which can be independent of sales of the firm and the firm's profitability. As an extension of this reasoning, we might hypothesize that efficient markets are those in which measures of consumer satisfaction are positively and strongly related to the sales, and profitability of the firm. It is seen that efficient markets will be ones in which consumer's expectations are met leading to satisfaction which leads to continued growth in sales for firms providing these products. Contrarily, firms which do not satisfy their consumers should experience weak sales or profitability. Free efficient markets should lead to strong relationships between these variables. It is in these markets in which measures of consumer satisfaction would be most useful to the firm as lead indicators of sales. In imperfect markets, consumer satisfaction and profit might be less related, and therefore seen as independent measures of market performance compared with sales and profit.

Complaint Data As A Measure Of Marketing Performance

Of course, not all dissatisfied consumers complain. It is even likely that many times complaints come in from consumers who are satisfied. But it is clear that companies receive complaints from a small fraction of their total number of consumers. Complaints are generally seen as being expressions from consumers about dissatisfactory experiences. Viewed in this manner, complaints may be very useful for the firm in the discovering and eliminating product and marketing problems. A problem unrecognized is a problem unsolved. Complaints help firms recognize problems in the marketplace. As such, complaints are very useful indicators of market performance. They do not indicate global or total lack of acceptable performance. On the other hand, they do indicate problems which in many cases are significant and deserve the attention of management. Several different areas within the marketing function have been observed to benefit from a careful analysis of the number and type of complaints received.

Product Performance

One food manufacturer produced a natural powdered lemonade drink mix. The product was anhydrous and tended to attract moisture from the air. When the product had set on the consumer's shelf, after it had been opened, it often turned hard as stone. The problem was particularly vexing in that a major segment for this product is the casual or occasional user of lemonade. These consumers may prepare one or two glasses instead of an entire gallon as is the case with the frozen concentrate. But these consumers who enjoy the powder are also the consumers who experience the hardening of the mix because they tend to leave it on the shelf for longer periods. A number of these consumers complained to the firm about the problem. The firm was generally unaware of the nature and extent of the problem, but as a result of the complaints was able to reformulate the product to prevent it from hardening.

Marketing Integration

On occasion, advertisements may make claims for products about efficacy or availability of a product which are generally unmet. Advertisements may mislead consumers to the extent that they indicate product performance which is not forthcoming. Perhaps an advertisement was written by a copywriter who was generally unfamiliar with the product. Perhaps a slipup in the mails prevented a fulfillment house of providing premiums to consumers as promised in a label promotion. Complaints from consumers may alert marketing management to the existence of these problems.

Customer Relations

Improper handling on the retail floor, including rudeness and unnecessary delay, may be undetected by a distant centralized management. Complaints from consumers may alert management for the need for better training and better development of the sales force.

Channels of Distribution

Consumer complaints of products being out of stock, or products being received in damaged condition may alert the firm that changes are necessary. The firm may receive only the invoice and the shipping receipts and presume that delivery was satisfactory. Indications from consumers that retailers are not providing the product in sufficient quantities may be useful by the marketing department in increasing shelf allocation and inventory.

In an idealized world, the marketing department would have developed an information system sufficient to deal with all of these marketing problems. It is easy to find fault with a management team which would allow too many of the errors to occur. However, the point is that errors of these types occur all the time. Marketing systems are not perfect. And consumer complaints may provide significant value in alerting management to these problems when they occur. Early warning allows management to correct the problems and prevent them recurring.

AN EXAMPLE OF A COMPLAINT INFORMATION SYSTEM

This section presents information on the complaint information system of a large oil company. The purpose of presenting this illustrative material is to indicate the way in which complaint information can be analyzed and provided to management to improve marketing performance. It is presented also to suggest that major corporations are actively involved in the resolution of complaints and the improvement of marketing performance based on using complaints as indicators of performance.

Figure 2 presents consumer information flows in the firm. The initial feedback loop between the consumer and the firm depict the consumer's complaints and the firm's reaction and feedback to the consumer. The second feedback loop charts the path of complaints as they are coded and processed and distributed to marketing management. It is the second feedback loop which is germane to the illustration presented in this paper.

This oil company collects complaints from consumers on a computerized file. The file is periodically processed and reports are generated which are seen to be useful to marketing managers at all levels in a firm. Table 1 presents a report which analyzes complaints by territory and complaint description. This report is used to relate the type of complaint to the dealer involved. Information on complaints by dealer are filed in the dealer's records.

Table 2 presents a summary by region of the total number of complaints in certain serious complaint categories. These complaints are compared quarterly with the past year's performance and the planned performance for the quarter. Goals are determined for each district for the coming year and a comparison of actual and planned complaints is made quarterly. Table 3 shows this analysis.

Table 4 shows the total number of complaints of a serious nature received for each service station within a region and territory. This report allows the district and territory manager to quickly discover where problems are occurring. In addition to number and type of complaint received, the information system produces reports on the costs involved in these complaints. Of course, many complaints are received for which no monetary restitution is sought. However, the claims and the amounts remitted to consumers are important to management. Table 5 breaks down these costs for each complaint within a district and indicates whether the amount remitted is charged to the dealer or to the oil firm. Table 6 aggregates these data by district and compares quarterly performance to the same quarter in the last year. The number of complaints which have remained unresolved beyond 30 days are presented as well. In another report, the names of each complainer for unresolved complaints beyond 30 days is listed by territory. This report is used by management to identify lingering complaints which require immediate action.

This oil firm sends a questionnaire to each complainer after the complaint has been closed by the firm. The results of this questionnaire, which pertains primarily to the consumer's satisfaction with the complaint handling process, are presented in Table 7. With this questionnaire and this report, the firm attempts to audit the effectiveness of the complaint handling system. There is also an elementary attempt to measure the impact of complaints and complaint resolution on future sales.

These tables do not represent the entire system of complaint information. They are presented here to illustrate one way in which an oil company captures complaint information and uses it to aid management in the detection and resolution of consumer problems.

FIGURE 2

CONSUMER INFORMATION FLOWS IN THE FIRM

TABLE 1

COMPLAINT TYPES BY REGION

TABLE 2

DEALER COMPLAINT REPORT BY EXCEPTION - COMPLAINT ANALYSIS

TABLE 3

CUSTOMER COMPLAINT ANALYSIS SOCIAL PERFORMANCE PLAN

TABLE 4

DEALER COMPLAINT REPORT BY EXCEPTION - DEALER ANALYSIS

TABLE 5

CUSTOMER COMPLAINT LOG (10/05/7)

TABLE 6

MONETARY COMPLAINT SETTLEMENT/AGED ANALYSIS REPORT - 197 FIRST QUARTER

TABLE 7

CUSTOMER SATISFACTION BY DISTRICT ANALYSIS - SOCIAL PERFORMANCE PLAN

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