Value, Satisfaction, and Loyalty
Value, satisfaction, and loyalty are the integral aspects of the business environment that characterize customers and are closely interrelated. Still, before analyzing these relationships, it is necessary to define the concepts. Customer value can be defined as a comparison of measured “get” attributes to “give” attributes (Lam et al. 295). This concept is utilized as a ratio between the overall benefit obtained by an organization and total sacrifices.
Another approach to explaining this concept involves two aspects of customer value such as desired value and perceived value. The desired value is related to customers’ desires about a definite service or product. In turn, perceived value is the aspect that comprises the benefit that customers expect to obtain from a product or service after they buy it.
Customer loyalty can be described as “a buyer’s overall attachment or a deep commitment to a product, service, or organization” (Lam et al. 294). The concept of loyalty resembles the relationship commitment, which is treated as a desire of being in a valued relationship. Customer loyalty is observed in diverse behaviors such as the recommendation of a product or a service provider to other individuals as well as constantly patronizing the provider (Lam et al. 295). On the whole, these two behaviors can be considered as indicators of customer loyalty.
Finally, customer satisfaction is one of the significant concepts that directly influence the success of an organization. It can be defined as “a positive affective state resulting from the appraisal of all aspects of a firm’s working relationship with another firm” (Lam et al. 295). In other words, customer satisfaction is a measure of the extent to which services or products provided by an organization meet or surpass expectations of customers.
Researchers usually single out two conceptualizations of customer satisfaction such as service encounter or transaction-specific satisfaction and overall or cumulative satisfaction (Lam et al. 295). While the first aspect deals with the encounter of a certain service or product, the second one is an indicator that comprises past, present, and future performance of an organization.
Relationships Between Customer Value and Satisfaction
The concepts of customer value and customer satisfaction are closely interrelated. The models of customer satisfaction that are currently utilized are grounded on a paradigm of disconfirmation of expectations (Lam et al. 296). Still, these models frequently do not consider the role of customer perceived value as a determining factor for customer satisfaction. At the same time, some investigators claim that product or service quality has the potential to influence customer satisfaction. The customer value presupposes evaluation of the correlation between the benefits that a product or a service possesses and its cost.
These benefits include, for example, product or service quality. Research provides evidence of a positive effect that customer value has on customer satisfaction (Lam et al., 307). It can be explained in the following way. The more benefits a customer receives from a product or service at a lower price, the greater is the level of his or her satisfaction. Consequently, manufacturers and service providers should be concerned about quality-price correlation to contribute to an increase in customer satisfaction levels.
Relationships Between Customer Satisfaction and Loyalty
Another pair of concepts that have a proven relationship is that between customer satisfaction and customer loyalty. The study by Lam et al (307) supports two hypotheses that predicted a positive effect of customer satisfaction of customer loyalty in the aspects of recommendation and patronage. It should be mentioned that customer satisfaction is one of the major determinants that have an impact on the development of the long-term relationship between manufacturers or providers and their clients. Satisfied customers are more likely to purchase goods or services of the same producer or provider than those who are not satisfied with the products they receive.
Moreover, a high level of customer satisfaction has a positive impact on the recommendations they give to their friends or relatives, which can be more valuable for a company than advertising. Consequently, customer satisfaction has a direct positive impact on customer loyalty, which means that an increase in customer satisfaction is expected to bring the growth of customer loyalty.
Mediating Role of Customer Satisfaction in the Relationships Between Customer Value and Loyalty
Summarizing both relationships between customer value and satisfaction as well as between customer satisfaction and loyalty, it is possible to conclude that customer satisfaction has a mediating role in the relationship between customer value and customer loyalty. The previous discussion provides evidence of a positive impact that customer value has on customer satisfaction and satisfaction, in turn, positively influences customer value (Caruana 813).
Thus, satisfaction can be considered a crucial element of relations between a customer and a service provider or product manufacturer. While the concept of satisfaction is similar to that of service quality, they have certain distinctions. For example, satisfaction is a post-decision customer experience while quality influences the process of decision making before purchasing a product or service (Caruana 815).
Lam et al. (297) suggest a theoretical justification that supports the mediating role of customer satisfaction in relationships between customer value and customer loyalty. This framework comprises such elements as cognition, affect, and behavioral intent or behavior. As applied to the service management context, this framework proves the importance of customer satisfaction as a mediator. Thus, customer value is a representation of customers’ rational decision between the costs and benefits of purchasing a product or service. Customer value is treated as a cognition variable. In turn, customer satisfaction is considered as an affecting variable.
As a result, customer loyalty implies behavior or a disposition “to behave positively toward a service provider” (Lam et al. 297). Therefore, the suggested framework provides a ground for a supposition that customer satisfaction has an impact on the effect that customer value has on customer loyalty.
Summarizing, it should be mentioned that the fact of customer value’s effect on loyalty through customer satisfaction provides opportunities for companies to improve their product or service quality thus contributing to an increase in customer perceived value. It is a logical mechanism or a sequence of events. Thus, high-quality products or services increase customer satisfaction. Customers compare products or services in the market and make their decisions to purchase the one they consider suitable due to the sound correlation of price and quality. In case customers’ expectations are met, they are satisfied with the product or service.
Consequently, they are eager to build long-term relationships with a manufacturer or provider or recommend their products to other people thus becoming loyal customers and stimulating the attraction of new customers to a company. Hence, customer value should be one of the concerns of companies that are interested in growing customer loyalty.
Caruana, Albert. “Service Loyalty. The Effects of Service Quality and the Mediating Role of Customer Satisfaction.” European Journal of Marketing, vol. 36, no. 7/8, 2002, pp. 811-828.
Lam, Shun Yin, et al. “Customer Value, Satisfaction, Loyalty, and Switching Costs: An Illustration from a Business-to-Business Service Context.” Journal of the Academy of Marketing Science, vol. 32, no. 3, 2004, pp. 293-311.