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Using Customer Satisfaction Research for Relationship Marketing: A Direct Marketing Approach

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Relationship marketing has become an important and necessary concept in today's business world. Due to the importance of repeat business, it is in particular vital for retail businesses to focus on longer-term relationships with customers. In this paper we demonstrate that customer satisfaction research is not only a tool to measure consumer attitudes, but can also be a proactive tool for managing customer relations.
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CHARLES E. GENGLER
PETER T. L. POPKOWSKI LESZCZYC

Using Customer Satisfaction
Research for Relationship
Marketing: A Direct
Marketing Approach
CHARLES E. GENGLER is an Assistant Professor of Marketing at Rutgers University in Camden, New Jersey. He received his PhD
in Marketing in 1991 from the University of Texas–Dallas. Dr. Gengler has research and consulting interests in positioning
strategy, advertising and promotions, persuasion and motivation. He has published in a variety of academic journals including
Journal of Consumer Research, Journal of Advertising Research, and International Journal of Research in Marketing. PETER T. L.
POPKOWSKI LESZCZYC is Assistant Professor at the Department of Marketing and Business Economics and Law, University of
Alberta. He received his BS from State University of New York, Geneseo, an MBA from SUNY Buffalo, and a PhD in Marketing
from the University of Texas at Dallas. He is a member of the American Marketing Association, College on Marketing, INFORMS,
and Canadian Institute for Retail and Services Studies. His research interests include empirical and theoretical issues of consumer
brand and store choice behavior, price promotions, pricing and advertising issues, and short- and long-run effectiveness of
marketing mix variables. His research has appeared in Marketing Letters, Environment and Planning A, and Canadian Journal
of Economics.
CHARLES E. GENGLER
PETER T. L. POPKOWSKI
LESZCZYC
ABSTRACT
Relationship marketing has become an important and necessary concept in today’s business world. Due
to the importance of repeat business, it is in particular vital for retail businesses to focus on longer-term
relationships with customers. In this paper we demonstrate that customer satisfaction research is not only
a tool to measure consumer attitudes, but can also be a proactive tool for managing customer relations.
1997 John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc.
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Few companies have realized the opportunity to improve the
marketing organizations and transaction-oriented
relationship with a customer while performing marketing re-
organizations is the content and maintenance of a
search. Any direct contact, including customer satisfaction sur-
customer information system (12). In a relationship
veys, is an important opportunity to improve the relationship
marketing environment, the whole corporate culture
with customers. In our paper we show that consumer re-
search and relationship marketing are integrated components
must be devoted to serving the customer. Every cus-
of an overall customer orientation, and that marketing re-
tomer contact is an opportunity to enhance (or dam-
search can be used as a tool to perform relationship marketing.
age) a customer’s perception of the firm. Although
A direct marketing approach is used, contacting customers by
this concept is broadly acknowledged by many
telephone. Our results show an increase in repeat business
firms, it is regularly forgotten when performing cus-
for automobile repair services with customers contacted by
phone in a customer satisfaction survey.
tomer survey research. A properly executed cus-
tomer survey interaction not only provides manage-
ment with valuable information, but can leave cus-
‘‘Personal relations are the important thing for ever
and ever, and not this outer life of telegrams and
tomers with the sense that the company really cares
anger.’’ (E. M. Forster, Howards End, 1910)
about them. This both increases the loyalty of
‘‘happy’’ customers and can make the difference in
keeping disgruntled customers from switching to an-
Over the last decade, competitive forces have
other brand. On the other hand, a cold, impersonal
prompted corporations to take an increased focus
market research interview can leave a customer feel-
on knowing their customers better through im-
ing alienated and even defensive. This can have di-
proved consumer research (21). Better understand-
sastrous effects on customer loyalty (14,27). As trade
ing of what consumers perceive as ‘‘quality’’ and
barriers are lowered, consumer choices and brand
‘‘value’’ has been the key to the development of
competition will multiply. In this environment, no
successful corporate strategies for the 1980s and
organization can afford to miss any opportunity to
early 1990s. In an age when competition has in-
strengthen relationships with customers.
creased, consumer research, and more specifically,
In this paper, we briefly review the use of rela-
customer satisfaction research has become essential
tionship marketing. Then, a study of whether cus-
for a company’s survival (12). In many product cate-
tomer satisfaction research through telephone calls
gories, where consumer research was once thought
has an impact on subsequent repurchase behavior
to be simply a source of competitive advantage, it
(loyalty) is presented. The main emphasis of this
has now become a necessity (7).
paper is to demonstrate how customer satisfaction
Concurrent with this intensified focus on the
research can become a proactive tool for relation-
consumer, a relationship marketing orientation is
ship marketing.
emerging as central to designing organizational
structure and strategy. Relationship marketing is be-
coming pervasive in both industrial and consumer
markets (11,16,17,22), including automotive (15,25),
banking (6,18,20,24,28), and a multitude of others
RELATIONSHIP MARKETING
(26). Under the relationship marketing perspective,
firms view themselves as having an ongoing rela-
The term relationship marketing was introduced by
tionship with their customers, aimed at delivering
Berry (1). Relationship marketing is simply an orien-
extra value and generating multiple transactions
tation of treating all customer interactions as part of
over time. This is in contrast with a transaction orien-
an ongoing stream of interactions, rather than treat-
tation — focusing on a single sale at a time (9,29).
ing each customer interaction as an isolated incident.
Consumer research and relationship marketing
Relationship marketing focuses on a long-term rela-
are inseparably intertwined aspects of an overall
tionship and series of transactions with the cus-
customer orientation. However, it is seldom recog-
tomer. Many feel that this is so important that it
nized that research is part of the relationship. In fact,
redefines the marketing concept itself (19). Gro
¨n-
a major difference between relationship-oriented
roos (10:53) states: ‘‘The most important issue in
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marketing is to establish, strengthen, and develop
Lexus stresses that telephone follow-ups be made
customer relations where they can be commercial-
by sales staff shortly after delivery, by the service
ized at a profit and where individual and organiza-
department after service visits, and even by employ-
tional objectives are met.’’
ees at corporate headquarters. Illingsworth com-
The relationship marketing concept has contin-
ments, ‘‘Every employee, from the newest secretary
ued to develop (2). Calonius (5) dicusses the ‘‘prom-
to the vice-president, calls one owner a week, just
ise’’ concept in terms of relationship marketing. Un-
to touch base and see if there’s anything the com-
like transaction orientation, which would focus on
pany can do for them.’’ (15:51)
making promises, relationship marketing must focus
not only on making but on keeping promises made
to the customer, ideally developing trust and loyalty
Alamo’s ‘‘Best Friends’’ Program
between customer and supplier. Loyal customers are
In another example, Alamo Rent-A-Car implemented
of obvious benefit to sellers (3,22,23). The trust in a
what it refers to as a ‘‘Best Friends Program.’’ Chair-
relationship has value to the buyer in terms of re-
man Michael Egan described the program as fol-
duced risk, reduced stress, reduced search costs, and
lows (25:43):
a generally simpler life (2,4). This component of
‘‘Make your customers your best friends; treat
relationship marketing is particularly important to
them that way all the time, and they will always be
direct marketers.
your customers. And, they will always be your best
Implementation of a successful relationship mar-
friends. Extend this concept to your fellow Alamo
keting orientation requires that personnel working
family members. Make each one with whom you
within the firm are sold on the concept themselves
come in contact your best friend. What happens
(11,13). Service quality cannot be treated as just a
then? Our work environment becomes a happy
‘‘program’’ or ‘‘special campaign’’ (6). It requires a
place with a caring, family atmosphere. It becomes
continuous commitment from the entire organiza-
a pleasure to come to work every day. Moreover,
tion. Furthermore, it requires a commitment from all
because you have a caring attitude, because you
of the third-party vendors who support the organiza-
have created a family atmosphere, the customer
tion (30). In an age where firms are increasing their
senses it and responds accordingly.’’
use of outside services for many functions, they must
The program results were impressive and imme-
continuously take measures to ensure that these
diate (25). Between 1989 and 1990, business transac-
firms share a common vision of customer relation-
tions increased 30 percent. At the same time sales
ships. Anything less can cause serious damage to
complaints went down 15 percent and rudeness
the firm’s reputation (30). Therefore, many firms are
complaints went down 50 percent.
placing an intensified focus on the implementation
These examples illustrate that companies are
of full relationship marketing programs both within
adopting relationship marketing philosophies based
their firms and within the service firms they employ.
on interpersonal contact. Furthermore, the Alamo
example cites increased business transactions and
reduced complaint behavior, attributing this activity
The Lexus ‘‘Customer First’’ Program
to the relationship marketing program they have
For example, in the auto industry Toyota’s Lexus
adopted. Asking customers what can be done for
operation prides itself on customer-relationship
them or how they can be helped are ways of letting
management according to J. D. Illingsworth, group
customers know the company cares, and they are
vice president of Toyota Motor Division in the U.S.
also informal forms of customer satisfaction re-
(15). Toyota’s creed is ‘‘customer first, dealer sec-
search.
ond, and Toyota third.’’ This illustrates Toyota’s ob-
If communication techniques can be incorporated
servation that all members of the channel must be
into traditional customer satisfaction research to
involved and committed to the relationship orienta-
achieve the same ‘‘caring’’ effect, then two important
tion. Illingsworth (15) states that the company went
research issues must be addressed. First, it is im-
through a very careful dealer selection process, ini-
portant to know if this interaction translates into cus-
tially allowing only about 7 percent of the candidates
tomer behavior, i.e., whether customer satisfaction
that applied to actually become dealers. In addition,
surveys conducted by telephone have an impact on
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customer behavior. Secondly, it is important to as-
Sample
sess whether interacting with customers to maintain
In this study, only customers who had visited a
a relationship will bias responses to customer satis-
dealer for service in the first quarter of 1992 were
faction survey data. Basically we are looking at the
included in the sample. A total of 124,195 subjects
extent to which a direct marketing approach can be
were identified nationwide. Telephone contact was
used to perform relationship marketing while col-
made within two weeks after a service visit. A total
lecting survey data.
of 64% of the subjects were contacted, and the re-
mainder were used as a control group. At the end
of the year, customers were then cross-referenced
with service visits made throughout the rest of the
year to assess postcontact behavior and determine
STUDY: DOES CUSTOMER
the impact of telephone contact.
SATISFACTION RESEARCH AFFECT
It is to be expected that some of the 36% who were
REPURCHASE?
not contacted may have moved during the time period
between service and contact, thereby impacting their
A Study of Automobile Dealer Service
ability to return for future service. Analysis of demo-
Repurchases
graphic and model ownership data indicated no sig-
Here, we analyze the effects of a telephone customer
nificant difference between those contacted and not
satisfaction survey upon subsequent customer re-
contacted. Although within the not-contacted group
purchase behavior for automobile dealer service. It
there may have been some sample attrition from those
must be emphasized that the telephone survey was
who had a service visit in the first quarter of the year,
conducted by professional interviewers specifically
this could not reasonably account for the large differ-
trained in relationship marketing techniques. As
ences found between the groups. According to DeAre
with Lexus and Alamo, the techniques are designed
(8), 18.1% of the population moved residences be-
to communicate the perception of caring about the
tween March 1985 and March 1986. Using this figure,
customer. This means that rather than maintaining
and assuming a uniform distribution of moves across
a strict script in the interview process, which can
the year, we estimate that 0.70% of the population
seem cold and uncaring to customers, the interview-
may move within a given two-week period. (After
ers are trained to respond sympathetically and reas-
the two-week period, we expect that those who were
suringly to customer concerns and complaints.
surveyed and those that were not would move at the
For example, when customers responded particu-
same rate.) Adjusting the 36% figure by 99.3% gives
larly negatively to any of the questions, the inter-
us a control group size of 35.74% of the population.
viewer would respond with apologetic comments
Hence, comparisons of behavior are based upon a
such as ‘‘I am sorry to hear that,’’ or other similar
64% group that was contacted, a 35.74% group that
statements as appropriate. At the end of the survey,
was not contacted, and a 0.26% group of the popula-
separate closing statements were used for satisfied
tion that could not repurchase because they had
and dissatisfied customers. Satisfied customers were
moved. If anything, this adjustment is overly cautious,
simply told, ‘‘. . . thank you for your answers and
since many of these moves may have been local rather
for coming to [dealership name]. Goodbye.’’ Dissat-
than inhibiting the individuals from revisiting the
isfied customers were told, ‘‘. . . let me apologize
dealer.
for the problem(s) you’ve had and the inconve-
nience you’ve been caused. I’ll make sure this infor-
mation gets back to the dealership management.’’
Results
In cases of a serious complaint, subjects are asked
Table 1 shows that telephone contact significantly
for their daytime phone number so that the dealer-
improved customer loyalty; 55.6% of those who
ship can contact them. There was no corporate pol-
were contacted after their first visit returned for addi-
icy of incentives to promote repurchases for dissatis-
tional service visits, whereas only 48.7% of those not
fied customers. Each individual dealership handled
contacted returned for visits. A chi-square test of
customer problems individually as appropriate to
whether the patterns in Table 1 differed from what
the level of severity.
would be expected as random chance was signifi-
26
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with greater frequency; however, for both those
TABLE 1
with and without warranty coverage, contact by tele-
Impact of Customer Contact on Repurchase Behavior for
phone substantially increased the likelihood of sub-
Dealer Automobile Service
sequent visits. The increase for those not on war-
Total
ranty is especially important, since these customers
Number
Customers
Average
will naturally be the most profitable segment.
of
Who
Number of
The bottom line in this study is how the increased
Customers
Repurchased
Repeat Visits
customer repurchase frequency translated into in-
100% satisfied
48,779
28,077
1.14
creased profits. According to the research firm, an-
customers
(39.8%)
(57.6%)
nual parts profit was $21.17 higher for contacted
Medium-
18,755
9,582
0.94
customers than for noncontacted customers. Annual
Satisfied
(15.3%)
(51.1%)
service profit was $38.11 higher for contacted cus-
Customers
tomers than for noncontacted customers. Given that
‘‘At-risk’’ or
10,309
5,599
1.04
the telephone contacts cost $8 per year (for two
dissatisfied
(8.4%)
(54.3%)
customers
service visit follow-ups), this is approximately a
Total contacted
77,843
43,258
1.08
741% return on investment!
(63.5%)
(55.6%)
Not contacted
44,757
21,785
0.93
(36.5%)
(48.7%)
SUMMARY
Relationship marketing is one of the most important
cant at the .001 level. Further analysis broke the
competitive trends in business today. It requires a
surveyed customers down into three categories
commitment to delivering quality to the customer
based upon their satisfaction level. The majority of
from the entire organization, not just from the sales
customers surveyed (63%) were 100% satisfied with
staff or customer phone representatives. Carrying
the service visit, 24% were not 100% satisfied, but
this philosophy through, it also requires that a firm
were not strongly dissatisfied either, and the re-
ensure that other service firms which interact with
maining 13% were dissatisfied and designated as at
customers also keep the same commitment. This in-
risk of taking their business elsewhere. For the at-
cludes marketing research firms. In this paper we
risk customers, an alert notice was sent to the dealer
have demonstrated that telephone surveys are more
so that any corrective action necessary could be
than just data collection, they are opportunities to
taken. After being contacted by telephone, the 100%
strengthen relationships with customers.
satisfied customers returned at a rate of 57.6%, the
Therefore, customer satisfaction research is one
midrange satisfied customers returned at a rate of
area where this philosophy can be successfully em-
51.1%, and the at-risk customers returned at a rate
ployed to turn a mundane data collection process
of 54.3%. It seems that the contact with the at-risk
into a proactive promotional tool. All customer con-
customers was particularly effective, since one
tacts are opportunities to make an impression on
would a priori expect them to be least likely to re-
the customer, and are part of the relationship with
turn, yet they returned at a rate significantly larger
that customer. The important point is not merely
than the uncontacted group’s rate of 48.7%.
that contacting customers after the purchase has a
Another issue analyzed was whether there was a
positive effect, but that this effect can be achieved
difference in response between customers whose
simultaneously with customer satisfaction data col-
purchases were in warranty and those not on war-
lection.
ranty. For those on warranty who were contacted,
The fastest-growing companies of the next de-
62.9% returned for additional service, whereas those
cade will be those who establish and maintain a
on warranty who were not contacted returned at a
loyal base of customers. Any company that only fo-
rate of only 55.7%. For those not on warranty, 51.5%
cuses on new customers may lose customers as fast
of those contacted returned for a second visit, com-
as it gains them. Relationship management firms are
pared with only 44.8% of those not contacted. As
a new form of specialized business destined to grow
one would expect, customers on warranty return
in the future. Research firms that emphasize quality
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customer contact and support will displace those
segments would significantly improve relationship
firms which do not. This is not only true for con-
management.
sumer product firms, but also for the third-party ser-
vice firms working for them. Any customer contact
is perceived as reflecting on the original firm,
whether it is marketing research, an outside firm
managing frequent-flyer programs, a data pro-
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JOURNAL OF DIRECT MARKETING
VOLUME 11 NUMBER 1 WINTER 1997
29
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