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Author:

Ieva Gailevičiūtė, Kaunas University of Technology, Lithuania

Abstract

This paper presents how service or product requirements can be analysed by using Kano model and discusses the potential benefits that can be achieved by applying this approach to skis industry. According to the Kano model, service/product features chould be classified into three classes depending on their ability to create customer satisfaction or cause dissatisfaction: must-be, one-dimensional and attractive requirements. This study suggests that Kano model can to identify the most important customer service/product elements, and to distinguish the differences between customer groups.

Introduction

Which products and services can be used to achieve the highest level of customer satisfaction? What are the characteristics of the product that lead to customer satisfaction and which product features seem to be necessary for customer? So far customer satisfaction was seen as one-dimension interpretation – the higher the perceived quality of the product, the higher the customers satisfaction is and vice versa. However, individual product requirements (features) which provide a lot of satisfaction may not always mean a high level of customer satisfaction. The aim of the paper is to investigate a detailed description of the Kano model and to analyse what helps to clarify the essential service requirements (attributes), leading to customer satisfaction.

Kano model: theoretical background

Nowadays customer satisfaction is one of the key goals for both smaller and larger organizations. In service sector it is exceptionally important, because customer satisfaction is probably the main “key” to a successful business, recognition and retention of customers. It is very important to clarify not only the most important determinants of customer satisfaction with the services of factors, but also methods that allow to find out it, exploring in the most effective way.  As Gustafsson et al. (1999) argue, Kano model explains what information can be expected and received from customers in order to find satisfaction factors. In his model, professor N. Kano (Sauerwein et al., 1996) distinguishes three product requirements (features) used to determine customer satisfaction in some cases:

1. must-be requirements (features); if these conditions (requirements) are not met and do not perform the basic functions, the customer will be extremely unhappy. The must-be requirements are the main criteria of the product/service. In most cases, this is a crucial competitive and if they do not provide much satisfaction, the customer will not be interested in product at all. Antony and Preece (2002) presents a model to meet these requirements: as a must-be requirement for banks may be courtesy of staff, the services offered by carriers – passenger and driver safety. In product case, this could be the S-class vehicles equipped with air bags (Raab et al., 2008).
2. one-dimensional requirements (features); according to these requirements, customer satisfaction is proportional to the needs of the level – the higher the satisfaction level is, the higher the customer’s satisfaction is and vice versa. One-dimensional requirements – a clear customer’s requirements. As one possible example of this can be the waiting time at the bank.
3. attractive  requirements (features); these requirements are based on the evaluation of the product, which is mainly determined by what level the customer will be satisfied with a product. Attractive requirements are neither urgent nor expected by the customer. As Webber and Wallance (2007) complete these findings, if any organization is able to provide the must-be and onedimensional requirements, and yet these characteristics, it is lively, unexpected and challenging, then that organization has a high chance of great joy and delight customers by the products/services, or even to distinguish from competitors and grab to their side. In other words, Antony and Preece (2002) simply say that this is what customers expect, has requested direct service providers, vendors, however receive and mostly remain so surprised, both together and meet.

All three types of requirements can be seen in a Figure 1 (Sauerwein et al., 1996).

Berger et al. (1993), presenting a chart (see Figure 1), explain that the horizontal axis provides how well and fully product/service requirements are met, and the vertical axis shows the level of customer satisfaction (satisfied or dissatisfied customer). ReVelle et al. (1998) presented all three customer requirements types of profiles and in what ways or research the company can get the best information about customer needs. Attractive requirements often becomes innovations, completely unprecedented novelties, and also the authors describe in keywords such as customer delight, surprise, performance improvements etc. One-dimensional (performance) requirements are easily described as known needs and features which customer expects before buying products or services. Finally, must-be requirements are described as buyers expectations. These requirements can be obtained by monitoring competitors or customer complaints.  Further interpreting of the Kano model, Sauerwein et al. (1996) distinguish the following types of user requirements for the classification of benefits:

• Priority of the evolution of its development. For example, to invest improvements to the must-be requirements are not very useful, because they are already in the satisfaction level. It would be better to improve one-dimensional or attractive requirements, because these requirements are increasingly based on perceived product quality and customer satisfaction levels.
• Product requirements are better to understand: the classification of the requirements into must-be, one-dimensional and attractive helps better to understand of what leads to customer satisfaction.
• Kano model is used to determine the individual characteristics of the importance of customer satisfaction. Thus creating the necessary conditions of optimal, focused on product development and its evolution.
• Must-be, one-dimensional and attractive requirements are different, because their performance is expected from the different customer segments.

Also, Matzler and Hinterhuber (1998) present the following advantages of Kano model:

• Kano model promotes understanding of the product or service requirements. You can identify the factors which have the greatest impact on customer satisfaction.
• If two product features cannot be improved for technical or financial reasons, a feature which has greater impact on user satisfaction can be found in the Kano model.
• Attractive product requirements are the major key to competitiveness in the market. Summarizing the main advantages of Kano model show that it can determine certain product/service features that help to achieve the highest customer satisfaction level. Only after establishing product/service features that provide customer satisfaction it is possible to achieve effective outcomes. Kano model makes it possible to highlight a wide range attractive, appealing service/product features.

Below is an example of how product requirements are classified according to the values questionnaire (survey). Ski industry, where customers were surveyed in 1500, will show how a set of product requirements for the building of the survey (questionnaire) as assessed and the results are interpreted and used as the basis for product development, improvement. The ski industry case is presented because it most accurately describes essence of Kano model. Of course, there was found other studies cases where Kano model is used: Kano model for investigation of student satisfaction with university in Turkey (Bilgili and Unal, 2008), Kano model for analyzing the use of innovative, new products/services to market (Shen et al., 2000), and Tan and Pawitra (2001) Kano model combines with service quality SERVQUAL measurement method.

Step 1: Identify the product requirements. Griffin and Hauser examined (Sauerwein et al., 1996) that only 20-30 interviewed in the same segment of users may be sufficient to result in about 90% – 95% of the total possible product requirements. In most cases, to identify some of the requirements for the following research methods: focus group interview, survey. Focus group interview helps to find and identify the various users needs. Meanwhile, individual interview method is more suitable for use as an example, the price comparison. It is also useful for the registration of a customer survey where product requirements and problems are visible, clear to customers. However, the issue of „new“ or „hiding“ of the requirements of individual users is not enough interviews. According to the authors, it is very important and necessary for the establishment of the hidden characteristics and problems, whereas the detailed analysis of the problems will be solved. Problem solving – help for the future, when you want to improve and develop product features. Thus, the authors distinguish the following four key questions that help in investigating customer problems:

1. Which associations does the customer  make when using the product X?
2. What kind of problems/defects does the customer associate with the use of the product X?
3. Which criteria does the customer take into consideration when buying the product X?
4. Which new features or services would better meet the expectations of the customer? What would the customer change in the product X?

Xu et al. (2008) argued that the first step to identify specific product requirements is a useful tool that helps to classify and to identify customer preferences. It also helps to determine how they affect customer satisfaction with product/service. At this moment non-linear relationship between product characteristics and customer satisfaction is found.

Step 2: Construction of the Kano model questionnaire. The Kano model survey is constructed and later carried out using the surveys of customers. A questionnaire has a group of two questions for each attribute. Then each pair of questions includes a functional form (a product has characteristic, feature), and dysfunctional question form (a product doesn`t have characteristic, feature) (Berger et al., 1993) (see Figure 2). Must-be, one-dimensional and attractive product requirements, as well as product requirements of the customer indifference, can be classified according to the questionnaire values. Each product characteristic is formulated as a couple of questions that customer may respond to one of five different options. The first question concerns the reaction of the customer benefits of the product characteristics, whether the product has the feature (functional form of the question – practical, useful), and the second question relates to the customer`s reaction if the product does not have this feature (dysfunctional form of the question – confused, spoiled). 

Figure 2. Functional and dysfunctional question in the Kano questionnaire (Sauerwein et al., 1996)

Next evaluation table (see Figure 3) shows the characteristics of the product, according to concerted two responses, which may be classified. If the customer to question “If the edges of your skis grip well on hard snow, how do you feel?” responses “I like it that way” – functional form of the question. Replies “I am neutral“ or „I can live with it that way“ because „If the edges of your skis do not grip well on hard snow, how do you feel?“ – dysfunctional form of the question. Berger et al. (1993), in this case, the combination of questions simply explain as follows: the first question is formulated „If [product/service] has [property/requirement/feature X], how do you feel?“; the second question is formulated „If [product/service] does not have [property/requirement/feature X], how do you feel?“. 

Figure 3. Kano evaluation table (Sauerwein et al., 1996)

Sauerwein et al. (1996) show that the combination of the questions in the evaluation table produces category A. This indicates that edge grip is an attractive customer requirement, it is a necessary condition. Category I means that the customer is indifferent to this product feature. He/she does not care about the product feature, or feature is missing. Category Q is a questionable result. Usually the answers in this category do not access. Questionable score means that the question was phrased incorrectly, or that the person interviewed did not understand the question or the wrong answer was selected by mistake. R category means that the product feature is not only wanted by the customer but he/she even expects the reverse. For example, when offering holiday tours, a certain customer segment willing to pre-planned events every day, but other users may not like it, because they want to plan their own personal events. In addition to the Kano questionnaire, it might be helpful to have the customer rank the individual product criteria of the current product and to determine the relative importance of the individual product criteria (see Figure 4).

Figure 4. Structure of the Kano questionnaire (Sauerwein et al. 1996) 

In conclusion, such Kano model survey design with a set of evaluation criteria can help to establish product/service priorities, its development and improvements.

Step 3: Implementation of the customer survey. Customers are well aware of its present and future needs. In most cases, the company while doing market research, makes a big mistake, simply interviews with its customers, from which you find useful information about their needs and desires. Companies from the customer can expect only what is currently offered in the market. However, customers have always been a great help for companies to evaluate a new concept or idea (Gustafsson et al., 1999).  In summary, any organization which wants to continue their business successfully and profitably they need to conduct a market study. And only weel-thought which survey method or approach may be the most appropriate way to begin an investigation.

Step 4: Analysis and interpretation. The questionnaire is analysed in three steps. After combined functional (positive) and dysfunctional (negative) question’s answers (see Figure 3), each service criteria are summarized in the table of results, which show the overall distribution. The next step is the results analysis and interpretation. Below Figure 5 is presented and it shows the example of individual requirements for the product (in this case, ski).

Figure 5. Table of the results (Sauerwein et al., 1996)

The easiest way for the results interpretation is analysis, which is based on the response rate of recurrence. In this case, for example, by analyzing the model with the skis, edge grip would be a must-be requirement (49.3%), ease of turn a one-dimensional requirement (45.1%) and service of edges and base an attractive requirement (63.8%). If the questionnaire includes sufficient customer – oriented variables, the results can be used as an ideal basis for marketing segmentation and thus differentiation of products/services according to different customer segments. Given the overall integrity of the results the formula: M>O>A>I. When decisions are made on the products/services development and so on, in particular, those features, properties must be considered, discussed, since it can have a significant impact on perceived product/service quality. The customer satisfaction coefficient indicates how much the service or product features and properties may lead to customer satisfaction or vice versa – frustration/dissatisfaction. Summing up the average satisfaction with the impact, influence, it must be to add attractive, onedimensional column and the divide by the total attractive, one-dimensional, must-be and indifferent responses. To calculate the average impact on dissatisfaction it should add the must-be and onedimensional columns and then divide by the same factors.

In this case, the minus sign is placed in a formula to emphasize its negative impact on customer satisfaction if this product quality is not fulfilled. Satisfaction with the positive values included in the scope from 0 to 1. If the value is closer to 1, the impact of customer satisfaction is greater; positive coefficient, which approaches the value 0 indicates that there is very little impact, importance. However, it is important to see negative satisfaction values too. If the value is approaching towards -1, customer dissatisfaction is very strong; size, approximately equal to 0, meaning that a certain property does not feature such a high level of dissatisfaction.

Figure 6. Customer satisfaction coefficients (Sauerwein et al., 1996)

Accordingly to Sauerwein et al. (1996) considered model (with skis), counting to formulas is shown in Figure 6. For instance, a bad edge grip with negative customer satisfaction coefficient of -0.83 leads to more than proportional dissatisfaction; good edge grip with a positive customer satisfaction coefficient of 0.40 can only slightly increase satisfaction. To sum up the entire calculation, the authors Sauerwein et al. (1996) provide a common graphical representation of satisfaction (see Figure 7). Figure 7. Satisfaction portfolio (Sauerwein et al., 1996)

Sauerwein et al. (1996) make the following conclusion: it is necessary to fill out and to fully understand must-be service features, characteristics, one-dimensional features to isolate from the rest exciting, challenging and unexpected (attractive) properties of all possible advantages and positive features. Reviewing and summarizing all the Kano model, Berger et al. (1993) conclude that the customer satisfaction evaluation method is perfect, in their words „brilliant“, but even this model still has more or less failures and shortcomings. One of them – the answers wording to the questions must be made very carefully and thoroughly. Second, a survey about service characteristics can help in implementing new ideas, but do not forget that different people have different approaches and service features and other elements, so even the Kano survey have difficulty determining what it is to improve service and customer satisfaction in them. Webber and Wallace (2007) add that the analysis of data should be careful of the selection size – the smaller the selection is, the chance of many mistakes becomes bigger.

Conclusions

Thus, assessed the researchers experiences and views on the Kano customer satisfaction method, I can make my own conclusions and evaluate that this model has both: advantages and disadvantages. Although the method requires extremely high levels of due diligence and experience, or a questionnaire may seem confusing, but this approach can help to identify the key features of product/service, which has a significant impact on customer satisfaction. Also, this method can help to identify the product/service features for which customers have problem and hence the dissatisfaction with the service/product. Determining these defects, when resolving and improving, developing product/services features, customer satisfaction level will rise.

References

1. Antony J., Preece D. (2002). Understanding, Managing and Implementing Quality. Frameworks, techniques and cases. London and New York: Routledge.
2. Berger C., Blauth R., Boger D., Bolster C., Burchill G., DuMouchel W., Pouliot F., Richter R., Rubinoff A., Shen D., Timko M., Walden D. (1993). Kano’s methods for understanding customer-defined quality. The Center for Quality Management Journal, Vol. 2 No. 4, p. 2-36.
3. Bilgili B., Unal S. (2008). Kano Model Application for Classifying the Requirements of University Students. Available at: http://mibes.teilar.gr/conferences/MMIBES_CD_2008/ORAL/Bilgili_Unal.pdf.
4. Gustafsson A., Ekdahl F., Edvardsson B. (1999). Customer focused service development in practise. A case study at Scandinavian Airlines System (SAS). International Journal of Service Industry Management, Vol. 10 No. 4, p. 344-358.
5. Matzler K., Hinterburger H. (1998). How to make product development projects more successful by integrating Kano’s model of customer satisfaction into quality function deployment. Available at: http://www.hinterhuber.com/uploads/articles/strategy/New_product_development_Kano_cust_satisfaction_Technovatio n.pdf.
6. Raab G., Ajami A. R., Gargeya B. V., Goddard J. G. (2008). Customer Relationship Management. A Global Perspective. Great Britain: Gower Publishing Limited.
7. ReVelle J. B., Moran J. W., Cox Ch. A. (1998). The QFD Handbook. Canada: John Wiley & Sons Inc.
8. Sauerwein E., Bailom F., Matzler K., Hinterburger H. (1996). The Kano Model: How to delight your customers. Available at: http://faculty.kfupm.edu.sa/CEM/bushait/CEM_515-082/kano/kano-model2.pdf.
9. Shen X., Tan K., Xie M. (2000). An integrated approach to innovative product development using Kano’s model and QFD. European Journal of Innovation Management, Vol. 3, No. 2, p. 91-99.
10. Tan K., Pawitra T. (2001). Integrating SERVQUAL and Kano’s model into QFD for service axcellence development. Managing Service Quality, Vo. 11, No. 6, p. 418-430.
11. Webber L., Wallace M. (2007). Quality control for dummies. United States: Wiley Publishing.
12. Xu Q., Jiao J. R., Yang X., Helander M. (2008). An analytical Kano model for customer need analysis. Design Studies, No. 30, p. 87-110.

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Author:

Lina Gegeckaitė, Kaunas University of Technology, Lithuania

Abstract

Today customer satisfaction is widely discussing and analyzing because all organizations want that their customers would be satisfied and fascinated. Numerous theoretical and empirical studies show a positive relationship between customer satisfaction and plenty of factors that influence that. Moreover, not all organizations, their staff and managers know how to achieve the key driver – customer satisfaction. So this paper takes a look how many of scientists describe the concept of customer satisfaction, and which factors this conception contains the most. Finally, other purpose of this paper is to present why customer satisfaction is so important goal for each organization at the present when the competition is strong and everlasting and despite this fact all want to round up more satisfied customers as far as possible.

Introduction

Nowadays customer satisfaction is one of the key goals in both smaller and larger organizations. In service sector it is exceptionally important because customer satisfaction is probably the main “key” to a successful business, recognition and retention of customers because service processes more or less involve the customer. Companies look for ways to find out customers desires but at the same time want to ensure their satisfaction with services. Therefore it is very important to clarify not only the most important determinants of customer satisfaction on services but also explore which of them are the most effective. So the main issue of this work is to find out the main conceptions and factors of customer satisfaction on services and its importance for organizations.

The conception of customer satisfaction on services

Customer satisfaction is a goal of each organization (Bagdonienė and Hopenienė, 2005). Going back to the 1950-1990 year as the authors Szwarc (2005) and Hill et al. (2007) tell hardly anyone spoke very much about customer service during that period. Organizations did not focus as much time and attention on customer service and the concept of customer satisfaction. Only in the last few years, organizations started to explore more on services and their provision of development and offer to customers. Therefore it‟s meaningful to find out wider what is the opinion of most scientists and how they define the particular concept of customer satisfaction and how they understand and describe the customer satisfaction on services. Firstly, as stated by Cochran (2003), satisfaction can mean basically anything that relates to the purchase of the organization. This may be due to factors such as price, execution time, comfort, responsiveness, reliability, benefits, and the same author argues that all the variables and more like a complex “mix” which fits to this definition. Vavra  (2002) points out that customer satisfaction and the definition also depend on the specificity of a given object so the author mentions that satisfaction may be of a product, decision, process, delivery terms, the use of experience as a store or company, organization, and prior to the purchase of available expertise and so on. Also it depends on what is purchased – the product or service. Similarly, the description of customer satisfaction is given by authors Giese and Cote (2000) arguing that customer satisfaction:

• is one of emotional, cognitive and / or reaction types;
• based on the product / service purchase, consumption practices and / or acquisitionrelated attributes (for example, service provider);
• may be expressed before the product / service selection, the choice of consumption, after a long experience of using.

In this case, it was found out that the authors talk about the general perception of customer satisfaction, definitions, generally refers to the concepts and inserts not one but several variables, the factors that help understand why the customer can stay fascinated, satisfied. In addition to this, we see that this includes not only services but also the easiest items, as distinct from services that are measurable and evaluation of satisfaction to many other factors (packaging, design, brand, size, etc.). As Hill et al. (2007) stated their opinion: there are many words and phrases that fit into this concept – and the customer loyalty, their relationships and experience, attention, admiration, service quality, emotional attachment, and so on. List could go on and on because there are so many phrases, but each of them describes the same phenomenon – the views and feelings that customer perceive his/her experience of receiving the service. Vavra (2002) tells that it is difficult to provide a specific definition suitable for all without exception, services, so gave two main features which can characterize the concept:

• satisfaction with services is defined as operating results;
• customer satisfaction is defined as the presence and experience in service delivery.

All this summarized the author offers to describe a customer satisfaction as an emotional response to what the customer expects to receive before the service and how it assesses the customer when he/she has already received. Meanwhile, as Hill et al. (2007) cited in their book, perhaps the clearest and best definition was told by American marketing expert Philip Kotler: “If the service meets the expectations of the customer is satisfied and, if exceeding the expectations of customer remain highly satisfied; well, if the result does not meet expectations, then the customer remains dissatisfied, without exception, the service”. So this concept can be seen in the fact that customer satisfaction remains the ultimate sentence if the service or the future of its rates of use, content.

Table 1. Definitions of customer satisfaction (Grigoroudis and Siskos, 2010)

However, the authors consider that customer satisfaction is in no way be confused with quality of service. First of all, customer satisfaction is a broader concept than service quality. Secondly, the service must be tested to give a final opinion on it. For example, it is possible that some people form an opinion about the hotel service quality, service, staff work and so on from advertising, reputation or communication “word of mouth”. However, in this case, it is impossible to form a satisfaction or dissatisfaction with hotel services in their own field testing. Third, customer satisfaction is much more subjective and emotion-based phenomenon than the quality of service. Finally, Hill et al. (2007) conclude that customer satisfaction or dissatisfaction is based on the experience and feelings that the client felt through contact with an organization. Grigoroudis and Siskos (2010) add to table some definitions which show the main points between satisfaction as an outcome and satisfaction as a process (see Table 1). So in theory it‟s quite easy to describe the concept of customer satisfaction on services: if the service does not meet expectations, customer is disappointed, but if the service meets the requirements of the customer or exceeds all their expectations, then the customer is very happy. Eventually, most of authors believe that this concept holds a lot of keywords (attitude, emotions, humour, consumer loyalty, their relationships and experience, attention, enjoyment, quality of service, maintenance, etc.). But perhaps all of them points out that customer satisfaction might be characterized the best in two ways: satisfaction as a result and satisfaction as the process of services.

The factors which determine the consumer satisfaction on services 

As mentioned previously, basic and essential key factor which helps to save customers in organizations is satisfaction (Baraškina and Kreišmanė, 2006). Satisfied customer last longer, buy more and more companies develop new services, positively impacting the company and its offerings, less attention to competitors‟ advertising, not as sensitive to price changes, while also providing new ideas for the company. Therefore every organization must continually monitor if their customers are satisfied. Bagdonienė and Hopenienė (2005) point out that one of the most important determinants of customer satisfaction – quality of service. Dulskis (2010) identifies the following consumer satisfaction factors: service provision, its quality; accessibility; the delivery rate (efficiency); professionalism; informative service; understanding the customer; friendly staff, their attitude and attention; the physical environment. So we see that one of the key customer satisfaction factors – consumer awareness, perception, and attitude. Jonikas (2010) believes that user satisfaction depends on the established relationship with the service provider. The author argues that the value of customer service is not just a service, but also the relationship between the company‟s employees, its image, as energy costs. We can see that Dulskis (2010) singled out customer satisfaction factors, so for companies it is important to see and evaluate the delivery efficiency, the staff friendly attitude and environment. Banytė (2009) describes factors of satisfaction such as availability of services (or a lot of time it takes to receive, book a service, or need to travel far to the salon and so on); service quality (70 % it depends on the human factor, for example, from staff). Good service can offset the higher price or to prevent the further sale. Some customers may buy more expensive services simply because it can buy closer to home, but rather a link to go to another end of town to get a full story, details about the service and friendly service. Banytė (2009) and even other authors (Bitner and Zeithaml, 1996) add that in addition to the satisfaction of all of these factors is the price of the service (for some particular satisfaction is caused by a low price), as well as the situation (for example, a customer rushes, comes after an unpleasant incident or is in a good mood and so on), personality of customer (for example, a customer always tend to be humble or on the contrary – always tend to find deficiency or defects).  Thompson (2002) in his article briefly and clearly describes the seven key factors that contribute to customer satisfaction on services. So the author refers such factors as the interaction face to face, informative, helpfulness and good service, attention to details, clearly structured service behaviour (in order not to send the client to a couple of other crews and so on). According to Thompson (2002), perhaps it‟s the most important because customers tend to be very disappointed if organization not fulfils their expectations. Of course, there are mistakes, misunderstandings, for example, crashing technique and did not come on time reports, letters, contracts, etc., but Vengrienė (2006) believes that you can always “expiate” the situation of being apologetic, providing free services or financial incentives as well as other small gift benefits. Therefore, both serving staff and the company should as far as possible to correct mistakes or failure, also to fulfil promises because most problems have been solved long remember so when organizations do it wrong it doesn‟t leave an impression, the more – satisfaction on services. Also, the authors Hill et al. (2007) consider that the customer satisfaction depends on staff satisfaction. As interpreted by the authors, the staff is proud to provide services with a good mood, enthusiasm (passion) and only then they do the best in their job.Thus, overlooked a number of both foreign and Lithuanian authors opinions, I have concluded my own perception of customer satisfaction and made the scheme which clearly shows the relation between the customer satisfaction and its factors (see Figure 1). It‟s quite easy to explain the scheme. First of all, regardless the service is used or not at all, or just waiting for the first experience, often a person has formed an opinion about the service. Well, then, of course, the customer meet the staff during (first) contact and if it‟s necessary, contact goes on during the process, the purchase of service. Then doubtless even after the customer experience it is formed, developed some emotions, feelings, reaction to what is got and depending on the situation – positive or negative. So as a result, on my mind, the customer is either dissatisfied, or satisfied (if exceeded all expectations and more – highly satisfied) on services he/she got. Finally, the scheme and analysis was based on literature but, on the other hand, it helped to form a clear view about what leads to customer satisfaction, what are the key factors of that. In the list (what form the satisfaction) there are shown mostly discussed aspects, determinants. However, it is possible to continue the list and add more features because the satisfaction is a subjective thing. After all some people like one aspect, others need opposite things so everyone has different view, need and expectations. That‟s why there are left suspension points in the list. In conclusion, after summarizing the number of authors‟ opinions, observations, it might be stated that researchers practical observations and studies have shown that the most important factors underlying customer satisfaction on services and services is  quality, informative, customer  understanding and pleasant. So it‟s very important to evaluate the behaviour of customers and do regular satisfaction surveys in order to continue long term relations between customers and service organizations.

The importance of customer satisfaction on services

After discussing the concepts of both customer satisfaction and the most important determinants to keep consumers satisfied it is left to find out the importance of customers satisfaction on services. As one of the most frequently mentioned reasons why customer satisfaction is so important for companies on services is a consumer loyalty. Singh (2006) considers that each organization becomes more flexible to the needs of its customers by offering alternatives to exclusive offers. Bagdonienė and Hopenienė (2005) argue that loyal customers are the most effective promoters of the organization of services. After all, the longer company is able to keep the consumer at the same time, it also receives and higher profits. Complementary to Bagdonienė and Hopenienė (2005) opinion, the authors Bakanauskas and  Pilelienė (2008) suggest that satisfaction is directly exposed to customer intention to purchase again. It determines not only the consumer‟s purchasing behaviour, but also airborne communications positive “word of mouth”, which is also important to service organizations. Expressing similar views Vavra (2002) considers that some content to the service customers is not only long-term clients, but also to spread positive information and feedback their experiences to others, potential customers, perhaps encouraging them to try the service. Satisfaction saves or completely eliminates the negative communication from “word to mouth”. The author adds that more than 90% dissatisfied customers do not make any effort to the company of their complaints, but simply share their negative experiences with potential customers. In other words, according to Singh (2006), when satisfied customers share their experiences with around five to six people, while disappointed with the ten ones. By the way, today communication spread faster and further than ever before, because most companies operate online, target online communities, etc. So therefore the importance of customer satisfaction is particularly important for service organizations (Vavra, 2002). Authors Hill et al. (2007) believe that organizations with more satisfied customers tend to have a better reputation and gain more confidence. Bagdonienė and Hopenienė (2005) note that the more satisfied staff is the more listens to the needs of customers, creatively eliminates problems and assumes more responsibility. It could be said that the relations between customers and staff (or organization) have a direct connection (this is called the mirror effect). Thus, the organization is interested in moral and increase staff satisfaction and developing loyalty. In addition to loyalty, positive communication “word of mouth”, reputation and staff satisfaction, Grigoroudis and Siskos (2010) list a few more arguments why customer satisfaction today is so important. Firstly, it is noted that customer satisfaction can reliable realistic market information. In this case, the organization has an excellent opportunity to assess the current situation and develop plans for the future. Secondly, the assessment of customer confidence in each organization‟s easier to understand customer behaviour and analyze their customers‟ expectations and desires. Summarizing all these factors, it might be said that customer satisfaction has a significant importance and value of each company providing the service. After all, satisfied with the service customers not only respond good words to potential clients, recommend to try organization‟s service, but also good feedback on service increase profits and bring more loyal customer, so as we see it‟s important and needful to explore the behaviour of consumers and their needs, which is very important to every organization nowadays. So Vavra (2002) argues that before almost two decades ago usually one of the most important factors for companies would become a trademark of reputation, profits and so on. And no one paid so attention if their customers where happy, satisfied or disappointed. So the authors revealed which factors are essential in determining whether the customer is satisfied or not, also helped better understand how is important to evaluate the satisfaction.  Finally, how ideas generalized Jonikas (2010), he claimed that it‟s not enough just to analyze the satisfaction, but it is necessary to search for causes of dissatisfaction. Therefore, the importance of customer satisfaction is strongly dependent on the organization as a service monitor, analyze and take appropriate steps to ensure that customers are satisfied. After all, satisfied customer is tend to be more loyal, more often share satisfied feelings with other people, potential customers and so on. In addition, it is believed that satisfied customers pay less attention to competitors, for example, they do not look at prices, special offers and so on. Simply, it is caused of the reason that they feel happy and satisfied with their permanent service organization. As already mentioned, customer satisfaction is one of the most important factors shaping both business services and other organizations. As a result of customer satisfaction in any case should be assessed, monitored and analyzed. As stated majority of the authors, the definitive ratings reveal the most effective, accurate, significant and, of course, objective information.

Conclusions

Nowadays customer satisfaction is one of the most important issues for almost all organizations, especially for service organizations. For this reason customer satisfaction should be analyzed, evaluated and translated into the main parameters.  As many authors indicate customer satisfaction is often known in two ways: satisfaction as an outcome and satisfaction as a process of services. The “key” indicators which determine satisfaction is service price, its quality, direct contact with staff, understanding the customer, friendly staff and their attitude and attention to customer, also physical environment and so on. It should be mentioned that those parameters are subjective so for this reason the number of customer satisfaction factors can be continue because of our practice, feelings during (or after) the given service. In this way, also very important for all organizations to know what makes their customers the most satisfied, fascinated. Firstly, evaluation of customer satisfaction is the best way to attract potential customers and make them loyal to organization. Secondly, it‟s the way which helps easier to understand customer behaviour and analyze their expectations and desires. Finally, it helps to raise organization‟s reputation and satisfied customers more respond good words to potential clients.

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Author:

dr. Vimi Jham,  Institute of Management Technology, India

Abstract

Banks in India have succeeded in promoting new services to its customers. The likelihood of current customers is tempted to do business online. The study sought to investigate factors that influenced Indian bank customers‟ adoption of three major banking channels, i.e. branch banking, ATM and Internet banking. Based on extant literature on bank marketing and interviews with bank managers in India, a questionnaire was designed. Then, in a large-scale survey by means of personal and telephone interviews, data was obtained from bank customers. This paper focuses on the adoption of multi channel banking by existing banks customers through an investigation of the factors that influence customer‟s acceptance of multi channel banking services. An exploratory study of the Indian customers in six banks is conducted to identify the factors which lead to adoption of multi channel banking services with the help of data reduction technique called Factor Analysis.

Introduction

As information technology becomes more and more sophisticated, banks in many parts of the world are adopting a multiple-channel strategy. Globally, the number of websites increased from 23,000 in 1995 to more than 55 million in 2005 (Zakon, 2005). The amount of Internet marketing research had grown dramatically since the review conducted by Ngai (2003) thus the right mix of banking channels depends not only on the channel characteristics, but also on the preferences of the consumers within a particular market. The challenge for bank marketers is to find the right mix of distribution channels so that they can remain profitable in different market segments. To this end, bank marketers have to understand why their customers like or dislike a particular channel. An understanding of the factors that have bearings on the adoption of different banking channels can help a bank adjust its marketing strategies. The present study aims to obtain insights into the factors that can influence adoption of banking channels among Indian bank customers.

Literature survey of multi channel banking

There is need for research to identify the factors that determine adoption of various channels provided by the bank. Significant effect of computer self-efficacy on behavioural intention through perceived ease of use, perceived usefulness, and perceived credibility is still to be assessed with the banking sector. Traditional branch-based retail banking remains the most widespread method for conducting banking transactions in India as well as any other country. However, Internet technology is rapidly changing the way personal financial services are being designed and delivered. In India banks have tried to introduce Internet-based e-banking systems to improve their operations and to reduce costs. Despite all their efforts aimed at developing better and easier Internet banking systems, these systems remained largely unnoticed by the customers, and certainly underused in spite of their availability. Holbrook and Hulburt (2002), McCole (2004) have made a compelling argument that the Internet is simply a new and evolving marketing channel that will find its place into the marketing mix of some, but certainly not all organizations. At the 2005 Direct Marketing Association‟s annual conference, much of the buzz from Internet practitioners pertained to multi channel consumer strategies seemly supporting this point of view. As Davis (1989) noted, future technology acceptance research needs to address how other variables affect usefulness, ease of use, and user acceptance. However, factors affecting the acceptance of a new IT are likely to vary with the technology, target users, and context (Moon and Kim, 2001). Recent research has indicated that trust has a striking influence on user willingness to engage in online exchanges of money and personal sensitive information (e.g. Hoffman et al., 1999; Friedman et al., 2000). The first dimension of trust, perceived credibility, is the extent to which one partner believes that the other partner has the required expertise to perform the job effectively and reliably (Ganesan, 1994). The second dimension of trust is benevolence. Benevolence is rooted in repeated buyer-seller relationships (Ring and Van de Ven, 1992; Zaheer et al., 1998). Perceived credibility is usually impersonal and relies on reputation, information and economic reasoning (Pavlou, 2001). It is more related to one‟s judgment on the privacy and security issues of the Internet banking systems. Consequently, perceived credibility is used as a new construct to reflect the security and privacy concerns in the acceptance of Internet banking.  Previous studies have found that in banking service, product quality plays an important role in determining customers‟ perceptions of the overall banking service quality. The bank product quality is primarily associated with product variety and diverse features. Strieter et al. (1999) noted that one of the most important developments in banking is the increased emphasis on marketing a wide array of financial services. Dixon (1999) also argued that the key to getting more customers for the banks through online service is not attraction of the Internet itself but the product offered to the customers. This argument was supposed by Latimore et al., (2000), who found that 87 percent of Internet banking customers want to make a variety of financial transaction at one side (so called “one-stop shopping”), including paying their bills electronically and automatically, viewing their monthly bank statements, and purchasing stocks and insurance. Therefore it could be noted that since the present banking customers, with the advent of the Internet technology, can have unlimited access to financial information and enjoy a wider range of choice in selecting competitive products and financial institution than ever before, the subtle “differentiating” quality levels (e.g. diverse features) of bank products and their timely introduction on the marketplace have become a key driving force in attracting new customers and enhancing customer satisfaction (Moles, 2000). As electronic banking becomes more wide spread, managers of financial institutions need to be able to assess the impact of losing relationships and accounts to aggressive online alternatives.  Kennickell and Myron (1997) examined the determinants of demand for electronic media for financial transactions; they found that the likelihood of using electronic media to obtain banking services rises with higher levels of financial assets and education. Additionally, younger consumers tend to use computers, ATMs, and debit cards more. However, the use of direct deposit rises with age. Kolodinsky et al. (2000) also found that age and education has an influence on whether consumers use electronic banking products. However, they conclude that positive attitudes toward e-banking services matter more than demographic factors in determining whether such services are used. These items included statements related to perceived use, convenience, relative advantages and risk associated with electronic banking. Mantel (2000) investigated the factors that influence consumers‟ willingness to use electronic bill payment. Jeevan (2000) observes that the Internet enables banks to offer low cost, high value added financial services. Banks as well as consumers view the security threat as perhaps the most serious threat. Denny (2000) observes that the security of Internet access to client account is the biggest challenge facing banks. One of the major factors affecting the banks is the changing need and perceptions of the consumer (Rose, 2000). Increasingly, consumers expect online services from their financial institutions (Constantine, 2000) and electronic delivery of services is becoming a necessity.  Multiple branches spread across the country and lack of national bandwidth are major constraints, especially for public sector banks (Varma, 2001). 65% of these banks are plagued with union issues, inertia and apathy towards online channels in India. With somewhat restricted growth of foreign banks due to their perceived expensive services, private entrepreneurial banks have pulled ahead. With deregulation and increasing competition from private and foreign banks, Indian banks had to gear up their technology infrastructure to get competitive edge on online service delivery (Jeevan, 2000). The lack of telecoms infrastructure and PC penetration is still a major problem for Indian banks.

Objective of the study & gaps in research

Perceived ease of use and perceived usefulness may not fully reflect the users‟ intention to adopt multi channels banking, necessitating a search for additional factors that better predict the acceptance of Internet banking. Several important external variables that have received more and more attention such as individual differences, computer self-efficacy as suggested by research (Agarwal and Prasad, 1999). Individual differences refer to user factors that include traits such as personality and demographic variables, as well as situational variables that account for differences attributable to circumstances such as experience and training. Furthermore, there has been no such empirical research to explicate how individual differences influence the usage intention of Internet banking. Numerous individual difference variables have been studied, including demographic and situational variables, cognitive variables, and personality-related variables (Zumd, 1979). This research paper attempts to fill this gap and identifies the various factors which will enhance the usage and adoption of multiple channels which banks in India provide the customer.

Research methodology

The questionnaire was designed from the literature review. It included 33 variables which help to gain an understanding of the channel adoption factors of Indian bank customers. Six Indian banks were chosen where the questionnaire was randomly administered to 210 respondents who were also customers of the bank. Out of 210 questionnaires, 196 were completed questionnaires. The banks chosen for the purpose of the study were the ones who have strong retail presence and offer comprehensive range of information to the customer. The 33 variables were measured with the help of 7 point semantic scale ranging from extremely satisfied to extremely dissatisfied, (where 1- extremely dissatisfied, and 7- extremely satisfied). The responses were transposed from spreadsheet to SPSS where these 33 variables were reduced to four principal components.

Analysis of the data

The data was subjected to Principal Component Analysis, a method categorized under the broad area of Factor Analysis. The 33 variables were reduced to 4 principal components through varimax rotation method (see Table 1).  Factor Analysis is a multivariate statistical procedure primarily used for data reduction and summarisation – large number of correlated variables is reduced to set of independent underlying factors. In our sample the Kaiser-Meyer-Olkin measure of sampling adequacy was 0.716, i.e. greater than 0.5. This suggests that the data is adequate for Factor Analysis.

After extracting the Eigen values of the four factors and the percent of variance explained by them as shown in Table 2, rotation of principal components is done through varimax rotation. After the number of extracted factors is decided upon, the next task is to interpret the name of the factors as shown below. This is done by the process of identifying which factors are associated with which of the original variables. Factor Analysis was used to summarize the 33 “channel adoption factors” into smaller sets of linear composites that preserved most of the information in the original data set.

Table 1. Identification of Principal Components

Factor one had all the statements dealing with convenience. Factor two had all the statements related to ease of use. The third factor had statements related to security issues. The fourth factor had traditional facilities which a customer looks for when he / she uses the traditional channel (see Table 1).

Table 2. Factors for channel adoption in Indian Banks

The factor loadings for the variables can be seen in Table 1. The largest factor loading for the variable is marked is bold. Table 2 represents the variables represented in the four identified principal components.

Results of the interviews

Branch banking. Undoubtedly, many banks are trying to reduce the resources needed by branch banking. However, it is still premature to talk about the operation of an entirely Internetbased bank in India. Physical bank branches with human tellers and service providers are still indispensable because this channel is needed for:

• first-time bank customers who need to open accounts;
• complicated services, such as mortgages or making remittances;
• Face-to-face service encounters where personal identification is essential.

The cost of branch banking is quite high compared to other banking channels. Furthermore, branch banking appears to be the least profitable market segment. According to the findings of the present study, the consumers of branch banking consist primarily of the people who are financially and cognitively less resourceful, but have plenty of time. Given these findings, how should branch banking be positioned? It may be suggested that two market segments should be differentiated for branch banking. The first market segment, as mentioned above, includes those who are less financially and cognitively resourceful, but have plenty of time. They rely primarily on branch banking and visit bank branches regularly. This market segment is likely to be the majority of customers visiting a bank branch. These customers tend to use only the basic banking services, such as withdrawing cash, checking account balances, and transferring funds between accounts. Counters providing only basic banking services are sufficient to satisfy most of these customers‟ needs. The second market segment includes those who primarily adopt other banking channels, such as ATM or Internet banking, but occasionally have the need to go to a bank branch in person for certain transactions. For this market segment, the strategic goals of the bank should be relationship building. The bank should not consider these contacts to be cost inducing, but regard these contacts as precious business opportunities. Not many of these customers would frequently use the services of branch banking: the bank can afford to devote more manpower to serve each of these customers. The bank staff should emphasize their service quality, and try to develop a commercial friendship with these customers. Over time, the bank should find such personal relationships to be profitable because of the higher level of customer retention and greater potential of cross-selling.

ATM. ATM was highly adopted by all bank customers, and adoption of it was positively associated with beliefs about its positive attributes. Informativeness seemed to be the weakest aspect of ATM banking. The ATM channel manager should seek ways to enhance informational content in this channel. For example, more financial information can be presented to the bank customers on the ATM display.

Internet banking. Among the three banking channels, Internet banking holds the greatest potential for development in the banking industry in India. This is because the level of adoption is still not very high – the market is not yet saturated. According to statistics compiled by NetRatings of ACNielsen (The Times of India News Service, 2001), Internet banking is expanding rapidly. Interestingly, beliefs about the convenience of Internet banking were not correlated with its adoption. Perhaps most bank customers were fully aware of the payments, trust and privacy Internet banking could bring. What really mattered were the other three attributes of the channel (i.e. informativeness, user-friendliness, and assurance). These are the areas in which channel managers have to work hard.

Satisfaction of the customer with multi channel usage

According to the research, the customer uses multiple channels for convenience, ease of use, security and to access traditional facilities. The customer prefers using a secure mode of transaction when money is involved. Privacy and trust play an important role in the usage of the Internet but the satisfaction with these parameters is very low. High satisfaction is indicated with buying and selling of stocks convenience, as a time saver, self service, easy to use, getting bank information and general information, timeliness and flexibility with the use of internet banking.

Discussions and managerial implications

This study provides us with a comprehensive picture of what a customer look at when using multi channel facility provided by the banks. Thus it provides an insight into how banks should allocate resources among the multi channel facility it provides to the customers. Overall, the banking channel that was most frequently used in India is the ATMs, followed by branch banking and Internet banking. It is interesting to note that the level of convenience, ease of use and security are important factors for any kind of banking. Indeed, there is an exponential growth of fraudulent activities on the Internet with ever more sophisticated and better organized virtual thieves (Richmond, 2005). More research is thus needed that addresses the ever-widening nature of trust and its impact on Internet usage. Related to the trust issue is government regulation and how this will impact Internet marketing, particularly in terms of how consumer protection. Unfortunately, few marketing scholars are equipped to work in this area and even fewer have research experience with these topics.  The strength of branch banking therefore seems to provide level of assurance, probably because transaction accuracy and security could be maintained more effectively in face-to-face transactions without reliance on an electronic medium. Although ATM is believed to be the weakest in the level of informativeness, it is the most frequently used banking channel. This is probably due to its high level of convenience provided to customers. Although Internet banking is also believed to have a high level of convenience, Internet banking could not beat ATM because ATM is the only channel that allows cash withdrawal 24 hours a day and does not require the customers to have access to computer facilities.

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