customer satisfaction/logistics interface, The

Sharma, Arun

Customer satisfaction is fundamental to business. The degree to which customers are satisfied determines whether customers make additional purchases and recommend the company and its products to others. Improving the quality of logistics service is particularly important because it increases customer satisfaction, which in turn heightens the occurrence of strategic partnering and corporate profitability. Unfortunately, an A.T. Kearney logistics study indicates that only about 10 percent of companies are capable of totally satisfying their customers.(1) The marketing literature has focused on customer satisfaction with regard to products and services.(2) In logistics, researchers have concentrated on the effect of logistics service policy(3) on customer satisfaction. Increasing attention, however, is being paid to the aspects of logistics policy that can increase customer satisfaction.(4)

The degree to which customers are satisfied with a product is determined by the combined impact of its attributes versus its cost. An important determinant of customer satisfaction is how well the product performs. However, in competitive markets, achieving a competitive advantage by providing a product with outstanding performance is difficult. Since the major players are each striving to gain market share, product performance becomes similar.(5) Similarly, price parity can be achieved with amazing speed. Businesses can, however, have a positive impact on customer satisfaction by providing outstanding logistics services. Since high levels of logistics services are not easily copied and are sometimes ignored as a competitive tool, they can be successfully used to develop a sustainable competitive advantage.

This paper examines the effect of logistics service policies on customer satisfaction and highlights strategies that can be used to improve satisfaction, establish strategic partnerships, and increase corporate profitability. Past research on customer satisfaction is integrated into a conceptual framework for examining customer satisfaction. Within the proposed framework, the primary determinant of customer satisfaction is the gap between customers' expectations of logistics service performance and actual logistics service performance. Specifically, logistics managers should understand and occasionally shape the customer's prepurchase logistics service expectations in order to increase customer satisfaction. The proposed framework also highlights strategies by which logistics managers can increase customer satisfaction by focusing on specific postpurchase customer/logistics interactions. For example, if a customer is dissatisfied with logistics service performance, logistics managers can increase satisfaction by listening to and promptly responding to the customer's dissatisfaction.

The interrelationships between the constructs are presented in Figure 1.(6) (Figure 1 omitted) Note that the light circles are those factors over which the selling firm has control. The medium circles include those issues that can be measured by the selling firm and are input into the logistics feedback system. Finally, the heavy circles are those factors which can be both controlled by the firm and measured as input into the logistics feedback system.

The gap between customers' prepurchase expectations of logistics services and actual logistics service and its effect on customer satisfaction is discussed first. The issues that affect customers' satisfaction, i.e., customer and selling firm's efforts, customer complaints, and logistics feedback systems, are explored next. We then examine the role that customer satisfaction plays in developing strategic partnerships and increasing corporate performance. The final section summarizes the research.

SHAPING CUSTOMERS' LOGISTICS PREPURCHASE PERFORMANCE EXPECTATIONS

This section discusses the impact of customers' expectations of logistics services prior to purchase on customer satisfaction. The importance of monitoring customers' expectations, and company and competitive performance have been highlighted by researchers.(7) Providing superior logistics service has been used to develop a strategic advantage by such firms as American President Companies (railway), Distribution Centers, Inc. (warehouse), Schneider National (motor carrier), and Xerox (manufacturing).(8) Firms should not, however, attempt to provide outstanding logistics service on all dimensions. To do so would be expensive, and it is likely that resources would be wasted on services that were unimportant to customers. Thus, it is critical to monitor and attempt to understand customers' expectations regarding logistics service when developing and adjusting logistics service policies.

Studies on logistics service requirements have had a long tradition in the logistics literature.(9) The research identified major areas of logistics service that have been summarized by Gilmour, and Lambert and Stock.(10) The following attributes are consistently ranked as very important by customers:

* Availability of Item--the ability of the supplier to satisfy customer orders within a specified time.

* After Sales Service and Backup--the ability to quickly replace defective or damaged items and subsequent follow-up to determine if user is happy with the purchase.

* Efficient Logistics Service Communications--the ability to quickly and intelligently handle customer queries about the product or service.

* Paperwork--the ability to efficiently and accurately complete necessary paperwork that cater to the customers' systems.

* Delivery Time--the ability to supply goods within the committed time with little variation.

Over time, customers gain experience with various logistics services providers and develop expectations with regard to what level of logistics service they should receive. The success of logistics service programs is largely dependent upon how closely customers' expectations of the services parallels the actual level of service provided (see Figure 1).(11) Logistics service expectations, however, exist in conjunction with the other components of the marketing mix.(12) Thus, in competitive markets, it is critical for firms to understand customers' logistics service expectations, as well as other marketing mix variables. This understanding of expectations is a key strategic element for gaining a sustainable competitive advantage.(13)

Disconfirmation of Expectations

As noted previously, customers have expectations of logistics service performance before they buy the product (prepurchase expectations). The level of logistics service can be better than expected (positive disconfirmation), equal to expectations (zone of indifference), or worse than expected (negative disconfirmation).(14) The greater the positive disconfirmation of product expectations, the greater will be the customer's postpurchase satisfaction with the product.(15) Anderson specifically found that the maximum positive disconfirmation (an indication of postpurchase satisfaction) occurred when prepurchase expectations were very low. The positive disconfirmation decreased as prepurchase expectations increased.(16)

Customers have logistics service performance expectations even before a transaction is made. These pretransaction expectations are typically based on previous experience with the firm, promotional materials, or discussions with salespeople.(17) The previous discussion suggests that logistics managers should determine customers' initial (precontact) logistics performance expectations. Also, logistics managers need to monitor their own service levels as well as those of competitors.(18) This information should be provided to salespeople and logistics managers to aid in presentations to customers.

It is difficult to entice new or maintain current customers if these customers have relatively low expectations of the seller's logistics service, i.e., lower than their actual service. In such a situation, the seller should attempt to raise these expectations by touting their actual service levels. However, if a customer has high initial logistics service expectations, i.e., higher than actual logistics service, the company should lower the expectations to realistic levels so as to reduce postpurchase dissatisfaction(19) or improve the service. It is also important to determine the source of the high expectations. Research has found that salespeople are not accurate about what their customers want and have a tendency to inflate their company's performance levels.(200 Thus, managers should monitor salespeople's communications with their customers. Similarly, an examination of the expectation formation process may reveal that the exaggerated information source originated with another media, such as direct mail. Although having higher than actual logistics service may entice customers to try a firm once, it may ultimately lead to lower overall satisfaction. Ultimately, lower satisfaction with logistics services reduces customer loyalty, leading to lower repeat purchases.(21)

Logistics service expectations that are equivalent to actual service levels may lead to lower initial sales, compared to service expectations that are higher than actual levels. This situation, however, should also result in higher satisfaction, and ultimately, greater repeat purchases. Since repeat purchases is a key success factor, the firm and its salespeople should help build realistic logistics service expectations. However, in an extremely competitive environment or when attempting to build market share with new customers, the company and its salespeople may not be ready to reduce the expectations of their logistics service for fear of losing an order to a competitor. In this situation, the company should provide customers with data on its logistics service levels vis-a-vis its competitors. Competitive data can be easily obtained by surveying customers, either formally or informally, about the service levels provided by their suppliers. As long as the selling firm is in a relatively strong position, this information can help reduce the customer's expectations for the entire industry while retaining relatively high expectations for the selling company.

Hunt and Chandran suggested that a written logistics service policy be provided to all customers.(22) This helps customers develop realistic expectations of logistics service and allows for greater satisfaction with the service they receive. Written logistics service policies also enable all employees in the organization to be aware of the minimum service standards required so that they can set appropriate objectives for their own performance.

A strong link between the logistics and sales departments is needed to be able to communicate realistic logistics service expectations to customers. Interdepartmental teams are being used by major companies, including Procter and Gamble, IBM, Kraft, and Black and Decker, to enhance communication between departments. Initial results from these companies show an increase in customer satisfaction and retention.(23)

POSTPURCHASE CUSTOMER SATISFACTION

In a postpurchase environment, several constructs impact customer satisfaction and the profits that result from that satisfaction (see Figure 1). Note that postpurchase satisfaction precedes customer satisfaction. in this paradigm, postpurchase satisfaction is transaction-specific and occurs immediately after the logistics service is received.(24) Customer satisfaction refers to the cumulative level of satisfaction based on the total purchase and consumption experience with a good or service over time.(25) Although postpurchase satisfaction may be useful in diagnosing a specific service encounter, cumulative customer satisfaction is a more fundamental indicator of a firm's past, current, and future performance. Cumulative customer satisfaction actually dominates the transaction-specific postpurchase satisfaction. Even though customers may have positive or negative reactions to any specific service encounter, over time and in the absence of any systematic problems, the long-run effect will prevail.(26)

Customer and the selling firm's efforts, customer complaints, and the selling firm's logistics feedback system also have a positive effect on customer satisfaction. This section examines each of the constructs that affect customer satisfaction in the postpurchase environment found in Figure 1.

Customer Effort and Satisfaction

The selling firm's ability to elicit effort from the customer affects the customer's evaluation and overall satisfaction of the selling firm. To increase the effort of their customers, selling firms increase the interaction of their salespeople on logistics-related issues, and provide seminars and reading materials about the company's products and services. Research suggests that the higher the effort customers make with regard to a seller's product or service, the higher the customer will evaluate the performance of the seller.(27) Increased effort by customers enhances their knowledge and also increases their commitment to a seller and its products.(28) Thus, the more time and effort the customers take to understand the selling firm and its capabilities, the higher will be their evaluations and satisfaction with logistics service.

Logistics managers can increase the effort of their customers and therefore customer satisfaction by developing strong partnerships with their customers that involve hands-on participation programs.(29) Specifically, customers should be involved in setting and monitoring logistics service standards. This can be accomplished through face-to-face negotiations as well as through electronic data interchange (EDI). For example, Black and Decker and Procter and Gamble involve customers such as Wal-Mart in setting logistics service levels.(30) This extra service takes the form of developing special packages (e.g., drill bits are packed with drills) and special deliveries. Increased sales and satisfaction from Wal-Mart to these vendors are attributed to the provision of these special services.

Selling Firm's Effort and Satisfaction

Oliver and Swan found that customers' perceptions of the contact personnel's efforts had a positive effect on their postpurchase satisfaction.(31) When customers believe that the selling firm's effort is greater than their expectations, they will be more satisfied than if the effort is the same as or lower than their expectations.

The logistics service research emphasizes the need to determine the relative importance of different service attributes and concentrate efforts on those attributes subject to cost considerations.(32) The selling firm can achieve even more impact, and therefore greater satisfaction, by also going out of the way to perform services that aren't necessarily as important or expensive as other services, but are highly visible to customers. For instance, providing online stock status reports may be relatively easy for some firms, even though it may not be that important to their customers. Yet, since this service is very visible to their customers, the perceived effort by the seller will be high. It is this perceived, rather than actual, effort by the selling firm that can have an important impact on customer satisfaction.

Since logistics personnel, i.e., logistics and transportation managers, as well as dispatchers and truck drivers, interface directly with their customers, they are in an excellent position to have a positive impact on customer satisfaction. Obviously, it is critical to achieve high levels of performance on the most important logistics services, such as availability and delivery time. Little things, however, also can make a difference. For instance, at Atlanta-based Genuine Parts, the logistics staff is authorized to procure an out-of-stock part from a competitor rather than fail to deliver a key customer's order.(33) Customers will perceive a high effort level on the part of the selling firm and will be more satisfied. Procter and Gamble has developed special teams that help retailers such as K-Mart and Eckerd in their logistics problems, such as how to warehouse diapers more efficiently.

Postpurchase Satisfaction and Customer Complaints

As indicated in Figure 1, an important contributor to long-term customer satisfaction is the level of satisfaction that immediately follows a sale (postpurchase satisfaction). The behavior of customers who have low levels of postpurchase satisfaction has been the basis of extensive research.(340 Specifically, these customers have a higher propensity to complain than those with high postpurchase satisfaction. Interestingly, research in a consumer setting has shown that customers who complain are more likely to repurchase even if their complaint is not satisfactorily handled than customers who do not complain.(35) Thus, the mere act of having customers voice complaints will enhance customer satisfaction.

Those involved in the logistics function--from manager to truck driver--should therefore be encouraged to elicit complaints from customers. Unfortunately, in many firms, the information gleaned from complaints is never utilized. Thus, a formal feedback system should be used so that the information can filter back through the organization, complaints can be formally acknowledged and problems solved. Customers whose complaints are promptly and satisfactorily handled by logistics managers will tend to have higher repurchase behavior and generate greater positive word-of-mouth publicity than customers whose complaints have not been satisfactorily handled.(36)

Logistics Feedback Systems

A formal logistics feedback system facilitates the customer complaint process. As Lambert and Harrington note, "The first firm in an industry to implement a real time, interactive logistics information system will have a competitive advantage, the last firm to do so doesn't need to spend the money.(37)

A logistics feedback system has several benefits to the seller. The most obvious is that it will help uncover recurring service problems. Although it is important to investigate every complaint, it is likely that chronic problems will surface from the most frequent complaints. Second, a quick response to some problems can circumvent potential legal problems. Third, a feedback system acts as a repository for complaints. Providing an outlet for customers to voice dissatisfaction should reduce the potential for negative word-of-mouth publicity to other customers. By the same token, positive word-of-mouth publicity is likely to occur when complaints are handled satisfactorily. Fourth, as we noted earlier, customers who complain are more likely to buy again, and a feedback system facilitates complaint behavior. Interestingly, regardless of whether or not there have been customer complaints, a postpurchase contact by the selling firm to the customer that reinforces the company's commitment to customer satisfaction has been shown to increase satisfaction, repeat purchase, and positive word-of-mouth.(38) Finally, suppliers that proactively solicit information from customers benefit from the stronger relationships that result. Customers will seek out and continue to use suppliers who take steps to assure that their needs are met.(39)

Soliciting information from customers can be easily handled using such standard marketing research methods as focus groups and mail or phone surveys.(40) Yet, rather than actively seeking information on customer needs, at least 80% of the respondents of an international A. T. Kearney survey interpret customer needs based on marketing and sales department input or customer complaints, although North American firms are more likely to base their service goals on formal data gathering techniques than their counterparts in Japan or Europe.(41)

Customer feedback can be collected by logistics managers and the corporate organization. Logistics managers can periodically call on customers to solicit feedback. A potential problem may be that logistics managers call only on existing customers, ignoring previously dissatisfied customers who no longer purchase from the company. To avoid this situation, a system can be set up whereby the logistics department can periodically write to each prospective customer to solicit feedback and a call can be made to customers who were not satisfied. Finally, with each shipment of goods, a letter can be sent with the names and phone numbers of the organizational employees who should be contacted for complainers. Negative feedback can be used to define changes that should be made to logistics management systems, sales presentations, training, control, and evaluation procedures. In contrast, positive feedback should be used to reinforce current logistics methods, embellish them, and teach them to incoming personnel.

OUTCOMES OF CUSTOMER SATISFACTION

The model proposes two major outcomes of customer satisfaction. Customer satisfaction, in conjunction with customer and selling firm efforts, is a precursor to the development of strategic partnerships. Additionally, customer satisfaction in association with the development of strategic partnerships, is posited to positively affect corporate profitability by both increasing sales and decreasing costs. These two outcomes are discussed next.

Customer Satisfaction and Strategic Partnerships

The development of strategic partnerships has been a recurring theme in both logistics and marketing for several years.(42) Since the literature is still evolving, various definitions have been proposed. An amalgam from two prominent sources, LaLonde and Cooper(43) and Bowersox et al.(44) produced the following definition of strategic partnerships: a business relationship in which two or more independent organizations decide to work closely together to yield differentiated and intermediate or long-term benefits to the parties involved.

Strategic partnerships are important because satisfied customers tend to remain loyal and continue to repurchase even after an unsatisfactory experience with a firm.(45) In contrast, the consequences of having dissatisfied industrial customers of logistics services are significant. Not only do the parties fail to develop strategic partnerships, but they may switch to a new supplier whose performance is closer to their expectations, or reduce the amount they are buying with their existing supplier.(46)

Earlier we discussed the transaction-specific effect of customers' and the selling firm's efforts on satisfaction. Several researchers have described the development of strategic partnerships as a metamorphosis from individual transactions to completely integrated systems.(47) Coyle and Andraski delineate the respective contributions of logistics and marketing to the development of strategic partnerships.(48) These partnerships generally evolve from a relationship between logistics suppliers and satisfied customers who have become repeat purchasers and loyal to a particular firm. Over time and with repeated transactions, this loyalty may lead to a strategic partnership. Recent empirical research has indicated that there has been a significant shift from a transaction-driven system to a contractually-driven system in recent years, and that cost reduction systems and technologies such as JIT and EDI have accelerated this trend.(49)

Research in logistics suggests that in order for a strategic partnership to develop, the selling and buying firms must demonstrate considerable effort in the following areas (there are demand creation and cost reduction opportunities in each area):(50)

* Having high expectations of the relationship

* Displaying mutual loyalty

* Developing systematic operational information exchange (e.g., EDI)

* Utilizing operating controls (e.g., shipment tracking, inventory management, sales projections)

* Willing to help in difficult situations

* Sharing risks

* Handling exceptions through negotiations

* Employing joint committees/task forces

* Exchanging technical information

* Having ongoing studies of operations and planning

To illustrate the development of strategic partnerships, consider the inventory management process that has been jointly developed by Baxter International and Northside Hospital in Atlanta.(51) Baxter assumed the warehousing function to provide Northside with a semi-stockless inventory system. The system has saved Northside millions of dollars and Baxter became the exclusive supplier for a large number of hospital supplies. Baxter management and hospital teams interact frequently to continuously improve the system. Similarly, PC Connection (and sister company MacConnection) needed to reduce lead time as well as decrease operating expenses.(52) To solve these sometimes conflicting objectives, they have formed a partnership with Airborne. Specifically, they located a warehouse at an Airborne hub, consolidate packages intended for the same destination in the same container, and transmit weight and destination information in advance. This program has accomplished PC Connection's objectives and has enabled their business with Airborne to expand. PC Connection has been named PC World's best mail order company in the country for two years in a row.

Customer Satisfaction and Profitability

There are several reasons why customer satisfaction leads to increased corporate profitability.(53) First, as illustrated in Figure 1 and as we noted in the previous section, the development of strategic partnerships through satisfied customers facilitates an increase in sales as well as a reduction in costs. Second, satisfied customers are less sensitive to price than either dissatisfied customers or new customers.(54) Third, they are more willing to pay for the services they receive. Fourth, it is far less expensive to maintain an existing account than to develop a new one. Finally, customers tend to purchase more frequently and in greater volume than less satisfied customers.(55) Thus, it is prudent to cultivate satisfied customers.

An additional reason why customer satisfaction leads to corporate profitability is that satisfied customers are likely to engage in positive word-of-mouth publicity for the selling firm. On the other hand, dissatisfied customers tend to engage in negative word-of-mouth publicity. Word-of-mouth is an important source of information for buyers and has been shown to be a major purchasing influence.(56) Therefore, a satisfied customer base should lead to higher sales and profits.

Empirical research has also established the link between customer service and profitability. A study by Levy attempted to determine an optimal customer service configuration by linking customer service attributes to financial issues through conjoint analysis.(57) Using a net present value approach, he approximated the value of different terms of purchase configurations and then applied those values to the utilities obtained from the remaining customer service variables. In a study of industrial distributors of lighting fixtures, Uhr, Houck, and Rogers found the firms' profitability was dependent on the order cycle time and variability of delivery time--two critical customer service attributes.(58) More recently, Rust and Zahorik provide a mathematical framework for assessing the economic value of customer satisfaction.(59) Their framework enables managers to determine which customer service variables have the greatest impact, and how much money should be spent to improve particular customer service programs. Anderson, Fomell, and Lehmann establish the positive impact of quality on customer satisfaction, and in turn, profitability. They found that in certain situations, increasing market share actually might lead to lower customer satisfaction, even if profitability remains strong.(60)

One would expect, and research has supported, a positive relationship between firm profitability and market share. Yet a meta-analysis by Szymanski, Bharadwaj, and Varadarajan(61) found that this relationship may only be significant in certain situations. Fornell(62) and Griffin and Hauser(63) argue that there may actually be a negative relationship between profitability and market share. Anderson, Fornell, and Lehmann(64) found empirical support for a negative relationship. They argue that a firm with a small market share may adequately serve a niche market and be quite profitable, but as a firm gains share they are less able to cater to the needs of specific customers because the market has become more heterogeneous. Customers may remain satisfied because economies of scale enable the firm to charge lower prices, i.e., customers still perceive a good value. Alternatively, satisfaction may decline as the firm attempts to service a larger, more heterogeneous clientele. We expect that customers' needs for logistics services are more homogeneous than for products and other services. Thus, the relationship between customer satisfaction for logistics services and market share should be positively related.

CONCLUSION

This paper presented a conceptual framework that examines the effect of the logistics department's behavior and logistics policy on customer satisfaction and corporate profitability. A key issue is to determine what to do if customers' logistics service expectations are different from the actual level of service. If expectations are lower than actual logistics service levels, it is important to raise those expectations to maintain current customers and to attract new ones. A potentially greater problem exists if expectations are higher than actual service. It is important to raise service levels in those areas that are perceived to be important to customers. If it is too difficult or expensive to improve in these areas, then the next best strategy is to attempt to shift customers' attention to other areas in which the firm excels. The best long-term strategy is to strive for no gap between actual and expected logistics service.

We then explored strategies that logistics managers can use to increase customer satisfaction, the development of strategic partnerships, and corporate profitability. It is important for the selling firm to get customers involved in the management of the logistics process. In general, the more effort the customers take in the process, the more satisfied they will be. Traditionally, the methods used to elicit effort from customers have been rather passive, e.g., interacting with salespeople. Increasingly, however, firms are forming strategic partnerships to develop Quick Response Inventory Systems (QR), share data through Electronic Data Interchange (EDI), and decide on such critical logistics issues as pull versus push inventory strategies, store versus distribution center delivery, and the use of third-party contract distribution services.

When customers believe that the selling firm is putting forth effort on their behalf, they tend to be more satisfied. It is clear that logistics departments must deliver on those services that their customers deem to be most important. Additionally, however, it is useful to concentrate on issues that may not be as important to customers or as expensive to achieve, but are highly conspicuous. These services can become symbolic of the effort that the selling firm is willing to expend to maintain satisfied customers.

Some firms don't like to hear complaints from their customers. Ironically, those who complain and have their problem resolved will tend to be more satisfied, have higher repeat purchase behavior, and generate more positive word-of-mouth publicity than customers whose complaints were not resolved or who did not complain in the first place. It is therefore in the best interest of selling firms to encourage complaints by setting up both formal and informal feedback systems. Of course, the satisfactory resolution of complaints is critical to customer satisfaction.

Satisfied customers lead to the development of strategic partnerships, and in turn, to increased corporate profits. Strategic partnerships are important because satisfied customers are the backbone of a firm's business. Also, dissatisfied customers can do irreparable damage to a firm by failing to repurchase and through negative word-of-mouth publicity. Strategic partnerships evolve over time through repeated transactions. Considerable effort on the part of both the selling and buying firms is necessary to develop and sustain strategic partnerships.

Why should firms strive for customer satisfaction? Maximizing shareholder value or profits is a primary goal of firms.(65) There are several reasons why satisfied customers lead to profitable firms. First, satisfied customers are typically loyal and repeat purchasers who develop strategic partnerships with the supplier company. Second, since new accounts are more difficult and expensive to develop than established ones, it behooves firms to maintain their satisfied customers. Third, positive word-of-mouth publicity is likely to accrue to firms with satisfied customers. Fourth, there are significant consequences of having customers that are dissatisfied with logistics services. Fifth, it is easier to increase profit margins with a satisfied customer base. Finally, several empirical studies have shown a positive link between customer service and profitability.

NOTES

1 Patrick M. Byrne and William J. Markham, "Global Logistics: Only 10% of Companies Satisfy Customers," Transportation and Distribution 34 (December 1993): 41-45.

2 Jagdip Singh, "Consumer Complain Intentions and Behavior: Definitional and Taxonomical Issues," Journal of Marketing 52 (January 1988): 93-107.

3 This paper takes a physical distribution perspective of customer service rather than the broader conceptualization of the concept used in the marketing literature. Firms involved with logistics services can include manufacturers, wholesalers, transportation firms, public warehouses, etc. See Frances Gaither Tucker, "Creative Customer Service Management," International Journal of Physical Distribution and Materials Management 13, no. 3 (1983): 34-50, reprinted in International Journal of Physical Distribution and Logistics Management 24, no. 4 (1994): 32-40.

4 Highlighting the importance of customer satisfaction is a special issue of the International Journal of Physical Distribution and Logistics Management 20, no. 2 (1990).

5 Douglas M. Lambert and Arun Sharma, "Competitive Analysis for Logistics Decisions," International Journal of Physical Distribution and Logistics Management 20, no. 1 (1990): 17-24.

6 This model is an adaptation of a model presented by: Dhruv Grewal and Arun Sharma, "Customer Satisfaction Issues and Sales Management Policy: A Conceptual Examination," Journal of Personal Selling and Sales Management 11, no. 3 (Summer 1991): 13-24.

7 Richard L. Oliver and John E. Swan, "Consumer Perceptions of Interpersonal Equity and Satisfaction in Transactions: A Field Study Approach," Journal of Marketing 53 (April 1989): 21-35; and same references as Notes 3 and 4.

8 Donald J. Bowersox, "The Strategic Benefits of Logistics Alliances," Harvard Business Review 68 (July-August 1990): 36-45; and R. D. Shapiro, "Get Leverage from Logistics," Harvard Business Review 62 (May-June 1984): 119-126.

9 Same reference as Note 3. Also, Jay U. Sterling and Douglas M. Lambert, "Customer Service Research, Past, Present and Future," International Journal of Physical Distribution and Materials Management 19, no. 2 (1989): 1-23; International Journal of Physical Distribution and Logistics Management 4, no. 4 (1994); Peter Gilmour, "Customer Service: Differentiating by Market Segment," New Horizons (1982): 37-44; Jay U. Sterling and Douglas M. Lambert, "Establishing Customer Service Strategies Within the Marketing Mix," Journal of Business Logistics 8, no. 1 (1987): 1-30; Douglas M. Lambert and Thomas C. Harrington, "Establishing Customer Service Strategies Within the Marketing Mix: More Empirical Evidence," Journal of Business Logistics 10, no. 2 (1989): 44-60; and D. W. Jackson, J. E. Keith, and R. K. Burdick, "Examining the Relative Importance of Physical Distribution Service Elements," Journal of Business Logistics 7, no. 2 (1986): 14-32.

10 Gilmour reference in Note 9 and Douglas M. Lambert and James R. Stock, Strategic Logistics Management, 4th ed. (Homewood, Ill.: Richard D. Irwin, 1993).

11 W. B. Wagner, "Customer Service in Industrial Marketing: Hedge Against Competition," European Journal of Marketing 21, no. 7 (1987): 7-17.

12 Same reference as Note 3 and Sterling and Lambert reference in Note 9.

13 N. E. Marr, "Understanding Customer Service for Increased Competitiveness," International Marketing Review (Autumn 1987): 45-53; and L. S. Kyj and M. J. Kyj, "Customer Service: Product Differentiation in International Markets," International Journal of Physical Distribution and Material Management 19, no. 1 (1989): 30-38.

14 Oliver and Swan reference in Note 7.

15 Gilbert A. Churchill and Carol Surprenant, "An Investigation into the Determinants of Customer Satisfaction," Journal of Marketing Research 19 (November 982): 491-504; and John E. Swan and Linda Jones Combs, "Product Performance and Consumer Satisfaction: A New Concept," Journal of Marketing 40 (April 1976): 25-33.

16 Rolph E. Anderson, "Consumer Dissatisfaction: The Effect of Disconfirmed Expectancy on Perceived Product Performance," Journal of Marketing Research 10 (February 1973): 38-44.

17 Stephen A. LaTour and Nancy C. Peat, "The Role of Situationally-Produced Expectations, Others' Experiences, and Prior Experience in Determining Consumer Satisfaction," in Advances in Consumer Research, Jerry C. Olson, ed. (Ann Arbor, Mich.: Association for Consumer Research, 1980), pp. 588-592.

18 Same references as Note 5.

19 H. Keith Hunt, "CS/D: Bits and Pieces," in Consumer Satisfaction, Dissatisfaction and Complaining Behavior, Ralph L. Day, ed. (Bloomington, Ind.: Indiana University Press, 1977), pp. 38-41.

20 Douglas M. Lambert, Howard Marmorstein and Arun Sharma, "The Accuracy of Salespersons' Perceptions of their Customers: Conceptual Examination and Empirical Study," Journal of Personal Selling and Sales Management 10 (Winter 1998): 1-9.

21 John E. Swan and Richard L. Oliver, "Postpurchase Communication by Consumers," Journal of Retailing 65 (Winter 1989): 516-533.

22 J. H. Hunt and R. Chandran, "User Perceptions of Customer Service," International Journal of Physical Distribution and Logistics Management 21, no. 8 (1991): 17-20.

23 P. Sellers, "How to Remake Your Sales Force," Fortune, 4 May 1992, pp. 98-103.

24 H. Keith Hunt, "CS/D--Overview and Future Research Directions," in Conceptualization and Measurement of Customer Satisfaction and Dissatisfaction, H. Keith Hunt, ed. (Cambridge, Mass.: Marketing Science Institute, 1977), pp. 455-488; same reference as Note 19; Richard L. Oliver, "Effects of Expectations and Disconfirmation on Postexposure Product Evaluations," Journal of Applied Psychology 62 (April 1977); 246-50; Richard L. Oliver, "A Cognitive Model of the Antecedents and Consequences of Satisfaction Decisions," Journal of Marketing Research 17 (November 1980): 460-469; Richard L. Oliver, "A Conceptual Model of Service Quality and Service Satisfaction," in Advances in Services Marketing and Management, Teresa A. Swartz, David E. Bowen, and Stephen W. Brown, eds. (Greenwich, Conn.: JAI Press, 1992), II, pp. 65-86; and Youjae Yi, "A Critical Review of Customer Satisfaction," in Review of Marketing, Valarie A. Zeithmal, ed. (Chicago: American Marketing Association, 1989).

25 Claes Fornell, "A National Customer Satisfaction Barometer: The Swedish Experience," Journal of Marketing 55 (January 1992): 1-21 and Michael D. Johnson and Claes Fomell, "A Framework for Comparing Customer Satisfaction Across Individuals and Product Categories," Journal of Economic Psychology 12, no. 2 (1993): 267-286.

26 Eugene W. Anderson, Claes Fornell, and Donald R. Lehmann, "Customer Satisfaction, Market Share, and Profitability: Findings From Sweden," Journal of Marketing 58 (July 1994): 53-66.

27 Richard N. Cardozo, "An Experimental Study of Customer Effort, Expectation, and Satisfaction," Journal of Marketing Research 2 (August 1965): 244-249.

28 Nessim Hanna, "Can Effort/Satisfaction Theory Explain Price/Quality Relationships?" Journal of the Academy of Marketing Science 6 (Winter 1978): 91-100.

29 Sandy Jap and Barton Weitz, "A Taxonomy of Long-Term Relationships," Working Paper, College of Business Administration, University of Florida, 1994; F. Robert Dwyer, Paul Schurr, and Sejo Oh, "Developing Buyer-Seller Relationships," Journal of Marketing 51 (April 1987): 11-27: Robert Krapel, Deborah Salmond, and Robert Spekman, "A Strategic Approach to Managing Buyer-Seller Relationships," European Journal of Marketing 25 (1991): 22-37; B. G. Yovovich. "Dos and Don'ts of Partnering," Business Marketing (March 1992): 38-39; "Smart Selling: How Companies Are Winning over Today's Tough Customers," Business Week, 3 August 1992, pp. 46-52; Erin Anderson and Barton Weitz, "The Use of Pledges to Build and Sustain Commitment in Distribution Channels," Journal of Marketing Research 29 (February 1992): 18-34; George Levinger, "Toward the Analysis of Close Relationships," Journal of Experimental Social Psychology 16, no. 4 (1980): 510-544.

30 Same reference as Note 22.

31 Oliver and Swan reference in Note 7.

32 Same references as Notes 3 and 9.

33 Bowersox reference in Note 8.

34 Same reference as Note 2.

35 Marshal L. Richins, "Negative Word-of-Mouth by Dissatisfied Consumers: A Pilot Study," Journal of Marketing 47 (Winter 1983): 68-78.

36 Prescilla L. LaBarbera and David Mazursky, "A Longitudinal Assessment of Consumer Satisfaction/Dissatisfaction: The Dynamic Aspect of the Cognitive Process," Journal of Marketing Research 20 (November 1983): 393-404.

37 Douglas M. Lambert and Thomas C. Harrington, "Establishing Customer Service Strategies Within the Marketing Mix: More Empirical Evidence," Journal of Business Logistics 10, no. 2 (1989): 58.

38 Ronald J. Carey, Steven H. Clicque, Barbara A. Leighton and Frank Milton, "A Test of Reinforcement of Customers," Journal of Marketing 40 (October 1976): 98-100; Shelby D. Hunt, "Post-Transaction Communications and Dissonance Reduction," Journal of Marketing 34 (July 1970): 46-51; and Eldon M. Wirtz and Kenneth E. Miller, "The Effect of Postpurchase Communication on Consumer Satisfaction and on Consumer Recommendation of the Retailer," Journal of Retailing 53 (Summer 1977): 39-46.

39 Same reference as Note 1.

40 Same reference as Note 5 and Note 9.

41 Same reference as Note 1.

42 John T. Gardner, Martha C. Cooper, and Tom Noordewier, "Understanding Shipper-Carrier and Shipper-Warehouse Relationships: Partnerships Revisited," Journal of Business Logistics 15, no. 2 (1994): 121-143.

43 Bernard J. LaLonde and Martha C. Cooper, Relationships in Providing Customer Service (Oak Brook, Ill.: Council of Logistics Management, 1989).

44 Donald J. Bowersox, Patricia Daugherty, Cornelia L. Droge, Dale S. Rogers and Daniel L. Wardlow, Leading Edge Logistics: Competitive Positioning for the 1990's (Oak Brook, Ill.: Council of Logistics Management, 1989).

45 Same reference as Note 36.

46 R. M. Pisharodi and C. J. Langley, "A Perceptual Model of Customer Service Based on Cybernetic/Control Theory," Journal of Business Logistics 11, no. 1 (1990): 26-48.

47 Gardner et al. reference in Note 42 and Bowersox, E Robert Dwyer, Paul H. Schurr, and Sejo Oh, "Developing Buyer-Seller Relationships," Journal of Marketing 51 (April 1987): 11-27; and George Levinger, "Toward the Analysis of Close Relationships," Journal of Experimental Social Psychology 16, no. 4 (1980): 510-544.

48 John C. Coyle and Joseph C. Andraski, "Managing Channel Relationships," in Annual Conference Proceedings of the Council of Logistics Management (Oak Brook, Ill.: Council of Logistics Management, 1990) I, pp. 245-57.

49 Same reference as Note 43.

50 Same reference as Note 42.

51 Robert J. Berling, "The Emerging Approach to Business Strategy: Building a Relationship Advantage," Business Horizons 36 (July-August 1993): 16-26.

52 Same reference as Note 51.

53 Anderson reference in Note 26.

54 David A. Garvin, Managing Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988).

55 Fredrick F. Reichheld and W. Earl Sasser, "Zero Defections: Quality Comes to Services," Harvard Business Review 68 (September/October 1990): 105-111.

56 Hubert Gatignon and Thomas S. Robertson, "A Propositional Inventory for New Diffusion Research," Journal of Consumer Research 11 (March 1985): 49-67; Johan Arndt, "Role of Product-Related Conversations in the Diffusion of a New Product," Journal of Marketing Research 4 (August 1967): 291-295; and Joseph R. Mancuso, "Why Not Create Opinion Leaders for New Product Introductions?" Journal of Marketing 33 (July 1969): 20-25.

57 Michael Levy, "Toward an Optimal Customer Service Package," Journal of Business Logistics 2, no. 2 (1988): 87-109.

58 Ernest B. Uhr, Ernest C. Houck, and John C. Rogers, "Physical Distribution Service," Journal of Business Logistics 2, no. 2 (1981): 158-169.

59 Roland T. Rust and Anthony J. Zahorik, "Customer Satisfaction, Customer Retention, and Market Share," Journal of Retailing 69, no. 2 (Summer 1993): 193-215.

60 same reference as Note 26.

61 David M. Szymanski, Sundar G. Bharadwaj, and P. Rajan Varadarajan, "An Analysis of the Market Share-Profitability Relationship," Journal of Marketing 57 (July 1993): 1-18.

62 Fornell reference in Note 25.

63 Abbie Griffin and John R. Hauser, "The Voice of the Customer," Marketing Science 12 (Winter 1993): 1-27.

64 Same reference as Note 26.

65 Michael Levy and Michael F. van Breda, "The Decomposition of Firm Value in a Hierarchical Retailing Organization," Journal of Retailing 64, no. 2 (Summer 1988): 215-225; and Alfred Rappaport, Creating Shareholder Value: The New Standard for Business Performance (New York: Macmillan, 1986).

ABOUT THE AUTHORS

Arun Sharma is associate professor of marketing at the University of Miami (Florida). He received his Ph.D. in marketing at the University of Illinois at Urbana-Champaign. He has developed a stream of research in personal selling and business logistics that has been published in leading marketing and logistics journals.

Dhruv Grewal is associate professor of marketing at the University of Miami (Florida). He received his Ph.D. in marketing from Virginia Polytechnic Institute and State University. His research in pricing and retailing has been published in leading marketing journals.

Michael Levy is professor and chair of marketing at the University of Miami (Florida). He received his Ph.D. in marketing and logistics from Ohio State University. The results of his research in retailing, business logistics, financial retailing strategy, pricing, and sales management have been published in leading marketing and logistics journals. He is co-author of Retailing Management (2nd ed., 1995).

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