LITERATURE REVIEW

INTRODUCTION

The followings are composed of several dimensions covering almost all important elements

that have been dealt with many other research works. Review of this literature also brings

to light other research findings and suggestions on similar customer satisfaction practices.

The purpose of this literature review is to verify whether the selected model is applicable in

this study. Since the research analyze the impact of important contextual factors on these

practice, several research findings associated with some contextual factors are also discussed in

this review. Literature review covers the following areas of previous research studies.

CUSTOMER SATISFACTION

Customer satisfaction has been viewed both as transaction specific satisfaction, which is the

post purchase evaluation of the match, between expectations and actual performance and

cumulative satisfaction, which reflects the overall evaluation, based on transactions over time

and is the net sum of the customer experience with the seller.

Customer satisfaction is assumed to lead to attitude change, repeat purchase, and brand

loyalty, lower costs of attracting new customers, and lower costs of handling returns and

complaints. (Payne and Richard 1993) state that relationship marketing focuses on keeping

customers and building a relationship with them, thus enhancing customer loyalty. It is now

being increasingly recognized that the greater the satisfaction the customer has with the firm

and its products, the more likely long term customer retention and improved profitability.
Many cases show that increasing customer satisfaction levels can bring a company's facility and

customer service systems to a level that's above and beyond the quality of others. ACSI

(American Customer Satisfaction Index) model is a series of causal equation, linking customer

expectation, perceived quality, perceived value and customer satisfaction together. In the

model, customer satisfaction leads to two results: customer complaints and customer loyalty.

Loyalty is regarded as the source of customer retention and their tolerance to price. In the last

decades, lots of causal models were constructed to indicate the relationships among perceived

performance, customer satisfaction and loyalty, most of which concluded that increase in

satisfaction led to improvement in loyalty' which might lead to repurchase, positive word-of-

mouth behavior, cross buying and price tolerance. But among these research results, few of

them took industry factors into account. There is no practical suggestion for Electronics

Products enterprises to evaluate and improve customer satisfaction either. Combined other

scholars' results and industry conditions, we proposed a customer satisfaction conceptual

model for Electronics Products enterprise.

There has been a quite obvious increase in the emphasis on a firm's ability to produce high-

quality products and/or provide high-quality services. Identification of high-quality products or

services can be achieved by measuring customer satisfaction with these products or services.

The concept of customer satisfaction transforms all industries from production centralized to

customer based. Several evaluation models or indices exist for assessing customer satisfaction

in various industries. To achieve a highly reliable and stable index of satisfaction, the American

Customer Satisfaction Index (ACSI) defines the satisfaction as a weighted average of three

survey ratings: perceived quality, perceived value, and customer expectations. The ACSI

index has been used to measure the satisfaction in the manufacturing/nondurables,

insurance, services, public administration, and government. Although the ACSI index has an

accepted satisfaction evaluation methodology, it is not designed for the construction industry.

Generally, the evaluation result for customer satisfaction is highest for competitive products,

lower for competitive services and retailers and lowest for government and public agencies.

The ACSI system criteria cannot be adapted to the construction industry; a new evaluation

model must be developed not only for the construction industry, but also for CPM services.

Customer Expectations

Expectations reflect customers' anticipated performance before usage. Customers may use

different "types" of expectations when forming opinions about a product's anticipated

performance. There are four types of expectations: the ideal, the expected, the minimum

tolerable, and the desirable expectations. Many factors affect house buyers' expectations,

including marketing, advertising and sales promotions as well as innate personal needs, word

of mouth and competitive offerings. Measuring expectations disconfirmation apart from

expectations is also significant in consumer satisfaction research. Expectations disconfirmation

has a negative influence on customer's perceived product and service value. Electronics

Products enterprises should pay attention to the inverse relationship between customer

expectations and perceived value.

Perceived Price

Perceived price is the sacrifice of money to obtain certain product or service. Perceived

value comes from the interaction process between perceived quality and customer's sacrifice.
Higher price often means higher quality and may create higher purchase intention. It also

increases customer's purchase costs. Sometimes a house's objective price is high, but for a

certain customer it is acceptable, because the customer feels that it's reasonable to afford

such a sacrifice. In Electronics Products industry, rational customers pay more attention to

product and service quality developers supply. Comparatively speaking, price is an

influencing factor to customer satisfaction, but not as critical as other factors. Developers

should make an effort to enhance housing planning and service quality as well as lower

development cost, because only those high performance-cost ratio houses will satisfy

customers.

Perceived Product Quality

The most important determinant of quality for a product is the customer's perception of its

quality. The more a product achieves its intended qualities, the more we would expect customers

to be satisfied. Creating quality in a product is, therefore, a matter of achieving the right balance

between delivering customer expectations and exceeding them. House is a kind of durable

product. Gener5'lly, "commercial house quality includes: community planning, position,

community scale, family area, transportation condition, environment, construction design,

material, equipment and construction quality etc.

Perceived Service Quality

Perceived service is the customer's perception of what actually did, should or will occur.

Service quality comes from service strategy, service system and service personnel. In the

whole service process, customer perceives service quality by evaluating service attitude,
service content, service price, service equipment, service efficiency and convenience: the six

dimensions affect customer satisfaction through affecting service quality perception.

Service quality has a characteristic of heterogeneity. In Electronics Products industry, a

company without luxurious department or villa still can have high-level customer

satisfaction and competitive edge through service quality improvement strategy.

Customer will buy a house when the product quality matching its price, but they cannot

tolerate poor service level. Actually, our customer satisfaction survey (in five residential

communities in Hebei) results indicate 86.5 percent complaints come from dissatisfaction with

service.

If customer satisfaction level is supreme, it leads to customer loyalty that will bring

corresponding loyal behaviors and intention of repurchase, word-of-mouth, cross buying and

price tolerance respectively. China's Electronics Products market has great potential, a lot

more Chinese would invest in Electronics Products for profit in years to come, and

satisfaction improvement means more to Electronics Products enterprises. High referral rates

and word-of-mouth have great impact on companies' sales because less money for marketing

would need to be spent. Besides, a loyal customer may have price tolerance to expensive house

or service. As there is a cross-regional development trend in China's Electronics Products

market, cross buying (the customer's willingness to buy other products or service provided by

the same company) may improve housing developers' profitability. If customer's perceived value

is quite low, customer dissatisfaction will come. Developers have to deal with complaints,

negative word-of-mouth, and customer defection. Undoubtedly, no one would like to be

involved in those kinds of problems. To avoid this risk, Electronics Products enterprises should
know better what factors lead to satisfaction and what factors lead to another direction, and

then set up and implement a customer-oriented, quality-centered satisfaction strategy.

The main objectives are:

To compare the results of the two methods.

To evaluate the homogeneity of the set of customers,

To overcome the problem of no response (missing data) in the data set.

Determining quality in construction is a complex issue. In general, quality can be

defined rough two approaches: conformance to requirements and customer satisfaction. The

major concern in the conformance to requirements approach is how well the constructed facility

conforms to design specifications. This is the contractors' internally focused definition of

quality. The limitation of this approach is that customers may not know or care about how

well the product and/or service conforms to internal specifications; customers want their needs

and expectations met or even exceeded. The strengths of this approach are that measuring

quality is relatively straightforward and easy and should lead to increased efficiency on the part

of the organization.

On the other hand, the customer satisfaction approach defines quality as the extent to which a

product or service meets and/or exceeds a customer's expectations. The strength of this

approach compared to the quality approach is that it captures what is important for the

customers rather than establishes standards based on management judgments that may or may

not be accurate. Customer satisfaction thus approaches quality from a customer's viewpoint.

According to this determination, it is the customer who defines quality. The weaknesses of
this approach are that measuring customers' expectations is a difficult task and the fact that a

customer's short-term and long-term evaluations may differ. (Reeves and Bednar, 1994).

(Barrett, 2000) sees that quality in construction can he thought of as the satisfaction of a whole

range of performance criteria held by an interacting host of stakeholders and mediated by a

range of mechanisms. According to (Winch and associates, 1998) the problem with the

existing literature on construction is that it concentrates on the problems of producers instead

of providing value for the customer. Terre is a need for customer orientation and satisfaction,

not for allocating liability.

Customer satisfaction can be used for evaluation of quality and ultimately for assessment of the

success of a company's quality improvement programme. According to (Torbica and Stroh,

2001). a quality improvement effort will lead to a higher product and service quality. which

will lead to improved customer satisfaction. Their study has confirmed that implementation of

TQM is positively associated with homebuyer satisfaction, and it is the "total offering" that

generates the total degree of customer satisfaction. (Al-Momani, 2000) examined service

quality in construction delivered by contractors and the project owner's expectati service

quality gap as his analysis tool. He found that contractors pay very little attention to the owners

(customers) satisfaction, and that this contributes to poor performance.