Customer satisfaction and retention: the experiences of individual employees


Ove C. Hansemark, Marie Albinsson

The Authors

Ove C. Hansemark, Ove C. Hansemark is based at the Department of Work, Economics, and Health, University of Trollhättan/Uddevalla, Uddevalla, Sweden.

Marie Albinsson, Marie Albinsson is based at the Department of Work, Economics, and Health, University of Trollhättan/Uddevalla, Uddevalla, Sweden.

Abstract

The purpose of this study was to explore how the employees of a company experience the concepts of customer satisfaction and retention. A phenomenological method was used, allowing the informants' own interpretations to be discovered. Satisfaction was discussed from three perspectives: definition of the concept, how to recognise when a customer is satisfied, and how to enhance satisfaction. The informants' experience pertaining to these three categories varied, and a total of seven ways to define, recognise or enhance satisfaction were discovered. These were: service, feeling, chemistry, relationship and confidence, dialogue, complaints and retention. All except the first two of these categories of experience were found to enhance retention, implying that the informants have found that strategies for enhancing both satisfaction and retention are similar. The strongest connection between retention and satisfaction strategies turned out to be in terms of relationship and confidence.


Article type: Case study.

Keywords: Customer satisfaction, Customer retention, Banks, Phenomenology, Employees involvement.

Content Indicators: Research Implications*** Practice Implications** Originality** Readability**


Managing Service Quality
Volume 14 Number 1 2004 pp. 40-57
Copyright © MCB University Press ISSN 0960-4529


Introduction

Customer satisfaction and retention are critical for retail banks, as they have an impact on profit (Levesque and McDougall, 1996). However, as business leaders try to implement the concept of customer satisfaction and/or retention in their companies, employees working with customers may come to regard customer retention (Levesque and McDougall, 1996) or satisfaction (Stauss et al., 2001) as in themselves the goal of business. Regardless as to what business leaders may be trying to implement in their companies, any employee interacting with customers is in a position either to increase customer satisfaction, or put it at risk. Employees in such positions should therefore have the skills to respond effectively and efficiently to customer needs (Potter-Brotman, 1994).

Each individual in an organisation creates his or her own understanding of a phenomenon (Argyris and Schön, 1978), and each individual understanding consists of assumptions - not truths - as to the context. It is the understanding of the situation that provokes an action (Weick, 1979, 1995). An individual interprets the world through his or her own mental model, creating his or her own world; a reality of the second order thus arises (Watzlawick, 1976) that is in some way incomplete (Senge, 1990).

It is the experience and attitudes of the individuals in closest contact with customers that are most likely to affect whether or not customers are satisfied and willing to return to the company. It is also the people in direct contact with customers who determine who the retained and satisfied customers are, and their experience determines how they treat the customers. However, we know very little about how employees in a company experience the concepts of customer retention and satisfaction.

Customer satisfaction, rather than retention, has traditionally been the focus of research and managerial efforts. Customer satisfaction has been deemed directly to affect customer retention and companies' market share (Rust and Subramanian, 1992). Service quality, service features, and customer-complaint handling determine customer satisfaction in banks. Service offerings, such as extended hours of operation and competitive interest rates also play a role in determining satisfaction (Levesque and McDougall, 1996). Later research, however, has indicated that companies are more successful if they apply customer-retention rather than customer-satisfaction strategies (Knox, 1998). Moreover, customer retention has been found to be a key to profitability (Desai and Mahajan, 1998) and an important determinant of market share among service firms (Appiah-Adu, 1999).

Previous research into customer satisfaction and retention has generally focused on the potential advantages of pursuing strategies for satisfying or retaining customers, rather than on the concepts themselves. This paper will fill that research gap, by exploring how individuals serving customers experience the concepts of satisfaction and retention. How individuals within an organisation perceive these concepts is interesting for at least two reasons. First, if the people closest to the customers do not understand and accept the company's attitude and rules about how to handle customers, then management has not successfully communicated their message. Without uniform understanding of the concepts, it is impossible for employees to promote the organisational goal. Second, when various staff members' experiences of satisfaction and retention differ; that is, if they have created their own mental models of the concepts, their different understandings lead to different actions in relation to customers. This could make it difficult to provide good service to customers. This research will examine the condition in a synchronous manner, from the perspective of the individuals dealing with customers. The paper will be of value to anyone interested in how a company's staff actually experience and value customer satisfaction and retention.

Satisfaction and retention in theory

Satisfaction is an "overall customer attitude towards a service provider" (Levesque and McDougall, 1996, p. 14), or an emotional reaction to the difference between what customers anticipate and what they receive (Zineldin, 2000), regarding the fulfilment of some need, goal or desire (Oliver, 1999). A similar definition is provided by Gerpott et al. (2001) who propose that satisfaction is based on a customer's estimated experience of the extent to which a provider's services fulfill his or her expectations.

Customer satisfaction brings many benefits. Satisfied customers are less price sensitive, buy additional products, are less influenced by competitors and stay loyal longer (Zineldin, 2000). Although customer satisfaction is important, it is not equally important to the company. There are many customers whose satisfaction is less important, such as those a company cannot serve or who are unprofitable; on the other hand, there are customers whose satisfaction is crucial to a company's survival, and the goal should always be to satisfy those customers (Bhote, 1996).

Ovenden (1995) argues that organisations must be aware of how well or badly its customers are treated. Customers rarely complain, and when someone does, it might be too late to retain that customer. One important component in the concept of satisfaction is complaint management. Nyer (2000) has investigated the relation between consumer complaints and consumer satisfaction. The author found that encouraging consumers to complain increased their satisfaction, and this was especially the case for the most dissatisfied customers. Research has also found that the more intensely a customer complains the greater the increases in satisfaction. Johnston (2001) claims that complaint management not only results in customer satisfaction, but also leads to operational improvement and improved financial performance.

Research conducted by Athanassopoulos (2000) indicates that product innovations, staff service, price, convenience and business profile are all determinants of customer satisfaction. Bejou et al. (1998) propose that customer satisfaction can be enhanced through relationships, provided they are developed and managed to the customer's satisfaction.

Satisfaction increases customer retention, and customer retention depends on the substance of the relationship between parties (Eriksson and Löfmarck Vaghult, 2000). Spreng et al. (1995) examine the importance of service recovery in determining overall satisfaction, arguing that a company is more likely to retain a customer by encouraging complaints and then address them, than by assuming that the customer is satisfied. Satisfied and properly served customers are more likely to return to an organisation than are dissatisfied customers who could choose simply to go elsewhere (Ovenden, 1995).

Consumers, even though satisfied, may suddenly decide to switch service providers. A satisfied customer may or may not intend to return to a company, which is the reason satisfaction does not necessarily lead to retention. Customer satisfaction can even increase in a company while retention levels remain unchanged (Lowenstein, 1995). Not all retained customers are satisfied; they may stay with a provider only because of lack of alternatives (Eriksson and Löfmarck Vaghult, 2000). Reichheld and Aspinall (1993) also argue that satisfaction does not necessarily lead to repurchase or retention.

Hallowell (1996) argues that customer satisfaction on its own cannot produce lifetime customers even though satisfaction can result in retention. Stauss et al. (2001) indicate that satisfaction is merely a step towards the goal of customer retention, and that retention effects increase with the degree of satisfaction.

Retention can be defined as "a commitment to continue to do business or exchange with a particular company on an ongoing basis" (Zineldin, 2000, p. 28). A more elaborated definition is to define retention as the customers' liking, identification, commitment, trust, willingness to recommend, and repurchase intentions, with the first four being emotional-cognitive retention constructs, and the last two being behavioral intentions (Stauss et al., 2001).

Retaining old customers also costs less than acquiring new ones. The company knows the customers and what they want, and the initial costs of attracting the customers have already been expended (Davidow and Uttal, 1989). Old customers also pay less attention to competing brands and advertising, are less price sensitive and create favourable word-of-mouth (Desai and Mahajan, 1998). Customer retention also brings benefits such as employee retention and satisfaction, better service, lower costs (Reichheld, 1995), lower price sensitivity, positive word-of-mouth, higher market share, higher efficiency and higher productivity (Zineldin, 2000). Customers not wanted by the company, i.e. those who are unprofitable or whose needs cannot be met by the company, should, however, not be retained (Reichheld, 1996).

Potter-Brotman (1994) describes how service affects retention, and brings up the value of teaching all employees to be service providers, with the ability to enhance relationships with customers rather than endanger them. The author suggests that companies must concentrate on hearing customers' unique voices in order to find out what kind of service they consider to be exceptional.

Customers could defect at a rate of 10-30 per cent per year (Reichheld, 1996). A decrease of only 5 per cent in customer defection can increase profits up to 95 per cent, depending on the industry. In banks, the increase is usually 85 per cent (Reichheld, 1996), and Reichheld and Kenny (1990) argue that this is because of longevity effects. Another advantage is that while customer acquisition strategies are easily copied by competitors, retention strategies are not.

Stauss et al. (2001) studied the retention effects produced by customer clubs. Their results reveal that customers who are satisfied with the customer club are likely to be more satisfied with the relationship with the service provider, which, in turn, affects customer retention. The authors describe customer retention as the goal of customer clubs. In addition, Appiah-Adu (1999) finds that the most critical element in retaining customers is the company's customer philosophy, implying that companies ought to strive for complete satisfaction rather than just satisfaction among its customers.

Desai and Mahajan (1998) look at the concepts of acquiring, developing and retaining customers from a cognitive and affective perspective. They provide examples of how cognition and affects are used to increase retention, and use frequent-flyer programs as an example of an effective way of building loyalty. The authors suggest that in order to retain customers, companies must continually develop their products and services so as to meet the evolving needs of customers. Their research also assumes that retained customers are in fact satisfied, and not retained simply because of habit, indifference or inertia. Included in retention strategies is the development of new products and services to meet and satisfy the evolving needs of the customers; thus satisfaction is a component of retention.

Even though Johnston (2001) has shown that the relationship between customer satisfaction and retention is very weak, an understanding of the two concepts cannot always be achieved by isolating them from each other, but rather by examining the relationship between them. Gerpott et al. (2001) suggest that customer retention and customer satisfaction should be treated as distinct, but causally inter-linked constructs. According to them, "customer satisfaction is a direct determining factor in customer loyalty, which, in turn, is a central determinant of customer retention" (Gerpott et al., 2001, p. 253). Rust and Subramanian (1992) link quality to customer satisfaction and argue that this has a direct effect on customer retention and market share. In addition, Athanassopoulos (2000) discusses satisfaction as an antecedent of customer retention. The author examined customer satisfaction cues in retail banking services in Greece. The results of his study indicate that product innovativeness, staff service, price, convenience and business profile are dimensions of customer satisfaction. The author also states that customers do not consider switching banks until they have encountered a series of negative effects.

Appiah-Adu (1999) finds that the most critical element in retaining customers is the company's customer philosophy. He also stresses that there is a difference between satisfaction and complete satisfaction, and that the goal should be to achieve the latter. Eriksson and Löfmarck Vaghult (2000) argues that customer retention is central to the development of business relationships, and that these relationships depend on satisfaction. Knox (1998) argues that to build relationships, the company should strive for customer development. Retention is a significant part of customer development, since retained customers spend more with the company than with its competitors, thereby supporting profitable growth.

In summary, the literature defines satisfaction as based on the difference between what customers expect and what they get. The benefits of satisfaction are many, the most prominent being less price sensitivity, purchase of additional products and less interest in competitors. Good complaint management, product and service development, price and good relations contribute to satisfaction. Retention is defined as repurchase intentions and is obtained by good service and good relationships. Customer clubs and frequent-flyer programs are suggested as ways to increase retention. The benefits of retention are lower costs for the company, less price sensitivity, favourable word-of-mouth, greater market share and increased profits. The relationship between satisfaction and retention is described as weak, and research shows that satisfaction does not necessarily lead to retention.

Methodology and design

This study intends to expand our understanding of how people who work with customers interpret the concepts of customer satisfaction and customer retention. A phenomenological method was used, since it allowed the presentation of people's own interpretations of the two concepts (Gerber, 2001). Phenomenology could be seen as a philosophy, but it is also a technique for gathering and analysing data (Goulding, 1999). The method of phenomenology allows people's "life-worlds" to be discovered (Küpers, 1998), thus capturing their intersubjective experiences. Phenomenology is used to describe the structure of experiences as they present themselves to consciousness, and to find what is hidden in ordinary experiences (Gibb, 1998).

Our pre-understanding, as researchers, of satisfaction and retention, was grounded in a literature-based review of previous research concerning satisfaction and retention. While collecting and analysing the data we endeavoured to keep our experience and knowledge at a distance, to eliminate the risk of colouring our interpretation of the informants' experiences.

A multiple-case design (Yin, 1994) was chosen, allowing many stories to be heard involving numerous and disparate interpretation of the concepts. The aim of the case-study method is not statistical generalisation, and the gathering of data does not require statistical sampling (Yin, 1994). Phenomenological studies should be concerned with the data, and could use non-probability sampling, with informants chosen because they have lived the experience. Lived experience "must be understood relative to the specific life-world from which it emerges" (Thompson et al., 1990, p. 347). The unit of analysis was employees in direct contact with customers. We hoped that each case would have its own unique characteristics, and that themes and categories would emerge from comparing stories.

The marketing manager of a company, in this case a bank, was initially contacted by e-mail and asked to let his staff participate in the study. In total, 11 people in positions with close customer contact were chosen for the research (Table I). Small numbers of informants are traditional in phenomenological research, since considerable time is needed for in-depth interpretation of the long interviews (Bergadaà, 1990). Participation was voluntary and the informants' identities were kept anonymous.

The informants were all working as either financial advisors, responsible for between 300 and 600 customers, or capital advisors, responsible for between 50 and 100 customers. Capital advisors have more responsibilities, and spend more time and contact per customer. Seven women (W1-W7) and four men (M1-M4) participated. The informants' characteristics are summarised in Table I.

Informants were interviewed individually in their habitual setting, i.e. in the bank where they worked, using a semi-structured format. Phenomenological principles were the basis for each interview. Informants were encouraged to speak freely about the research topic, in order to obtain the fullest descriptions of their experiences. The researcher withheld all personal views during the interview. The goal was to grasp the "life-world" the informants regard as real (Goulding, 1999). The emic terms, i.e. the words used by the informants themselves, were used in the follow-up questions (Ratneshwar, 1999).

Each interview lasted 40 minutes to an hour and was audio taped to include all data. It was then transcribed verbatim, i.e. without grammatical correction or other "tidying up" of the text (Ratneshwar, 1999). The reliability of transcripts was further ensured by transcribing things such as pauses or laughs, to make the reality of the informant more obvious to the reader (Silverman, 2000).

The data were then analysed by reading and re-reading the data in depth to search for differences and patterns in the informants' experiences regarding customer satisfaction and retention (Gerber, 2001). Each individual interview was used to create a better understanding of shared experimental meanings, and this, in turn, gave a deeper comprehension of each individual case. This was a to-and-fro process, with interpretations being continuously revised and the context broadened as more of the text was understood. The process, also called bracketing, allowed us to examine the text from a phenomenological perspective without predefining informants' experiences (Thompson et al., 1990). A close examination in search of structures and meanings revealed various aspects of the informants' experience.

Employee perceptions

The bank in which the informants worked operates both in Sweden and abroad, providing service for individuals and businesses. It has about 600 branches, one-third of which are in Sweden, and over 20,000 employees world-wide. The informants were employees in three different local branches, located in smaller Swedish towns. They worked as either capital or financial advisors, responsible for between 50 and 600 customers each. Their customers were individuals with capital exceeding SEK250,000.00 (about US$25,000.00), or businesses.

Increased satisfaction is a priority of the bank, and their goal is to have the market's most satisfied customers by year 2004. The aim is both to decrease the number of dissatisfied customers, and increase the number of satisfied customers. The focus is not on a certain segment of customers, or on a certain business area, but on all customers throughout all business areas. The employees are informed about the goals and strategies through internal meetings and the business plan.

The bank surveys customer satisfaction once a year using a customer satisfaction index provided by an outside consultancy. The index consists of a large number of questions about matters such as service, personnel and treatment. Customers respond to each question on a scale from one to five, indicating whether they rate the factor in question as negative, positive or neutral. The results of the last customer satisfaction survey conducted in the bank indicated that 90 per cent of the bank's customers were satisfied. Satisfied customers are defined as having good relations and communication with the bank. The information collected via the survey is used to help enhance satisfaction, by improving on the matters customers have indicated they are dissatisfied with. The bank goes through the results to determine what customers feel are the bank's strengths and weaknesses, and makes an activity plan for improving the bank's weaknesses. The bank focuses mostly on responding effectively to complaints, and on what they term "hygienic factors"; that is, what customers expect in their contact with the bank; for example, cash in the ATM, and having people answering the phone when customers call.

The bank does not employ any retention strategies. Its focus is solely on satisfying its customers, and the bank expects this to lead to more retained customers. Retaining customers is, however, not a specified goal.

All the interviews started with a discussion about the concept of the consumer, and the informants were asked to give their view of the customer. W1 is a financial advisor, responsible for about 350 customers. For her, customers are people who come to the bank because they want to, people with whom she has a good relationship.

W2 works as a financial advisor, and is responsible for over 600 customers. She has worked at various branches of the bank, and noted that there is a difference between how you handle customers in a small town and in a large town: in the former you are more personal. She thinks of customers as "the people the bank cares about and for whom we try to do our best".

W3 recently began working as a capital advisor, and divides her work between two branches. She has ten years' experience as financial advisor, during which time she had a clientele of 300. She is now responsible for fewer than 100 customers. The new job means fewer customers, but more time and contact per customer and more responsibility. She describes customers as relationships to other people, as opportunities to get to know someone to do business with, and adds that both parties should gain something from the relationship.

W4 works as a financial advisor. She says: "A positive moment with a customer is when you feel you are making contact ... when it is not purely professional, but when the customers have confidence in you. When you feel it and when you see you leave a satisfied customer. We deal with people - not money. Without the customer the business stops".

W5 works as a financial advisor and is responsible for 300 customers, some she meets frequently, and others she has never met. She regards customers as existing in a service relationship, i.e. a relationship where you give the customer a lot of service because it is a deep relationship.

W6 has worked as a financial advisor in various branches, and is responsible for about 300 customers with whom she has continuous contact. She views a customer as someone who is buying the bank's services, and has chosen this bank before others.

W7 started working as a financial advisor just recently, but in spite of this, has built up a clientele of 370. She says her goal with customers is to build a good relationship and to satisfy them: "If we don't have any customers we don't have any business".

M1 works as a capital advisor. He views customers like this: "The customers are what I live off, so to say. They are the most important things we have - the only thing we have, really".

M2 works as a financial advisor handling loans and equity investments, and is responsible for around 400 customers. He has been working in the bank over 30 years. He describes a customer as someone with whom he has a relationship, and says that this relationship is often the reason why customers choose to stay with the bank.

M3 works as a financial advisor responsible for about 400 customers, and divides his time between two branches. He describes customers as what he and the company lives off, adding that his job is to serve them and do his best for them, building up trust in him and the company.

M4 recently started working as a capital advisor, responsible for 50-100 customers, but he had worked as a financial advisor, responsible for about 400 customers, for over ten years. He refers to a customer as someone you want to do business with or help in some way, since he works in a service-based company.

In summary, most informants began describing what a customer means to them by strongly emphasising the relationship they have with their customers and the confidence they have in each other, thus connecting their descriptions to strong relations and feelings. Another viewpoint was that customers are the key to business, and as such the informants need to provide them with what they want and offer good service to satisfy them.

The concept of satisfaction resulted in three different discussions during the interviews: how to define a satisfied customer, how to know when a customer is satisfied and how to create or enhance satisfaction.

Informants' definitions of satisfied customers indicated three different experiences: a satisfied customer is someone with whom you have a good relationship in which you have gained trust; someone with whom you have good contact and an open dialogue; and a customer who is retained versus not retained.

Confidence in each other and the importance of a good relationship were themes articulated by many informants, and emphasised repeatedly throughout the interviews. W6, a woman with many years' experience in the bank, explains why she finds it so important. She believes that if a customer does not trust her enough to give her the information needed to do a good job, the customer will not be satisfied with what she is doing:

When a customer is satisfied, we have a good relationship. It is easy to sit and talk. The customer has confidence in me. This confidence, I view as a satisfied customer. You can feel if the customer puts faith in you when you sit and talk. You feel whether the customer is relaxed and wants to answer questions. The customer needs to inform me as to his situation, for me to give the right recommendations. If you don't have the entire picture, it is hard to give the right advice. It takes a while before a customer trusts you (W6).

Dialogue and contact were also used to define satisfaction. W1, who has been working in the bank over 20 years, has found that good contact, in which dialogue is kept open, is the key to both a satisfied customer and a satisfied employee. By good contact, she means that customers feel they can bring up things that dissatisfy them; through open dialogue, this dissatisfaction can be turned back to satisfaction:

It is hard to define what a satisfied customer is - maybe you are never satisfied here in life. But I feel satisfied when I feel I have good contact with my customer. When, even if sometimes something negative is brought up, it can be turned into something positive - then I think they are satisfied (W1).

The definition of a satisfied customer was also connected to the concept of retention. Two different, and opposed, meanings were discovered: that a satisfied customer is a retained customer, and that a satisfied customer may not be a retained customer. The first meaning is illustrated by M1, who has experienced that satisfaction results from a very good relationship, which, in turn, gives you no reason to leave the bank - rather the opposite. The informant also stresses that this relationship is necessary in order to do business with the customer:

Satisfaction is the basis of everything. I would have a hard time believing that a dissatisfied customer stays. I think that when you are satisfied, you have built up such a relationship that you don't want to change it. It takes a long time to build a good relationship. You don't do it in a couple of meetings - it takes years. The first year you work, you spend most of your time meeting the customers and building relationships. The second year you start making business. You can't make any business until you have a good relationship with the customer (M1).

Other informants believe that regardless as to whether a customer is satisfied or not, he or she may switch banks. Various reasons were given to explain this, such as changes in life, the feeling that the grass is always greener on the other side, technology, relationships and treatment. W2 illustrates this:

Satisfied customers could, for example, be contacted by another bank and switch because they offer something extra. But, hopefully, the grass is not greener on the other side. They might notice that after a while. Just because they are satisfied, it doesn't mean they can't turn elsewhere (W2).

The informants were also asked how they knew when a customer was satisfied. The individual answers to this included a feeling, chemistry between employee and customer, mutual confidence and a good relationship and open dialogue. Each of these meanings is illustrated with examples.

The informants typically experienced that it is possible to feel, or sense by looking at the body language, when a customer is satisfied. M3, having worked at the bank over ten years, trusts his feelings as to when customers are satisfied, rather than asking if they are. He is aware that he cannot know for sure whether customers actually are satisfied, but believes that his feelings about the customer will give him a good idea of this:

You never know - it is a feeling. You can see it in the customer, in their body language and things. You know most customers pretty well and can "read them" a little bit. But you don't get a receipt for how satisfied they are. You can tell by looking at a person. It is easy when you have personal contact, harder when you are talking on the phone (M3).

Some informants trust the chemistry between people to determine if a customer is satisfied. W7 began her work as a financial advisor only recently, and speaks about the chemistry between people when talking about satisfaction. She connects it closely to the feeling, but emphasises the interpersonal chemistry in judging when a customer is satisfied. With the right chemistry, she feels it is possible to get the customer to open up a bit more:

Many times, you can feel if the customers are satisfied - or especially if they are dissatisfied. It has to do with whether the chemistry between you is right. Then I think you have a satisfied customer, when you get a little bit deeper and talk a bit more personally (W7).

Mutual confidence and a good relationship were also used to determine whether a customer is satisfied. M1 has found that in a good relationship, the customer trusts you with more assets if he or she is satisfied. He regards these actions as a proof that the customer has confidence in him:

You notice by their actions whether they are satisfied or not. Sometimes customers come back and trust you with more assets you didn't know about. Then I know I have done a good job, since they are willing to trust me with more money. Then it is definitively a satisfied customer (M1).

An open dialogue was also said to be used when determining satisfaction. W3, a woman with long experience in her job, believes that open dialogue to find out whether the customer is satisfied is more important than simply trusting her feelings:

Many customers tell you when they are satisfied. And we ask a lot and check with the customers whether they are getting what they want and whether they are happy. And listen a lot (W3).

How did the informants, then, consider satisfaction to be enhanced? The informants had four different experiences of how satisfaction can be enhanced: through a good relationship with mutual trust, open dialogue, effective complaint handling, and personal service. Each of these is exemplified as follows.

Nearly all the informants shared the experience that in order to satisfy a customer, it is necessary to strive for confidence and build strong relationships. M3 illustrates this, revealing a deep concern for the customer. For him, trust is a matter of mutual respect, something that is only created in a good relationship with the customer. He stresses the necessity of listening to the customer in order to determine what he or she really wants and needs, and says it is essential to find out as much as possible about the customer to be able to build confidence and a relationship:

Regular contact with the customers, in one way or another, is important. Many times the personal relationship is as important as the conditions offered in keeping the customer satisfied. And you have to listen to the customer - if he only wants to have contact once a year I cannot contact him more than that. He would lose trust in me if I did, since I wouldn't be sticking to my part of the deal. So the more knowledge you have of a customer, the easier it is to retain him and to keep him satisfied. If they don't have confidence in you, it is easy to lose the customer (M3).

As with the other aspects of satisfaction mentioned in the interviews, open dialogue was also found to be necessary when striving to enhance customer satisfaction. The experience of W3 exemplifies this. The informant emphasises the key words - asking, listening and responding:

We ask a lot of questions, but the most important thing is to listen. And react if you get a signal that something is not good - we have to respond to that immediately (W3).

Nearly all informants, who also seemed to think immediately of dissatisfaction when reflecting on satisfaction, mentioned the value of good complaint management. This issue had obviously affected informants deeply and some took the matter very personally. Despite this, they all said they valued complaints. W3 believes that a dissatisfied customer can become satisfied if complaints are welcomed and the problem is solved; many times showing the customer that you care and are trying is enough. She connects this to winning back lost confidence. Her experience is that there is more to win than to lose in handling a complaint, referring both to the chance of winning the customer back and to possible positive word of mouth:

If they tell us! Then we can do something about it. Maybe we can repair the damage. It is difficult, but a dissatisfied customer can become satisfied. Because when we respond to a complaint in the customer's favour, we show that we care about him. And we are hopefully able to build confidence again. If we solve the problem, the customer may tell his friends how well we fixed it - instead of telling them we didn't. So either way, I think you win more than you lose on a complaint (W3).

Service was also found to enhance satisfaction. W7 believes the level of service plays an important role in satisfying customers, arguing that different customers often want different kinds of services, but prefer to obtain them all in the same place, i.e. the bank, this being more convenient for them. She also stresses the value of personal service:

I think personal service plays an important part in satisfying customers. And that you have knowledge of more than one thing: we have the whole package, with law, inheritance, wills, etc. And I think they appreciate when you get in touch with them - they may not come in otherwise (W7).

Notably, although most of the informants at some point brought up the concept of loyalty - which previous research has sometimes equated with retention none of them viewed retention and loyalty as the same. Instead, the informants focused on how to define the concept, and how to enhance retention.

Most informants tended simply to define a retained customer as someone who keeps coming back. In the few cases where informants attempted to deepen the definition, they described a retained customer as one who has a good relationship with and confidence in the bank, or simply being lazy or acting out of habit. A retained customer was also experienced as being, perhaps being, or not being satisfied.

The relationship and confidence existing between the bank and the customer was used to explain why a customer was retained. The experience of W4 illustrates this:

A retained customer is someone who comes back for reasons as simple as the fact that he is recognised. He knows the staff and the staff knows him. He has confidence in the bank and in me (W4).

The experience of some informants was that customers are often retained out of habit, because the customers are too lazy to search for an alternative. W6 puts this simply:

Some customers are retained simply because they are lazy. It is very simple to continue with what they have. They stay out of habit, because their interest is not deep enough for them to engage in finding another solution (W6).

Are retained customers satisfied? The question as to whether or not retained customers are satisfied resulted in three different answers: they are satisfied, not satisfied, or might be but are not necessarily satisfied. W6 is the only one who gave the first answer. She strongly believes that retained customers are satisfied with the business they do and the relations they have in the bank:

I think so! They see the whole picture, what we can offer. If they try another bank, you haven't gained their confidence, and therefore they are not satisfied (W6).

The impossibility of satisfying everyone, and the inconvenience of changing banks, were reasons given for why some customers can be retained even though they are not satisfied. Voicing an opinion shared by many of the informants, W5 thinks that laziness is a bigger reason for retaining a customer than satisfaction. She believes that although many customers may want to change banks, for reasons such as not having a strong connection to the bank, they stay because it is more convenient than switching:

I don't think they always are [satisfied]. Because they are lazy as well. Maybe they don't know exactly how to switch banks ... and here they know the bank, and recognise faces ... I am sure a lot of people would like to change, especially younger people who don't feel a strong connection with the bank. But they stay since it is convenient to have a contact within a bank. It is like going to the dentist, I assume - you would like to go to another one, since you are not completely satisfied with the one you have, but it is easier to stay than to look for a new one. It is convenient to stay (W5).

A more indeterminate view was held by M1. For him, the question as to whether or not a retained customer is satisfied depends on how satisfaction is defined. The informant thinks customers accept the situation and stay when it is "good enough", even though they are not perfectly satisfied. He explains this by giving his definition of satisfaction, and, like many of the others, M1 connects it to the relationship with the customer. This, the informant feels, has to be good enough rather than perfect: when a customer is satisfied enough, he or she stays with the bank:

It depends on how you define satisfied. I think you are satisfied when you have an acceptable business relation. It is good enough, but not fantastic. Then I think they are satisfied. But by nature, I think we are always convinced that the grass is greener elsewhere. When a customer is perfectly satisfied, I think it means he is convinced he has the best under all circumstances - and, most of all, the best relationship with the person with whom he is making his businesses. But satisfied, it means you have it good enough, but you may be aware of or you may think that there are better solutions out there - for example, with a competitor. But there are no reasons to check it out, since you already have it good enough (M1).

How was retention to be enhanced? Again, the individual answers to this question differ, and include presentation of changes in service and products, chemistry between people, mutual confidence and good relationships, regular contact and open dialogue and handling of complaints.

Presentation of changes was regarded as enhancing retention. W1, who has been working in the bank for over two decades, finds that customers are best retained by introducing changes, which she views as a response to the changing needs of the customer. The informant meant that this demonstrates to the customer how important they are to the bank:

To try - even if they are asking strange questions - to meet them in the best possible way. It doesn't always mean the price. You can show them that we have other solutions as well. You have to bring in new things - not always the old stuff. Suggest new products, etc. Remember who they are and what they want. Make them understand they are important to us - invite them to customer meetings, special occasions (W1).

Personal chemistry was also regarded as enhancing retention. The chemistry existing between the customer and the advisor may often determine whether a customer is retained, according to W2's experience. She illustrated this by happily describing one of her customers, stressing that he stays with the bank just because he gets along with her, rather than for any other reason:

One of my customers [laugh] has done business with this bank nearly all his life. He thinks our interest rates are bad. He has one of those things that are extended every third month [laugh]. He thinks we are cheap and threatens to leave us every time (laugh). But he is very sweet and thanks me for being nice and trying to do my best for him, he is buying my arguments. He stays with us each time, even though he claims he won't. The chemistry between us is right. The "percentage" that finally makes up for it is the personal chemistry. He stays because of the chemistry, instead of leaving because of the interest rate (W2).

As with the informants' experience concerning the concept of satisfaction, most of them highly value the importance of striving for good relationships, built on mutual confidence in enhancing retention. Describing a customer, W3 immediately makes the connection to relationships. When sharing her views on how to retain a customer, she emphasises the same thing, believing that confidence and relationships are two important pieces of the puzzle:

Some people you get to know inside out, and have great conversations with. And since I have my own group of customers, they know that I know their stories, that they won't need to tell them again next time they come. You also have to be serious and loyal and you must listen. Build confidence. If you have all those pieces of the puzzle, I doubt they'll leave. It is best to have a little bit of everything, with a focus on the soft values - the personal ones (W3).

W4 has had the same experience, but emphasises the importance of the staff, arguing that staff treatment may determine whether or not a customer is retained. The informant stresses that the customer must feel welcomed by the bank, arguing that often it takes little more than simply being recognised by the employees:

I believe it has to do with the way they are welcomed and treated at the office. I don't think that customers care which bank they are customers of, as long as they feel welcomed at the branch. The people, the staff, are of great importance. Customers come back for reasons as simple as the fact that they are recognised in the bank and the staff knows who they are. They have confidence in you. Then they feel safe (W4).

In enhancing retention, regular contact and open dialogue were brought up repeatedly. Many informants placed great value in keeping in touch with their customers in an attempt to retain them. Here, individual views differ slightly as to why this contact is so important. Some think it is enough to call simply to say hello and let the customers know you are there to help them; others have learned that each contact should be used to sell something. M2, who has been with the bank over 20 years, thinks contacts should be used to deliver information, believing an informed customer will find no reason to leave:

Personal contact is important. I try to get together with my customers a couple of times a year, maybe not all of them. And some I try to meet more often. Try to keep them informed as to what we offer. Then it is up to them to decide whether or not they want to buy. I think that when you keep the customers informed, they feel they have the best and are not worried about whether the grass is greener on the other side. And if I have informed the customer as to what we have, he knows. And if he doesn't want it from me now, he won't buy it from someone else either (M2).

Another reason why one should strive for contact is to find out what the customer wants and needs. M4 puts it simply:

You have to keep in contact. Talk to them. Frequent contact - but not more than they want. You have to listen to the customer. Find out what they really want (M4).

Complaint management was also regarded as enhancing retention. Most of the informants had learned by experience that handling dissatisfaction was important in retaining a customer. M1 stressed the need to listen to customers, to let them talk, in order to resolve complaints and by that retain the customers:

I think you have to put a lot of time into a dissatisfied customer. First of all, let him tell you himself why he is dissatisfied. If you can make him tell you what is bothering him, and then try to fix that, he might stay with the bank. But if you don't give him the time, he will definitively leave (M1).

In summary, the results revealed that informants tended to perceive the concepts of satisfaction and retention in different as well as similar ways. The individuals viewed the concepts in the light of as many as nine different types of experience (Figure 1). Most of the informants referred to more than one type of experience in defining or referring to a concept. The most salient factors were a good relationship characterised by mutual confidence, regular contact with open dialogue and proper complaint handling. The latter took up a major part of many of the interviews, implying that informants have found that if complaints are not encouraged and dealt with, customers will not be satisfied or retained. Relationship and trust were also mentioned repeatedly in the interviews. The argument was that without a good relationship, business could not be conducted.

While many of their experiences were related by the informants to both satisfaction and retention, a few were not. One of these is feeling, which was used in defining satisfaction, but not retention. The reason it was not used to define retention could be very simple: satisfaction is harder to detect than retention, since the first concept relates to what the customer thinks, and the second to how he or she acts. The same goes for habit or laziness, which were used in explaining retention, but not satisfaction.

Service and changes in the products offered were two other concepts that informants connected to either satisfaction or retention, but not to both (though these two could potentially be regarded as connected: changes could, for example, mean better service). This could mean what it seems to imply: that informants differ regarding these and do not consider that changes enhance satisfaction or that better service will enhance retention. Another explanation could be that these experiences were simply not covered in the interviews, since the informants were allowed to speak quite freely, sharing their experiences in ways which were comfortable to them.

Customer satisfaction was defined in various ways; for example, a satisfied customer is one who has confidence in his advisor, recognises the value of the job being done, and understands that mistakes are sometimes made. With confidence, according to the informants, it is possible to build a good relationship. The informants' awareness of the value of having good relationships with customers, and of the importance of winning customers' confidence, indicates that those are important factors contributing to customer satisfaction.

Informants' mentioned four ways to ascertain whether a customer is satisfied or not, and all but the first are also connected with retention: feelings, chemistry, relationship and confidence and, finally, dialogue. The latter two were important when defining satisfaction as well.

It is, however, notable that rather than asking customers straight out if they are satisfied, some informants simply trust their feelings that they are. These informants believe that they know their own clients so well that they can "read" their feelings. The chemistry existing between people was also mentioned as a way to ascertain when a customer is satisfied. This makes one wonder whether the informants really know when a customer is satisfied or not. Not all informants simply trusted their feelings, though. Some had experienced that you never know unless you ask, and emphasised the importance of asking questions, listening to what the customer says, and reacting immediately. To do this, regular contact was considered necessary. This reveals that the informants define customer satisfaction and believe they recognise it, sometimes with reference to the same experiences and sometimes to completely different ones.

When sharing their experience as to whether and how it is possible to make a customer more satisfied, the theme of customer dissatisfaction was brought up repeatedly. This was so prominent in the informants' experience that it took up much of the interview time. For these informants, the concept of satisfaction was immediately connected with dissatisfaction. It seemed easier to think of a situation in which a customer had been dissatisfied, than one in which a customer had been satisfied. It was obvious that such situations deeply affected certain informants. Despite the feeling of awkwardness a dissatisfied customer can engender, the informants viewed complaints as positive and necessary. Nearly all the informants valued and encouraged complaints, well aware that the company has more to gain if the customer voices dissatisfaction to them, rather than to a friend.

The preferred way of handling complaints turned out to be listening to what the customer has to say. By listening, the real problem behind the complaint can be discovered and solved in the best way for the customer, turning dissatisfaction into satisfaction. By showing customers that you care and are willing to make an effort to solve their problems, informants also found it was possible to gain more customer confidence.

When pondering how to enhance customer retention, concepts such as dialogue and contact, relationships and confidence came up repeatedly, although the informants differed as to how these matters should be handled. Some informants found that it was enough simply to call and let customers know you were there for them, while others thought a bit of information or selling was needed each time. The need for contact in gaining trust and enhancing the relationship was emphasised. While reflecting on these matters, informants also mentioned that they must share a bit of themselves to give the customer confidence, find something in common, and welcome and listen to the customer.

The informants' continual awareness of the need for personal contact and a good relationship in enhancing retention was striking. Whether staff in other positions share the same awareness is unclear, but this group does. This may, however, be a result of their working with extended customer responsibility, i.e. having their own group of customers to care for.

As was the case in enhancing satisfaction, complaint handling was also found to be of major importance in enhancing retention. The informants desired an organisation where employees have the authority to handle complaints and quickly solve problems, thus limiting the damage to relationships with customers.

When reflecting on the connection between satisfaction and retention, the informants' opinions divided them into two groups, one believing that the satisfied customer is retained, and the other arguing that satisfaction is no guarantee of retention. The first group believed that when customers are satisfied, they have no reason to leave. In one case described in the results, a satisfied customer has built up such a relationship with the bank that he or she does not want to change banks. Another informant did not believe that a satisfied customer is necessarily retained; the argument was that if another bank offers better terms and conditions, even a satisfied customer may leave.

Reversing the concepts, looking at whether a retained customer is satisfied, revealed three different viewpoints. One informant believed that retained customers are necessarily satisfied, reasoning that when customers stay, the bank has gained their confidence and they are completely satisfied. One group of informants had found that a retained customer is not necessarily satisfied: while it is impossible to satisfy all customers, many of them are retained nevertheless. The inconvenience of switching banks was used to explain why customers who are not satisfied, or even dissatisfied, may still stay with the bank. Customer laziness was also frequently cited as an explanation - a tendency to stay because it is more convenient than switching. One informant brought the conversation back to relationships, arguing that customers can be retained because of the relationship they have with the bank, even though they may not be completely satisfied.

Some of the factors found to enhance satisfaction, such as relationship and confidence, dialogue and complaints, were also found to enhance retention. The most commonly cited factors were the importance of handling complaints, and of building confidence and strong relationships. These two factors constantly came up in interview, and all the informants seemed to have found that without these ingredients, customers would be neither satisfied nor retained. The only factors that differed in terms of enhancing either satisfaction or retention, were service and changes, the first being referred to when discussing satisfaction, the second being connected with retention.

Discussion

The purpose of this paper is to explore, from the perspective of the employees, how individuals dealing with customers interpret the concepts of satisfaction and retention. A phenomenological method was used so as to uncover the informants' experiences.

The results reveal that the informants perceive the concepts of satisfaction and retention in different ways. This is in line with the findings of Argyris and Schön (1978), that each individual in an organisation creates his or her own understanding of a phenomenon. In other words, employees create a reality of the second order (Watzlawick, 1976) out of their concepts.

The informants perceived satisfaction and retention in as many as nine different ways. Open dialogue and frequent contact with the customer was regarded as the key to customer satisfaction. This is closely connected to having good relationships, with high levels of trust, with customers. Levesque and McDougall (1996) provide a similar description, but use the words "service quality". One of the most experienced informants said you could recognise a satisfied customer when you had a good relationship with the customer, a relationship characterised by mutual confidence. No research has been found that offers a similar definition of satisfaction, although Eriksson and Löfmarck Vaghult (2000) suggest that relationships depend on satisfaction. Another important antecedent of satisfaction was demonstrated when the informants discussed how to know when a customer is satisfied. Many informants mentioned being able to feel satisfaction, and claimed that you could tell by the chemistry existing between people. This is interesting, as it demonstrates the affective nature of the construct, and illustrates the importance of knowing the antecedents of customer satisfaction.

When connecting customer satisfaction to customer retention, two interpretations were discovered: one that a satisfied customer is a retained customer, the other arguing the opposite. The informant who equated a satisfied with a retained customer, brought up the concept of relationship when explaining why customers choose to stay when satisfied. This is supported by Eriksson and Löfmarck Vaghult (2000), who argue that relationships depend on satisfaction. Athanassopoulos (2000) also regards satisfaction as an antecedent of retention.

However, the more common experience was that a satisfied customer is not necessarily a retained customer, which is supported by Reichheld and Aspinall (1993). The arguments were that customers could be offered something better elsewhere and choose to switch banks even though they might be satisfied with what they have. This is supported by Lowenstein's (1995) finding, that a satisfied customer may suddenly switch provider for no obvious reason. Appiah-Adu (1999) is of the opinion that customer satisfaction on its own cannot produce lifetime customers.

During the interviews, four different approaches to enhancing satisfaction were uncovered: relationships characterised by mutual confidence, open dialogue, complaint handling and service.

The need for good relationships, in which both parties have confidence in each other and open dialogue is possible, is in line with the findings of Eriksson and Löfmarck Vaghult (2000), who stress the importance of customer relationships. Bejou et al. (1998) also found that relationships developed and managed to suit the customer can enhance customer satisfaction.

Levesque and McDougall (1996) confirm that service and complaint handling enhances satisfaction. Their research found these to be the most important customer satisfaction determinants in banks. According to them, satisfaction can be restored, but not enhanced, when a complaint is properly handled, which is why attempts to make it right the first time are preferred. Rust and Subramanian (1992) also suggest that complaint handling helps improve satisfaction, which is supported by Johnston (2001) and Nyer (2000). Service as enhancing satisfaction finds support in Athanassopoulos (2000), who also indicates product innovation, price, convenience and business profile as determiners of customer satisfaction.

The connection between retention and satisfaction was experienced in many different ways. Only one informant believed that a retained customer is necessarily satisfied. Ovenden (1995), who argues that in order to retain a customer, it is necessary to satisfy him, supports this. Desai and Mahajan (1998) also assume that retained customers are, in fact, satisfied, and not retained simply because of habit, indifference or inertia. Johnston (2001), on the other hand, finds a weak relationship between satisfaction and retention, in line with most informants' experience. Eriksson and Löfmarck Vaghult (2000) argue that not all retained customers are satisfied, saying they may not have achieved the kind of relationship in which they can be satisfied.

The factors found to help retain a customer differed widely, including presentation of changes, chemistry between people, mutual confidence and a good relationship, open dialogue and regular contact, and handling of complaints.

Presentation of changes was felt to influence customer retention because new services or products should be offered to satisfy changing customer needs and wants. This was confirmed by Desai and Mahajan (1998), who suggest that companies must develop their products and services to meet the evolving needs of the customers, in order to retain them.

One informant explained that chemistry between people determines whether a customer can be retained. This is closely connected to the informants' experience that mutual confidence and strong relationships were important. Potter-Brotman (1994) supports this by suggesting that employees' ability to enhance customer relationships and to be good service providers affects customer retention. Eriksson and Löfmarck Vaghult (2000) view retention as depending on relationships as well, although their focus is on business relationships. The importance of confidence is also examined by Stauss et al. (2001), who indicate that a retained customer can be defined as someone who is committed, feels trust and is willing to recommend. A line could be drawn between relationships and open dialogue, since the first depends on the second. Rust and Subramanian (1992) explain the advantages of open dialogue, suggesting that in order to retain customers a company must first listen to them.

When sharing experiences pertaining to retention, nearly all the informants repeatedly brought up the keystone concept of complaints. This, too, is supported by Rust and Subramanian. They urge employees to listen to the customer as a natural step towards encouraging complaints. Levesque and McDougalls' (1996) research into customer satisfaction and retention in retail banks, also advocates effective complaint handling to enhance retention. Ovenden (1995) is more pessimistic, arguing that customers rarely complain, and when they do, it might be too late to retain them. Spreng et al. (1995) believe that by encouraging and addressing complaints, one is more likely to retain customers than by simply assuming they are satisfied.

Notably, the official aim of the bank was to satisfy customers, which, indirectly, they assumed, would lead to retained customers. The informants shared with the bank their definitions of a satisfied customer; significantly, the employees did not consider that all satisfied customers would be retained. To enhance customer satisfaction, the bank tried to eliminate the problems it had identified with the customer satisfaction index, and applied effective complaint management. This was in line with informant experience concerning satisfaction enhancement, although informants stressed that good relationships were more important. Regarding retained customers, both the bank and its employees found that, although retained, a customer may not necessarily be satisfied. The bank would not, however, go as far as the employees, who suggested that some customers stayed with the bank out of habit or sheer laziness.

One limitation of the study was that we did not have full access to the customer satisfaction index used by the bank, which contained the items used to indicate whether a customer is satisfied. This would have given us a clearer idea of how the bank defines the concept of satisfaction. Another limitation of this study is that the results cannot be generalised, since the phenomenological method we used examined how individuals experienced the concepts. However, it is rare for a phenomenological study to yield generalised results. Another limitation was that the two concepts did not receive the same attention from the employees during the interviews. Both concepts were defined, but more emphasis was placed on satisfaction than on retention. The concept of satisfaction was covered in depth, while no answer was given as to when a customer was considered to be retained. As can be seen in the results, satisfaction was viewed in more different ways by the informants than was retention. As satisfaction was the prime goal of the bank, this is hardly surprising.

Future research could examine the perspectives of both employees and managers. Our results revealed that although employees tended to think that satisfaction and retention are enhanced in similar ways, there were wide differences between how individual employees perceived the two concepts. Further research concerning the impact such individual differences might have on a company would be of great value. This study also revealed that employees strongly relate satisfaction and retention to relationships and confidence, contact and dialogue. The affective nature of this construct would be an interesting subject for future studies from various perspectives. A study comparing the experiences of managers and employees concerning the concepts would also be valuable. This study examined individual experiences of only two concepts, satisfaction and retention. Differing individual interpretations of other concepts - such as service and quality - used every day in an organisation, might also be disruptive and might also be fruitfully studied. Another field of interest could be the customers' viewpoint. What do concepts used in organisation actually mean to the individual consumer? Few or no phenomenological studies have examined this question.

In summary, the purpose of this paper was to explore how individuals dealing with customers experience the concepts of customer satisfaction and customer retention. The study found three different perspectives regarding satisfaction: the definition of what a satisfied customer is, how to know when a customer is satisfied and how to enhance satisfaction. A satisfied customer was experienced as someone with whom you have a good relationship characterised by mutual confidence, with whom you have good contact and open dialogue, or as someone who is either retained or not retained. Informants claimed to be able to know whether a customer was satisfied by just feeling it, by having the right chemistry, by the nature of the relationship or by dialogue. The latter two were also regarded as enhancing satisfaction, along with good handling of complaints and service.

Retention was believed to be enhanced in the same way as satisfaction, with the exception of service. Instead, the informants experienced introduction of changes and chemistry to enhance retention. The strongest connections between satisfaction and retention turned out to pertain to the experiences of relationship and confidence, and frequent contact accompanied by open dialogue. Complaint handling was also strongly connected to both concepts. The question as to whether a retained customer is necessarily satisfied elicited three responses: the customer is satisfied, the customer is not necessarily satisfied, and it depends on how satisfaction is experienced by the customer.

Our most relevant finding may be that the informants experienced and expressed the concepts of satisfaction and retention using many different mental models. Managers should be concerned when employee understanding of key concepts differs within the organisation, and differs also from management's understanding. When employees perceive the concepts in different ways they value them differently, which could result in diminishing service quality, dissatisfied customers and lower profitability. It is not enough for managers to define the concepts and establish goals for the employees, or even to evaluate the goals, nor is it enough for managers to guide employees on how to satisfy and retain the customers. They also need to evaluate and understand the employees' perception of the concepts.

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Table I Summary of the informants' ages, years service in the bank, occupation, years on the job, number of customers and education

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Figure 1 The connection between the informants' experiences of satisfaction and retention


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