Customer Satisfaction in China's Emerging Realty Market

Market Orientation and Customer Satisfaction Theory

It would appear, from work done by Pelham, that there is no reason to attempt to achieve customer satisfaction in any industry except to create significant company performance improvement. He constructs this argument by noting that results indicate that, "compared to strategy selection, firm size, or industry characteristics, market orientation has the strongest positive relationship with measures of performance. The most influential market orientation elements are fast response to negative customer satisfaction information, strategies based on creating value for customers, immediate response to competitive challenges, and fast detection of changes in customer product preferences" (Pelham, 2000, p. 48). He also attempts to move the idea out of the academic sphere — which holds that "customer needs should drive the firm's decisions" (Pelham, 2000, p. 48) — and into practice, particularly in small and medium-sized firms. Arguably, these constitute a great many of the realty firms in China at this nascent period of Chinese commercial and private residential real estate.

Indeed, Pelham's work echoes Levitt's (1960) finding that firms adopting this philosophy and converting it into action will see superior performance.

Market orientation is, in fact, the underlying factor operative in customer satisfaction. Narver and Slater defined market orientation as the "organization culture that most effectively creates the necessary behaviors for the creation of superior value for buyers and, thus, superior performance for the business" (Narver and Slater, 1990, p. 21). The definition implies that the firm will understand its need to perform activities that are most likely to achieve superior customer satisfaction.

Other researchers who contributed to the understanding of market orientation and its relationship to customer satisfaction were Kohli and Jaworski (1990), who tested a more comprehensive model than either Pelham or Narver and Slater had tested, but arrived at similar conclusions: customer satisfaction is more important to the success of a firm than customer understanding or competitive orientation dimensions of the company's marketing efforts. The work of all three indicated that understanding customer needs could, along with knowing competitor capabilities, be an important determinant of performance. There was one caveat, however, common to all three studies: these findings held only when high levels of behaviors designed to increase customer satisfaction were also present. Also paramount, according to Pelham, Kohli and Jaworski, and Narver and Slater, was quick response to negative customer satisfaction information and competitive campaigns targeting the firm's customer base.

Pelham gathered the results of his own studies and those of Kohli and Jaworski and Narver and Slater to provide a range of action steps. He noted that monitoring customer satisfaction and the activities of competitors should be done, and that responding quickly to both opportunities and threats discovered thereby was also important. He argued that success depends on an understanding of how to create superior value for a firm's customers — but that this must not be based on industry conditions alone, but rather on the pro-active efforts of the company with respect to customer satisfaction. Pelham notes that:

"The chief executive must increase his/her personal attention to customer satisfaction and must challenge the adequacy of current assumptions about the relationship between product benefits and customer needs in order to improve the firm's understanding of its customers" (2000, p. 48).

Certainly, Pelham's translation of a theory of customer satisfaction into a call to action is of value to the emerging realty market in China.

Jacoby, Johar, and Morrin reported on a great deal of research in an attempt to find the locus of consumer satisfaction, including research that addressed attribute satisfaction, information satisfaction, and the impact of marketing communications. Others, such as Arnould and Price (1993), studied individual businesses — in their case, white-water rafting — and suggested there was only a weak link between expectations and consumer satisfaction. More valuable was the broader work of Ostrom and Iacobucci (1995), which suggested that customer satisfaction is based on different attributes for different types of services. In short, in Chinese realty, the link between expectations and consumer satisfaction might be either weaker or stronger than it is in white-water rafting. A corollary to that finding was proposed by Johnson et al. (1995), who demonstrated that customer expectations and consumer satisfaction are dynamic in nature.

Consumer Loyalty, Brand Research, and Satisfaction Measurement

Schultz and Bailey noted that it is relatively easy to measure customer consistency and longevity. However, they also noted that researchers have found it difficult to explain why otherwise satisfied customers — "or at least those who claim satisfaction in various research situations, often drift away from the company or the brand" (2000, p. 41). They offer a timeline of knowledge and theory concerning customer satisfaction, examining briefly the "heavy half" theory and Haley's "benefit segmentation" theory; both, they claim, focused on how customers behaved in the marketplace.

That was all before the 1960s, when research began to focus on the economics of information — that is, the "cost and ability of consumers to search for information about alternatives and to understand brand choices" (Schultz and Bailey, 2000, p. 41).

Jacoby and Kyner (1973) sought to differentiate brand loyalty from repeat purchasing behavior, and suggested that loyalty might be based on buyer psychological factors. Their work was expanded in 1978, when Jacoby and Chestnut published Brand Loyalty: Measurement and Management, which provided the foundation for understanding how consumers relate to, decide among, and purchase various brands.

After supermarket scanner data became available in the 1980s, research shifted toward consumer choice: "direct marketers and catalogers began to develop very sophisticated approaches using regression, CHAID, CART, and other statistical techniques. There, the focus was almost entirely on observable consumer behaviors in the form of longitudinal purchase occasions" (Schultz and Bailey, 2000, p. 41). Jones and Sasser (1995) and Reichheld (1996) subsequently proposed an economic value of customer loyalty.

All of these developments came from the marketer's perspective, with little involving direct responses from consumers regarding what their brand loyalty actually was (Schultz and Bailey, 2000, p. 41). Schultz and Bailey lamented that so little had been done on the consumer side, and noted with concern that the research conducted on consumer satisfaction involved the "rapidly developing electronically driven markets of the United States, United Kingdom, Scandinavia, Australia, Japan, and the like." They proposed that it was "time to revisit what is known about the consumer view of brand or customer loyalty" (2000, p. 41).

Hall investigated customer satisfaction in the context of the United States federal government. Although this would seem to have limited application to the current issue, Hall noted that customer satisfaction means something different in a governmental setting than in a commercial one. Because of China's recent history, some of her findings may be useful for understanding the realty market and its relationship to customer satisfaction in China. Hall's relevant observation is worth quoting at length:

The American Customer Satisfaction Index and Government Applications

"In the federal sector, loyalty is not as important a component of customer satisfaction as it is for the private sector. For most federal sector services there are no alternative sources. The natural market forces, which drive private sector organizations, generally are not present. Rather than repeat customer business, customer satisfaction in the federal sector is generally represented by trust citizens have in the overall operations of the government" (2002, p. 23+).

Because of the recent — and in many ways continuing — overwhelming presence of government mandates and expectations in China, trust may well turn out to be a primary factor in consumer satisfaction concerning realty transactions in China.

Moreover, Hall's findings were based in great degree on the American Customer Satisfaction Index (ACSI), which in turn is based upon the Swedish Customer Satisfaction Barometer. In the United States, the ACSI has been in use since 1994. It uses customer surveys and econometric modeling, incorporating a computer-assisted telephone interview function to collect responses to specific survey questions concerning perceived quality, expectations, satisfaction, and dissatisfaction or complaints (Hall, 2002, p. 23+). A computer-based econometric model is then used to predict the power of various activities believed to be the drivers of satisfaction.

Hall notes, however, that it is not logical to simply use drivers believed to be responsible; rather, one must find out what drivers actually are responsible. She gives the example of a motor vehicle department that consistently earned low ACSI scores. Believing that long lines were the problem, they increased the number of clerks and shortened the lines, but the scores remained low. After collecting data from customers, they discovered that the lines were not the problem at all; rather, customers objected to unflattering photographs on their license cards. "In fact, [consumers] were willing to stay in line 20 to 30 minutes to obtain a better photograph since they would not have another photo for four years" (Hall, 2002, p. 23+).

The ACSI model has two major drivers: customer expectations and perceived quality. While other instruments can be used, the best reason to adopt the ACSI is that it quantifies customer satisfaction in ways that allow comparison with other groups, thereby enabling a business to answer not only the question "How are we doing?" but also to determine how it is doing in relation to a standard or to others. In addition, repeating the ACSI can provide trend data (Hall, 2002, p. 23+), which is important both to government agencies and to new industries. Hall notes that "besides the ability of the ACSI to maintain a pulse on customer satisfaction, the ACSI is an index, not just a survey. This means it groups all participants and provides an integrated score, or index" (2002, p. 23+).

Schay et al. reported that the United States federal Office of Personnel Management uses a similar instrument that measures nine core dimensions underlying customer satisfaction. "These dimensions were distilled from 139 dimensions identified in the management, marketing, and organizational psychology literature. The dimensions are empirically related to organizational effectiveness and relevant to all service sectors" (Schay et al., 2000, p. 30), and would therefore need to be developed specifically for each industry.

While the ACSI is the dominant measuring tool in much of U.S. consumer satisfaction research, the Kano system has arisen in Japan for the same purpose. It is widely known that the Japanese economy runs on businesses that believe quality is paramount and that Total Quality Control (TQC) is the most important function. "Some Japanese quality experts believe that Japanese TQC has no intrinsic value beyond the pursuit of customer satisfaction and quality assurance" (Gitlow, 1994, p. 197+).