Customer Satisfaction

Before studied the relationship between customer satisfaction and profit and the relationship between employee involvement and profit, it is important to make clear what are meant by “customer satisfaction”, “employee involvement”, and “profit”.

Customer satisfaction measures how well the expectations of customer concerning a product or service that provided by a firm. There are two different conceptualizations of customer satisfaction. The first one is transaction-specific, from this perspective, customer satisfaction is viewed as a post-choice evaluative judgement of a specific purchase occasion. The other is cumulative, from this perspective, cumulative customer satisfaction is an evaluation based on the total purchase and consumption experience with a good or service over time. Transaction-specific satisfaction may provide specific diagnostic information for a particular product or service encounter, and cumulative satisfaction is a more fundamental indicator of the company’s past, current, and future performance. (Anderson, E. W, 1994) In addition, customer satisfaction involves several factors, like the quality of the product, the quality of the service offered, the environment of the place where the product and service is purchased, and the price of the product and service.

Profit is reflected in decrease in liability, increase in asset or owners’ equity. For financial benefit, when the amount of revenue from a business activity more than the expense, cost and tax. Profit always goes to the business’s owners, who may or may not decide to use it on the business.

        In the basic explanation, employee involvement is the employees decide how they work is done, make advice for improvement, make a goal or plan, and monitor their performance. In addition, employee involvement is a management and leadership philosophy, and it is about how employees are most enabled to contribute to continuous improvement of their work organization. Employee involvement is also making an environment in that employees have an impact on decision-making and actions that affect their works.

Customer satisfaction and profit

There are several key benefits of high customer satisfaction for a company. For example, high customer satisfaction could reduce price elasticities, lower costs of future transactions and reduce failure cost. Increased customer satisfaction means more customers will buy in the future. If the firm’s customers have strong satisfaction, it could ensure a steady stream of future cash flow, so it should be reflected in the company’s economic returns.

The more customer satisfaction, the longer they are continually to purchase from the goods, and the more profit that company gain. For example, there are four co-workers that regularly patronize a restaurant close to their workplace, and they all have high satisfaction with the restaurant. If the average price of a meal is $10 and they visit the restaurant four times a week, the annual revenue received by the establishment is around of $6,000. One hundred similarly high satisfaction customers would be worth $200,000. This group would be worth a million dollars over the next five years. The net present value of the established margin from these high satisfaction customers reflect their asset value to the restaurant. Increasing customer satisfaction increases the value of a firm’s customer assets and future profitability.