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- “Measuring customer satisfaction in the context of a project-based organization”
Tuomas J. Ahola, Helsinki University of Technology
tuomas.ahola@hut.fi
Jaakko Kujala, Helsinki University of Technology
jaakko.kujala@hut.fi
- ABSTRACT
There is a lack of research that focuses on the suitability of the concept of customer satisfaction
and the current methods used for measuring it in organizations operating in business-to-business
(B2B) markets, such as project-based organizations (PBO), which typically provide customized
product and service offerings to a rather limited customer base. In this theoretical paper, we
discuss how certain characteristics of PBOs should be taken into consideration when measuring
customer satisfaction. In addition, we discuss the suitability of different customer satisfaction
measurement (CSM) methods for PBOs. We argue that PBOs can expect to benefit from survey-
based CSM methods. However, survey-based methods do not often suffice alone and standard
instruments should not be directly transferred from a B2C context to a B2B context. In addition,
we argue that the match between the selected CSM methods and the salient features of the PBO
in question should always be considered.
KEYWORDS: customer satisfaction, methods, project-based organization, project management
Introduction
Up-to-date information about customer satisfaction is important for successful management of
complex projects. The importance of customer satisfaction is emphasized in the case of project-
based organizations, where a customer often plays an integral role in the project delivery process.
Turner and Keegan (2001, p. 256) elegantly define project-based organization as an organization
in which:
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- “the majority of products made or services supplied are against bespoke designs for customers”
According to Kerzner (1995) the client organization can have a great deal of influence on project
success. Information about sources customer satisfaction or dissatisfaction can be used to ensure
that both project product and the delivery process meet customer expectations.
The concept of customer satisfaction, how it should be measured, and its implications for an
organization have been studied extensively in the context of traditional product-oriented
industries such as consumer goods and in the context of mass-produced services such as hotel
services or air travel services. Numerous studies and publications have almost unanimously
concluded that measuring customer satisfaction can lead to several benefits for the organization
applying it:
• CSM results can be used to discover important strengths and weaknesses in
product/service offerings and more effectively focus improvement efforts towards these
issues (Lin & Jones, 1997; Emerson & Grimm, 1999; Sharma et al. 1999; Yang, 2003a;
Lam et al., 2004).
• Depending on the industry context, CSM results may be used to estimate the degree of
customer loyalty which is vital for long-term revenues (Gronholdt et. al, 2000; Lam et al.,
2004).
• CSM enables the supplying organization to compare the performance of its different
business units in different time periods and locations (Jones & Sasser, 1995).
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- • CSM is useful for assessing the effectiveness of efforts to redesign elements of the service
delivery system (Chase & Bowen, 1991; Juran & Gryna, 1988).
• Customer satisfaction can be used as a basis for customer segmentation
(Athanassopoulos, 2000).
• According to McColl-Kennedy and Schneider (2000), measuring customer satisfaction is
not a neutral act, but an intervention. The opinions of the customer whose satisfaction is
measured can be affected by the measurement process
• CSM can be used by the supplier as a symbolic activity for demonstrating customer-
oriented behaviour (Kujala & Ahola, 2004).
Striving for high customer satisfaction can be considered important, since increased customer
satisfaction has been linked to customer behaviour that positively affects business results (e.g.
Kotler, 1994; Rust & Oliver, 1994; Vavra, 1997; Lam et al., 2004).
We did not find any academic papers focusing on CSM in a project-based B2B context and only
a rather limited number of papers that focused on CSM in a general B2B context. We presume
that in practice, many project-based organizations among other organizations operating in B2B
markets are measuring customer satisfaction with methods developed for B2C market contexts
without clearly understanding that several of the underlying assumptions inherent in these
methods are not valid in a B2B context (Rossomme, 2003; Kujala & Ahola, 2004). According to
Piercy (1996), this may lead to considering CSM as a superficial and unnecessary activity which
is likely to limit the utilization of the CSM results.
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- The research focus in this paper is to point out the key differences between traditional, product or
service offering B2C organizations and project-based B2B organizations that are relevant for
implementing CSM practices. In accordance with Kujala & Ahola (2004) we define customer
satisfaction measurement system to include entire process consisting of:
• Gathering information concerning customer satisfaction
• Assessing the validity and reliability of this information
• Using this information in decision-making processes
This wider definition emphasizes the use of information. Loomis (1999) has demonstrated that
there are significant challenges related to the use of customer satisfaction information in
organizational decision making processes.
This paper is structured as follows. We first discuss the factors that differentiate organizations
operating in B2C markets from project-based organizations operating in B2B markets and that
are relevant for measuring customer satisfaction. Secondly, we review three different methods for
measuring customer satisfaction. Thirdly, we present hypotheses that allow assessing the
suitability of these different methods for project-based organizations. Finally, in the concluding
section, we discuss the implications of our paper for project-based organizations and propose
avenues for further research.
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- Differences between B2C and project-based B2B organizations that
affect measuring customer satisfaction
In a B2C context the customer can often be clearly defined. The customer is in most cases an
individual person that purchases a specific product or a service for a specific price. For a project-
based B2B organization this is typically not the case. It is other organizations that buy projects
from the supplying organization, but individual persons within these organizations that make the
actual buying decisions. This makes defining the customer difficult. Should it be the entire
purchasing organization, or one or several individuals within this organization? Clearly, this
question has great implications towards measuring the satisfaction of the customer.
One should also consider how the concept of satisfaction is defined. Oliver (1997) defines
satisfaction as “pleasurable fulfillment”. He further links this fulfillment to an act of consumption
by the consumer. Oliver’s, like most existing definitions of satisfaction, view satisfaction as a
function of what is expected and what is experienced by the customer. But as stated earlier, the
customer is not clearly defined in a B2B context. It is important to differentiate whether CSM is
focusing on the satisfaction of the customer organization as a whole or the satisfaction of certain
individuals within that organization. These are clearly two different issues, since in the context of
a project delivery, there are several individuals involved from both the buyer and seller sides.
Another issue is the experience of consumption linked to most definitions of satisfaction. In a
B2B project delivery, not all individuals from the purchasing organization that are involved in the
project participate directly to the consumption, or use of the delivered project.
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- It is rather straightforward to reason that in a project-based B2B context, to ensure the
continuation of a business relationship, the supplier needs to keep several individuals from the
customer’s side satisfied. However, it is also typically the case that certain individuals from the
purchasing organization have more influencing power in project purchase decisions1, and thus
their satisfaction matters more that the satisfaction of those individuals who do not possess such
power (Silk & Kawani, 1982). Therefore, it can be argued that the aggregate satisfaction of the
buying organization is a rather complex function of satisfactions of individual, from an
importance viewpoint, non-equal persons within that organization. To contrast this to a B2C
context, there it is often enough if the satisfaction of one individual can be ensured to keep the
business relationship alive.
Several researchers argue that in a B2B context, measuring the satisfaction of one key informant
suffices (e.g., Pennings, 1979; Phillips, 1981; Conant et al., 1990). It can be argued that in a
project-delivery context, a relying on the satisfaction of single key informant does not produce
accurate results since, different individuals within the customer organization have differing
power to affect decision-making (Silk & Kawani, 1982) and differing satisfaction elements
(Rossomme, 2003), i.e. elements that affect the level of satisfaction, and one can argue that a
single key informant is unlikely to represent the aggregate satisfaction of the entire organization,
and even if such person did exist, it would often be very difficult for the supplying organization
to identify this person. This would require some kind of method or “influence screen”
1
This importance and power of different individuals to affect project purchase decisions can also be considered from
another viewpoint. For example, several authors refer to gatekeepers, persons who have a great amount of power to
control the information that crosses organizational boundaries. Clearly these individuals, even if they do not make
the project purchase decisions, have significant power to affect them.
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- (Rossomme, 2003) specifically designed at identifying the key informant, whose satisfaction
should then be measured. Clearly, in traditional B2C CSM, no such processes are required.
The importance of a customer account typically differs significantly between B2C and project-
based B2B organizations. Project-based organizations often have a very limited amount of
customers and are very dependent of each of these customer accounts, when in B2C context the
customer base is often large and the dependence on one account is low. This has implications for
measuring the satisfaction of these accounts, and it can be argued, that it can be worthwhile to
invest more resources in measuring the satisfaction of one customer account, when the customer
base is small, since if the results of the measurement activity are not correct, the financial
implications for losing a customer are significantly higher. This issue has direct implications
towards whether or not customer satisfaction should be measured by different methods in B2B
and B2C contexts. This question is answered in the later sections of this paper.
Another key difference between a B2C product or service provider and a B2B project-based
organization is the nature of the organization’s offering. In a B2C context, the offering is
typically either a product or service and thus the CSM typically focuses on measuring the
customers satisfaction towards some elements (or attributes) of this offering. Which attributes
should be measured and how each attribute’s relative importance should be calculated is under
continuous scientific debate. In the context of B2B project deliveries, the offering often contains
a complex product (or hardware) component, and a service component including all the
interpersonal interactions related to conducting business between two organizations. The complex
technical nature of project product, which is intended for generating revenues for customer over
long period of time, makes it difficult for the customer to give an informed opinion how satisfied
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- he is to specific product features. When comparing B2B project-deliveries to B2C product or
service offerings, it is in the former case even less clear, which attributes should be measured and
which of these two attribute-laden components (hardware and service) is more important towards
the aggregate satisfaction of the customer.
According to Granovetter (1985), embeddedness, or social bonding has great implications for
economic activity. Individual persons do not make purchase decisions solely by technical
reasoning, but interpersonal social ties significantly affect these decisions. Interpersonal social
ties and trust play a greater role in interorganizational economic exchange than they do in B2C
commerce, since B2B exchanges tend to involve significant amounts of money, risk, and persons.
According to (Crosby et al., 1990), interpersonal relationships may be strengthened by
investments to social resources such as respect, concern and advice, and according to Bolton et
al. (2003) social bonds may even be stronger than structural bonds in an interorganizational
business relationship. Social bonding between individuals is linked to past experiences between
them, and one component of these experiences is the satisfaction towards the behaviour of the
other person. Following this line of reasoning, one can argue that in B2B commerce, customer
satisfaction is affected significantly by factors that are not directly linked to the product or service
component of the offering, but to how persons from two different organizations get along. These
social bonds play a very crucial role in project-based business, since the definition of the project
is often influenced via negotiations (Cova et al., 2002). If the chemistry is not there, for example,
because of weak social bond resulting from breach of trust in a previous project, the seller will
probably find himself in a disadvantageous position.
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- One of the specific features of project business is frequent interaction and joint construction of
project product with supplier and customer during the project delivery process (Gordon et al.,
1993). Customer satisfaction is not influenced only by product and service quality, but how they
perceive the quality of project delivery process. This feature further increases the importance of
maintaining high level customer satisfaction, because satisfied customer is more willing to co-
operate and accept compromises leading to flexible delivery process (Kujala & Ahola, 2004).
Measuring customer satisfaction
In this section, we first discuss three different methods for measuring customer satisfaction, the
customer satisfaction survey, two incident-based techniques (critical incident technique and
sequential incident technique), and measuring customer satisfaction by interviews. Additionally,
we briefly discuss the use of indirect measures of customer satisfaction, such are repurchase
intentions, customer retention and profit. The purpose of this section is to point out the key
differences between these methods. Our review of these methods is primarily based on literature
covering the topics of CSM, and service quality measurement. Service quality is distinct from
customer satisfaction but the two concepts overlap considerably and their boundary can be argued
to be somewhat blurred (Robinson, 1999).
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- Customer satisfaction survey
Most academic studies and papers clearly consider CSM as an activity that is based on
standardized questionnaires that are delivered to a sample of the customer base. These
quantitative multi-attribute questionnaires are then analyzed via statistical techniques. To ensure
the reliability and generalizability of these results, the sample size needs to be considerable,
normally in excess of 50 customers per surveyed segment. Surveys are used to assess the
satisfaction of customers towards physical products and intangible services and in addition to the
traditional B2C context, they are also utilized in a B2B context (Bearden et al, 1993; Kujala &
Ahola, 2004). Most academic papers have aimed at contributing to extant knowledge by defining
the various attributes of the product or service offering to measure (e.g. Parasuraman et al., 1985;
Bolton & Drew, 1991; Bitner et al., 1990), how they should be measured e.g. should you measure
the customer’s perception of the offering (Cronin & Taylor, 1992 & 1994) or the difference
between customers expectations and experiences (Parasuraman et al., 1985 & 1988 & 1991), and
to how the relative importance of these attributes should be calculated (e.g. Green & Tull, 1975).
Customer satisfaction surveys usually fulfil three organizational needs:
• They enable the organization to compare the performance of its different business units in
different time periods and locations (Jones & Sasser, 1995).
• They can produce rich information for generating continuous quality improvement
activities, when they are examined carefully and used within a consistent framework (Lin
& Jones, 1997).
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- • They are useful for assessing the effectiveness of efforts to redesign elements of the
service delivery system (Chase & Bowen, 1991; Juran & Gryna, 1988).
There are, however, some inherent problems regarding to survey-based CS measurement. Firstly,
the amount of attributes in a survey is always limited, i.e. a survey cannot contain all possible
attributes affecting customer satisfaction, because this would make the questionnaire very long,
severely limiting the amount of customers willing to complete it. Secondly, customers have to
aggregate their product or service consumption experiences in a potentially problematic way. For
example, when rating “the friendliness of staff”, a customer has to aggregate her answer is she
has encountered friendly and less friendly staff. Thirdly, the operationalization of the satisfaction
attributes is problematic, since customers always interpret the questions contained in the survey
in more or less different ways. This decreases the reliability of the results.
Two major streams of research have emerged around how customer satisfaction should be
measured. The “gap analysis” approach examines differences between customer expectations and
the performance of the organization’s offerings (see e.g. Parasuraman et al., 1985 & 1988 &
1991). Another stream of research is the performance-based approach (or linear regression
approach) (see e.g. Cronin & Taylor, 1992 & 1994), where only the customers’ perceptions about
the performance of the company’s products and services are assessed. Overall satisfaction is then
assessed on the performance scores of various attributes. Both of these methods have their
strengths and weaknesses, which are discussed in detail in Danaher (1997). Some common
problems related to customer satisfaction surveys is their tendency to show a high level of
satisfaction, a lack of standard satisfaction scales and the proliferation and excessive use of
surveys (Altany, 1993; Mehta, 1990). Additional problems mentioned are haphazard sampling
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- procedures, the quality of survey data and instruments, non-response problems and problems
relating to reporting and interpretation of the results of the survey (Lin & Jones, 1997).
Standardized survey-based CS measurement can be argued to be based on a positivistic view of
reality. Customer satisfaction as a whole can be understood and measured when the product or
service offering is divided into several measurable attributes. These attributes then
mathematically relate to overall satisfaction.
Standardized and customized surveys
When implementing survey-based satisfaction measurement, the supplier can either utilize a
standardized and tested scale, such as SERVQUAL (Parasuraman et al., 1988 & 1991), modify a
standardized scale to better suit its business context, or develop the entire scale in-house.
Standardized scales have usually been rigorously tested for the validity and reliability of results.
However, because they are often developed to be used by different organizations operating in
different contexts, some measures involve clear compromises and do not optimally fit the
operating context of an individual organization. Customized surveys developed in-house by the
supplier have the advantage that the measures are developed with managerial knowledge and
expertise of the specific business context (Jeffries & Sells, 2000). However, their validity and
reliability is hard to verify. In addition, the results obtained with the use of customized surveys
cannot be compared with results obtained with standardized scales. This can make benchmarking
of CS difficult or impossible between organizations and if the supplier uses different customized
surveys for each of its sub-business units, comparison of CS may not even be possible between
them.
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- Critical incident technique (CIT) and sequential incident technique (SIT)
As a method for assessing customer satisfaction CIT (and SIT) allows the detailed description of
problematic customer incidents as the customers perceive them (Flanagan, 1954). CIT also
allows the categorization of the critical incidents into homogenous groups, and thus makes
limited generalization of the results possible. The underlying assumption behind critical incident
technique (CIT) is that customer satisfaction is strongly affected by very positive or negative
experiences in the product/service delivery and consumption processes. These two techniques
have been used primarily in the B2C service context (Bitner et al, 1990), but have also been
successfully applied in B2B contexts (Lockshin & McDougall, 1998; Franco et al., 2004). By
systematically documenting critical incidents, the supplier organization can gather valuable
information regarding to the events that have very significantly affected the satisfaction of its
customers. Sequential incident technique (SIT) is very similar, but it also records usual events
that do not affect customer satisfaction in the same degree than critical incidents do. Both
techniques use qualitative interviews to collect customer incidents. Collected data is then sorted
into groups containing similar incidents.
The main strengths of CIT and SIT are as follows:
• They have the ability to record incidents, which significantly affect customer satisfaction
in a manner that is very natural to the customers (Flanagan, 1954; Nyquist & Booms,
1987).
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- • They are not limited to a set of pre-determined attributes that can or cannot capture the
key events significantly affecting the satisfaction of individual customers.
• They are able to produce very detailed descriptions of the events behind satisfaction or
dissatisfaction, descriptions that are often useful for product or service development
functions (Bitner et al., 1990; Nyquist & Booms, 1987).
The key weakness of CIT and SIT is that when recording the customer incidents, they cannot
determine the relative importance of these incidents (Stauss & Weinlich, 1997). Some incidents
have more influence and the satisfaction of some customers is more easily influenced, and this is
not taken into account in these techniques. To tackle this problem, Edvardsson and Roos (2001)
proposed a technique for analyzing the criticality of critical incidents from a customer viewpoint,
but there is no evidence supporting the widespread use of this technique.
From an epistemological viewpoint, CIT and SIT is based on an interpretative or constructivist
view of reality. To understand when and how customer satisfaction has been affected, the
supplier utilizing CIT or SIT does not concentrate on isolated elements but tries to gain a holistic
picture of the events and their interrelations that together form customer satisfaction or
dissatisfaction.
Measuring customer satisfaction by interviews
The interview method for measuring customer satisfaction provides a qualitative approach, which
avoids many of the problems associated with the survey method. Interviews can be arranged in
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- several different contexts such as individual customer visits, focus groups and customer seminars
(Yang, 2003b). However, there have been no studies focusing on how widespread and systematic
the use of interviews for assessing customer satisfaction is in a project-business context. The
utilization of interviews to measure customer satisfaction can result in several benefits:
• They encourage the customer to discuss various elements and incidents affecting
customer satisfaction in great detail. This information can then be used by the supplier to
improve its operations.
• Because in a B2B project-delivery context, the supplier is typically in contact with several
customer personnel, interviews allow the supplier to gain a holistic view of how different
individuals perceive the supplier and which persons within the customer organization are
most important for aggregate satisfaction of the customer organization.
• They can promote interpersonal bonding between customer and supplier personnel.
• The interviewing situation involves two-way interaction and gives the supplying
organization the possibility to explain why it has behaved in certain ways. For example, a
person within the customer organization can be dissatisfied with the supplier organization,
but if the supplier is capable of giving a solid explanation of what has happened and why
as well as provide a solution that will correct the situation, a considerable positive impact
towards the satisfaction of the customer is possible.
A major drawback of using interviews for measuring CS is the method’s very limited ability to
produce generalizable results, since interview data that is not based on strictly structured, formal
interviews is so context dependent that it often cannot be generalized. Another key weakness of
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- the interview method is the fact that it is very resource consuming. Both the supplier and the
customer need to allocate a significant amount of their employees’ time to the process.
From an epistemological viewpoint, the customer satisfaction interview is based on an
interpretative or constructivist view of reality. The supplier aims to understand how satisfied
different individuals at the customer organization are, what are the reasons behind satisfaction or
dissatisfaction and how these different individuals, with differing possibilities to affect the
customer organization’s decision making, and their satisfaction contribute towards the
satisfaction of the customer organization as a whole. In this case, the measurement of CS includes
the identification of key individuals and their relative importance and the measurement /
assessment of each key individual’s satisfaction or dissatisfaction and the underlying reasons.
The interviewing skills of the person conducting the CS interviews are essential in ensuring the
validity and reliability of the results.
Summarizing our argumentation, Table 1 presents the key dimensions, which differentiate the
three discussed methods for measuring customer satisfaction.
TABLE 1 – Common methods for measuring customer satisfaction and their key characteristics
Methods for measuring customer satisfaction
Characteristics Standardized or Critical incident technique Interview (telephone or
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- of methods customized customer (CIT) & Sequential incident personal)
satisfaction survey technique (SIT)
Formality High / moderate Moderate Low
Underlying Satisfaction is attribute- Satisfaction is incident-based Satisfaction is based on how
Assumption(s) based individual persons’
expectations towards the
supplying organization are
met
Customer base Large Medium / small Medium / small
Sample size Statistically significant Limited sample of customer Limited sample of customer
proportion of customer base base
base
Sample Homogenous segments Typically a group of Heterogeneous customer
homogeneity can be identified homogeneous customer base with differing needs
personnel (e.g. end-product
users)
Analysis of Quantitative Mostly qualitative – content Qualitative
data analysis, grouping incidents
into heterogeneous
categories
Typical Mass-produced Services, both mass- Customized consumer
industry consumer goods and produced and customized services, B2B services, B2B
context where services project-delivery
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- applied
Results Product / service Service development Managing individual
commonly development function, function, individual service customer relationships,
used for Benchmarking employee feedback, service managing ongoing projects,
recovery service recovery
View of reality Positivistic Interpretative, constructivist Interpretative, constructivist
Validity of Selection and The ability to correctly Selection and skills of the
results depends operationalization of discuss and record incidents interviewers
on attributes
Reliability of Stability of measures The ability to generalize Selection of interviewers and
results depends and response bias incidents into homogeneous informants
on categories
Limitations -Limited number of -Results can often not be -Very time consuming for
attributes generalized supplier and customer
-Forced aggregation of -Difficult to analyze data -Hard or impossible to
experiences with statistical methods generalize results
-Differing
interpretations of
survey questions
Indirect measures of customer satisfaction
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- In addition to measuring customer satisfaction directly by the methods discussed earlier, it can
also be measured indirectly based on different factors such as customer retention, product prices
relative to competitors’ products, process efficiency or ultimately even profit level. Customer
satisfaction has been proven to have a positive correlation with customers’ repurchase intent
(Cronin & Taylor, 1992; Oliver & Swan, 1989). Rust (1994) provides a detailed model of the
influence of customer satisfaction on financial performance. However, studies focusing on the
relationship between customer satisfaction and profits have produced somewhat conflicting
results. Some researchers (Nelson et al., 1992; van der Wiele et al., 2002) have shown a positive
correlation between customer satisfaction and profits, while other researchers such as Tornow &
Wiley (1991) discovered a negative correlation between customer satisfaction and financial
performance.
Indirect measures of customer satisfaction provide simple ways of assessing the state of customer
satisfaction. They do not consume very much of the suppliers resources, but it must be noted that
they are always based assumptions about that customer satisfaction correlates positively with
these measures of organizational effectiveness and efficiency. There is very limited amount of
studies that focuses on impact of customer satisfaction in project-business. I can be also argued
that in project-business each customer relationship is specific and thus solely focusing on indirect
measures involves a very high risk of making wrong conclusions. For example, high customer
retention may be the result of supplier being able to sell to the customer in a situation in which
they have no viable alternatives, even if the customer is dissatisfied with the supplier. We also
note that the above mentioned studies focusing on indirect measurement of CS do not directly
focus on project-based business, and their generalizability to a project-based B2B context is
questionable.
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