Do managers know what their customers think and why?

Abstract

The ability of a firm’s managers to understand how its customers view the firm’s offerings and the drivers of those customer perceptions is fundamental in determining the success of marketing efforts. We investigate the extent to which managers’ perceptions of the levels and drivers of their customers’ satisfaction and loyalty align with that of their actual customers (along with customers’ expectations, quality, value, and complaints). From 70,000 American Customer Satisfaction Index (ACSI) customer surveys and 1068 firm (manager) responses from the ACSI-measured companies, our analyses suggest that managers generally fail to understand their firms’ customers in two important ways. First, managers systematically overestimate the levels of customer satisfaction and attitudinal loyalty, as well as the levels of key antecedent constructs such as expectations and perceived value. Second, managers’ understanding of the drivers of their customers’ satisfaction and loyalty are disconnected from those of their actual customers. Among the most significant “disconnects,” managers underestimate the importance of customer perceptions of quality in driving their satisfaction and of satisfaction in driving customers’ loyalty and complaint behavior. Our results indicate that firms must do more to ensure that managers understand how their customers perceive the firm’s products and services and why.

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Notes

  1. 1.

    Consumers surveyed by the ACSI are asked questions with regard to a specific product/service brand rather than the company marketing the brand (where these are different). These named brands are the largest that a company will sell in that specific marketplace. In many cases, companies have only one brand in that marketplace, or one major brand that most consumers will have experienced. However, as a robustness check we compared our results for the whole sample with those for the subset of companies in our sample marketing only one brand in the same ACSI industry and did not find any significant differences.

  2. 2.

    As a robustness check we also examined the impact of using 2010 ACSI consumer data, and the conclusions of the analyses remain largely unchanged. This is not surprising, as company-level ACSI satisfaction results tend to exhibit a significant amount of autocorrelation.

  3. 3.

    The standard ACSI structural model typically includes a 14th survey item, a question regarding price tolerance/reservation price included in the customer loyalty latent variable. This question asks the respondent to indicate how much the company could raise the price of the product/service/brand experienced before he or she would definitely defect to a competitor. During questionnaire design and pre-testing with academics and managers, it was determined that this question would be too difficult to meaningfully adapt to the marketing manager questionnaire, and it was therefore excluded from both samples.

  4. 4.

    As part of the qualification/eligibility validation process, the responding managers were asked to respond to the statement, “I have great knowledge of our company’s customers” using a 10-point Likert-type scale ranging from “strongly disagree” to “strongly agree.” Respondents reported an average score of 7.89 (standard deviation = 1.82). In all of the analysis that follows, we limited our sample of manager-respondents to only those who answered above average on the “knowledge of their company’s customers” question, i.e., scoring 8 or higher.

  5. 5.

    One of the two variables for which this is not the case is the percentage of customers who have complained about their experiences with the firm’s products/services within the past 6 months. While the manager sample number is lower than that self-reported by customers, this is also a further indicator of a “rosy view” bias among managers.

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Correspondence to G. Tomas M. Hult.

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Constantine Katsikeas served as Area Editor for this article.

Appendices

Appendix 1

Table 8

Table 8 Survey items, item wording, and scale

Appendix 2

Table 9

Table 9 Companies included in sample

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Hult, G.T.M., Morgeson, F.V., Morgan, N.A. et al. Do managers know what their customers think and why?. J. of the Acad. Mark. Sci. 45, 37–54 (2017). https://doi.org/10.1007/s11747-016-0487-4

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Keywords

  • Organizational learning
  • Customer satisfaction
  • Customer orientation
  • American Customer Satisfaction Index (ACSI)