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Customer satisfaction is a core of every business. Company`s profitability, reputation, sales, service, image -  all these factors depend on customers, therefore, they must always be treated at its best. In the modern economy, the equilibrium between customer satisfaction and company`s profitability is a key to any business success. Many authors and scientists give various definitions on customer satisfaction. In the following paragraph, the most common definitions of customer satisfaction will be introduced.  

2.1.2 Definition of Customer Satisfaction

Kotler and Keller gave the most comprehensive definition of customer satisfaction. They defined it as follows: “person\'s feeling of pleasure or disappointment which resulted from comparing a product\'s perceived performance or outcome against his/her expectations” (Kotler and Keller 2006, 144.)

According to Rai (Rai 2008, 7.), the formula for customer satisfaction is the following: customer satisfaction equals customer perception of the service received minus customer expectation of the customer service. Referring to this formula, the conclusion is that if customer's perception of the service exceeds customer's expectation then a customer stays satisfied as well as the opposite; if customer's perception is less than customer's expectations then a customer gets dissatisfied.

Tse and Wilton identified customer satisfaction as ‘'the consumer's response to the evaluation of the perceived discrepancy between prior expectations (or some norm of performance) and the actual performance of the product as perceived after its consumption''. (Tse & Wilton 1988, 204.)

According to Gerson, customer satisfaction is a customer's perception about the expectations that have been or have been not met. The buyer obtains the product or service and expects it to work well. If it does, the customer is satisfied if it is not, the customer is dissatisfied. (Gerson 1993, 5.)

2.1.3 Factors Determining Customer Satisfaction

As it was mentioned before, customer satisfaction is a key to a company`s success, therefore, the goal for every organisation is to keep track of customer satisfaction level on the continuous basis. There are few main factors determining customer satisfaction. The scheme below explains those factors in details:

Figure 2. The Scheme of Customer Satisfaction and its Determinants (Gegeckaitė 2011).

First, the opinion about the product itself is formed long before obtaining the service (primary expectations, opinion, impression), therefore the very first impression of experiencing the service is crucial for the company's future success. When the customer finally gets to experience a service or product, there are two outcomes:

 If customer`s expectations were met or exceeded, a customer stays satisfied

 If customer`s expectations were higher than service provided, a customer gets dissatisfied

The factor which influences future satisfaction or dissatisfaction is customer's first impression (behaviour, emotions, reaction, experience). It depends on how the customer was welcomed (employee's competence, friendliness), on the quality of the service provided, physical environment, price/quality ratio of the service, etc. Businesses should consider each of those factors to keep customers happy and satisfied.

2.1.4 Kano Model of Customer Satisfaction

The Kano model of customer satisfaction was developed by Dr. Noriaki Kano and his colleagues in 1984 to categorise the attributes of a product or service, based on how well they can satisfy customers' needs. (Kano et al., 1984.) The graph below pictures the process of the model:

Figure 3.  Kano Model of Customer Satisfaction (Berger et al. 1993, 2).

The model shows a connection between a product/service performance and customer satisfaction. It reflects three types of product requirements which influence customer satisfaction in diverse ways.

The first requirement is so called ‘'must-be requirement''. This is a very basic requirement of a product or service for every company since if this requirement is not fulfilled the customer will not be interested in a product at all. Very often customers take this attribute for granted therefore the satisfaction is not increased but stays stable instead.

The one-dimensional requirement is corresponding with the fulfillment level meaning that the better requirement is fulfilled the more customer is satisfied and vice versa. One-dimensional requirements are usually technical and easily measurable.

Attractive requirements have the biggest influence on customer satisfaction level. It is not expected by the customer, hence there is no dissatisfaction if the requirements were not met. If this requirement is totally fulfilled the customer is more than satisfied. (Elmar Sauerwein, Bailom, Matzler, & Hinterhuber 1996, 1-2.)

2.1.5 Advantages of Kano model

There are a few advantages of using the Kano model:

 The criteria of the product or service with the biggest influence on customer satisfaction can be easily identified

 Must-be requirement is already on the satisfactory level, hence there is no use to improve it

 For the increase of customer satisfaction, it is better to improve one-dimensional or attractive requirement

2.2 Service Quality

2.2.1 Introduction

The service industry requires close employees and customers' interaction. The outcome of this interaction leads either to high or low service quality level. The high level of service quality attracts more customers and allows to build a big and loyal customer base. The quality of the service is determined by customers' perception of the service meaning customers' satisfaction or dissatisfaction. The research shows that it is much harder to obtain new customers than keeping the existing ones. (Tricia Morris, 2016.) Nowadays companies invest a considerable amount of money into different management programs where they can learn how to obtain and keep new customers. It is worth investing into these programs because the loyal customer base is an index of a good quality service. As William Foster says, “Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction and skillful execution; it represents the wise choice of many alternatives.” William A. Foster (Goldstein, 2009.)

2.2.2 Definition of Service Quality

There are a number of different definitions of service and service quality. Philip Kotler, for example, identified service as ‘'an act or performance that one party can offer to another that is essentially intangible and does not result in transfer of ownership'' (Kotler et el, 2012.)

Asubonteng gave the following definition of service quality: ‘'service quality can be defined as the difference between customer expectation for service performance prior to the service encounter and their perceptions of the service received''. (Asubonteng et al, 1996.)

Service quality is an assessment of how well a delivered service meets customer's expectations. Businesses shall assess the service quality provided to their customers to improve the efficiency of the service, to quickly identify problems, and to better assess client satisfaction. (BusinessDictionary 2017)

2.2.3 Dimensions of Service Quality. SERVQUAL model

The service quality measures how well service meets customer's expectations. Every customer has different expectations what makes service quality an important challenge to any business owner. Customers will take several dimensions into account when determining service quality of a business. Zeithaml, Parasuraman, and Berry identified five dimensions to evaluate the quality of the service: reliability, tangibles, responsiveness, assurance and empathy. (Parasuraman et al. 1985,41-50.) They called it SERVQUAL model for the quality control. Business owners must always consider all dimensions to provide the highest quality service possible:

 Reliability is the most important dimension in the service quality meaning to be able to provide the service in the way that it was promised to the customer. It is important that businesses can fulfill the service they advertise. For example, if the product was promised to be delivered in thirty minutes then it must be delivered within this time frame and this is the factor called reliability

 Tangibles consist of the physical environment of the service. It can be design of the building or an office or appearance of employees

 Responsiveness means responding to a customer within a certain time frame. It is very important that businesses can respond to a customer efficiently. For example, if the customer calls with a complaint or request about a product or service received, the issue must be solved immediately and not postponed for the next time

 Assurance involves knowledge, competencies, and skills of employees and their ability to educate their customers

 Empathy shows individual approach to every customer

2.2.4 The Eight-Point Framework for Delivering the Service

Ability to manage customers' complaints is one of the key elements of every company`s success. Nowadays many companies do not pay proper attention to this branch of the business due to the big scope of work they have. Businesses do not analyse the content of the complaints what leads to the same mistakes and, hence, customers' dissatisfaction. To avoid it, companies shall learn more on how to manage customer`s complaints in the most efficient way possible.

The eight-point framework for delivering the service was developed to manage and approach any customer service in a proper and effective way. The framework consists of eight distinct functions of the organisation – four tactical service functions which handle customer contacts and four strategic service functions which are focused on HR (Human Resource) department and information flow. The original functions in the complaint-handling framework were derived from an analysis of more than five hundred corporations. The framework has been able to sustain customer service process by managing customer complaints and developing customer relationship management (CRM) strategies. (Goodman 2009, 113.) In the next paragraphs, both tactical and strategic service functions will be introduced.

The tactical service functions consist of the several activities: intake, response, output and control. Those are the tasks involving daily interaction with the customers. (Goodman 2009, 112.) The main goals of the tactical functions are:

 to ensure that corporate social responsibility (CSR) considers each customer`s problem or complaint

 to manage answers and complaints and solve it in the most efficient way

 to store given information and to be able to analyse the frequency of the problem and roots of it

The table below shows all tactical service functions and its activities:

Tactical Service Functions Functions

Intake Response Output Control

Screening Response Investigation Coordination Internal Follow-up

Logging Contact Data Response Formulation Storage, Retrieval, and Distribution Referral Follow-up

Classifying Contacts Response Delivery

Table 1. Tactical Service Functions and its activities. Adapted from ‘'A Framework for Organising Customer Service Activities by Function'' (Goodman 2009, 114).

The tactical service functions include ten activities:

Intake:

 Screening divides contacts by distinct types and if needed forwards them to the appropriate channel

 Logging Contact Data records customer's complaints or other issues electronically or in a paper form

 Classifying Contacts codes each contact according to its type (Goodman 2009, 114.)

Response:

 Response Investigation takes individual customer`s requests and investigates all factors needed for the answer

 Response Formulation uses response investigation material and answers to the customer in the most appropriate way with an individual approach

 Response Delivery transmits answers to the customer via call, email, letter or voice message

Output:

 Coordination makes sure that all members of the group in the organisation are aware of customer`s issues and can communicate the message in a right way

 Storage, Retrieval, and Distribution stores customer`s requests and complaints data in the central location and makes sure that all users have access to it

Control:

 Internal Follow-up monitors disposition of data handled within the organisation and follows up the progress using various techniques

 Referral Follow-up monitors complaints handled by third parties or other organisations and headquarters (Goodman 2009, 115.)

The strategic service functions consist of the analysis, evaluation and incentives, staff management and awareness activities. The activities enable an organisation to improve the experience for most customers. It helps to analyse customer`s information, identify a problem and improve the procedures. The strategic functions are focused on the customer`s experience value. (Goodman 2009, 113.)

The table below shows all strategic service functions and its activities:

    Strategic Service Functions

Analysis Evaluation and Incentives Staff Management Awareness

Statistical Generation Evaluation Recruitment Contact Solicitation

Opportunity Analysis Incentives Training Proactive Communication

Input to the Organization Accountability Supervision and Scheduling

Table 2. Strategic Service Functions and its activities.  Adapted from ‘'A Framework for Organising Customer Service Activities by Function'' (Goodman 2009, 114).

The strategic service functions include eleven activities:

Analysis:

 Statistical Generation combines all data gathered from complaints and requests handled

 Opportunity Analysis identifies systematic problems that prevent customer's loyalty

 Input to the Organisation summarises the outcome of the process and gives certain recommendations to the head of the department

Evaluation and Incentives:

 Evaluation assesses the performance of complaint handlers and focuses on the improvement of the response process

 Incentives provide employees with the rewards to stimulate better work and effectiveness

 Accountability assigns certain responsibilities for handling complaints and preventing problems and evaluates the performance afterward (Goodman 2009, 116.)

Staff management:

 Recruitment seeks for the competent employees in certain area being able to work either in the office or distantly

 Training provides staff with the educational training where everyone obtains specific skills via role playing or other methods

 Supervision and Scheduling makes sure that both parties are satisfied with their work and schedule and that the workload equals to the time given

Awareness:

 Contact Solicitation informs customers that organisation is very eager to take every complaint and educates them about the availability of the service

 Proactive Communication educates customers on how to avoid any issues purchasing the product or obtaining the service (Goodman 2009, 117.)

2.2.5 Quality Control

All companies should keep track of their businesses in order to succeed. Quality control is a process which helps companies to check the quality of a service or product as well as to check employees' work. It reduces mistakes and lowers risks at the workplace. For example, to motivate employees and provide them with qualification opportunities the company can implement various qualification courses for the better effectiveness of the staff.

There are four main types of quality control:

- The process control means that process of producing a product or delivering any service is functioned properly with all set rules. The example in a restaurant industry can be food preparation. An organisation has to make sure that everything is prepared for the process so that it goes smoothly

- The acceptance sampling. This is a process of sampling a product or service. Sometimes it can be too costly for the company to make a sample of a product, however, it has to be done in order to meet the company's specific needs

- The control charts. It helps a company to analyse a variation in the process. It gives opportunity to double check the actual process

- The product quality control focuses on a product itself to make sure that it meets company`s standards. During this stage, a company has to make sure that nothing is missing and all stages of the process are completed (Study.com)

2.3 Importance of Customer Satisfaction and Service Quality Measurement

2.3.1 Introduction

Whenever something is being measured, as a result it usually gets better, improved and completed. This is the reason why measurement techniques have become the important part of quality improvement. That has also become the reason why so many organisations nowadays are starting to measure their customers' satisfaction level. When the company has quantitative or qualitative figures, it easier to analyse certain factors to improve company`s efficiency. (Gerson 1993, 6.)

2.3.2 The Importance of Measuring Customer Satisfaction and Service Quality

To measure something, it is essential to understand the reasons underneath the process. According to Richard Gerson, measurement programs must answer the following questions: who, what, when, where, how and why something needs to be measured. (Gerson 1993, 23.). Below, there are six main measurement program questions which are essential for the company's success:

Who must measure the quality? Everyone

What must be measured? Everything that affects the customer

When to measure? All the time

Where to measure? Throughout the entire company and every process

How to measure? The company establishes performance standards that are quantifiable to measure performance

Why is it important to measure? To learn how to improve quality and increase customer satisfaction

Table 3. Measurement Program Questions (Gerson 1993, 23).

In this paragraph, there will be seven main reasons introduced on why it is important to conduct those measurements.

The first reason for measuring quality and customer satisfaction is to learn about customer`s perceptions. It is worth trying to consider each customer's needs because every customer has different perceptions within the same environment. Instead of taking average results, the company should try identifying different perceptions to meet all customer's needs. The company may try to find out what customers find attractive in a business, what might make them change using a service, what are their criteria for acceptable service quality performance, what can be done for a better satisfaction, etc. (Gerson 1993, 24.)

The second reason is to determine customer's needs, wants, requirements and expectations. Customer satisfaction measurement programs must not only identify customer`s feelings about a product or service but also identify their needs and desires. It is also important to understand what customers require from a product or service provided as well as what customers expect a company to provide while performing a service or during the overall sale. Current and future needs must be identified as well. Companies should analyse the behaviour of their customers as well as personal and psychological reasons behind every purchase of a product or using a service. (Gerson 1993, 26.)

The third reason is to close the gaps. There are many gaps between customers and a company which are based on different perceptions of both parties: (Gerson 1993, 26.)

- The gap between what a business thinks a customer wants and what a customer really wants. It is when a company produces a product or delivers a service and tells customers to obtain it while customers need a totally different product or service. The company here should first assume what customers want, let them know about it and only after that ask directly what customers want (Gerson 1993, 27.)

- The gap between what a business thinks a customer has bought and what a customer perceives has been received. The perception gap between what a company thinks was provided and what a customer received sometimes can be big enough. The gap exists because a customer perceived an obtained product or service in a different way with what a company has thought (Gerson 1993, 27.)

- The gap between the service quality the business believes it is providing and what the customer perceives is being provided. This gap is very similar to the preceding issue. For instance, a company sets certain customer service policies and does not inform customers about it. The customer feels that service is lacking something and feels dissatisfied and businesses here cannot be aware of customer's dissatisfaction. Thus, there is a possibility of a misunderstanding between two parties and that is the reason why the gap occurs (Gerson 1993, 27.)

- The gap between customers' expectations of the service quality and actual performance. If a company is not aware of customer`s needs there is a big possibility that a customer will get dissatisfied because his or her expectations were not met. Therefore, it is essential first to learn about customer`s needs and expectations and only after that provide the service (Gerson 1993, 27.)

- The gap between marketing promises and actual delivery. Very often companies market their service or product in the best way possible exceeding customer expectations. If the promises were not delivered, a customer will get dissatisfied by getting lower quality service than was expected (Gerson 1993, 27.)

Closing those gaps is essential for companies' success as well as for obtaining new customers and retaining the old ones.

The fourth reason is to inspect what company does to improve the service and customer satisfaction. Customers and employees should be aware of certain standards set by a company to perform the service at its best. The measurement of the performance should be made compared to the standards that were set. Goals and objectives must be set based on the customer`s requirements and expectations and afterward measured. This will help to improve both customer satisfaction and quality of the service. Analysis of where the business is now and where it has to be will help to improve the performance of the service. At the end, if customer`s needs and perception were met and even exceeded, a customer will be satisfied. (Gerson 1993, 29.)

The fifth reason for measurement quality and satisfaction is that improved service leads to increased profits. If the service is improving, there will be more customers what automatically leads to the bigger profit. In addition, if the level of the service quality and customer satisfaction increases at the same time, the company can charge more for the service and goods provided and that will lead to a greater profit. (Gerson 1993, 29.)

The sixth reason is to learn how the business is doing and whether it goes further or not. This reason might be the most crucial because it is extremely important to understand the current stage of the business. In addition, a company should have clear goals and objectives for the future success. Customer satisfaction and quality performance measurements will help to understand whether the customer is satisfied and whether the business is doing good or not. (Gerson 1993, 30.)

Finally, the last step is to apply the process of a continuous improvement. This is important to understand that improving service once in a while will not make a company successful in a long term because this is a continuous process which requires great efforts, however, pays off at the end with a big loyal customer base, satisfied employees, and a huge competitive advantage. (Gerson 1993, 30.) This is something organisations shall do every day, step by step, analysing their company's weaknesses and strengths, measuring service quality and customer satisfaction level. Following those steps, a company will stay successful and highly competitive.

2.3.3 The Benefits of Measuring Customer Satisfaction and Service Quality

Measuring customer satisfaction and service quality in the service business is a crucial factor in a company`s success. Measurements are vital because it allows to see how business is going, compare results and come up with the certain improvement plans. It also gives the possibility to give the feedback to the staff members what makes them work more efficiently. When the results are measured, it is easy to see whether the business is growing or goes down and see the roots of the problem. In addition, it gives people the sense of accomplishment what, hence, gives more motivation to the further work and development. With the measurement techniques, it is easier to reward people with their work because the results are visible and the company is aware of who did what, when and where. Measurements lead to the higher level of productivity and greater results. (Gerson 1993, 31.)

2.3.4 Tools for Measuring Customer Satisfaction and Service Quality

There are many techniques for measuring the quality of the service and customer satisfaction. In this chapter, several of them will be introduced.

Benchmarking is a process of measuring the performance of a company's product, service, or processes against those of another business considered to be the best in the industry. (business encyclopedia n.d.) This is a useful tool for improving company's performance by comparing it to another industry. It allows to identify weaknesses of the company, adapt new knowledge from other companies and effectively apply it. (Gerson 1993, 43.)

Force Field Analysis was developed by Kurt Lewin in the 1940s. This method is mostly about analysing the current stage of the business and finding ways for its improvement. It allows identifying driving and restraining forces of the company. Driving forces here are the ones which lead to the increased productivity of the company and restraining forces are those which lower productivity. The decision can be taken when driving forces and restraining forces become equal. (Gerson 1993, 45.)

Check Sheet is a tool which allows seeing the frequency of poor-quality events or customer dissatisfaction. On the form, there are several columns where a company can mark the problem occurred and tick the time when something has happened. The last column is the column which summarises the results and allows to see the most significant problem. (Gerson 1993, 33-34.) The example of the check sheet is shown below:

Problem January February March Total

Goods broken 2 2 1 5

Wrong delivery 1 0 0 1

Stock is not full 3 2 1 6

Table 4. Check Sheet Example

This allows a company to see the bigger picture of the problem and then take following measures.

Pareto Chart is a tool for measuring problems in quality control and customer satisfaction. Problems are pictured on a vertical bar graph by the frequency of their occurrence. With this graph, it is easy to see the importance of each problem and take the right order of the problem solution. (Gerson 1993, 34-35.) The example of the Pareto chart is shown below:

Figure 4. Pareto Chart (Excel Easy).

Histograms are the vertical graphs which illustrate numerical data about the frequency of the service and product distribution. It is very similar to the Pareto chart. The only difference is that histograms display quantitative data while the Pareto chart is all about qualitative information. (Gerson 1993, 36-37.) The example of the histogram graph is shown below:

Figure 5. Salary Histogram Example (ConceptDraw).

Cause-and-Effect Diagram, also called fishbone diagram, was created by Professor Kaoru Ishikawa in the 1960s. This is a quality control tool which allows identifying the roots and causes of the problem. This technique is mostly used in group settings when there is almost no quantitative data for the analysis. With the help of this tool, it is easy to identify why the process is not working. (Gerson 1993, 39.) The example of the cause-and-effect diagram is pictured below:

 Figure 6. Cause-and-Effect Diagram Example (Edraw).

3 RESEARCH METHODS

3.1 Introduction

According to Kothari, research methods refer to the methods the researchers use in performing research operations (Kothari 2004, 7-8.) There are several types of the research. The most common types include quantitative and qualitative research methods.

3.2 Quantitative Research

Quantitative research focuses on the numerical data, amounts, statistical information, etc. It can be done through various questionnaires, polls, and surveys. It is easier to analyse quantitative data than qualitative one due to an easy access of the countable data. (Gerson 1993, 55.)

3.3 Qualitative Research

Qualitative research is all about content. It is used to understand thoughts, motivations, opinions of people and underlying reasons for it. It is more flexible and can be derived from the interviews, own observations, etc. Qualitative data can be hard to analyse due to a big and various scope of information. (Gerson 1993, 55.)

3.4 Data Collection

There is a primary and secondary data when it comes to collecting information. Primary data is a new information which is gathered for the current research. It takes more time, efforts and resources to collect the primary data comparing to the secondary one. Secondary data is the information which already exists and which is easily accessible. The advantage of collecting the secondary data is that it saves time and costs. (Gerson 1993, 53-54.)

3.5 Target Group of the Research and Size of the Sample

The aim of this thesis is to research customer satisfaction and quality service level at Fafa's restaurant and find certain solutions for its improvement. In this research, a quantitative approach was used in order to gather a primary data. The survey consists of 16 questions including 3 open-ended questions. The form of the survey can be found in Appendix 1. The answers to the open-ended questions can be found in Appendix 2. The survey was conducted at Fafa's restaurant in Tampere. The printed versions of the survey were handed between 15th of April 2017 to 15th of May 2017. There were 75 respondents participating in the survey. In the next paragraph, the findings of the research will be summarised and analysed.

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