Understanding Customer Delight and Outrage

Delivering quality to customers in a competitive marketplace dictates the need to continually enhance a customer’s experience and satisfaction. However, evidence indicates that satisfying customers is not enough to retain them because even satisfied customers defect at a high rate in many industries. For example, Xerox found that its “totally satisfied” customers were six times more likely to repurchase Xerox products during the following eighteen months than its “merely satisfied” customers were. “Totally satisfied” ranks only two scale points higher than “merely satisfied,” although it earns six times more loyalty. Apparently, the scales that researchers commonly use to measure satisfaction do not translate linearly into outcomes such as loyalty in terms of purchases. This also suggests that businesses must strive for 100 percent, or total, customer satisfaction and even delight to achieve the kind of loyalty they desire.1

Current studies attribute a higher degree of emotionality to the opposite end of the satisfaction continuum — that is, to dissatisfaction — than was true in the past. For example, Bell and Zemke suggest that customers who have experienced service failures fall into two categories — annoyed and victimized. They define “annoyance” as minor irritation associated with a promise not fully realized; a feeling of “victimization” is characterized by a major feeling of “ire, frustration, and/or pain.” In effect, the feeling of being victimized is a deeper emotion than feeling irritated and might lead to outrage, not dissatisfaction. In the language of recovery, it may be more difficult to recover from feelings of victimization than to recover from irritation or annoyance — unless the latter occurs repeatedly.2

These insights suggest that focusing on customer delight and outrage — emotions more intense than satisfaction or dissatisfaction — may lead to a better understanding of the dynamics of customer emotions and their effect on customer behavior and loyalty. Such behaviors include actively choosing to purchase exclusively from one business and offering word-of-mouth support or unsolicited advocacy of a service business.

In general terms, most customers range from being moderately dissatisfied to moderately satisfied (see Figure 1). We can infer that such a state of moderation means customers are essentially ambivalent in their loyalty to a particular business. We predict that these customers would likely “defect” in the presence of even a modest motivator — for example, getting a better price, finding a more convenient store location, or trying a new or different merchant.

An outraged or delighted customer feels far less ambivalent. An outraged customer will almost certainly defect, and is likely to become what Jones and Sasser call a “terrorist.” That is, negative experiences motivate them to tell others. Consider a customer who, after reserving a car, arrives in town with his or her family to start a vacation and discovers that the rental agency has no car available. This outraged customer will likely become a terrorist telling an emotionally charged story that is exaggerated with each retelling! In contrast, a delighted customer is likely to become a loyal “apostle” for the firm’s good service deeds. Having experienced the firm’s superior service, an apostle has faith in the firm and will spread the good word through unsolicited advocacy.3

The challenge for managers of service businesses is to reduce the number of terrorists and create apostles, which requires mastering the factors that promote customer delight and avert customer outrage. In this article, we present a perspective on customer satisfaction that addresses in greater detail the emotions of delight and outrage. This conceptualization is based on people’s needs rather than the more conventional model that focuses on customer expectations.

Not meant to refute or supplant the more traditional models that center on expectations, our proposal may, however, yield additional insight into the emotional reactions of customers to service experiences. For instance, the preceding rental car example could be recast as an instance of unfulfilled expectations. Yet, the resultant outrage and terrorist tactics engendered later seem incongruous with mere unmet expectations. Whereas by recasting the situation as one that violated the customer’s fundamental need to be treated fairly, we can more readily equate the outrage with a deeper emotional experience. First, we briefly discuss the conventional model of satisfaction and follow with a fuller treatment of our complementary needs-based model.

Met-Expectations Model

Typically, conventional models of customer satisfaction are implicitly or explicitly variations of the met-expectations model (also called “disconfirmation of expectations” or “gap”). This framework assumes that customers have specific expectations about their interactions with a firm and, by meeting those expectations, the firm can satisfy the customer. Customer satisfaction models are often quite complex. For example, some models differentiate between perceptions of quality and customer satisfaction (quality being only one component of satisfaction), and others use various approaches to assess “expectations” (what should be, what is ideal, or what is realistically expected). All focus on satisfying the customer’s expectations of the attributes being delivered —whether those attributes relate to facets of service quality, the core service, or value.4

The met-expectations model extends somewhat into the arena of customer delight. That is, exceeding customer expectations causes customer delight. Whereas quality and satisfaction result from meeting customer expectations, delight may result from providing the customer more than expected. Pleasant surprises, so to speak, create delighted customers. More precisely stated, the met-expectations model proposes that delight is the outcome of the initial experience of positive surprise. That is, a customer’s expectations are positively disconfirmed, which activates an aroused state that is quite positive — or pleasant. The customer experiences this pleasant state as the “emotion of delight.”5

How can a service firm act on this proposal to increase customer delight? First, the firm needs accurate data on its customers’ expectations — experience-based expectations, rather than ideal or normative expectations. That is, eliciting surprise requires a firm to know what its customers expect (experience-based expectations) or their predictions about the outcome of their next exchange with the firm. Delight is delivered when the firm provides a surprising, positive departure from expectations. For example, if a dry cleaning customer is treated to free service in reward for loyal patronage, delight results primarily because the customer had predicted (expected) the need to pay.6

But achieving delight and engendering the loyalty that ostensibly follows in the met-expectations model can be elusive for several reasons. First, research conducted at service firms (insurance companies, car repair shops, beauty parlors) reveals that meeting expectations on the basis of reliability of performance does not improve loyalty behaviors beyond a certain point — that is, it quickly reaches an asymptote in terms of loyalty. Research shows that after fulfilling basic reliability expectations, a firm then must meet expectations related to responsiveness and assurance to enhance loyalty. Thereafter, a firm must meet expectations for empathy to receive yet another boost. Fulfilling expectations to promote loyalty is a dynamic rather than static construct — expectation levels are always ratcheting upward. The construct is dynamic in the absolute amount of the expectation (e.g., the amount of reliability) and the target of the expectation (e.g., assurance, empathy). Second, identifying the specifics of the expectations varies from business to business, that is, in banking, reliability means something different than in retail establishments. Finally, personal expectations are related to internal standards that lack absolute frames of reference, making them difficult to measure for research purposes and also difficult to manage.7 Generally speaking, systematically evoking customer delight by exceeding customer expectations is a difficult management task.

Needs-Based Model

Though useful for understanding customer satisfaction and dissatisfaction, the met-expectations model is less helpful in offering insights about customer reactions that are more emotionally charged than satisfaction or dissatisfaction. We believe firms cannot understand or manage emotionally charged customer reactions, such as delight and outrage, by merely meeting or exceeding specific service expectations. The rationality of such an approach seems mismatched to the emotionality — even irrationality — of delight and outrage. Thus, we need another perspective.

We propose to explain that customer delight and outrage in the service business originates with the handling of the three basic customer needs — security, justice, and self-esteem. Let’s begin with two basic premises:

• Customers are people first and consumers second.
• People strive to satisfy core needs in life at a level more fundamental and compelling than meeting their specific expectations as consumers.

By thinking of customers as consumers, a service firm focuses on service performance attributes and how to meet or exceed consumer expectations. Thinking of customers foremost as people shifts the emphasis to basic human needs. The impulse on the part of people to fulfill these basic needs is sacrosanct; violate these needs and the outcome will be outrage; gratify them and the outcome will be delight.

How Needs Shape Customer Behavior

Needs and expectations shape customer behavior. The desired outcome of expectations is getting what one anticipates from a service encounter as a consumer; needs focus on obtaining what one seeks from life as a person. Expectations can be satisfied; needs are such that continuous gratification yields enhanced states of well-being — pleasure or delight. Failing to meet expectations may yield disappointment, but needs are so central to a core state of well-being that failure to gratify them can yield outrage.

Although it may appear as if needs and expectations are psychologically distinct, they are not. Needs and expectations are on a continuum that ranges from the specific (expectations) to the fundamental (needs). Do people have expectations that their needs will be gratified? This seems a reasonable assumption. Do people have expectations that service will be reliable and delivered with assurance? This also seems reasonable. However, needs center on the customer and his or her internal state, whereas, in the case of expectations about service, the focus is on a delivery attribute, not the customer. By concentrating on needs, we have an opportunity to delve more deeply into the customer’s internal states to offer managers insights about how to create customer delight, as well as how to avoid customer outrage.

Three Needs: An Overview

Personality theorists, such as Maslow, and philosophers, such as Aristotle, have described the various dimensions of the human psyche. Maslow’s needs hierarchy has a relatively long history of application to management. Various theories estimate that the number of human needs ranges from three to more than fifteen. In our conceptualization, we borrow two needs (the needs for security and self-esteem) from Maslow’s five and propose a third (the need for justice) that emerges from considerable research in philosophy and psychology and has received increasing attention in the services literature:8

• Security: the need to feel unthreatened by physical or economic harm.
• Justice: the need to be fairly treated.
• Self-esteem: the need to maintain and enhance one’s self-image.

How well do these three needs reveal the likelihood of eliciting customer delight and outrage? Generally, our own experience in studying service businesses suggests that the best way to “manage” security and justice is to avoid violating them. Violation of these needs will often incite outrage; however, respecting these two needs seems more likely to produce satisfaction than delight. In contrast, firms that excel in bolstering the customer’s esteem are likely to engender customer delight. Next, we describe each need and offer more specific managerial tactics about avoiding outrage and creating delight.

Security

Most people do not know when their security needs have been gratified because they are generally unaware of them in the first place. At some subconscious level, most adults are gratified with regard to security; it is when someone or something violates their security that their needs typically come into play, which usually results in outrage. For example, consider a hotel guest who is unaware of the degree to which his or her security needs (protection from physical harm) are gratified until fire breaks out in the hotel. Either the hotel’s emergency procedures meet the security needs, or the customer becomes outraged by the hotel’s failure to ensure his or her safety. Service businesses must be keenly aware of physical security issues and should plan for a worst-case scenario by, among other things, training employees. Any business having even a miniscule possibility for physical harm to customers should be prepared to deal with the inherent dangers.

When the potential for financial harm exists, the possibility of customer gratification is greater; however, the true test still occurs in a crisis situation. In a volatile stock market era, financial advisers establish investment portfolios suited to their clients’ risk limits and thus fulfill their security needs. While National Association of Security Dealers brokers have no such formal responsibility, brokers who are members of the New York Stock Exchange are legally responsible for ensuring that their recommendations are consistent with a client’s financial situation. Upholding a customer’s need for security, then, also involves the basic mental and emotional security concerns of the consumer. That is, can the customer entrust his or her well-being to the service provider?

We crave stability and seek equilibrium, especially when our physical and financial worlds are involved. A company’s first rule for gratifying security needs is to protect stability. This means never failing to keep a promise related to security needs. To fulfill this proposition requires that the firm know which promises its customers implicitly expect it to honor. Maintaining an orderly and predictable world — which is characteristic of Disney-owned properties — appeals to consumers because safety and financial concerns are minimized and the physical environment is spotless. Disney knows that “unclean equals unsafe” in the customer’s mind. Club Med also exemplifies orderliness and predictability, with prices known in advance. Why is the Saturn automobile such a winner, despite its rather modest product attributes? Customers value the predictability of their financial commitment when buying a Saturn car; the company protects and honors its customers’ security needs.

Customers fear being involved in protecting their own safety and economic well-being, although managers don’t commonly realize this. Customers need fire-protection systems in hotels. They need monitoring systems in airports to keep dangerous people off airplanes. They need to protect their credit cards from unauthorized use. They need quick feedback about their mortgage applications. Customers cannot readily influence the outcomes at a hotel or airport, which do or do not provide appropriate service. However, with regard to credit cards and mortgages, at the outset of a relationship, customers and the companies they patronize must know their responsibilities. Problems emerge when (1) complete information is unavailable or, if fully available, is nearly illegible (e.g., the small print of credit card agreements), and (2) the bank asks repeatedly for more information. Customers know that their security (e.g., obtaining the mortgage) depends on their interactions with the bank, but they may feel threatened and worry about managing their involvement properly.

Let’s consider whether positive deviations from stability, routine, and equilibrium might yield positive consequences. Earlier, we argued that people seek consistency, equilibrium, and stability in their lives and that deviation from this stable state can create outrage. But what if the deviation from the steady state is a positive deviation? For example, what if the mortgage application process produces a lower-than-expected interest rate? Such a positive outcome can produce delight, and this is precisely why mortgage application procedures are undergoing radical changes.

So, security needs are also susceptible to positive delight but, for service businesses, such delight is more difficult to secure for two reasons. First, when financial or economic issues are concerned, delighting a customer is usually an expensive proposition. Second, when physical security is at stake, the only way to delight a customer is to intervene in some kind of crisis involving potential physical harm — a negative state to begin with. Regarding security needs, “Do not violate them” is the wisest motto.

Justice

Although personality-based needs theories do not discuss the demand for justice or fairness, considerable research in philosophy and social psychology suggests that justice is central to relationships within society and between individuals. Lerner, a social philosopher and psychologist, proposed that people have a justice motive that derives from an implicit contract with others and with society, in general, to be treated fairly. This implicit contract has also been called a “psychological contract,” an implicit agreement that people have with others (friends, relatives), with institutions (the organization for which one works), and with society at large (the courts).9

Interestingly, the psychological contracts implicit in relationships between service businesses are useful constructs for understanding the nature of the interactions between a service business and its customers. Berry has noted: “The service promise . . . includes the implicit promise of fair play. Customers expect service companies to treat them fairly; they become angry and mistrustful when they perceive otherwise.”10 Given the centrality of relationships to service, in particular, and all kinds of consumer-business dealings, in general, it seems reasonable to consider justice as a motive extraordinarily relevant to our present conceptualization.

Justice needs are not as critical to survival as security needs; violation of a justice need does not jeopardize life or financial security. Nevertheless, justice issues become salient when considering the degree of reciprocity existing between a business and a customer. We commonly recognize the investment that a firm makes in delivering a service, but seldom do we think of the investment a customer makes in a firm. Consider an insurance policyholder’s perspective:

“I invest time, money, and effort in patronizing this business and continually demonstrate loyalty to the business by renewing my policy. Yet, after I had one accident, the company raised my rates. I have been loyally paying premiums for many years, and now the company has been charging me higher fees for three years! What about all those years when I paid premiums and never had an accident?”

Studies in the services marketing and organizational behavior literature indicate that respecting the customer’s need for justice requires delivering justice of three types:11

1. Distributive justice involves the customer’s evaluation of the outcome.
2. Procedural justice, in which customers judge the fairness of rules and procedures used to determine outcomes.
3. Interactional justice involves how a firm’s employees relate, on a personal level, with the firm’s customers; interactional justice concerns how employees relate personally to the firm’s clients rather than what the specific noninterpersonal procedures might be. Interactional justice might be thought of as “bedside manner” compared to the specific procedures or medications prescribed.

Distributive justice is difficult to manage because customers use some combination of three often internally inconsistent rules (equity, equality, and need) in determining if a firm fairly distributes outcomes. The equity rule implies that if individuals invest a certain amount of effort, time, or money, a firm should reciprocate proportionately. For example, people who have paid on insurance policies for years without filing a claim may feel they should not experience rate hikes the first time they have an accident. The equality rule implies that everyone is treated the same way (e.g., charged the same rates) regardless of investment. The needs rule implies that, on the basis of unique, individual requirements, firms may treat people differently.12 In effect, then, a customer may define justice as being treated the same as some other customers (on the basis of equity), the same as all other customers (on the basis of equality), or like no other customer (on the basis of need).

Airlines have effectively acted on the differences in these distribution rules. For example, the airlines employ the equity principle by stating clearly that first-class service accrues more often to those who invest (pay, travel) the most. Airlines publicly declare what they will do for the investment their passengers make and then deliver it without coach-class passengers feeling unjustly treated. From a justice perspective, the secret of the airlines’ success is that everyone knows the ground rules of investment for getting first-class treatment and finds equity in balance.

But the airlines respect equality and need, too. All people in coach class get the same food, regardless of their fare base. Passengers do not board the aircraft wearing their fare base codes for all to see. In the absence of public information about a basis or the bases for differential treatment, equality is imperative. How about need? The airlines give additional boarding time to parents traveling with children. They also care for children traveling alone and monitor closely their transfer from airport staff to cabin attendant. The key to success, when need is a basis for action, is the publicly known reason for different types of treatment. When differential treatment occurs, as in cases of need or equity, the reason for that treatment must be public, otherwise people will expect equality.

The secret to gratifying a customer’s need for equity justice is to literally, or at least figuratively, compensate the person for investments of time, effort, and money. For example, the insurance actuaries could be challenged to differentiate long-term policyholders from short termers when calculating the probabilities of having a second accident for the potential assessment of premium increases. The ten-year anniversaries of insurance policies could yield a gift certificate relevant to the policy — perhaps a tankful of free gasoline, car wash, or oil change for an auto policy. A seemingly minor corporate investment in terms of cost, such a gesture could be a psychologically equitable acknowledgment of customer loyalty. By demonstrating loyalty to the customer, a firm hopes for customer loyalty in return.

The importance of procedural and interactional justice is evident in recent research on the customers of several service firms, which reveals the many facets of the service experience that have an impact on feelings of justice:13

• Keeping promises and commitments. Companies need to keep promises, especially when time is the issue; people don’t want to wait when they have a reservation or a specific time commitment.
• Flexibility in dealing with unusual requests. Companies honor reasonable yet out-of-the-ordinary requests.
• Help when needed. Companies are unjust if they don’t help someone who needs help.
• Friendliness. Companies should treat people with openness and warmth.
• Honesty. Companies shouldn’t lie to customers.
• Politeness. Companies should treat people courteously and respectfully.

The items listed above relate to how a firm treats people. Fairness and justice can deal with outcomes and with procedures, but service consists primarily of procedures that must be masterfully trained, reinforced, and monitored. Of course, the core service (the food, the insurance policy, the surgery, i.e., the service outcome that a firm distributes) is not unimportant; however, we must acknowledge the importance of the delivery (procedural and interactional justice).14

What happens when a business does not behave justly? The firm loses its customers’ trust and possibly their loyalty and patronage. Once a company violates trust, it is difficult to change the resulting outrage to satisfaction, much less delight. But, as with security needs, it may be possible to plan for crises and subsequently recover. How can outrage be turned into delight? In the services world, to recover is to deal effectively with the problem. Because errors are inevitable, there will always be disgruntled or angry consumers. Consequently, well-planned recovery tactics must be in place. In fact, some research suggests that when a business makes amends, or recovers, a remarkable kind of customer loyalty may result. Three rules govern this sort of outcome:

• Recover quickly. Fix the problem immediately with no questions asked. If it won’t be corrected immediately, follow up with the customer, and keep the customer informed.
• Recover effectively. Solve the problem the first time; a firm gets only one chance to recover. If it fails at service recovery, it commits what is termed a “double deviation.” This invariably is associated with customer outrage.
• Leave the customer better off than before the error. Ensure that the customer feels safer, feels better about himself or herself, and feels justly treated.15

Self-Esteem

Safeguarding or enhancing self-esteem is the key to creating customer delight. A firm is more likely to outrage a customer by failing to respect security and justice needs than it is likely to gratify those needs and thereby create delight. However, service firms do have an opportunity to create delight. By maintaining or, better yet, by enhancing a person’s feelings of self-esteem, a firm can produce delight before anything goes wrong! The key is to enhance feelings of self-worth by acknowledging the customer’s perspective, importance, and rights. Also, the more competent a customer feels, the more delighted he or she will be. In general, customers like to control a situation, in the sense that the situation centers around them, when that is appropriate.16

Maintaining and enhancing esteem take many forms. In preserving a customer’s self-esteem, the company may need to enhance his or her sense of self-worth, so he or she does not feel or appear stupid. For example, the cachet of a well-known product — the polo player signifying a Ralph Lauren shirt or the CK of Calvin Klein jeans — reaffirms a consumer’s self-image in some way. Why else would someone spend $60 for a designer polo shirt when L.L. Bean sells one of better quality for half the price (at least according to Consumer Reports)? Maintaining esteem in a service scenario consists of interpersonal events that take place during delivery. The best service firms quickly acknowledge the worthiness of the customer’s perspective by establishing rapport and soliciting details about the problem: “I understand that you are upset about . . . .” “Please tell me exactly what happened so I can fully understand what made you so upset . . . .” “I will follow up on this issue and get back to you within one hour because I know how important this is to you.”

Top service firms treat the customer as an important individual, not just as a member of a certain class of consumers. When service providers at least appear to view customers as unique people with particular problems and personal histories, the customers are delighted. Patients dearly appreciate the attentive physician who listens to a description of their condition. Remembering the names of repeat customers is invaluable, whereas stereotyping negates a customer’s sense of individuality. For example, some automobile salespeople primarily focus their attention on the male when a couple shops for a car, even though women often are equally knowledgeable about autos.

A second effective way to reaffirm a customer’s feeling of confidence and competency is to arrange environments in ways that permit them to feel in control. We suspect that Disney properties are so popular because visitors never seem to feel lost. Well-designed signage is ever-present, and knowledgeable, cheerful employees provide directions. Parents never appear ignorant in the eyes of their children — or, more importantly, parents don’t fear loss of face in this milieu.

The need to maintain one’s self-esteem can be a factor in even the simplest of service encounters. We have actually heard parents refer to their “performance anxiety” when taking their children to McDonald’s. As they approach the service counter, they begin to wonder: “Will I get the order right? Will I forget what the kids want? Will I take too long to order and anger the people waiting behind me or the employees serving me?” No one enjoys feeling stupid.

Sharing information also reaffirms customer feelings of competency, whereas being condescending to customers clearly challenges their self-perceived level of intelligence. Physicians who are unwilling to explain the details of a diagnosis to a patient or airline personnel who dismiss passenger queries about flight delays are assuming lack of interest or intellect in their “audience.”

In services, we believe that choice is a secret weapon in efforts to enhance esteem. Why do people love supermarkets, “category killers” (e.g., Home Depot stores), and department stores? Choice. Psychologically, choice offers control, which shoppers love —especially control over the environment.17 In fact, certain psychologists argue that people create their environments primarily to control them. We organize and decorate our homes so we can feel in control there. Some people love suburban utility vehicles (four-wheel-drive, all-terrain vehicles) because they offer more options for controlling the “on the road” experience.

Crestar Bank in the metropolitan Washington, D.C., area initiated a successful sales campaign to increase new checking accounts. Customers could choose three of six free services when they opened a new account. The bank did not offer only three services as part of the deal; it offered six and the customer could choose three of them. The campaign was successful because of this choice.

So, how does a firm maintain and enhance esteem in services? By making the environment knowable and predictable; by creating a customer-friendly environment in which people feel smart, competent, important, and comfortable; and by offering them choices. However, service is not synonymous with servility18 or obsequiousness toward the customer. Overdone efforts to enhance customer self-esteem may insult their intelligence. (Consider the realtor who tells you how spectacular your home is when you know it is below average for the neighborhood.) Providing customers with too many choices may overwhelm them and result in compromised feelings of competency and control.

Managing Customer Needs

Service consists of an exchange relationship; customers exchange their money and loyalty for what we argue is need gratification — a psychological contract with service firms to have needs gratified in exchange for money, time, and effort. We do not claim that customers seek delight from this type of relationship; delight is a bonus that “buys” greater depth in the relationship and increased loyalty from customers. We do claim that customers want gratification; failure to gratify can lead easily to outrage. The challenge for service firms is to gratify and perhaps delight customers, while avoiding the perception that they do not respect customer needs.

Next, we present a few strategies for managing the customer’s need for security, justice, and self-esteem in a business relationship.

Human Resources Management

Firms can develop and reinforce respect for a customer’s security, esteem, and fairness needs through human resources (HR) management practices, such as selection, training, performance appraisal, and reward systems. First, companies must explicitly identify employee behaviors associated with the three needs as a framework for HR practices.

• Hiring. Give job applicants a realistic job preview. Outline how they are expected to act in a customer contact position. Identify desirable attributes for the job in order to design interviews or behavior simulations and exercises for effective screening of applicants. For example, AT&T hires its telephone contact employees using a simulation based on a careful analysis of job competencies required to deliver AT&T’s service quality.
• Designing training programs. List the critical behaviors that new employees must display, and, perhaps more importantly, teach them about the firm’s service-quality norms by emphasizing the need-gratification behaviors.
• Developing and implementing performance-management systems. List need-gratification behaviors and assess the degree to which employees actually display them in order to reinforce their training indoctrination. Performance management is service-quality management that provides an opportunity to recognize and reward employees who accomplish specific difficult, but attainable, service goals.19

At a large U.S. day care and preschool provider, regional managers and corporate staff worked in groups using a critical-incident technique to specify which staff behaviors were ineffective and which were particularly effective in conveying respect for the customer.20 In other words, they categorized behaviors as likely to be associated with customer outrage or likely to be associated with customer delight. For example, relative to the need for esteem, an ineffective event would be confronting parents in front of their child about an overdue tuition payment; an effective event would be telephoning parents at home unexpectedly to compliment their child’s work at school that day. Their goal became using these needs-based identifiers in training and possibly performance appraisal. The overarching benefit of the exercise was to provide a framework for systematically examining the role of customer emotions, delight, and outrage in the service encounter.

Hiring, training, and performance management can be accomplished in ways that support a service-quality philosophy, or they can be accomplished in rigid and/or punitive ways. We recommend a simple rule for organizations implementing HR practices: Treat your employees as if they were customers and focus on gratifying their needs. Creating a climate in which employees feel capable of attaining their own goals and desires can translate into a milieu conducive to gratifying customer needs.

Technology and Personalization

Information technologies are central in catering to and affirming customer needs. James A. Unruh, chairman and CEO of Unisys Corporation, observed that certain technologies safeguard physical security, such as in-home and car alarm systems, emergency dispatch systems, or medical advances.21 Some information systems protect financial security via transaction processing by banks, mortgage companies, and brokerage firms. The same systems also safeguard the individual customer’s economic well-being by monitoring for unusual drops or shifts in account balances.

In relation to esteem, Unruh emphasized how technology can enhance an individual’s feelings of competency and control. Many emergent forms of self-service devices, such as informational kiosks and voice mail systems, allow customers to act on their own behalf. Internet-based interactive technologies and on-line services, such as Prodigy or America Online, offer an ever-broadening array of options to customers for handling their service transactions. In addition, information technologies allow companies to collect demographic, historical, behavioral, and even psychological data about their customers. This enables companies to tailor recognition and reward programs to long-term customers and to identify new customers for special attention. These tactics indulge the customer’s need for self-esteem and justice. In this sense, technology can greatly enhance a firm’s ability to personalize service. At the same time, this personalization must respect the customer’s need for security. As detailed information about individual consumers becomes widely accessible via the Internet, how to protect each person’s need for security and privacy looms as an issue of concern.

Market Research

A company may solicit its employees’ perceptions about whether customer needs are being gratified or denied. Alternatively, or in addition, employees can ask customers to clarify how they feel about the company’s products or services in relation to the three basic needs. Organizing a focus group that consists of a small group of customers to discuss needs-based issues is often productive and can be followed by surveying, in real-time, a larger group at a service facility or polling by mail. When we queried people about their experiences during a doctor’s visit, for example, we easily coded their responses according to the three basic needs (see Table 1). This research project yielded similar observations for restaurant and bank customers. By eliciting customer feedback in this way, it is possible to monitor efforts to improve the gratification of customer needs and assess them as a basis for action.

Aggressively pursuing customers with problems is the best form of market research. Companies should get to know the customers who have experienced a problem or expressed dissatisfaction. Berry describes how managers at Bank One in Texas teach staff members to “run to” or embrace a problem and learn from its solution.22 He also notes that Dell Computer holds regular meetings to discuss customer complaints and solutions to ward off future dissatisfaction. Cisco Systems encourages customers to help each other by participating in a Web-based users group for the posting of problems and solutions. Service firms can benefit greatly from creating a centralized database of such information.

Unfortunately, customers do not always clearly know their needs. Trained researchers often are better suited to interpret the feelings and emotions associated with delight and outrage that result from seemingly innocuous actions by an organization. For example, why should someone else’s unacknowledged reservation outrage a bystander? Justice. Why is it important for financial institutions like banks and insurance companies to appear carefully tended in terms of the tangibles (paint, carpets, direct mailings, and up-to-date computers)? Security. Why are some senior citizens unwilling to use ATMs. Esteem. They fear losing their ATM card and feeling stupid.

At the Heart of Customer Relationships

Recent emphasis on relationship marketing — that is, attracting, developing, and retaining customers —provides a useful framework for summarizing our perspective.23 Innate human needs dominate much of our behavior and especially our reaction to the behavior of others. Robert Hogan, a prominent personality theorist, argued that the fundamental attribute of personality is its relational nature; people are not islands unto themselves but, for the most part, define themselves in relationship to others.24

Consider our earlier arguments about the fundamental nature of the customer exchange relationship. Companies must manage how they implement concern for customer needs in all actions that might influence customer’s feelings about their relationship with the firm. This includes the activities of the back office (e.g., billing, shipping), not just front-office personnel who directly contact the customer.

To focus on needs is to concentrate on relationships. In contrast, a focus on performing well on service attributes reinforces a transactional view of service delivery. Building relationships requires that companies view customers as people first and consumers second. Thoughtful understanding of the three customer needs presented here, combined with the actions outlined to implement a philosophy of need gratification, can produce the type of relationships that leads to customer retention and profitability.