Description
Improving quality and customer satisfaction has received considerable attention in recent years. This study examines construction in terms of customer satisfaction and quality. A framework is developed to evaluate the dynamics of customer satisfaction and quality.
Analysing customer satisfaction and quality in construction –
the case of public and private customers
Sami Kärnä
Helsinki University of Technology
Construction Economics and Management
P.O. Box 2100, FIN-02015 HUT, Finland
[email protected]
Abstract. Improving quality and customer satisfaction has received
considerable attention in recent years. This study examines construction in
terms of customer satisfaction and quality. A framework is developed to
evaluate the dynamics of customer satisfaction and quality. An empirical
analysis is conducted to explore customer satisfaction in construction as
perceived by two customer groups: public and private customers. Results
indicate that the need for contractors to improve performance relates
mostly to quality assurance, handover procedures and material. Public
customers were found to be less satisfied with the contractor’s
performance than private customers. For a contractor, the main benefit of
high customer satisfaction is the opportunity to remain a customer’s
potential partner in the future.
Keywords: Construction quality, customer satisfaction, project
management.
1. Introduction
Customer satisfaction has become one of the key issues for companies in their
efforts to improve quality in the competitive marketplace. It can be seen as either
a goal of or a measurement tool in the development of construction quality.
Customer satisfaction is considered to affect customer retention and, therefore,
profitability and competitiveness (Anderson and Sullivan 1993). According to
J ones and Sasser (1995), complete customer satisfaction is the key to securing
customer loyalty and generating superior long-term financial performance. It is
also apparent that high customer satisfaction leads to the strengthening of the
relationship between a customer and a company, and this deep sense of
collaboration has been found to be profitable (e.g. Storbacka et al. 1994).
Accordingly, customer satisfaction is an important factor in the
development of the construction process and the customer relationship. It is
natural that managers in the construction industry should be concerned about
customer satisfaction because of its expected influence on future projects and
word-of-mouth reputation. However, so far, customer satisfaction in the
construction industry is under-researched. For example, Torbica & Stroh (2001)
emphasise that the use of “soft” performance criteria, such as customer
satisfaction, is at an early evolutionary stage in construction. In addition, the
main focus on customer satisfaction approaches in the construction has been on
house building.
The significance of customer satisfaction, and its use for evaluating the
quality from the customer’s perspective, have been emphasised by many authors
in construction (Barret 2000; Torbica and Stroh 2001; Maloney 2002; Yasamis
et al. 2002). This study examines customer satisfaction in construction as
perceived by two customer groups: public and private customers. The main
focus is to explore these customer groups’ perceptions of the contractors’
performance. The results are interesting, because there are some distinguishing
features of customers groups, related to for example the competitive bidding
process and procurement. It is also essential to find out how the perceptions of
the customer groups differ from each other. For example, Al-Momani (2000) has
observed that many public projects are not achieving what was expected.
According to his study, public customers were found to be less satisfied than
private ones. Soetanto and associates (2001) have also examined the customers’
and architects’ perceptions of contractor performance. They found that the
architects were less satisfied than customers in regard to overall contractor
performance.
Initially, this paper presents an overview of customer satisfaction, which
has developed in the service industry. Then a brief review of existing approaches
to customer satisfaction and quality in construction is discussed. In order to
examine the links between customer satisfaction and quality, a theoretical
framework is also created. Subsequently, the results of a data analysis and
findings are presented, based on performance of Finnish construction companies.
Finally, some conclusions are also presented.
2. Customer satisfaction
Customer satisfaction is a function of perceived quality and disconfirmation
– the extent to which perceived quality fails to match repurchase expectations.
Customers compare the perceived performance of a product (service, goods)
with some performance standard. Customers are satisfied when the perceived
performance is greater than the standard (positively disconfirmed), whereas
dissatisfaction occurs when the performance falls short of the standard
(negatively disconfirmed). Additionally, there is an extensive difference
between the loyalty of merely satisfied customers and those who are completely
satisfied. Customers who are just satisfied find it easy to switch suppliers when a
better offer comes along. As a result, the significance of customer satisfaction is
emphasised in markets where competition is intense (Kotler 2000; J ones and
J asser 1995).
A company must periodically measure customer satisfaction in order to
learn how satisfied its customers are. Torbica and Stroh (2001) argue that, in
construction, the extent of customer satisfaction is only known late in the project
when most of the customer’s money has already been spent. When companies
know which attributes of a service or product affect customer satisfaction, their
challenge is to modify their current offering in a way that would lead to
maximum customer satisfaction.
Customer satisfaction is one of the key elements in total quality
management (TQM), an approach that emphasises overall satisfaction through
the continuous improvement of products. Construction companies are adopting
TQM to improve their performance. However, construction has lagged behind
other industries in implementing total quality management because of its
inability to accurately determine customer requirements and successfully
transform these requirements into the completed facility (Ahmed and Kangari
1995). In addition, there is much dissimilarity between manufacturing and
construction, so TQM techniques must be adapted for the construction industry.
Understanding the customer’s requirements is essential in ensuring customer
satisfaction, and the demand for the construction product must be viewed in
relation to the intended use of the facility. Ahmed and Kangari (1995) suggest
that customer orientation, communication skills and response to complaints all
play an important role in the overall satisfaction of the customer in the
construction industry.
According to an earlier study, based on RALA’s feedback data (Kärnä et al.
2004), factors of quality and co-operation have a strong effect on overall
satisfaction. Therefore, these factors can be used as a basis for improving overall
satisfaction. The study emphasises the fact that the contractors’ ability to co-
operate can reduce the adverse impact of poor quality assurance in the
completion stage. There also exists a dependency between the quality of the
overall service level and the quality of the contracted work.
In order to measure customer satisfaction in construction, the main subjects
must be identified. A customer may be defined as the owner of the project and
the one that needs the constructed facility. In simple terms, the customer is the
buyer of the product or service. Kamara (2000) describes the ‘customer’ as a
body that incorporates the interests of the buyer of construction services,
prospective users and other interest groups. Ireland (1992) lists the potential
customers that have expectations and requirements that affect the outcome of a
project. This wider perspective on the customer includes: the co-contractors and
partners, project director, project team members, contractors and subcontractors,
vendors and suppliers, users of the product and services and society. It is also
important to note that there are generally several persons involved in a buying
decision. This ‘buying centre’ includes all persons involved in the procurement
of the service and consists of the following: decider, influencer, purchaser,
gatekeeper and user. Customer satisfaction is affected by the roles of individual
members of the buying centre in terms of interests and goals, the decision
process and structures (Brockmann, 2002).
3. Literature review
The relationship between customer and contractor in construction constitutes a
multilevel complex in which parties operate simultaneously and collaborate with
in-groups of networks (Figure. 1). Therefore, customer satisfaction should be
understood as a relationship-specific rather than transaction-specific construct
(see e.g. Homburgh and Rudolph, 2001). As a result, traditional customer
relationship management models used in product manufacturing will not
produce the best results in construction. In addition, co-operation between
customer and contractor is strongly emphasised; the customer’s input has
considerable implications for the outcome of the construction project. The
complex nature of the construction process, changes in project organisation, and
the uniqueness of each project make it difficult to exploit past experiences and
customer feedback in future projects. In addition, Love and associates (2000)
suggest that each firm in the construction supply chain is both customer and
supplier, and that their creation of value is the fundamental factor in successful
projects.
Ireland (1992) emphasises that the project manager’s role is vital for
mutual, trusting relationships and customer satisfaction. Ireland also found that
the project manager’s ability to manage customers relates directly to the success
of the project. Soetanto and associates (2001) additionally recognise that the
satisfactory performance of participants is a prerequisite to maintaining
harmonious working relationships. Because the performance of each participant
in the construction project coalition is interdependent, other participants should
assess their performance.
Customer
User
Contractor
Subcontractor(s)
contracts
negotiations
operative
purchasing
Architect
customer chain
Customer
User
Contractor
Subcontractor(s)
contracts
negotiations
operative
purchasing
Architect
customer chain
Customer
User
Contractor
Subcontractor(s)
contracts
negotiations
operative
purchasing
Architect
customer chain
Figure 1. Customer relationships and interactions in the construction supply chain
Determining quality in construction is a complex issue. In general, quality can
be defined through two approaches: conformance to requirements and customer
satisfaction. The major concern in the conformance to requirements approach is
how well the constructed facility conforms to design specifications. This is the
contractors’ internally focused definition of quality. The limitation of this
approach is that customers may not know or care about how well the product
and/or service conforms to internal specifications; customers want their needs
and expectations met or even exceeded. The strengths of this approach are that
measuring quality is relatively straightforward and easy and should lead to
increased efficiency on the part of the organisation.
On the other hand, the customer satisfaction approach defines quality as the
extent to which a product or service meets and/or exceeds a customer’s
expectations. The strength of this approach compared to the quality approach is
that it captures what is important for the customers rather than establishes
standards based on management judgements that may or may not be accurate.
Customer satisfaction thus approaches quality from a customer’s viewpoint.
According to this determination, it is the customer who defines quality. The
weaknesses of this approach are that measuring customers’ expectations is a
difficult task and the fact that a customer’s short-term and long-term evaluations
may differ (Reeves and Bednar 1994).
Barrett (2000) sees that quality in construction can be thought of as the
satisfaction of a whole range of performance criteria held by an interacting host
of stakeholders and mediated by a range of mechanisms. According to Winch
and associates (1998) the problem with the existing literature on construction is
that it concentrates on the problems of producers instead of providing value for
the customer. There is a need for customer orientation and satisfaction, not for
allocating liability.
Customer satisfaction can be used for evaluation of quality and ultimately
for assessment of the success of a company’s quality improvement programme.
According to Torbica and Stroh (2001), a quality improvement effort will lead to
a higher product and service quality, which will lead to improved customer
satisfaction. Their study has confirmed that implementation of TQM is
positively associated with homebuyer satisfaction, and it is the “total offering”
that generates the total degree of customer satisfaction. Al-Momani (2000)
examined service quality in construction delivered by contractors and the project
owner’s expectations using the service quality gap as his analysis tool. He found
that contractors pay very little attention to the owners (customers) satisfaction,
and that this contributes to poor performance.
4. Customer satisfaction framework
In order to evaluate the dynamics of customer satisfaction and quality in
construction, a framework must be created. The theoretical basis for a
framework can be built using the service marketing literature and the
characteristics of construction quality. Essentially, construction is a service
industry. Customers purchase the capacity to produce, and usually participate in
the construction process to a considerable extent - these are also characteristics
of services (e.g. Winch et al. 1998).
The relationship between customer satisfaction and quality can be explored
by using Grönroos’ (1982; 2001) quality dimensions. In his work, Grönroos
determines the technical quality of the service process that the customer is left
with when the service production process and its buyer-seller interactions are
over. Customers can often measure this dimension relatively objectively because
of its technical nature. The service dimension is another quality dimension,
which has also been used in the literature as a functional or process quality of the
process. The customer is also influenced by how he receives the service and how
he experiences the simultaneous production and consumption process.
Functional quality, however, cannot be evaluated as objectively as the technical
dimension, yet functional quality would probably be more important than
technical quality in determining overall perceived quality. Various services have
the nature of both quality dimensions (technical; what? and functional; how?).
For example, if a defect in the construction process is settled with satisfactory
results for the customer, the outcome of the defect handling process has good
technical quality, whereas if the defect handling process had been complicated
and time-consuming, the functional quality and total perceived quality would be
lower than it otherwise would have been.
The customers’ expectations play an important role in the evaluation of
contractor’s performance. Customer satisfaction in the construction industry can
be defined as how well a contractor meets the customer’s expectations, and the
quality on construction projects can be regarded as the fulfilment of expectations
(see e.g. Barrett 2000). The customer’s expectations of construction are a
function of several factors: the customer’s past or direct experiences with the
contractor and similar contractors, word-of-mouth information about the
contractor, and the customer’s personal needs. In addition, a customer’s
expectations are affected by a contractor’s marketing activities and image, and
the customer’s own investment in the project and the relationship.
The distinction between product quality and process quality has also been
noticed in the construction industry. For example, Arditi and Gunaydin (1997)
found that product quality refers to achieving quality in the materials,
equipments and technology that go into the building of a structure, whereas
process quality refers to achieving quality in the way the project is organized and
managed in the three phases of design, construction, and operation and
maintenance.
In construction, the completed facility refers to the physical product left
standing when the work has been completed and the contractor-customer
interactions involved in it are over. Yasamis and associates (2002) refer to the
transformation process from resources to the constructed facility as the
contracting service. They suggest that quality in construction includes a mix of
product and service quality dimensions (see also Maloney, 2002). The
customer’s satisfaction with the constructed facility, the contracting facility and
the contracting services define project-level quality in construction.
At the project level, the customer assesses the contractors’ performance in
relation to three comparisons, all of which impact customer satisfaction (Figure
2).
1. comparison – between the quality of the building, the customer’s
expectations and the adjusted goals for the building.
2. comparison – between the quality of the construction process and the
experiences, which have emerged during the process.
3. comparison – between the customer’s expectations and experiences.
Figure 2. Interrelationships between customer satisfaction and quality at project level
5. Data analysis and findings
RALA’s feedback system
In this chapter we empirically examine customer satisfaction as perceived by the
customers. The focus is on process quality, although there are some items, such
as quality assurance and handover, which refer to the technical quality and
physical elements of the construction outcome.
The data for this study were generated as a function of the Construction
Quality Association (RALA). RALA is an independent joint association offering
audited information for the Finnish construction and real estate sector. The basis
of RALA's feedback system is a standard evaluation, which is part of each
project (Figure 3). In practice, the customer (owner or general contractor in case
of subcontracts) fills in a form at the time of conclusion of a project and delivers
it to RALA immediately after the completion of the project.
Customer
satisfaction
Expectations and adjusted
goals of the building
comparison
Quality of the process
Design
Construction
Handover
Management
Co-operation
Knowledge
Experiences
Quality of the building
Technical Functional
comparison comparison
Customer
satisfaction
Expectations and adjusted
goals of the building
comparison
Quality of the process
Design
Construction
Handover
Management
Co-operation
Knowledge
Experiences
Quality of the building
Technical Functional
comparison comparison
This feedback system provides a workable and resource-saving means of
collecting customer feedback. Feedback information from this system may also
be considered more objective than a contractor’s own feedback survey, because
social interaction components do not exist. The questionnaire used was
developed in expert meetings with a wide range of representatives from
construction management and the real estate industry in Finland.
While this study is among the first to measure customer satisfaction in the
Finnish construction industry, it is not without limitations. RALA's customer
feedback system is a simplified model, which ought to be developed towards the
framework presented in the preceding chapter. The evaluation process of the
first experiences of the feedback model is at an early stage and the feedback
model is going to be created in phases. Phased creation of the model is important
for two reasons. Firstly, in this stage the main objective was to get the customers
to commit to adopting the model and to acquire the contractors’ approval for a
model. The second objective was to show the practical value of the model to the
parties by using the model, for example for improving communication between
the parties. Hence, the feedback model was not created solely for research
purposes; it is developed as a practical tool to assist co-operation between
parties.
UTILIZATI ON
OF FEEDBACK
Markets
Regular client feedback
of established
form on projects
Transparent feedback
on enteprise´s
operations
in projects
implemented by it
Figure 3. RALA's feedback system
Survey and data findings
The respondents gave their responses regarding their level of satisfaction on a
five-point interval scale from 1 (indicating very high dissatisfaction) to 5
(indicating very high satisfaction) for all the items.
Feedback from the projects was collected using a 22-item scale that
measures quality according to five subheadings, namely 1) (Q) quality assurance
and handover procedures, 2) (E) environment and safety at work, 3) (C)
functional modes of co-operation, 4) (P) personnel, and 5) (S) site supervision
and subcontracts of the contractor (Table 2). Evaluated attributes, means, gap
sizes and p-values are shown in Table 2. The survey data was gathered from 354
respondents (Table 1).
The analysis of data was performed using the chi-square test to compare the
mean responses for the customer groups. Individual attributes and subheadings
are presented in the table.
Table 1. Distribution of respondents between the two groups of customers
n %
Private 200 56
Public 154 44
Total 354 100
This section outlines the results from analyses conducted on empirical data
obtained from the survey. The mean values vary from 2.96 (workability of
handover material and maintenance manual) to 3.83 (capacity of supplier’s
personnel for co-operation). The overall customer satisfaction rate is 3.32 for
public customers and 3.54 for private customers.
In general, low satisfaction could be found in both groups for the items
related to quality assurance and handover: workability of handover material and
maintenance manual, quality of assignment material, and repair of defects and
deficiencies noticed during the handover inspection. This result highlights the
importance of quality assurance during the project and its impact on customer
satisfaction. The common feature of the low satisfaction items is that they
emerge in later phases of the construction project. They also require mutual co-
operation between parties.
Highest ratings in this survey concerned the contractor’s co-operative
abilities and the skills of the contractor’s workers and supervisors. This result
was a surprise because it is a broadly held assumption in the construction
industry that constructors’ abilities to co-operate are rather poor. The result
indicates that the skills of the supplier’s work supervisors and workers, and the
contractor’s capacity for co-operation could compensate for – or lessen the
impact of – poor quality assurance and handover.
A negative experience of some attributes of the project seems to reflect
very strongly on how the customer perceives the success of the whole project.
This survey of the projects, which have had poor overall customer satisfaction,
shows the interesting way in which customers assess the contractor’s
performance as poor in all areas, even if that is not the case.
Table 2 contains a list of 22 attributes, mean scores and gap sizes. The
largest gap of a value –0.35 between the customer groups is for attribute 6
(repair of defects and deficiencies noticed during handover inspection), while the
smallest gap of a value –0.01 is for attributes Q4 (quality of assignment material
and maintenance manual) and C3 (tending to notices of defect). According to the
survey, public customers have lower satisfaction rates for each attribute than
private customers.
The smallest differences amongst customer groups were in attributes Q4
(quality of assignment material and maintenance manual) and 16 (tending to
notices of defect). The differences between public and private customers
perceptions of contractors performance is illustrated in Figure 4.
Although there is a significant difference in the customer groups’
perceptions of the contractors’ performance, both groups behave similarly in
relation to low and high satisfaction items.
Table 2. Attributes, mean scores and gap sizes
Attributes Mean
Code Public Private Gap p-value Mean
Quality assurance 1 Contracted work quality Q1 3.35 ** 3.66 -0.31 0.00 3.52
and handover 2 Management and implementation of agreed quality assurance procedures Q2 3.19 3.33 -0.14 0.15 3.26
3 Workability of handover material and maintenance manual Q3 2.88 3.03 -0.15 0.12 2.96
4 Quality of assignment material and maintenance manual Q4 3.21 3.22 -0.01 0.36 3.21
5 Degree of completion at handover inspection Q5 3.18 * 3.47 -0.29 0.01 3.34
6 Repair of defects and deficiencies noticed during handover inspection Q6 3.09 * 3.44 -0.35 0.00 3.28
Environment 7 Cleanliness and order on site E1 3.19 * 3.45 -0.27 0.00 3.33
and safety at work 8 Management of work safety on site E2 3.26 ** 3.56 -0.30 0.00 3.42
9 Management of environmental issues and related know-how on site E3 3.18 * 3.42 -0.24 0.00 3.31
10 Tending to official obligations E4 3.51 ** 3.84 -0.32 0.00 3.69
Personnel 11 Skill of supplier’s work supervisors P1 3.58 * 3.86 -0.28 0.01 3.73
12 Skill of supplier’s workers P2 3.38 3.57 -0.19 0.01 3.48
13 Commitment of supplier’s employees to set goals P3 3.27 3.48 -0.21 0.02 3.38
Co-operation 14 Capacity of supplier’s personnel for co-operation C1 3.69 * 3.96 -0.27 0.01 3.83
15 Agreement about changes C2 3.50 3.65 -0.15 0.11 3.58
16 Tending to notices of defect C3 3.35 3.36 -0.01 0.68 3.36
17 Access of supplier’s employees C4 3.63 ** 3.94 -0.31 0.00 3.79
18 Information flow on site C5 3.35 3.50 -0.15 0.01 3.42
19 Quality of overall service level C6 3.39 * 3.66 -0.27 0.00 3.54
Site supervision
20 Conformity of supplier’s subcontracting to contract S1 3.20 3.32 -0.12 0.16 3.26
and subcontracting 21 Adherence to schedule in accordance with common agreements S2 3.33 3.61 -0.28 0.01 3.48
22 Tending to site supervision duties S3 3.33 * 3.58 -0.25 0.01 3.47
Significant at the level: * 0.05; ** 0.01
2,50
2,70
2,90
3,10
3,30
3,50
3,70
3,90
4,10
Q1 Q2 Q3 Q4 Q5 Q6 E1 E2 E3 E4 P1 P2 P3 C1 C2 C3 C4 C5 C6 S1 S2 S3
Public Private Mean
Figure 4. Performance analysis
6. Conclusions
The research presented here has focused on customer satisfaction and quality in
the construction industry. As construction companies face increasing
competition, greater attention continues to be given to customer relationships
and satisfied customers. Companies use various approaches to customer
satisfaction in developing and monitoring product/service offerings in order to
manage and improve customer relationships and quality. Measuring customer
satisfaction also has several benefits for organisations, for example, in
improving communication between parties, enabling mutual agreement,
evaluating progress towards the goal, and monitoring accomplished results and
changes.
Customer satisfaction surveys also bring contactors valuable information
about their customers. In order to achieve customer satisfaction, companies must
understand what their customers need and how contractors meet those needs.
Grönroos (2001) emphasises that customers also have certain wishes regarding
how they want to be treated; furthermore, he notes, the service or physical
product purchased has to fit the customer’s internal value-generating processes.
In this survey, the views of the two groups of project owners regarding
contractor’s performance differed in all areas. The results highlight the need to
design the service product from the customer’s perspective.
Typically, customers were satisfied with the contractor’s abilities to co-
operate and the skills of the contractor’s workers and supervisors, whereas low
satisfaction could be identified in the items related to quality assurance and
handover. According to this survey, a common feature of the low satisfaction
items is that they come out in later phases of the construction project. This result
could indicate that the contractor and customer have not planned the completion
stage, or that it has been poorly designed. It could also indicate that there is a
problem in managing schedules, which also requires mutual co-operation
between parties. This finding is similar to the findings of Soetanto and associates
(2001), whose importance-performance analysis suggests that contractors need
to improve their performance in most aspects of the project. In terms of criteria
in need of improvement, customers considered correction of defects the priority.
However, this situation could also be derived from the customer’s subjective
perceptions of the project: The customer might overemphasise the later stages of
a project because of its long duration and because the defects found during the
hand-over period stay clearly in the customer’s mind. This is a limitation of the
study, but it is important to notice the quality improvement efforts that
contractors should be aware of.
Winch and associates (1998) emphasise that in a construction, a surprised
customer is a dissatisfied customer. As mentioned earlier, a negative experience
of some attributes of the project seems to reflect strongly on the customers
overall sense of satisfaction. In this situation, contractors might pursue short-
term customer satisfaction at the expense of long-term quality and high customer
satisfaction.
Public customers could be more professional than private ones, in which
case their demands and expectations would be at a higher level. Public owners
typically operate with a larger number of contractors and therefore the
contractors’ qualitative deviation (small and big contractors) is greater than in
the case of private customers. Al-Momani (2000) also found that there are some
important differences among the views of different owners (customers); public
officials have a very poor satisfaction rate and have the most complaints
regarding the contractors’ performance.
In addition, private customers could be more established partners in co-
operation, which would then reflect on customer satisfaction. By contrast, public
customers have to follow legislative procurement, which essentially narrows the
criteria for selecting contractors. Competitive bidding is usually based on price
criteria, and therefore contractors do not have enough incentive to exceed the
customer’s expectations, and may see customer satisfaction as insignificant. In
the case of public customers, contractors participate in new competitive biddings
foe each new contract despite the success or failure of their earlier projects,
whereas private customers would drop unsatisfactory contractors from the
competition.
In construction, customer satisfaction does not guarantee loyalty (future
work with that customer). The criteria of selecting a contractor are mainly based
on price, but also on the contractor’s technical and financial capability and on
previous experiences of the contractor’s competence. Satisfaction is therefore
reflective of customers’ experiences of and confidence in the contractor’s
abilities and co-operation capability. A dissatisfied customer will not work with
that contractor in the future, but a satisfied customer would not necessarily
guarantee future projects for the contractor. Therefore, the main benefit of high
customer satisfaction for a contractor is the opportunity to remain a customer’s
potential partner in the future. However, the essential objective in improving
customer satisfaction is to achieve customer loyalty, which can lead, for
example, to partnering arrangements.
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doc_950981072.pdf
Improving quality and customer satisfaction has received considerable attention in recent years. This study examines construction in terms of customer satisfaction and quality. A framework is developed to evaluate the dynamics of customer satisfaction and quality.
Analysing customer satisfaction and quality in construction –
the case of public and private customers
Sami Kärnä
Helsinki University of Technology
Construction Economics and Management
P.O. Box 2100, FIN-02015 HUT, Finland
[email protected]
Abstract. Improving quality and customer satisfaction has received
considerable attention in recent years. This study examines construction in
terms of customer satisfaction and quality. A framework is developed to
evaluate the dynamics of customer satisfaction and quality. An empirical
analysis is conducted to explore customer satisfaction in construction as
perceived by two customer groups: public and private customers. Results
indicate that the need for contractors to improve performance relates
mostly to quality assurance, handover procedures and material. Public
customers were found to be less satisfied with the contractor’s
performance than private customers. For a contractor, the main benefit of
high customer satisfaction is the opportunity to remain a customer’s
potential partner in the future.
Keywords: Construction quality, customer satisfaction, project
management.
1. Introduction
Customer satisfaction has become one of the key issues for companies in their
efforts to improve quality in the competitive marketplace. It can be seen as either
a goal of or a measurement tool in the development of construction quality.
Customer satisfaction is considered to affect customer retention and, therefore,
profitability and competitiveness (Anderson and Sullivan 1993). According to
J ones and Sasser (1995), complete customer satisfaction is the key to securing
customer loyalty and generating superior long-term financial performance. It is
also apparent that high customer satisfaction leads to the strengthening of the
relationship between a customer and a company, and this deep sense of
collaboration has been found to be profitable (e.g. Storbacka et al. 1994).
Accordingly, customer satisfaction is an important factor in the
development of the construction process and the customer relationship. It is
natural that managers in the construction industry should be concerned about
customer satisfaction because of its expected influence on future projects and
word-of-mouth reputation. However, so far, customer satisfaction in the
construction industry is under-researched. For example, Torbica & Stroh (2001)
emphasise that the use of “soft” performance criteria, such as customer
satisfaction, is at an early evolutionary stage in construction. In addition, the
main focus on customer satisfaction approaches in the construction has been on
house building.
The significance of customer satisfaction, and its use for evaluating the
quality from the customer’s perspective, have been emphasised by many authors
in construction (Barret 2000; Torbica and Stroh 2001; Maloney 2002; Yasamis
et al. 2002). This study examines customer satisfaction in construction as
perceived by two customer groups: public and private customers. The main
focus is to explore these customer groups’ perceptions of the contractors’
performance. The results are interesting, because there are some distinguishing
features of customers groups, related to for example the competitive bidding
process and procurement. It is also essential to find out how the perceptions of
the customer groups differ from each other. For example, Al-Momani (2000) has
observed that many public projects are not achieving what was expected.
According to his study, public customers were found to be less satisfied than
private ones. Soetanto and associates (2001) have also examined the customers’
and architects’ perceptions of contractor performance. They found that the
architects were less satisfied than customers in regard to overall contractor
performance.
Initially, this paper presents an overview of customer satisfaction, which
has developed in the service industry. Then a brief review of existing approaches
to customer satisfaction and quality in construction is discussed. In order to
examine the links between customer satisfaction and quality, a theoretical
framework is also created. Subsequently, the results of a data analysis and
findings are presented, based on performance of Finnish construction companies.
Finally, some conclusions are also presented.
2. Customer satisfaction
Customer satisfaction is a function of perceived quality and disconfirmation
– the extent to which perceived quality fails to match repurchase expectations.
Customers compare the perceived performance of a product (service, goods)
with some performance standard. Customers are satisfied when the perceived
performance is greater than the standard (positively disconfirmed), whereas
dissatisfaction occurs when the performance falls short of the standard
(negatively disconfirmed). Additionally, there is an extensive difference
between the loyalty of merely satisfied customers and those who are completely
satisfied. Customers who are just satisfied find it easy to switch suppliers when a
better offer comes along. As a result, the significance of customer satisfaction is
emphasised in markets where competition is intense (Kotler 2000; J ones and
J asser 1995).
A company must periodically measure customer satisfaction in order to
learn how satisfied its customers are. Torbica and Stroh (2001) argue that, in
construction, the extent of customer satisfaction is only known late in the project
when most of the customer’s money has already been spent. When companies
know which attributes of a service or product affect customer satisfaction, their
challenge is to modify their current offering in a way that would lead to
maximum customer satisfaction.
Customer satisfaction is one of the key elements in total quality
management (TQM), an approach that emphasises overall satisfaction through
the continuous improvement of products. Construction companies are adopting
TQM to improve their performance. However, construction has lagged behind
other industries in implementing total quality management because of its
inability to accurately determine customer requirements and successfully
transform these requirements into the completed facility (Ahmed and Kangari
1995). In addition, there is much dissimilarity between manufacturing and
construction, so TQM techniques must be adapted for the construction industry.
Understanding the customer’s requirements is essential in ensuring customer
satisfaction, and the demand for the construction product must be viewed in
relation to the intended use of the facility. Ahmed and Kangari (1995) suggest
that customer orientation, communication skills and response to complaints all
play an important role in the overall satisfaction of the customer in the
construction industry.
According to an earlier study, based on RALA’s feedback data (Kärnä et al.
2004), factors of quality and co-operation have a strong effect on overall
satisfaction. Therefore, these factors can be used as a basis for improving overall
satisfaction. The study emphasises the fact that the contractors’ ability to co-
operate can reduce the adverse impact of poor quality assurance in the
completion stage. There also exists a dependency between the quality of the
overall service level and the quality of the contracted work.
In order to measure customer satisfaction in construction, the main subjects
must be identified. A customer may be defined as the owner of the project and
the one that needs the constructed facility. In simple terms, the customer is the
buyer of the product or service. Kamara (2000) describes the ‘customer’ as a
body that incorporates the interests of the buyer of construction services,
prospective users and other interest groups. Ireland (1992) lists the potential
customers that have expectations and requirements that affect the outcome of a
project. This wider perspective on the customer includes: the co-contractors and
partners, project director, project team members, contractors and subcontractors,
vendors and suppliers, users of the product and services and society. It is also
important to note that there are generally several persons involved in a buying
decision. This ‘buying centre’ includes all persons involved in the procurement
of the service and consists of the following: decider, influencer, purchaser,
gatekeeper and user. Customer satisfaction is affected by the roles of individual
members of the buying centre in terms of interests and goals, the decision
process and structures (Brockmann, 2002).
3. Literature review
The relationship between customer and contractor in construction constitutes a
multilevel complex in which parties operate simultaneously and collaborate with
in-groups of networks (Figure. 1). Therefore, customer satisfaction should be
understood as a relationship-specific rather than transaction-specific construct
(see e.g. Homburgh and Rudolph, 2001). As a result, traditional customer
relationship management models used in product manufacturing will not
produce the best results in construction. In addition, co-operation between
customer and contractor is strongly emphasised; the customer’s input has
considerable implications for the outcome of the construction project. The
complex nature of the construction process, changes in project organisation, and
the uniqueness of each project make it difficult to exploit past experiences and
customer feedback in future projects. In addition, Love and associates (2000)
suggest that each firm in the construction supply chain is both customer and
supplier, and that their creation of value is the fundamental factor in successful
projects.
Ireland (1992) emphasises that the project manager’s role is vital for
mutual, trusting relationships and customer satisfaction. Ireland also found that
the project manager’s ability to manage customers relates directly to the success
of the project. Soetanto and associates (2001) additionally recognise that the
satisfactory performance of participants is a prerequisite to maintaining
harmonious working relationships. Because the performance of each participant
in the construction project coalition is interdependent, other participants should
assess their performance.
Customer
User
Contractor
Subcontractor(s)
contracts
negotiations
operative
purchasing
Architect
customer chain
Customer
User
Contractor
Subcontractor(s)
contracts
negotiations
operative
purchasing
Architect
customer chain
Customer
User
Contractor
Subcontractor(s)
contracts
negotiations
operative
purchasing
Architect
customer chain
Figure 1. Customer relationships and interactions in the construction supply chain
Determining quality in construction is a complex issue. In general, quality can
be defined through two approaches: conformance to requirements and customer
satisfaction. The major concern in the conformance to requirements approach is
how well the constructed facility conforms to design specifications. This is the
contractors’ internally focused definition of quality. The limitation of this
approach is that customers may not know or care about how well the product
and/or service conforms to internal specifications; customers want their needs
and expectations met or even exceeded. The strengths of this approach are that
measuring quality is relatively straightforward and easy and should lead to
increased efficiency on the part of the organisation.
On the other hand, the customer satisfaction approach defines quality as the
extent to which a product or service meets and/or exceeds a customer’s
expectations. The strength of this approach compared to the quality approach is
that it captures what is important for the customers rather than establishes
standards based on management judgements that may or may not be accurate.
Customer satisfaction thus approaches quality from a customer’s viewpoint.
According to this determination, it is the customer who defines quality. The
weaknesses of this approach are that measuring customers’ expectations is a
difficult task and the fact that a customer’s short-term and long-term evaluations
may differ (Reeves and Bednar 1994).
Barrett (2000) sees that quality in construction can be thought of as the
satisfaction of a whole range of performance criteria held by an interacting host
of stakeholders and mediated by a range of mechanisms. According to Winch
and associates (1998) the problem with the existing literature on construction is
that it concentrates on the problems of producers instead of providing value for
the customer. There is a need for customer orientation and satisfaction, not for
allocating liability.
Customer satisfaction can be used for evaluation of quality and ultimately
for assessment of the success of a company’s quality improvement programme.
According to Torbica and Stroh (2001), a quality improvement effort will lead to
a higher product and service quality, which will lead to improved customer
satisfaction. Their study has confirmed that implementation of TQM is
positively associated with homebuyer satisfaction, and it is the “total offering”
that generates the total degree of customer satisfaction. Al-Momani (2000)
examined service quality in construction delivered by contractors and the project
owner’s expectations using the service quality gap as his analysis tool. He found
that contractors pay very little attention to the owners (customers) satisfaction,
and that this contributes to poor performance.
4. Customer satisfaction framework
In order to evaluate the dynamics of customer satisfaction and quality in
construction, a framework must be created. The theoretical basis for a
framework can be built using the service marketing literature and the
characteristics of construction quality. Essentially, construction is a service
industry. Customers purchase the capacity to produce, and usually participate in
the construction process to a considerable extent - these are also characteristics
of services (e.g. Winch et al. 1998).
The relationship between customer satisfaction and quality can be explored
by using Grönroos’ (1982; 2001) quality dimensions. In his work, Grönroos
determines the technical quality of the service process that the customer is left
with when the service production process and its buyer-seller interactions are
over. Customers can often measure this dimension relatively objectively because
of its technical nature. The service dimension is another quality dimension,
which has also been used in the literature as a functional or process quality of the
process. The customer is also influenced by how he receives the service and how
he experiences the simultaneous production and consumption process.
Functional quality, however, cannot be evaluated as objectively as the technical
dimension, yet functional quality would probably be more important than
technical quality in determining overall perceived quality. Various services have
the nature of both quality dimensions (technical; what? and functional; how?).
For example, if a defect in the construction process is settled with satisfactory
results for the customer, the outcome of the defect handling process has good
technical quality, whereas if the defect handling process had been complicated
and time-consuming, the functional quality and total perceived quality would be
lower than it otherwise would have been.
The customers’ expectations play an important role in the evaluation of
contractor’s performance. Customer satisfaction in the construction industry can
be defined as how well a contractor meets the customer’s expectations, and the
quality on construction projects can be regarded as the fulfilment of expectations
(see e.g. Barrett 2000). The customer’s expectations of construction are a
function of several factors: the customer’s past or direct experiences with the
contractor and similar contractors, word-of-mouth information about the
contractor, and the customer’s personal needs. In addition, a customer’s
expectations are affected by a contractor’s marketing activities and image, and
the customer’s own investment in the project and the relationship.
The distinction between product quality and process quality has also been
noticed in the construction industry. For example, Arditi and Gunaydin (1997)
found that product quality refers to achieving quality in the materials,
equipments and technology that go into the building of a structure, whereas
process quality refers to achieving quality in the way the project is organized and
managed in the three phases of design, construction, and operation and
maintenance.
In construction, the completed facility refers to the physical product left
standing when the work has been completed and the contractor-customer
interactions involved in it are over. Yasamis and associates (2002) refer to the
transformation process from resources to the constructed facility as the
contracting service. They suggest that quality in construction includes a mix of
product and service quality dimensions (see also Maloney, 2002). The
customer’s satisfaction with the constructed facility, the contracting facility and
the contracting services define project-level quality in construction.
At the project level, the customer assesses the contractors’ performance in
relation to three comparisons, all of which impact customer satisfaction (Figure
2).
1. comparison – between the quality of the building, the customer’s
expectations and the adjusted goals for the building.
2. comparison – between the quality of the construction process and the
experiences, which have emerged during the process.
3. comparison – between the customer’s expectations and experiences.
Figure 2. Interrelationships between customer satisfaction and quality at project level
5. Data analysis and findings
RALA’s feedback system
In this chapter we empirically examine customer satisfaction as perceived by the
customers. The focus is on process quality, although there are some items, such
as quality assurance and handover, which refer to the technical quality and
physical elements of the construction outcome.
The data for this study were generated as a function of the Construction
Quality Association (RALA). RALA is an independent joint association offering
audited information for the Finnish construction and real estate sector. The basis
of RALA's feedback system is a standard evaluation, which is part of each
project (Figure 3). In practice, the customer (owner or general contractor in case
of subcontracts) fills in a form at the time of conclusion of a project and delivers
it to RALA immediately after the completion of the project.
Customer
satisfaction
Expectations and adjusted
goals of the building
comparison
Quality of the process
Design
Construction
Handover
Management
Co-operation
Knowledge
Experiences
Quality of the building
Technical Functional
comparison comparison
Customer
satisfaction
Expectations and adjusted
goals of the building
comparison
Quality of the process
Design
Construction
Handover
Management
Co-operation
Knowledge
Experiences
Quality of the building
Technical Functional
comparison comparison
This feedback system provides a workable and resource-saving means of
collecting customer feedback. Feedback information from this system may also
be considered more objective than a contractor’s own feedback survey, because
social interaction components do not exist. The questionnaire used was
developed in expert meetings with a wide range of representatives from
construction management and the real estate industry in Finland.
While this study is among the first to measure customer satisfaction in the
Finnish construction industry, it is not without limitations. RALA's customer
feedback system is a simplified model, which ought to be developed towards the
framework presented in the preceding chapter. The evaluation process of the
first experiences of the feedback model is at an early stage and the feedback
model is going to be created in phases. Phased creation of the model is important
for two reasons. Firstly, in this stage the main objective was to get the customers
to commit to adopting the model and to acquire the contractors’ approval for a
model. The second objective was to show the practical value of the model to the
parties by using the model, for example for improving communication between
the parties. Hence, the feedback model was not created solely for research
purposes; it is developed as a practical tool to assist co-operation between
parties.
UTILIZATI ON
OF FEEDBACK
Markets
Regular client feedback
of established
form on projects
Transparent feedback
on enteprise´s
operations
in projects
implemented by it
Figure 3. RALA's feedback system
Survey and data findings
The respondents gave their responses regarding their level of satisfaction on a
five-point interval scale from 1 (indicating very high dissatisfaction) to 5
(indicating very high satisfaction) for all the items.
Feedback from the projects was collected using a 22-item scale that
measures quality according to five subheadings, namely 1) (Q) quality assurance
and handover procedures, 2) (E) environment and safety at work, 3) (C)
functional modes of co-operation, 4) (P) personnel, and 5) (S) site supervision
and subcontracts of the contractor (Table 2). Evaluated attributes, means, gap
sizes and p-values are shown in Table 2. The survey data was gathered from 354
respondents (Table 1).
The analysis of data was performed using the chi-square test to compare the
mean responses for the customer groups. Individual attributes and subheadings
are presented in the table.
Table 1. Distribution of respondents between the two groups of customers
n %
Private 200 56
Public 154 44
Total 354 100
This section outlines the results from analyses conducted on empirical data
obtained from the survey. The mean values vary from 2.96 (workability of
handover material and maintenance manual) to 3.83 (capacity of supplier’s
personnel for co-operation). The overall customer satisfaction rate is 3.32 for
public customers and 3.54 for private customers.
In general, low satisfaction could be found in both groups for the items
related to quality assurance and handover: workability of handover material and
maintenance manual, quality of assignment material, and repair of defects and
deficiencies noticed during the handover inspection. This result highlights the
importance of quality assurance during the project and its impact on customer
satisfaction. The common feature of the low satisfaction items is that they
emerge in later phases of the construction project. They also require mutual co-
operation between parties.
Highest ratings in this survey concerned the contractor’s co-operative
abilities and the skills of the contractor’s workers and supervisors. This result
was a surprise because it is a broadly held assumption in the construction
industry that constructors’ abilities to co-operate are rather poor. The result
indicates that the skills of the supplier’s work supervisors and workers, and the
contractor’s capacity for co-operation could compensate for – or lessen the
impact of – poor quality assurance and handover.
A negative experience of some attributes of the project seems to reflect
very strongly on how the customer perceives the success of the whole project.
This survey of the projects, which have had poor overall customer satisfaction,
shows the interesting way in which customers assess the contractor’s
performance as poor in all areas, even if that is not the case.
Table 2 contains a list of 22 attributes, mean scores and gap sizes. The
largest gap of a value –0.35 between the customer groups is for attribute 6
(repair of defects and deficiencies noticed during handover inspection), while the
smallest gap of a value –0.01 is for attributes Q4 (quality of assignment material
and maintenance manual) and C3 (tending to notices of defect). According to the
survey, public customers have lower satisfaction rates for each attribute than
private customers.
The smallest differences amongst customer groups were in attributes Q4
(quality of assignment material and maintenance manual) and 16 (tending to
notices of defect). The differences between public and private customers
perceptions of contractors performance is illustrated in Figure 4.
Although there is a significant difference in the customer groups’
perceptions of the contractors’ performance, both groups behave similarly in
relation to low and high satisfaction items.
Table 2. Attributes, mean scores and gap sizes
Attributes Mean
Code Public Private Gap p-value Mean
Quality assurance 1 Contracted work quality Q1 3.35 ** 3.66 -0.31 0.00 3.52
and handover 2 Management and implementation of agreed quality assurance procedures Q2 3.19 3.33 -0.14 0.15 3.26
3 Workability of handover material and maintenance manual Q3 2.88 3.03 -0.15 0.12 2.96
4 Quality of assignment material and maintenance manual Q4 3.21 3.22 -0.01 0.36 3.21
5 Degree of completion at handover inspection Q5 3.18 * 3.47 -0.29 0.01 3.34
6 Repair of defects and deficiencies noticed during handover inspection Q6 3.09 * 3.44 -0.35 0.00 3.28
Environment 7 Cleanliness and order on site E1 3.19 * 3.45 -0.27 0.00 3.33
and safety at work 8 Management of work safety on site E2 3.26 ** 3.56 -0.30 0.00 3.42
9 Management of environmental issues and related know-how on site E3 3.18 * 3.42 -0.24 0.00 3.31
10 Tending to official obligations E4 3.51 ** 3.84 -0.32 0.00 3.69
Personnel 11 Skill of supplier’s work supervisors P1 3.58 * 3.86 -0.28 0.01 3.73
12 Skill of supplier’s workers P2 3.38 3.57 -0.19 0.01 3.48
13 Commitment of supplier’s employees to set goals P3 3.27 3.48 -0.21 0.02 3.38
Co-operation 14 Capacity of supplier’s personnel for co-operation C1 3.69 * 3.96 -0.27 0.01 3.83
15 Agreement about changes C2 3.50 3.65 -0.15 0.11 3.58
16 Tending to notices of defect C3 3.35 3.36 -0.01 0.68 3.36
17 Access of supplier’s employees C4 3.63 ** 3.94 -0.31 0.00 3.79
18 Information flow on site C5 3.35 3.50 -0.15 0.01 3.42
19 Quality of overall service level C6 3.39 * 3.66 -0.27 0.00 3.54
Site supervision
20 Conformity of supplier’s subcontracting to contract S1 3.20 3.32 -0.12 0.16 3.26
and subcontracting 21 Adherence to schedule in accordance with common agreements S2 3.33 3.61 -0.28 0.01 3.48
22 Tending to site supervision duties S3 3.33 * 3.58 -0.25 0.01 3.47
Significant at the level: * 0.05; ** 0.01
2,50
2,70
2,90
3,10
3,30
3,50
3,70
3,90
4,10
Q1 Q2 Q3 Q4 Q5 Q6 E1 E2 E3 E4 P1 P2 P3 C1 C2 C3 C4 C5 C6 S1 S2 S3
Public Private Mean
Figure 4. Performance analysis
6. Conclusions
The research presented here has focused on customer satisfaction and quality in
the construction industry. As construction companies face increasing
competition, greater attention continues to be given to customer relationships
and satisfied customers. Companies use various approaches to customer
satisfaction in developing and monitoring product/service offerings in order to
manage and improve customer relationships and quality. Measuring customer
satisfaction also has several benefits for organisations, for example, in
improving communication between parties, enabling mutual agreement,
evaluating progress towards the goal, and monitoring accomplished results and
changes.
Customer satisfaction surveys also bring contactors valuable information
about their customers. In order to achieve customer satisfaction, companies must
understand what their customers need and how contractors meet those needs.
Grönroos (2001) emphasises that customers also have certain wishes regarding
how they want to be treated; furthermore, he notes, the service or physical
product purchased has to fit the customer’s internal value-generating processes.
In this survey, the views of the two groups of project owners regarding
contractor’s performance differed in all areas. The results highlight the need to
design the service product from the customer’s perspective.
Typically, customers were satisfied with the contractor’s abilities to co-
operate and the skills of the contractor’s workers and supervisors, whereas low
satisfaction could be identified in the items related to quality assurance and
handover. According to this survey, a common feature of the low satisfaction
items is that they come out in later phases of the construction project. This result
could indicate that the contractor and customer have not planned the completion
stage, or that it has been poorly designed. It could also indicate that there is a
problem in managing schedules, which also requires mutual co-operation
between parties. This finding is similar to the findings of Soetanto and associates
(2001), whose importance-performance analysis suggests that contractors need
to improve their performance in most aspects of the project. In terms of criteria
in need of improvement, customers considered correction of defects the priority.
However, this situation could also be derived from the customer’s subjective
perceptions of the project: The customer might overemphasise the later stages of
a project because of its long duration and because the defects found during the
hand-over period stay clearly in the customer’s mind. This is a limitation of the
study, but it is important to notice the quality improvement efforts that
contractors should be aware of.
Winch and associates (1998) emphasise that in a construction, a surprised
customer is a dissatisfied customer. As mentioned earlier, a negative experience
of some attributes of the project seems to reflect strongly on the customers
overall sense of satisfaction. In this situation, contractors might pursue short-
term customer satisfaction at the expense of long-term quality and high customer
satisfaction.
Public customers could be more professional than private ones, in which
case their demands and expectations would be at a higher level. Public owners
typically operate with a larger number of contractors and therefore the
contractors’ qualitative deviation (small and big contractors) is greater than in
the case of private customers. Al-Momani (2000) also found that there are some
important differences among the views of different owners (customers); public
officials have a very poor satisfaction rate and have the most complaints
regarding the contractors’ performance.
In addition, private customers could be more established partners in co-
operation, which would then reflect on customer satisfaction. By contrast, public
customers have to follow legislative procurement, which essentially narrows the
criteria for selecting contractors. Competitive bidding is usually based on price
criteria, and therefore contractors do not have enough incentive to exceed the
customer’s expectations, and may see customer satisfaction as insignificant. In
the case of public customers, contractors participate in new competitive biddings
foe each new contract despite the success or failure of their earlier projects,
whereas private customers would drop unsatisfactory contractors from the
competition.
In construction, customer satisfaction does not guarantee loyalty (future
work with that customer). The criteria of selecting a contractor are mainly based
on price, but also on the contractor’s technical and financial capability and on
previous experiences of the contractor’s competence. Satisfaction is therefore
reflective of customers’ experiences of and confidence in the contractor’s
abilities and co-operation capability. A dissatisfied customer will not work with
that contractor in the future, but a satisfied customer would not necessarily
guarantee future projects for the contractor. Therefore, the main benefit of high
customer satisfaction for a contractor is the opportunity to remain a customer’s
potential partner in the future. However, the essential objective in improving
customer satisfaction is to achieve customer loyalty, which can lead, for
example, to partnering arrangements.
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