1

Customer Satisfaction and Employee Satisfaction: A Conceptual Model and

Research Propositions

Abstract

Purpose: The marketing literature reflects remarkably little effort to develop a framework for

understanding how customer responses to service affect the work attitudes of employees. In

particular, very little is known about the influence of customer satisfaction and customer

satisfaction outputs on the individual employee’s work satisfaction.

Theoretical Background: The authors draw on balance theory and emotional contagion theory

to provide a foundation for future research by developing research propositions, and

constructing a framework for understanding how customer satisfaction influences employee

satisfaction.

Practical Implications: Managers can use the information from this study as a guide for

matching employees to customers.

Keywords: Employee Satisfaction, Customer Satisfaction, Employee-Customer Identification,

Emotional Contagion, Balance Theory, Customer Status

Track: Services Marketing

2

Customer Satisfaction and Employee Satisfaction: A Conceptual Model and

Research Propositions

1. Introduction

The study of customer satisfaction, along with its determinants and outcomes is a major area

of interest among marketing academia. In terms of outcomes of customer satisfaction,

performance and loyalty have been the major variables considered. However, in recent years,

there is a growing a body of research which focuses on how customer satisfaction affects

employees (Pugh, 2001, Ryan, Schmidt and Johnson, 1996; Yi, Nataraajan and Gong, 2011;

Luo and Homburg, 2007). The idea that customer outcomes might influence employee

attitudes has been present in the literature for over four decades. For example Friedlander and

Pickle (1968: ) suggest that “Customer satisfaction may fulfill employee service needs,

thereby causing employee satisfaction”. However till date, very little empirical attention has

been devoted to the potential impact of customer satisfaction on employee satisfaction. To the

researchers’ knowledge, only three empirical studies (Ryan, Schmidt, and Johnson, 1996;

Pugh, 2001; Luo and Homburg, 2007) have explicitly addressed this issue.

A careful examination of the limited literature on this topic reveals two important gaps. First,

most extant studies have discussed or tested a direct relationship between customer and

employee satisfaction. This leaves the reader with a “black box” of “process”. There is

therefore need for more theoretical work explaining this key relationship. Second, there is a

need to better understand “what factors make an employee’s work satisfaction more or less

prone to the influence of customer satisfaction?” The limited literature in this area, by

focusing on aggregate employee satisfaction, often implicitly assumes that employees are

similarly influenced by customer satisfaction or dissatisfaction. This is unlikely because

individual characteristics, job characteristics as well as relational dynamics might result in

work satisfaction being influenced to different degrees by customer satisfaction. From a

practice perspective, describing conditions under which the relationship between customer

satisfaction and employee satisfaction may be stronger or weaker provides information to aid

managers in the individual management of employees.

The purpose of this article, therefore, is to delineate the effect of customer satisfaction on

employee satisfaction, develop a propositional inventory, and create a framework for directing

future research in this area. While there are studies that focus on how employee satisfaction

influences customer satisfaction (e.g., Evanschitzky, Sharma and Prykop, 2012; Homburg and

Stock, 2005), our study, without conflicting with these studies, examines customer

satisfaction’s influence on employee work satisfaction. In developing propositions, we draw

on the literature in marketing and related disciplines. Figure 1 is a conceptual model for our

discussion.

2. Literature Review and Research Propositions

Work satisfaction is defined as an employees’ sense of satisfaction not only with the work

itself but also with the larger organizational context within which work exists.Customer

satisfaction is defined as an attitude resulting from an evaluative process where a standard

3

concerning an offer obtained from a company is compared to the customer’s perception of the

actual offer (e.g., Oliver, 1996). For reasons of parsimony, we do not discuss level of analysis

issues or the different facets of customer satisfaction overall satisfaction with the firm,

satisfaction with the employee etc.in this paper.

Figure 1: Customer Satisfaction and Employee Satisfaction

EMPLOYEESCUSTOMERS

PICS

SATISFACTIO

N

EMOTIONS

COMPLAINTS

COMPLIMENTS

EMOTIONSSATISFACTION

ECIDESEC

ESEC: Employee susceptibility to emotional contagion; ECID: Employee Customer Identification

PICS: Perceived Importance of customer Satisfaction

2.1 Mechanisms of Influence: How does the influence occur?

In explaining the direct and mediated paths linking customer satisfaction and employee

satisfaction, we draw upon three principles of social psychology that link individual’s

interactions and their attitudes. First, individuals seek balance, which may be achieved by

modifying their attitudes to correspond to those of others (Heider, 1958). Second, information

theory suggests that individual’s sentiments are influenced by the information to which they

are exposed through interaction with others (Anderson 1971). Third, emotional contagion

theory holds that exposure to someone else’s positive or negative emotions can produce a

corresponding change in the observer’s emotional state (Pugh, 2001) and subsequently lead to

attitude change.

4

2.2 Mediators: Direct Outputs of Customer Satisfaction

The key mediators which link customers’ satisfaction to employee satisfaction are customers’

reactions following their evaluation of satisfaction or dissatisfaction as well as their expressed

emotions. Literature suggests that complaining about service or complimenting service

employees are two potential reactions that may emanate from satisfaction judgements.

Furthermore, customers might express negative or positive emotions depending on their

satisfaction levels. Consequently

Proposition 1: Customer satisfaction has a direct effect on customers complaining behaviour

Proposition 2: Customer satisfaction has a direct effect on customers complimenting

behaviour

Proposition 3: Customer satisfaction has a direct effect on customers’ emotions

2.3 Employee Work satisfaction: why should customers matter?

In the internal marketing literature, work satisfaction is often thought to be the result of

controllable elements of the work environment and work conditions. However, while

intuitively convincing, working conditions as the major cause of work satisfaction have been

challenged. Research suggests that non-controllable elements also impact on the satisfaction

of employees and in particular frontline employees. Furthermore, there is a growing

appreciation that outputs of customer contact employee interactions with customers (e.g.,

customer satisfaction) are also determinants of employee satisfaction (Bell et al., 2004; Luo

and Homburg, 2007). There are a few reasons for this. First, a need fulfillment theory

perspective (Vroom, 1964), suggests that work satisfaction is the result of good performance

(Bagozzi, 1980). Second, customer satisfaction and its outputs serve as feedback to the

employee about how their work and their organization are perceived (Bell et al., 2004). Third,

customer satisfaction should influence employee work satisfaction because it indicates the

attractiveness of the organization as an employer and thus signals better future opportunities

for the employee (Luo and Homburg, 2007).

Therefore

Proposition 4: Customer satisfaction has a direct effect on employee satisfaction

Proposition 5: Customer complaining has a direct effect on employee satisfaction

Proposition 6: Customer compliments has a direct effect on employee satisfaction

2.4 Employee Emotions

Emotional contagion effects are likely to flow from customers to employees because

individuals are more likely to transmit their emotions to others when they are able to express

these emotions (Hatfield, et al., 1994). We argue that customers are more likely than

employees to consciously display emotions related to their experiences in the service

encounter. Individuals are also likely to assimilate the emotions of individuals to whom they

pay attention to. Furthermore, employees are likely to pay attention to the emotions of

customers because they depend more on the customers than vice-versa (Hatfield et al., 1994).

5

We also suggest in line with previous research that employee emotions are directly influenced

by customer complaints and customer compliments. Therefore

Proposition 7: Customer emotions directly influence employee emotions

Proposition 8: Customer complaining has a direct effect on employee emotions

Proposition 9: Customer compliments has a direct effect on employee emotions

2.5 Employee Emotions and Employee Satisfaction

We also suggest that employee emotions are crucial in determining how satisfied employees

are with their work. Employees who experience negative emotions on the job are less likely to

be satisfied than those who experience positive emotions. Therefore

Proposition 10: Employee emotions directly influence employee satisfaction

2.6 Moderators

2.6.1 Perceived Importance of Customer Satisfaction: Research has shown that the effect of

feedback on individuals depends on how important that feedback is to the individual (Earley,

1986). In essence, while some employees would perceive feedback in terms of customer

satisfaction as very important, others might perceive it as less important. These differences in

importance perceptions may result from different individual characteristics such as levels of

customer orientation or from perceptions of the consequences of customer satisfaction on

personally-relevant outcomes might differ from one employee to another. For example, some

employees may not consider their promotion to be significantly dependent on customers’

satisfaction while others might perceive the opposite. As a result of differences in perceived

importance, we expect that, for all levels of customer satisfaction, there would be differential

impacts of customer satisfaction on work satisfaction. Therefore:

Proposition 11: The effects of customer complaints, customer compliments, and customer

emotions respectively on customer emotions are moderated by the perceived importance of

customer satisfaction to the employee

Proposition 12: The effects of customer complaints and customer compliments on customer

satisfaction are moderated by the perceived importance of customer satisfaction to the

employee

2.6.2 Susceptibility to emotional contagion: Previous literature has documented individual

differences in susceptibility to emotional contagion due to differences in gender, culture,

personality, occupation, and so on (Hatfield et al., 1994). Translated to an organizational

context, differing levels of susceptibility should influence both the actions and reactions of

employees to events. Verbeke (1997), for example, found that salespersons that are more

sensitive to the emotions of their customers could perform better yet incur higher risks of

burnout in a sales organization. Accordingly, we conjecture that the effect of customer

6

satisfaction on employee work satisfaction will depend on how susceptible employees are to

the emotions of customers. Therefore:

Proposition 13: Susceptibility to emotional contagion increases the effect of customer

emotions on employee emotions

2.6.3 Employee-Customer Identification: Recent advances in social identity theory suggest

that identification with customers can also be a powerful source of self-definition (Korschun,

Bhattacharya and Swain, 2010). When a social identity is salient, people see themselves as

relatively interchangeable members of the group rather than as unique individuals; a process

known as depersonalization (Mackie et al., 2008). Depersonalization causes an individual to

react as a group member rather than as a unique individual, and so events have emotional

consequences based on how they affect the group and not the individual. Consequently, we

suggest that the more the employee identifies with the customer, the more the employees will

be influenced by the customer’s actions and emotions. Therefore:

Proposition 14: The effects of customer complaints, customer compliments, and customer

emotions respectively on customer emotions are moderated by the employee-customer

identification

3. Managerial Implications

First, our research suggests that customer satisfaction should impact upon employee work

satisfaction. This is important because, if customer satisfaction directly influences employee

satisfaction, then in addition to efforts by the organization to improve employee work

satisfaction efforts may also be focused on directly improving customer satisfaction. Second,

the research clearly delineates the process of influence as well as factors that can be expected

to strengthen or weaken the effect of customer satisfaction on employee work satisfaction.

While many of these factors are not controllable, some of them are controllable by managers

and therefore can be altered by them so that customer’s satisfaction might more readily

influence employee satisfaction. For example, managers can act to make customer satisfaction

more personally relevant (and so important) to employees through restructuring of rewards.

Managers can also use the information from this study as a guide for matching employees to

specific customers. For example, when faced with a difficult customer, who is constantly

dissatisfied, managers might choose to match such a customer with an employee who is less

likely to be influenced by the customer’s emotions and attitudes.

In conclusion, our propositional inventory and conceptual framework represent efforts to

build a foundation for understanding how customers influence employees. Future studies can

improve knowledge by expanding the framework and empirically testing our propositions.

7

Selected References

Anderson, N. H. (1971). Integration theory and attitude change. Psychological Review, 78 (3)

171–206.

Ashforth, B. E., Harrison, S. H., & Corley, K. G. (2008). Identification in organizations: An

examination of four fundamental questions. Journal of Management, 34(3), 325-374.

Dormann, C. & Zapf , D. (2001). Job satisfaction: a meta-analysis of stabilities. Journal of

Organizational Behavior 22(5): 483-504.

Earley, P. C. (1986). Trust, perceived importance of praise and criticism, and work

performance: An examination of feedback in the United States and England. Journal of

Management, 12, 457-473.

Hatfield, E., Cacioppo, J.T , & Rapson, R. (1994). Emotional Contagion. New York:

Cambridge University Press.

Heider, F. (1958). The psychology of interpersonal relations. New York: Wiley.

Judge, T.A.; Bono, J.E.; Erez, A. & Locke E.A. (2005). Core self-evaluations and job and life

satisfaction: the role of self-concordance and goal attainment. Journal of Applied Psychology,

90 (2), 257–268

Locke, K.D. (2003). Status and solidarity in social comparison: agentic and communal values

and vertical and horizontal directions. Journal of Personality and Social Psychology, 84 (3),

619- 631.

Luo, X., & Homburg, C. (2007). Neglected outcomes of customer satisfaction. Journal of

Marketing, 71(2), 133-149.

Mackie, D. M., Smith, E. R., & Ray, D. G. (2008). Intergroup emotions and intergroup

relations. Social and Personality Psychology Compass, 2(5), 1866-1880.

Pugh, D.S. (2001). Service with a smile: Emotional contagion in the service encounter.

Academy of Management Journal, 44 (5), 1018–1027.

Ryan, A. M., Schmit, M. J. & Johnson, R. (1996). Attitudes and effectiveness: Examining

relations at an organizational level. Personnel Psychology, 49 (4): 853–882.

Vroom, V. H. (1964). Work and Motivation. New York: Wiley.

Yi, Y., Nataraajan, R., & Gong, T. (2011). Customer participation and citizenship: behavioral

influences on employee performance, satisfaction, commitment, and turnover intention.

Journal of Business Research, 64(1), 87-95.