Importance-performance analysis revisited: the role of the factor structure of customer satisfaction

Abstract

The measurement and management of customer satisfaction has become a key issue in the last decade. Banks must thoroughly understand the needs of their customers and design products and services that meet and exceed their expectations. The importance-performance analysis (IPA) is a widely used analytical technique that yields prescriptions for the management of customer satisfaction. IPA is a two-dimensional grid based on customer perceived importance of service attributes and attribute performance. Depending on the interplay of these two dimensions, four strategies can be derived. Recent research in customer satisfaction, however, suggests that service attributes fall into three categories (basic factors, performance factors, and excitement factors) and that their importance depends on their performance. As a result, the traditional IPA needs to be reconsidered. In this article, the results of an empirical study on the satisfaction with bank services are presented and it is demonstrated that traditional IPA can be misleading. This is attributed to the existence of three satisfaction factors: basic, performance, and excitement factors. The authors then present an analytical procedure to identify these factors and discuss how these findings can be interpreted and how the traditional IPA should be extended and modified. The paper closes with managerial implications of the findings.