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Customer Satisfaction

Think of an incident in which you were
“surprised and delighted” as a satisfied
customer. How did that happen?

Think of another situation where you
were very disappointed as a customer,
and you did not return or you told others
about your negative experience. How did
that happen?

“Another satisfied
customer!”

Customer satisfaction means money!
• The lifetime value of a supermarket customer is estimated
at $250,000
• IBM in Rochester, Minn., calculates that a 1 percent
increase in customer satisfaction is worth $257 million in
additional revenues over five years.
• Marriott found that each percentage point increased in the
customer-wide satisfaction measure of intent-to-return was
worth some $50 million in revenues.
• A study in the Harvard Business Review showed that just a 5 percent
increase in customer retention boosts profits by 25 percent to 125 percent.
• Winners of the Malcolm Baldrige National Quality Award ( heavily oriented
toward customer satisfaction) outperform the Standard & Poor's 500-stock
index by 3:1 in ROI
• Sears, Roebuck operates on a financial model which shows that a 5 point
improvement in employee attitudes will drive a 1.3 point improvement in
customer satisfaction, which in turn will drive a 0.5 percent improvement in
revenue growth. The model also established that 4 percent improvement in
customer satisfaction translates into more than $200 million in additional
revenues.

68% of customers who stop buying do so because they perceive an employee as discourteous or indifferent • dissatisfied customers on average tell 12 friends of the poor service. and 95% of customers would do business again if a problem is resolved quickly and effectively • highly effective companies spend 10% of their operations budget on fixing problems related to customer complaints. but 91% will not make return purchases • 70-85% of dissatisfaction is due to customer service not product. satisfied people tell 5 friends (2:1 ratio) • 70% will return if complaint is resolved. when or why lost) • it’s more costly to win a new customer than to lose an existing one (5-7 times greater). it takes 12 positive incidents to make up for a negative one • Customers are three times more likely than service providers to recall the quality of the personal element in a transaction • 96% of dissatisfied customers never complain to the business. ineffective ones spend 40% .Customer (dis)satisfaction • the average business loses 10-30% of its customers each year (without knowing which.

17. are less brand loyal. Fortune magazine found that the companies with the happiest employees also produced the highest returns to shareholders by a substantial margin. have higher incomes. 27. have more experience with the product. are better educated.3 percent for run-of-the-mill companies. but only 1 per 100/500 get addressed by a senior executive • Quick resolution results in higher satisfaction & loyalty than multiple contacts • losing customers is strongly related to employee turnover.More (dis)satisfaction Facts People who complain are generally younger.5 percent vs. . and may have higher expectations • For every complaint there are an estimated 25 unnoted complaints • 75% of complaints reported to front line person do not get reported to management • Only 20% of complaints are directed to the manager by customers • 800# doubles calls to corporate.

 trust.)  •Knowledge and Involvement with product and  the purchase process •Awareness of other brands •Reasons for original product purchase  (selection reasons) •Primary benefits sought from the product  Product Evaluation •Attribute evaluation matrix: (quality. price.General Measures in a Customer Satisfaction Survey  Product Use •Frequency of product use  •Primary use location  •Primary precipitating events or situations for  product use or need  •Usage rates and trends  Product Familiarity •Degree of actual product use familiarity  •Knowledge (read product information. on sale) • Current price paid  Satisfaction Measurements • Overall Satisfaction • Reasons for Satisfaction Evaluation • Satisfaction with attributes. performance  •Identification of primary benefits sought  Comparison to other brands (better. etc. features. message fulfillment  evaluation  Value Analysis • Expectation of price • Expectation of relative price (full price. worse)  •What is the best thing about the brand. what  could be done better  Message and Package Evaluation • Packaging size. design  • Advertising Promise. value) •Perceived benefit associations matrix  Importance. performance. read  product label.  importance. benefits • Satisfaction with use • Expected and Ideal Satisfaction-Performance  Measures   • Likelihood of recommending • Likelihood of repurchasing .

ACSI Components (American Customer Satisfaction Index) Perceived value is measured  through overall price given quality  and overall quality given price. and the extent  to which a product or  service meets the  customer’s needs.  reliability. it has an inverse  relationship to customer complaints.  Customer expectations influence the evaluation of  quality and forecast (from  customers’ pre-purchase  perspective) how well the  product or service will perform.  Customer Loyalty is measured by   likelihood to purchase a company’s products  or services at various price points. this  shows the greatest impact  on customer satisfaction. it  has somewhat less impact on  satisfaction and repeat purchase.  Customer complaint activity is  measured as the percentage of respondents  who reported a problem with the measured  companies’ product or service within a  specified time frame.  but the magnitude of that effect varies greatly  across companies and industries. Customer  satisfaction has a positive effect on retention. Perceived quality refers to overall quality.  .

if met then delighted. Unlikely to cause dissatisfaction. dissatisfaction if met Meeting basic respect & courtesy needs. satisfaction vs. dissatisfaction if not met. indifference if met Customer hopes & asks but doesn’t expect. Build customer loyalty Benefits above & beyond expectations.Customer tells what is important. identify and suggest innovations with new products .

  The ability to respond to enquiries and complaints in a timely fashion. Zeithaml.  • Tangibles: How the product/service looks to the client. A conceptual model of service quality and Its implications for future research. MA: Marketing Science Institute. doing what you said you will do.  Parasuraman. (1984. being  thoroughly professional and ethical.  • Empathy: The degree to which the organization and service personnel  understand the individual client and their needs. A. the appearance of  personnel and equipment. Doing things  right the first time. Cambridge. the willingness to 'go the extra' for the client. August). you must keep innovating • Performance excellence occurs by design.  • Responsiveness: The availability. accessibility and timeliness of the service. etc. . not default • All parts of the organization are part of creating customer loyalty • Reliability: Keeping your promise. & Berry L. V..Some key points on developing loyalty • Since what was once unexpected/unstated becomes expected/stated. the ability to adapt the service to  each client. • Assurance: Making the customer feel safe in their dealings with you..

 Using this  information they wrote to the mothers on a quarterly basis. They  also sent out discount vouchers when it was time to buy the next size  up. mothers had                                                     to write in with full name and address details.Pampering Customer Loyalty Proctor & Gamble's Pampers product had 13%                                            market share in Hong Kong. To get the cash back. so that the nappies always performed well. That's $29mil just by staying in touch with the same  base. . They went on a                                                        massive campaign to gather the names and                                                addresses of mothers and babies through                                                     highly successful cash back sales promotion                                           activities.                                                   as well as the babies birth date and sex. Within 14 months (the fifth cycle of the ever-growing list of mothers)  Pampers had moved to the number one position with 49% market  share. telling them  of their babies growth and what to expect at the various stages. within 3 months over and over. Each percentage point was worth US$1million over the life usage  of the product.

3 3.4 3.8 15 7.8 12.9 3.3 3.8 9.7 Terminal Females 7.9 11.4 9.9 10.2 12.8 13.1 7.7 .5 10.6 9.4 7.1 10.2 14.2 14.1 6.4 8.2 13.3 9.3 7.5 Females 10 15.6 8.6 8.6 9.8 9.7 6.5 8.5 8.9 7.2 8.2 8.5 Value Comfortable life* Exciting life Accomplishment World peace World beauty Equality Family security Freedom* Happiness Inner harmony* Mature love National security Pleasure Salvation* Self-respect Social recognition True friendship wisdom Males 7.6 7.1 8.8 6.8 14.1 3.7 10.8 4.7 13.8 9.6 8.7 8.1 7.1 9.4 9.8 13.Rokeach’s Instrumental & Terminal Values (1973) Instrumental Value Ambitious* Broadminded Capable Cheerful Clean Courageous Forgiving* Helpful Honest Imaginative* Independent Intellectual Logical Loving* Obedient Polite Responsible Self-controlled Males 5.9 8.6 13.4 8.1 10.1 9.4 14.0 13.4 15 9.2 16.5 10.3 3.9 13.9 6.4 7.3 10.1 12.

valued end-goals: • I am helpful & caring Psychosocial consequences: psychological & social outcomes • I can tell others Functional consequences: tangible outcomes of product use • gives me useful information Attributes: product characteristics & features • Editorial content & articles “Why is it important? What does it give to you? What is negative about it? What do you want to avoid” .Basic design of the Hierarchical Values Map for Means-Ends Chain Analysis Values: abstract consequences.

Laddering for promotional strategy .

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) .Laddering: Hierarchical Value Map for Wine Coolers Self esteem: •Feel better about self •Self image •Self worth Accomplishment: •Get most from life Impress others: •Successful image Reward: •Satisfying •compensation Sophisticated image: •Personal status •How others view me Socialize: •Easier to talk •Open to •More sociable Avoid negatives of alcohol: More feminine: •Socially acceptable •Not too drunk •Not too tired Thirst quenching: •Relieves thirst •Not too sour crisp expensive Label (fancy) Avoid waste: •Doesn’t get warm Consume less: • can’t drink more •Can sip Quality: •Superior product •Superior quality Refreshing: •Feel alert & alive carbonation Belonging: •Security •Camaradarie •Friendship Family life •Maintain respect •Better family ties Bottle (shape) Less alcohol Filling Smaller size (10 oz.

Consumer decision-making map for express mail delivery .

• start by describing the attributes of the product • then link those to the benefits you obtain from it • then link to the (instrumental) values it satisfies • and finally.Laddering practice: • form pairs (or triads) and take turns constructing value ladders for each other’s purchases • identify some product you purchase to which you have had some degree of brand loyalty over the years. link to the terminal values it supports .

Supplementary Slides (not for study) .

Key Elements of the Balanced Scorecard Financial  Perspective Customer  Perspective t s Cu Operations  Perspective Learning & Growth  Perspective r e om a f s ti a S n o i ct .

handling complaints • Increased Word of Mouth • > reputation of business • Repeat Sales • > effective advertising • > frequent purchases • help introduce new products via instant awareness • > purchase volume • lower buyer’s risk of trial • > other goods/services • + relationship with key suppliers.Higher Profit Margins!!! • < price elasticity (tolerate price increases) • < transaction costs (not spend as much to attract new customers) • < product failure costs • < resources due to handling & returning • < reworking defective items. distributors & allies • < switching • enhance halo effect • insulate against short term adverse events Customer Satisfaction .

Some products that initially have a low degree of necessity are habit forming and can become "necessities" to some consumers.98. the greater the elasticity.00 to $1.99 to $1.99 may elicit a greater response than decreasing it from $1. • Permanent or temporary price change: a one-day sale will elicit a different response than a permanent price decrease. • Proportion of the purchaser's budget consumed by the item: products that consume a large portion of the purchaser's budget tend to have greater elasticity. • Degree of necessity or luxury: luxury products tend to have greater elasticity. .Price Elasticity Price change causes change in demand Factors Affecting the Price Elasticity of Demand • Availability of substitutes: the more possible substitutes. • Price points: decreasing the price from $2. • Time period considered: elasticity tends to be greater over the long run because consumers have more time to adjust their behavior.

It focuses on different sectors of the economy ranging from autos to household appliances to government services to grocery items. and Foresee Results.American Customer Satisfaction Index. a professional group in Milwaukee. in partnership with the American Society for Quality. ACSI results provide: • an economic indicator of the quality of economic output • calculation of the net present value of their company’s customer base as an asset over time • information for strategic business applications • a predictor of consumer spending & corporate earnings . an Internet tracking firm. is based on a quarterly survey by the National Quality Research Center at the University of Michigan business school.