Consumer Loyalty and

Experiences
Consumer Behavior
Term 5, PGPM 2021-22

Prof. Suresh Ramanathan

 What Does it Take to Satisfy a Customer?Mutual
Fund Advisor Example

Asymmetric Drivers

Gives right amount

of info and assistance

I feel like a valued customer

I have confidence in
his or her advice
Impact of exceeding expectations

Clearly communicates the

Impact of failing to meet expectations
required information

Can solve problems Series1

in one visit

-1.5 -1 -0.5 0 0.5 1 1.5

Regression Coefficients
 Managing Customer Expectations
Exceeding Emotional
Expectations

Danger Zone High Performance

Zone

- surviving on a relationship - exceeding physical and

- feel sorry for you emotional expectations
-drawing on customer - high emotional engagement
goodwill - loyalty created
-only sustainable for a while
Exceeding physical
Not meeting
expectations
physical
expectations
Dead Zone Commoditization
Zone

-overachieve physical,
- out of business underachieve emotional
- not achieving physical or - faster, quicker, cheaper
emotional expectations - running faster to stand still
- unable to survive - Innovation to imitation
Not meeting
Emotional expectations
 Is Satisfaction…

The absence of something negative?

The presence of something positive?

Or, neither – just get it right?

Bloomberg Businessweek 2013
You are not getting a refund, so f*** off.
We don’t want to hear your sob stories.
What part of “No Refund” do you not get?

- Michael O’Leary, CEO, Ryan Air

 Loyalty

• The Behavioral view:

– A biased (i.e., nonrandom) purchase response
expressed over time by a consumer or set of
consumers with respect to one or more brands
Views About Loyalty
 Is Loyalty Profitable?
Relationship between longevity and profits

Category Correlation
Grocery .45
Corporate Services .30
Direct Brokerage .29
Mail-order .20
 Does it result in higher profits?
Lifetime profit per customer

Low Revenue High Revenue

Long 50.85 289.83

Lifetime

50.49 257.96
Short
Lifetime
 Does it cost less?
Cost/Sales Ratio for four segments

Low Revenue High Revenue

Long .128 .063

Lifetime

.141 .065
Short
Lifetime
 Do loyal customers pay higher prices?
Average Item Price

Low Revenue High Revenue

Long 47.74 58.43

Lifetime

47.97 63.54
Short
Lifetime
Methods of Measuring
Loyalty
 The Ultimate Question
The Net Promoter Metric (Reichheld 1993)
 Budget
Avis National

Hertz
 Growth by Word of Mouth

3 yr Southwest
Growth

1999-
2002 Alaska
American

Northwest Continental

TWA Delta

US Air United

Net promoters
 Net Promoter Scores

USAA 82%
Harley-Davidson 81%
Costco 79%
Chick-fil-A* 78%
Amazon 73%
eBay 71%
Vanguard 70%
SAS 66%
Apple 66%
Cisco 57%
FedEx 56%
Southwest Airlines 51%
American Express 50%
Dell 50%
Problems with the Net Promoter Metric
Loyalty
 Consider the Following

Person Loyal Brand Other Brands Loyalty (% share

of uses)
Anne Star Market Folgers 50%
Yuban
Dunkin’
Farmer’s
Charles Coffee Connection Starbucks 100%
Peet’s
1369 Coffeehouse
Frank Chock Full ‘O Folgers 80%
Nuts Maxwell House
Hills Brothers
Green Mountain
Pam Gevalia Green Mountain 90%
Peet’s
Wendy Dunkin’ Donuts Folgers 80%
Brueggers
 Varieties of Loyalty

• Marriage
Socio-Emotional
Committed (Wendy, Dunkin’)
partnership .
* Fling (Pamela, Gevalia)
(Wendy, Brueggers) • best friend
• Hometown buddy(Frank, Chock Full)
(Anne, Farmer’s)
• Work partner
• Compartmentalized (Anne, Star Market)
Friendship
Shallow, (Frank, Hills) Intense,
• marriage of convenience
Superficial Deep
(Charles, Coffee Connection)

• Former love
(Anne, Yuban)

• Work colleague
(Pamela, Peet’s) Functional/
Utilitarian
Loyalty Redefined
Customer
Experiences
 The Gorilla vs. The Chimp
Or: Everyone cannot be a Walmart

• Operational excellence
• Product leadership
• Low costs

• Segment-specific initiatives
• Customer intimacy
• Defend niches to the death
What is an Experience?
• “An experience occurs when a
company intentionally uses
services as the stage, and
goods as props, to engage
individual customers in a way
that creates a memorable
event”
– Pine and Gilmore (1998)
 Experiences vs. Services

• Part of the distinction is Quantitative, part of it is Qualitative

• Quantitative:
– Service strives for Uniformity within Segments;
Experience for Personalization (e.g., Ritz Carlton,
Boutique Hotels)

• Qualitative:
– Service addresses specific problems of a client;
Experience addresses all problems the guest brings to
the situation
– Service ends with consumption; Experience extends into
Post-consumption
– Addresses a more abstract Goal
1. Understand how your brand
fits into the customer’s life
 Socio-Cultural
Context

Consumption Situation

Product Category
Experience

Brand
Experience
“I’d like a tall Toffee Nut Latte with non-fat milk,
no whipped cream, extra hot, to go”
 Instead of asking Ask this question
Questions to be asked and not asked

• How can our bank • What is the overall

reduce churn? customer experience at
the bank and why are they
leaving?
• How can we charge a
• How can I create a
premium for our coffee?
memorable coffee
experience?
• What is go-to-market
strategy for toys in India? • What is the role of play in
India?
2. Create an experiential
platform and put it into
action…
 Strategic
Experiential
Modules
SENSE
FEEL
THINK
ACT
RELATE
https://vimeo.com/10261997
https://youtu.be/SByymar3bds
3. Deliver throughout the
journey and across multiple
SEMs
The Experiential Grid
COURSE OBJECTIVES
 Broad Framework

Customer as Individual Customer as Decision-Maker Customer as Brand

- What we see - How we - How we feel

- What we evaluate - How we relate
remember - How we decide
- What we need - How we might
be
influenced
Consumer Behavior:
Course Framework

• Exposure
NEED
• Attention
RECOGNITION • Perception
• Motivation
INFORMATION
• Learning
SEARCH • Memory

EVALUATION OF • Attitudes
ALTERNATIVES
• Decision Making
• Situational Influence
CHOICE/ • Experiences
PURCHASE •
Post-Purchase
Satisfaction
POST-CHOICE • Customer Loyalty
EVALUATION • Brand Relationships
Understanding Consumer Behavior
Perception and Sensation

• Perceptual processes
• Subliminal advertising
• Just Noticeable Difference and Weber’s Law
• Biases in perception
• Physical distortions
• Expectations
• Motivations
 Learning and Memory

 How do consumers learn associations between products and beliefs

and feelings?
 How are these associations represented in memory and what
might influence them?
Consumer Motivations
 Attitudes

• How are attitudes formed?

• How can attitudes be changed?
• Affective, cognitive, or conative?
• measuring explicit attitudes and behavioral intentions
Fishbein multi-attribute model
measuring implicit attitudes and behavioral intentions
🛠 IAT
 Consumer Decision Making

• Understanding the consumer's decision processes

– People use different types of decision rules –
compensatory or non-compensatory- to make decisions.
– Sometimes, people may engage in a two-stage process, first
non-compensatory (e.g., lexicographic, elimination by aspects,
conjunctive, disjunctive) to eliminate a few choices, and then
compensatory models (e.g., weighted average) to make the
final decision.
– Decisions are however subject to significant contextual
influences – e.g., decoy effect, compromise effect, anchoring
and adjustment

– Consumers are fundamentally changing their decision journeys

with the advent of digital and mobile media
 Managing Customer
Satisfaction and Experience

– Satisfaction as a metric – relevant or not today?

– Brands as experience providers, not bundles of features
and benefits
– Manage the whole experience, not just customer service
– Create holistic experiences around the five SEMs –
sense, feel, think, act and relate
 The big picture...

• Consumers are
– incredibly fascinating and complex – the rational decision-maker is a
strawman
– cognitive misers, but do quite a good job using their limited resources
– experience-seekers, not merely information-seekers
– not vacuum-sealed in their own psychological cocoons but guided by
cultural and social contexts
– not so complex you can't measure and forecast some of their buying
behavior
• measure using, e.g., focus groups, laddering, ZMET, projective techniques, multi-attribute
utility measurement, conjoint, etc.
• common sense:
– talk to people
– put yourself into the shoes of the consumer
– go through the process from goal activation to learning from experience
– theoretically grounded intuition
– this takes practice

• Marketing
– start by understanding consumer
– help consumers through each stage of their buying process
– be flexible and use best technique for specific situation and budget
 What I Hope You Feel….

Twinch (twinch) – n. The movement a dog makes with its head when it
hears a high-pitched noise.
 What I Hope You Don’t Feel….

Mustgo (must’ go): n. Any item of food that has been sitting in the
refrigerator so long it has become a science project.
 Stay in Touch

suresh@Greatlakes.edu.in

https://www.linkedin.com/in/ramanathansuresh/