Another satisfied

customer!
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?
Customer Satisfaction
Customer satisfaction means money!
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.
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.
Customer (dis)satisfaction
96% of dissatisfied customers never complain to the business, but 91% will not
make return purchases
70-85% of dissatisfaction is due to customer service not product; 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; satisfied
people tell 5 friends (2:1 ratio)
70% will return if complaint is resolved, 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; ineffective ones spend 40%
the average business loses 10-30% of its customers
each year (without knowing which, when or why lost)
its 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
More (dis)satisfaction Facts
People who complain are generally younger, have higher
incomes, are better educated, have more experience with
the product, are less brand loyal, 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, 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; Fortune magazine
found that the companies with the happiest employees also produced the
highest returns to shareholders by a substantial margin, 27.5 percent vs. 17.3
percent for run-of-the-mill companies.

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, read
product label, etc.)
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, trust,
importance, performance, value)
Perceived benefit associations matrix
Importance, performance
Identification of primary benefits sought
Comparison to other brands (better, worse)
What is the best thing about the brand, what
could be done better


Message and Package Evaluation
Packaging size, design
Advertising Promise, message fulfillment
evaluation

Value Analysis
Expectation of price
Expectation of relative price (full price, on sale)
Current price paid

Satisfaction Measurements
Overall Satisfaction
Reasons for Satisfaction Evaluation
Satisfaction with attributes, features, benefits
Satisfaction with use
Expected and Ideal Satisfaction-Performance
Measures

Likelihood of recommending
Likelihood of repurchasing

General Measures in a Customer Satisfaction Survey
Customer expectations
influence the evaluation of quality
and forecast (from customers
pre-purchase perspective) how
well the product or service will
perform.
Perceived quality
refers to overall quality,
reliability, and the extent
to which a product or
service meets the
customers needs; this
shows the greatest impact
on customer satisfaction.

Perceived value is measured
through overall price given quality
and overall quality given price; 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; it has an inverse
relationship to customer complaints.
Customer Loyalty is measured by
likelihood to purchase a companys products or
services at various price points. Customer
satisfaction has a positive effect on retention,
but the magnitude of that effect varies greatly
across companies and industries.
ACSI
Components
(American
Customer
Satisfaction Index)
Meeting basic respect
& courtesy needs;
dissatisfaction if not
met; indifference if met
Customer tells what
is important;
satisfaction vs.
dissatisfaction if
met
Customer hopes &
asks but doesnt
expect; if met then
delighted. Unlikely to
cause dissatisfaction.
Build customer
loyalty
Benefits above &
beyond expectations;
identify and suggest
innovations with new
products
Some key points on developing loyalty
Since what was once unexpected/unstated becomes
expected/stated, you must keep innovating
Performance excellence occurs by design, not
default
All parts of the organization are part of creating
customer loyalty
Reliability: Keeping your promise, doing what you said you will do. Doing things
right the first time.
Assurance: Making the customer feel safe in their dealings with you, being
thoroughly professional and ethical.
Tangibles: How the product/service looks to the client, the appearance of
personnel and equipment, etc.
Empathy: The degree to which the organization and service personnel
understand the individual client and their needs, the ability to adapt the service to
each client, the willingness to 'go the extra' for the client.
Responsiveness: The availability, accessibility and timeliness of the service.
The ability to respond to enquiries and complaints in a timely fashion.
Parasuraman, A., Zeithaml, V., & Berry L. (1984, August). A conceptual model of service quality and Its implications for future
research. Cambridge, MA: Marketing Science Institute.
Proctor & Gamble's Pampers product had 13%
market share in Hong Kong. They went on a
massive campaign to gather the names and
addresses of mothers and babies through
highly successful cash back sales promotion
activities. To get the cash back, mothers had
to write in with full name and address details,
as well as the babies birth date and sex. Using this information they
wrote to the mothers on a quarterly basis, telling them of their babies
growth and what to expect at the various stages. They also sent out
discount vouchers when it was time to buy the next size up, so that the
nappies always performed well.

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. Each percentage point was worth US$1million over the life
usage of the product. That's $29mil just by staying in touch with the
same base, within 3 months over and over.
Pampering Customer Loyalty
Rokeachs Instrumental & Terminal Values (1973)
Value Males Females
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
7.8
14.6
8.3
3.8
13.6
8.9
3.8
4.9
7.9
11.1
12.6
9.2
14.1
9.9
8.2
13.8
9.6
8.5
10
15.8
9.4
3.0
13.5
8.3
3.8
6.1
7.4
9.8
12.3
9.8
15
7.3
7.4
15
9.1
7.7
Terminal
Value Males Females
Ambitious*
Broadminded
Capable
Cheerful
Clean
Courageous
Forgiving*
Helpful
Honest
Imaginative*
Independent
Intellectual
Logical
Loving*
Obedient
Polite
Responsible
Self-controlled
5.6
7.2
8.9
10.4
9.4
7.5
8.2
8.3
3.4
14.3
10.2
12.8
13.5
10.9
13.5
10.9
6.6
9.7
7.4
7.7
10.1
9.4
8.1
8.1
6.4
8.1
3.2
16.1
10.7
13.2
14.7
8.6
13.1
10.7
6.8
9.5
Instrumental
Basic design of the Hierarchical Values Map
for Means-Ends Chain Analysis
Values: abstract consequences, 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
Laddering for
promotional strategy
Laddering: Hierarchical Value Map for Wine Coolers
carbonation crisp expensive
Label
(fancy)
Bottle
(shape)
Less
alcohol
Filling
Smaller size
(10 oz.)
Refreshing:
Feel alert & alive
Quality:
Superior product
Superior quality
Consume less:
cant drink more
Can sip
Thirst quenching:
Relieves thirst
Not too sour
Sophisticated image:
Personal status
How others view me
More feminine:
Socially acceptable
Avoid negatives of
alcohol:
Not too drunk
Not too tired
Avoid waste:
Doesnt get warm
Reward:
Satisfying
compensation
Socialize:
Easier to talk
Open to
More sociable
Family life
Maintain respect
Better family ties
Belonging:
Security
Camaradarie
Friendship
Impress others:
Successful image
Accomplishment:
Get most from life
Self esteem:
Feel better about self
Self image
Self worth
Consumer decision-making map for express mail delivery
Laddering practice:

form pairs (or triads) and take turns constructing
value ladders for each others purchases

identify some product you purchase to which you
have had some degree of brand loyalty over the years.

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, link to the terminal values it supports
Supplementary
Slides
(not for study)
Financial
Perspective
Customer
Perspective
Operations
Perspective
Learning & Growth
Perspective
Key Elements of the Balanced Scorecard
Increased Word of Mouth
> reputation of business
> effective advertising
help introduce new products via instant awareness
lower buyers risk of trial
+ relationship with key suppliers, distributors & allies
enhance halo effect
insulate against short term adverse events
Repeat Sales
> frequent purchases
> purchase volume
> other goods/services
< switching
< 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, handling complaints
Customer Satisfaction
Higher Profit Margins!!!
Price Elasticity
Factors Affecting the Price Elasticity of Demand
Availability of substitutes: the more possible
substitutes, the greater the elasticity.
Degree of necessity or luxury: luxury products
tend to have greater elasticity. Some products that
initially have a low degree of necessity are habit forming and can
become "necessities" to some consumers.
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.
Time period considered: elasticity tends to be greater over the long
run because consumers have more time to adjust their behavior.
Permanent or temporary price change: a one-day sale will elicit a
different response than a permanent price decrease.
Price points: decreasing the price from $2.00 to $1.99 may elicit a
greater response than decreasing it from $1.99 to $1.98.

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