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.

Customer (dis)satisfaction
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
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%

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.

General Measures in a Customer Satisfaction Survey

Product Use
Frequencyofproductuse
Primaryuselocation
Primaryprecipitatingeventsorsituationsfor
productuseorneed
Usageratesandtrends
Product Familiarity
Degreeofactualproductusefamiliarity
Knowledge(readproductinformation,read
productlabel,etc.)
KnowledgeandInvolvementwithproductand
thepurchaseprocess
Awarenessofotherbrands
Reasonsfororiginalproductpurchase
(selectionreasons)
Primarybenefitssoughtfromtheproduct
Product Evaluation
Attributeevaluationmatrix:(quality,price,trust,
importance,performance,value)
Perceivedbenefitassociationsmatrix
Importance,performance
Identificationofprimarybenefitssought
Comparisontootherbrands(better,worse)
Whatisthebestthingaboutthebrand,what
couldbedonebetter

Message and Package Evaluation

Packagingsize,design
AdvertisingPromise,messagefulfillment
evaluation
Value Analysis
Expectationofprice
Expectationofrelativeprice(fullprice,onsale)
Currentpricepaid
Satisfaction Measurements
OverallSatisfaction
ReasonsforSatisfactionEvaluation
Satisfactionwithattributes,features,benefits
Satisfactionwithuse
ExpectedandIdealSatisfaction-Performance
Measures

Likelihoodofrecommending
Likelihoodofrepurchasing

ACSI
Components
(American
Customer
Satisfaction Index)

Perceived value ismeasured

throughoverallpricegivenquality
andoverallqualitygivenprice;it
hassomewhatlessimpacton
satisfactionandrepeatpurchase.

Customer complaint activity is

measuredasthepercentageofrespondents
whoreportedaproblemwiththemeasured
companiesproductorservicewithina
specifiedtimeframe;ithasaninverse
relationshiptocustomercomplaints.

Perceived quality
referstooverallquality,
reliability,andtheextent
towhichaproductor
servicemeetsthe
customersneeds;this
showsthegreatestimpact
oncustomersatisfaction.

Customer expectations
influencetheevaluationof
qualityandforecast(from
customerspre-purchase
perspective)howwellthe
productorservicewillperform.

Customer Loyalty ismeasuredby

likelihoodtopurchaseacompanysproducts
orservicesatvariouspricepoints.Customer
satisfactionhasapositiveeffectonretention,
butthemagnitudeofthateffectvariesgreatly
acrosscompaniesandindustries.

Customer tells what

is important;
satisfaction vs.
dissatisfaction if
met

Meeting basic respect

& courtesy needs;
dissatisfaction if not
met; indifference 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: Keepingyourpromise,doingwhatyousaidyouwilldo.Doingthings
rightthefirsttime.

Assurance: Makingthecustomerfeelsafeintheirdealingswithyou,being
thoroughlyprofessionalandethical.

Tangibles: Howtheproduct/servicelookstotheclient,theappearanceof
personnelandequipment,etc.

Empathy: Thedegreetowhichtheorganizationandservicepersonnel
understandtheindividualclientandtheirneeds,theabilitytoadapttheserviceto
eachclient,thewillingnessto'gotheextra'fortheclient.

Responsiveness: Theavailability,accessibilityandtimelinessoftheservice.
Theabilitytorespondtoenquiriesandcomplaintsinatimelyfashion.
Parasuraman,A.,Zeithaml,V.,&BerryL.(1984,August). A conceptual model of service quality and Its implications for future
research.Cambridge,MA:MarketingScienceInstitute.

Pampering Customer Loyalty

Proctor&Gamble'sPampersproducthad13%
marketshareinHongKong.Theywentona
massivecampaigntogatherthenamesand
addressesofmothersandbabiesthrough
highlysuccessfulcashbacksalespromotion
activities.Togetthecashback,mothershad
towriteinwithfullnameandaddressdetails,
aswellasthebabiesbirthdateandsex.Usingthis
informationtheywrotetothemothersonaquarterlybasis,tellingthem
oftheirbabiesgrowthandwhattoexpectatthevariousstages.They
alsosentoutdiscountvoucherswhenitwastimetobuythenextsize
up,sothatthenappiesalwaysperformedwell.
Within14months(thefifthcycleoftheever-growinglistofmothers)
Pampershadmovedtothenumberonepositionwith49%market
share.EachpercentagepointwasworthUS$1millionoverthelifeusage
oftheproduct.That's$29miljustbystayingintouchwiththesame
base,within3monthsoverandover.

Rokeachs 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
5.6
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

Terminal
Females
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

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
7.8
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

Females
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

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

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:
Doesnt get warm

Consume less:
cant 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

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)

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

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, 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 buyers risk of trial
> other goods/services
+ relationship with key suppliers, distributors & allies
< switching
enhance halo effect
insulate against short term adverse events

Customer Satisfaction

Price Elasticity

Price change causes

change in demand

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.

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