Customer Experience and Customer Relationships

Customer Experience Agenda  What is customer experience?  What are the four stages of the customer experience hierarchy?  What goals must a firm keep in mind when designing a desirable customer experience?

Definition of Customer Experience  In general,  A target customer’s perception and interpretation of all the stimuli encountered while interacting with a firm.  On the Internet,  The interpretation of one’s complete encounter with the site, from the initial look at the homepage through the purchase experience, including decisions such as abandoning a shopping cart.

The Experience Hierarchy - Four Stages of Customer Experience  Stage One: Experiencing Functionality - “The Site Works Well”  Usability and Navigation  Speed  Reliability  Media Accessibility  Security

The Experience Hierarchy - Four Stages of Customer Experience  Stage Two: Experiencing Intimacy – “They Understood Me”  Customization  Communication  Consistency  Trustworthiness

The Experience Hierarchy - Four Stages of Customer Experience  Stage Three: Experiencing Internalization – “It’s Part of Me” Exceptional Value Shift from Consumption to Leisure Activity Active Community Membership “The Company Cannot Manage Without Me”

The Experience Hierarchy - Four Stages of Customer Experience  Stage Four: Experiencing Evangelism – “I Love to Share the Story”  Taking the Word to the Market  Defender of the Experience

Exhibit 6–1: Stages of Customer Experience

Six Broad Goals for Creating a Desirable Customer Experience Create a Rich Description of the Target Customer Integrate the Online and Offline Experience Articulate Clear Stages of the Desired Experience Assess Relative Levels of Hierarchy Highly Leverage the Evangelists Continuously Monitor and Adjust

Exhibit 6–2: Stages of the Customer Experience Other- Oriented Personal General Customer Reactions Time to Develop Relationship Functional Evangelist Internalized Intimate

Source: EBay Screenshot

Exhibit 6–5: EBay Motors Suppose the user is interested in bidding on a vehicle in the Los Angeles area — a Volkswagen Jetta in the $10,000 to $16,000 price range and manufactured after Users click to the automotive section of eBay’s homepage and switch to the eBay Motors page.

Exhibit 6–6: Browse by Cars Once inside the eBay Motors site, the user follows the path “cars.”

Exhibit 6–7: VW Jetta Volkswagen and Jetta, leading to the current auctions that are happening

Exhibit 6–8: VW Jetta ’99 When inside the auctions listed, the user looks for the desired price range and the year model. The user finds a VW Jetta ’99 with bids starting at $6,400.

Exhibit 6–9: Bidding on the Jetta This model and price are of interest. The user decides to bid.

Exhibit 6–10: VW Jetta ’99 Reserve Not Yet Met The user is currently the winning bid, though the reserve price for this particular car has not yet been met. The user has to continue bidding more if he or she wants to win and purchase the car.

Exhibit 6–11: Confirmation

Exhibit 6–12: My eBay Jetta My eBay has the necessary information to keep track of all auctions the user has been participating in, thus users use this page as their main interface. By this means, the user can keep track of relevant information for the car auction.

Exhibit 6–4: Stages of Customer Experience for EBay

Customer Experience — Conclusion  Customer experience refers to a customer’s perception and interpretation of all the stimuli encountered while interacting with a firm  There are four stages to the customer experience, which are outlined by the “experience hierarchy”:  Stage One: Experiencing Functionality — “The Site Works”  Stage Two: Experiencing Intimacy — “They Understand Me”  Stage Three: Experiencing Internalization — “It’s Part of Me”  Stage Four: Experiencing Evangelism — “I Love to Share the Story”  In the process of designing a desirable customer experience, firms should set six broad goals: 1) create a rich description of the target customer, 2) effectively integrate the online and offline experience, 3) articulate clear stages of desired experience, 4) effectively assess relative levels of hierarchy, 5) highly leverage the evangelists and 6) continuously monitor and adjust

Customer Relationships

Exhibit 7–1: Ben & Jerry’s Homepage

What is a Relationship?  A relationship is a bond or connection between a firm and its customers.  It may be strong, weak or nonexistent.  It can be intellectual, emotional or both.  Involvement - Continuum ranging from communal to exchange based.

Relationship involvement for a hypothetical person Automobile Expensive Watch Scotch Whiskey Wine for Dinner Party Face Soap Eyeglasses Paper Towels Disposable Razor Liquid Bleach Insect Repellent Salad Oil Insecticide Toilet Tissue 35-mm Camera Stereo Component Credit Card Headache Remedy Hair Coloring Deodorant Soap Soft Drink Potato Chips Washer / Dryer High Low Product type (cost, level of symbolism, risk) Purchase situation (visibility, social acceptability) Consumer type (interests, values, attitudes) Exhibit 7–2: A Continuum of Relationship Involvement

Why do firms want relationships with customers? The long-standing buyer-seller relationship might lead the customer to:  Develop trust that the seller will provide good value.  Feel that the brand represents who they are.  Promote the seller to friends, family and acquaintances.  Seek out and actively read the seller’s promotional material.  Anticipate the positive feelings from remaining loyal to the seller.

Understanding the Value of Customer Relationships Two basic reasons why customer relationships increase profitability: 1. Costs of serving existing customers are lower. 2. Existing customers are willing to pay higher prices.

Measuring a Customer’s Value  Relationship depth, as reflected by the frequency and magnitude of purchases, is a critical component of customer profitability.  Questions to ask when measuring the lifetime value of customers:  Active and Inactive Customers  Customer’s Net-Present Value

Expected Relationship Between Length of Customer Tenure and Profitability Adapted from Werner J. Reinartz and V. Kumar, “On the Profitability of Long-Life Customers in a Noncontractual Setting: An Empirical Investigation and Implications for Marketing,” Journal of Marketing, 64 (October 2000), pp. 17–35. ShortLong Lifetime Low High Lifetime Profit

Harley-Davidson Screen Shot

The Stages of a Relationship 1. Awareness 2. Exploration and Expansion 1. Attraction 2. Relationship Norms 3. Trust 4. Power Relations 5. Satisfaction 3. Commitment 4. Dissolution

Moving Through the Relationship Stages Commitment Dissolution Exploration / Expansion  Customers can advance through the stages in several different ways Awareness

Two Alternatives for Customers at the Commitment Stage Commitment  Customers can either stay committed or move to dissolution Dissolution Stay Committed Stay Committed Satisfied, profitable customers Unsatisfied or unprofitable customers

Source: Example of a Website Geared Toward Creating a Customer Relationship

Level of Interaction by Stage of Customer Relationships Level of Intensity Four Key Stages of Customer Relationships Level of Intensity Stages of Customer Relationships Awareness Exploration / Expansion Exploration / Expansion Commitment Dissolution Intensity

The 2Is: Why The Web is Unique at Creating Customer Relationships 1. Interactivity  Defined as the extent to which a two-way flow if communication occurs between the firm and the customer. 2. Individualization  Reflects the degree to which firm-customer interactions are tailored or customized to the individual user.

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PwC Online Privacy Attitudes

Integrative Framework — Building Relationships on the Web Price Product Promotion Distribution Brand Marketing Levers Four Key Stages of Customer Relationships Awareness Exploration / Expansion Exploration / Expansion Commitment Dissolution

Customer Relationships — Conclusion  The customer relationship stages are: 1. Awareness — The customer recognizes that the firm is a possible exchange partner, but has not initiated any communication with the firm or purchased its products 2. Exploration — The customer considers the possibility of exchange, gathers information and perhaps initiates trial purchases 3. Commitment — The parties in a relationship feel a sense of obligation or responsibility toward each other 4. Dissolution — This stage signals the separation of buyer and seller — the loss of connection  The Internet allows firms to interact and to individualize in powerful ways. As a result, firm-customer relationships can be formed and can progress very quickly  Firms don’t always want a relationship with all customers... and vice versa