KelleyFall 2001 Marketing Management 1291 How to Get Customer Satisfaction Defining Customer Satisfaction Performance Measures of Service Quality Retaining Customers Measuring Customer Satisfaction Applying Customer Satisfaction Customer Database

KelleyFall 2001 Marketing Management 1292 Customer Satisfaction Rule 1: The customer is always right! Rule 2: If the customer is ever wrong, reread Rule 1. Stew Leonard’s Dairy Store Norwalk, Connecticut

KelleyFall 2001 Marketing Management 1293 Customer Satisfaction Facts Expectations = Performance (satisfied) Performance > Expectations (extremely satisfied, positive word-of-mouth, 1 will tell 3) Expectations > Performance (extremely dissatisfied, negative word-of-mouth, 1 will tell 11)

KelleyFall 2001 Marketing Management 1294 Customer Satisfaction Facts About 15% of those who are dissatisfied would be impossible to satisfy under any circumstances Satisfaction is influenced by situational factors (time, degree of inconvenience, emergency)

KelleyFall 2001 Marketing Management 1295 Performance Variables of Service Quality Reliability - ability to deliver what is promised, dependably and accurately Responsiveness - willingness to promptly help customers Assurance - ability to convey trust, competence and confidence Empathy - individual attention to customers Tangibles - physical facilities, equipment and your own appearance

KelleyFall 2001 Marketing Management 1296 Ten Deadly Sins of Customer Service 1. “I don’t know” 2. “I don’t care” 3. “I can’t be bothered” 4. “I don’t like you” 5. “I know it all”

KelleyFall 2001 Marketing Management 1297 Ten Deadly Sins of Customer Service 6. “You don’t know anything” 7. “We don’t want your kind here” 8. “Don’t come back” 9. “I’m right and you’re wrong” 10. “Hurry up and wait”

KelleyFall 2001 Marketing Management 1298 The Good, the Bad, and the Ugly There are no “bad” customers; some are just harder to please than others. Someone who never waited on a customer in his or her life

KelleyFall 2001 Marketing Management 1299 Customer Retention 80/20 Rule 80% of your sales will come from 20% of your customers Organizations lose 20% of their customers each year

KelleyFall 2001 Marketing Management Customer Retention $5 to attract a new customer, $1 to retain an existing customer 1998 survey found “attracting customers” was mentioned as a priority twice as often as “keeping customers”

KelleyFall 2001 Marketing Management Determining the Lifetime Value of Your Customers What percentage of your customers do you lose each year, fully or partially? Do you know the average cost of each lost customer? What is the profit value of a loyal customer over a lifetime? Lifetime Value of a Customer (LVC)

KelleyFall 2001 Marketing Management Determining the Lifetime Value of Your Customers Profit Streams of Longtime Customers The better your customers know you, the more they buy from you The better you know your customers, the better you can serve them If you have loyal customers, you can charge more Satisfied customers provide word-of-mouth advertising

KelleyFall 2001 Marketing Management Determining the Lifetime Value of Your Customers Average customer $ per year Average return on salesx Number of years average customer stays with youx Profit from your average customer= How much average customer increases orders each year+ How much costs decrease each year+ $ value of referrals each year+ Price increase without losing loyal customers+ Total

KelleyFall 2001 Marketing Management Measuring Customer Satisfaction Satisfaction Surveys “To understand what John Brown buys, you must look at John Brown through John Brown’s eyes” Questionnaire should be built on what is important to the customer Survey results need to be compared to something (year, competition, industry average)

KelleyFall 2001 Marketing Management Measuring Customer Satisfaction Complaint letters Only 4% of dissatisfied customers write letters of complaint Between % of complaining customers will buy again from you if you respond quickly The rate climbs to 95% if you respond quickly and well

KelleyFall 2001 Marketing Management Define Your Customers Customer #1 Customer #2 What Why Who When Where How

KelleyFall 2001 Marketing Management What Matters to Your Customers? List the performance variables that cause customers to buy from you

KelleyFall 2001 Marketing Management What Matters to Your Customers? List the performance variables that cause customers to buy from your competitors

KelleyFall 2001 Marketing Management Determine What Must Be Done to Retain Existing Customers Measure Customer Satisfaction 1. List the customer satisfaction measures that you take? 2. How often do you take each customer satisfaction measure? 3. Interpret each customer satisfaction measure. 4. Use the customer satisfaction information to improve marketing performance.

KelleyFall 2001 Marketing Management Determine What Must Be Done to Retain Existing Customers MeasureFrequencyResultsHow Used

KelleyFall 2001 Marketing Management Determine the Lifetime Value of Your Customers Average customer $ per year Average return on salesx Number of years average customer stays with youx Profit from your average customer= How much average customer increases orders each year+ How much costs decrease each year+ $ value of referrals each year+ Price increase without losing loyal customers+ Total