Chapter 7. Postpurchase Processes,. Customer Satisfaction Chapter 7 Postpurchase Processes, Customer Satisfaction and Consumer Loyalty Postpurchase process Postpurchase dissonance Why product use is important to marketers Why product disposal is important to consumers Concept of customer satisfaction Concept of consumer loyalty In this lecture we examine the postpurchase process as the ‘after sale’ period. In some ways it is more important than the actual lead-up to the sale. If postpurchase is not managed correctly then subsequent sales may not take place. It is important that marketers know how consumers are using products, as this can lead to important marketing decisions. In this ‘throw-away society’ we are being encouraged to think beyond the product purchase and use stage. Some consumers are thinking this way already and their needs must be considered. Finally we will discuss the importance of customer satisfaction and consumer loyalty. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Postpurchase Processes Postpurchase dissonance Product use and non-use Disposal Purchase evaluation Customer satisfaction, repeat purchase behaviour and consumer loyalty This lecture will cover the following topics: postpurchase dissonance product use disposal purchase evaluation, and aspects of gaining customer satisfaction and loyalty. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Postpurchase Consumer Behaviour This chart provides an overview of the relevant stages. The marketer must realise that each stage is important for the consumer. We look at each stage in detail. If complaint behaviour is not managed to the satisfaction of the consumer, then it may result in low satisfaction, subsequent brand-switching and possible discontinued use of the product.

Postpurchase Dissonance Some purchases are followed by postpurchase dissonance Probability of postpurchase dissonance, and the magnitude of dissonance, is a function of the: degree of commitment and/or whether the decision can be revoked importance of the decision to the consumer difficulty of choosing among the alternatives individual’s tendency to experience anxiety Following some purchases, some consumers experience doubts or anxiety about the wisdom of the purchase. This is known as postpurchase dissonance. It is most likely to occur: among individuals with a tendency to experience anxiety; after an irrevocable purchase; when the purchase was important to the consumer; and when the purchase involves a difficult choice between two or more alternatives. Postpurchase dissonance is important to the marketing manager because, if not resolved, it can result in a returned product or a negative evaluation of the purchase. (See page 186.) Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Product Use and Non-Use use innovativeness regional variations multiple vs single use Packaging Defective products product recalls Most purchases are followed by product use. This use may be by the purchaser or by some other member of the purchasing unit. Marketing managers are interested in product use for a variety of reasons. The main reason is that consumers use a product to fulfil certain needs. If the product does not fulfil these needs, a negative evaluation may result. Therefore, managers must be aware of how products perform in use. Monitoring product usage can indicate new uses for existing products, needed product modifications, appropriate advertising themes, and opportunities for new products. Product liability laws have made it increasingly important for marketing managers to be aware of all potential uses of their products. (See pages 186–187.) Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Product-Usage Index See page 187 for details.

Unique Packaging for Competitive Advantage See page 188.

The Incidence of Product Recalls 1998–2003 See pages 188–187.

Product Disposal and Marketing Strategy Recycling product package Trade-ins to motivate replacement Second-hand markets e.g. textbooks, clothes ‘Cash Converters’ Disposal of the product or its package may occur before, during or after product use. Understanding disposal behaviour has become increasingly important to marketing managers, because of the ecological concerns of many consumers, the costs and scarcity of raw materials, and the changing laws; for example, laws in the EU make manufacturers responsible for package disposal. The ease of recycling or re-using a product’s container is an important product attribute for many consumers. These consumers, sometimes referred to as ‘socially-conscious’ consumers, are an important market segment not only because of their purchases, but also because of their social and political influence. Product disposal is important to marketing strategy because disposal sometimes must precede product use due to financial or space limitations; certain disposal strategies may give rise to a used or rebuilt market; and difficult or unsatisfactory disposal alternatives may cause some consumers to avoid purchase of a particular item. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Product-Disposal Alternatives See pages 190–191.

Purchase Evaluation Evaluation of a purchase is influenced by: expectations perceived performance Basically, consumers develop certain expectations about the ability of the product to fulfil instrumental and symbolic needs. To the extent that the product meets these needs, satisfaction is likely to result. When expectations are not met, dissatisfaction is the likely result. (See page 193.) Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Expectations, Performance and Satisfaction See page 193 for definitions.

Dissatisfaction Responses Possible outcomes of a negative purchase evaluation: Taking no action Switching brands, products or stores Warning friends and colleagues Taking no action, switching brands, products or stores, and warning friends are all common reactions to a negative purchase evaluation. Marketing managers should generally encourage dissatisfied consumers to complain directly to the firm, and to no-one else. This will alert the firm to problems and provide it with an opportunity to make amends. Unfortunately, only a fairly small, unique set of consumers tend to complain. Developing such strategies as consumer hotlines could increase the percentage of dissatisfied consumers who complain to the firm. (See page 196.) Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Actions Taken by Consumers in Response to Product Dissatisfaction See pages 196–197.

Marketing Strategy and Dissatisfied Consumers Marketers need to satisfy consumer expectations by: creating reasonable expectations through promotional efforts maintaining consistent quality so that these reasonable expectations are fulfilled Marketers should avoid creating dissatisfied customers, and this can be managed by anticipating their reactions. Communicating with present and potential customers is one strategy. Maintaining consistent quality standards will also ensure that customers’ expectations are satisfied. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Repeat Purchase Behaviour Note the difference between: Brand loyalty implies a psychological commitment to the brand and Repeat purchase behaviour simply involves the frequent repurchase of the brand After the evaluation process, and, where applicable, the complaint process, consumers have some degree of repurchase motivation. There may be a strong motive to avoid the brand, a willingness to repurchase it some of the time, a willingness to repurchase it all of the time, or some level of brand loyalty (a willingness to repurchase coupled with a psychological commitment to the brand). Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Relationship Marketing The five key elements: 1. Developing a core product/service on which to build 2. Customising the relationship to the individual customer 3. Augmenting the core product/service with extra benefits 4. Pricing in a manner that encourages loyalty 5. Marketing to employees so that they perform well for customers See pages 202–203 for discussion. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Brand Loyalty is… biased a behavioural response expressed over time where a consumer selects a brand over alternative brands a function of psychological processes Some brand managers have an aim of converting customers to brand loyals, where they are biased towards the brand and, given the opportunity, choose it frequently over alternative brands. In some markets it may be very time-consuming and expensive to convert and maintain customers’ brand-loyalty status. It might be far more opportune to attract other consumer groups, to at least increase their purchasing frequency. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Repeat Purchase Behaviour and Marketing Strategy Kodak monitors six groups of consumers/customers: current customers new customers brand switchers trial users customers who upgrade trade-in customers As an example of a firm that utilises purchase frequency behaviour, Kodak monitors these groups and develops appropriate strategies for each. It must be emphasised that some groups may be too difficult to compete for, such as the brand switchers, who may simply be buying on price: competitors practicing discounting strategies will attract this segment. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Repeat Purchase Behaviour and Marketing Strategy (cont.) Once objectives are defined for each group it becomes possible to develop and implement marketing strategies and evaluate the results Thus, objectives should be set for each type of customer, possible strategies defined and marketing decisions made about prioritising groups to receive marketing attention. (See pages 200–201.) Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Importance of Customer Satisfaction The business of business is getting and keeping customers. (Drucker, 1979) Delivering high-quality service and high customer satisfaction is closely linked to profits, cost savings, and market share. (PIMS, Profit Impact of Market Share, 1970s) Customer satisfaction is not new to marketing and business. Peter Drucker, a leading marketing writer, was discussing this concept in the 70s. The realisation of the importance and impact on profits was also being discussed and measured by the PIMS market analysts in the 70s. Thus, customer satisfaction is an important component of business and marketing strategy. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Using Technology Modern information technology makes possible these close, ‘customised’ relationships that add customer perceived-value to the product/service. Technology such as computer tracking of customers now makes it possible customise and personalise service in many businesses. The service industries can provide many examples. Reminding customers that the next car service or dental inspection is due can add value for customers, but there is an added benefit to knowing some of the details—such as ‘we usually pick your car up for the service, is this still required?’ This ‘apparent’ attention to detail differentiates firms from their competitors. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Value of Customer Loyalty Increased purchases of the existing product Cross-purchases of your other products Price premium due to their appreciation of your added-value services Reduced operating cost because of familiarity with your service system Positive word-of-mouth which refers other customers to your firm Despite the fact that loyal customers may be expensive to attract and retain, there are many benefits for the firm. They are more likely to purchase more from your firm, are less price-sensitive, are less expensive to service as they are familiar with ‘how things work’, and they are more likely to sell the merits of your products to their acquaintances. (See page 203.) Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

“Loyal customers expect a good price, but they crave value most of all (Palmer, 1996) As Adrian Palmer, one of the noted authors in services marketing, pointed out: value is often more important than price. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

The customer is always right. Rule No.2 If the customer is not right, then refer to Rule No. 1!! An old adage made popular in a group of American supermarkets and used at one stage by Safeway supermarkets: Always refer to Rule No. 1! Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Measuring Customer Satisfaction Qualitative measurement techniques Focus groups Monitoring surveys It is very difficult to improve customer satisfaction if it is not measured in some way. Many firms constantly monitor their standing with customers through surveys and customer focus groups. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Next Lecture… Chapter 8: Perception Own notes Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins