1. Consumer Behavior Consumer Satisfaction ConsumerSatisfaction

2. Consumer Behavior Consumer Satisfaction Outline The concept of consumer satisfaction/ dissatisfaction Theoretical frameworks: –Expectancy-disconfirmation theory –Attribution theory Measurement and management of consumer satisfaction Consequences of satisfaction/dissatisfaction

3. Consumer Behavior Consumer Satisfaction Consumer satisfaction/dissatisfaction satisfaction refers to a consumer’s judgment that a product (or its features) provided a pleasurable level of consumption-related fulfillment (Oliver 1997); distinguish: –transactions-specific satisfaction –cumulative satisfaction

4. Consumer Behavior Consumer Satisfaction Expectancy-disconfirmation theory According to ED-theory, satisfaction is a function of three variables:  expectations regarding product performance formed prior to purchase  perceptions of product performance resulting from experience with the product  comparison of perceived performance with prior expectations, leading to positive or negative disconfirmation or confirmation;

5. Consumer Behavior Consumer Satisfaction Attribution theory success and failure experiences with products lead to positive or negative overall emotional reactions, but may also elicit causal inferences along three dimensions: locus stability controllability (dis) satisfaction appears to be primarily related to locus of causality; in addition, particular attributions seem to be linked to specific emotions (e.g., failures controllable by the marketer lead to anger) and may influence the type of redress sought (e.g., consumers prefer a refund to an exchange in the case of stable attributions for product failure);

6. Consumer Behavior Consumer Satisfaction How satisfied are customers with the company's product? What are the company's strengths and weaknesses? What recommendations would you make to the management of this company? What other data would you collect to assess how well the company satisfies its customers? In-class exercise: Satisfaction measurement

7. Consumer Behavior Consumer Satisfaction Measurement and management of customer satisfaction qualitative methods: –ghost shopping –complaint and suggestion systems –critical incident method (Bitner et al.) quantitative methods –direct ratings of overall satisfaction –derived measures of satisfaction importance-performance measures disconfirmation measures (GAPS, ACSI)

8. Consumer Behavior Consumer Satisfaction Critical incident technique (Bitner et al.) critical incidents are specific interactions between customers and service firm employees that are especially satisfying or especially dissatisfying; incident classification: –employee response to service delivery failure (e.g., unavailable or slow service); –employee response to customer needs and requests (e.g., ‘special’ needs, customer preferences, customer errors); –unprompted and unsolicited employee actions (e.g., level of attention, unusual employee behavior);

9. Consumer Behavior Consumer Satisfaction In-class exercise: ACSI Read the description of the ACSI model and be prepared to discuss the constructs included in the model. Think about the 9 paths (arrows) in the model and try to figure out the sign of the relationships. Once you are familiar with the model, study the National Quarterly Scores (use the link on the home page). Pick an industry that you’re interested in and study the historical performance of the major players in this industry. What are the implications of these scores for the future performance of these companies?

10. Consumer Behavior Consumer Satisfaction market-based performance measure for firms, industries, economic sectors, and national economies; assessment of overall customer satisfaction as well as its antecedents and consequences; can be used for benchmarking over time and cross-sectionally; American Customer Satisfaction Index (Fornell et al.) perceived quality customer expectations perceived value customer satisfaction customer complaints customer loyalty

11. Consumer Behavior Consumer Satisfaction The GAPS model WOM Personal Needs Past Experience External Communication to Consumers Expected Service Perceived Service Service Delivery Translation of Mgmt. Perceptions into SQ specs Management Perceptions of Consumer Expectations GAP 3 GAP 2 GAP 5 GAP 1 GAP 4 CONSUMERCONSUMER MARKETERMARKETER

12. Consumer Behavior Consumer Satisfaction Dimensions of perceived service quality (Parasuraman, Zeithaml, and Berry) reliability: ability to perform the promised service dependably, accurately, and on time; assurance: knowledge and courtesy of employees and their ability to inspire trust and confidence; tangibles: appearance of physical facilities, equipment, and contact personnel; empathy: caring, individualized attention the firm provides its customers; responsiveness: willingness to help customers and provide the requested service promptly;

13. Consumer Behavior Consumer Satisfaction Consequences of dissatisfaction responses to dissatisfaction: –do nothing; –avoid seller/brand in the future (“exit”); –negative word of mouth to friends; –complain to seller or a third party (“voice”); action taken depends on such factors as the level of dissatisfaction, the importance of the product, the costs and benefits of actions, attribution of blame, and personal characteristics;

14. Consumer Behavior Consumer Satisfaction Loyalty a deeply held commitment to rebuy or repatronize a preferred product or service in the future, despite situational influences and marketing efforts having the potential to cause switching behavior (Oliver); often measured by share of purchases, intent to repurchase, RFM, retention and longevity, positive WOM, etc.;

15. Consumer Behavior Consumer Satisfaction Satisfaction and loyalty (Heskett et al.) extremely dissatisfied somewhat dissatisfied slightly dissatisfied satisfiedvery satisfied terrorist apostle zone of affection zone of indifference zone of defection satisfaction Loyalty (retention)

16. Consumer Behavior Consumer Satisfaction Extending the duration of customer relationships the notion of exchange has shifted from a transaction paradigm to a relationship paradigm; however, the economics of defections are often not well understood (e.g., can a reduction of defections by 5 % really boost profits by 25% to 85% ?); customers become more profitable over time because operating costs decline, purchases tend to increase, price premiums can be charged, and loyal customers provide free WOM;

17. Consumer Behavior Consumer Satisfaction How much profit a credit card customer generates over time (Reichheld and Sasser)

18. Consumer Behavior Consumer Satisfaction A credit card company’s defection curve (Reichheld and Sasser) Note: Customer value refers to the net present value of the profit streams a customer generates over the average customer life.