1. “Another satisfied customer!”
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!”

2. 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.

3. Customer (dis)satisfaction
the average business loses 10-30% of its customers each year (without knowing which, when or why lost)
it’s 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%

4. 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 percent for run-of-the-mill companies.

5. General Measures in a Customer Satisfaction Survey
 Product Use
Frequency of product use
Primary use location
Primary precipitating events or situations for product use or need
Usage rates and trends Product Familiarity
Degree of actual product use familiarity
Knowledge (read product information, read product label, etc.)
Knowledge and Involvement with product and the purchase process
Awareness of other brands
Reasons for original product purchase (selection reasons)
Primary benefits sought from the product Product Evaluation
Attribute evaluation matrix: (quality, price, trust, importance, performance, value)
Perceived benefit associations matrix Importance, performance
Identification of primary benefits sought Comparison to other brands (better, worse)
What is the best thing about the brand, what could be done better
Message and Package Evaluation
Packaging size, design
Advertising Promise, message fulfillment evaluation
Value Analysis
Expectation of price
Expectation of relative price (full price, on sale)
Current price paid
Satisfaction Measurements
Overall Satisfaction
Reasons for Satisfaction Evaluation
Satisfaction with attributes, features, benefits
Satisfaction with use
Expected and Ideal Satisfaction-Performance Measures
Likelihood of recommending
Likelihood of repurchasing

6. (American Customer Satisfaction Index)
Customer complaint activity is measured as the percentage of respondents who reported a problem with the measured companies’ product or service within a specified time frame; it has an inverse relationship to customer complaints.
Perceived value is measured through overall price given quality and overall quality given price; it has somewhat less impact on satisfaction and repeat purchase.
ACSI Components
(American Customer Satisfaction Index)
Perceived quality refers to overall quality, reliability, and the extent to which a product or service meets the customer’s needs; this shows the greatest impact on customer satisfaction.
Customer expectations influence the evaluation of quality and forecast (from customers’ pre-purchase perspective) how well the product or service will perform.
Customer Loyalty is measured by likelihood to purchase a company’s products or services at various price points. Customer satisfaction has a positive effect on retention, but the magnitude of that effect varies greatly across companies and industries.

7. Customer hopes & asks but doesn’t expect; if met then delighted
Customer hopes & asks but doesn’t expect; if met then delighted. Unlikely to cause dissatisfaction. Build customer loyalty
Customer tells what is important; satisfaction vs. dissatisfaction if met
Benefits above & beyond expectations; identify and suggest innovations with new products
Meeting basic respect & courtesy needs; dissatisfaction if not met; indifference if met

8. 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: Keeping your promise, doing what you said you will do. Doing things right the first time.
Assurance: Making the customer feel safe in their dealings with you, being thoroughly professional and ethical.
Tangibles: How the product/service looks to the client, the appearance of personnel and equipment, etc.
Empathy: The degree to which the organization and service personnel understand the individual client and their needs, the ability to adapt the service to each client, the willingness to 'go the extra' for the client.
Responsiveness: The availability, accessibility and timeliness of the service. The ability to respond to enquiries and complaints in a timely fashion.
Parasuraman, A., Zeithaml, V., & Berry L. (1984, August). A conceptual model of service quality and Its implications for future research. Cambridge, MA: Marketing Science Institute.

9. Pampering Customer Loyalty
Proctor & Gamble's Pampers product had 13% market share in Hong Kong. They went on a massive campaign to gather the names and addresses of mothers and babies through highly successful cash back sales promotion activities. To get the cash back, mothers had to write in with full name and address details, as well as the babies birth date and sex. Using this information they wrote to the mothers on a quarterly basis, telling them of their babies growth and what to expect at the various stages. They also sent out discount vouchers when it was time to buy the next size up, so that the nappies always performed well.
Within 14 months (the fifth cycle of the ever-growing list of mothers) Pampers had moved to the number one position with 49% market share. Each percentage point was worth US$1million over the life usage of the product. That's $29mil just by staying in touch with the same base, within 3 months over and over.

10. Rokeach’s Instrumental & Terminal Values (1973)
Males
Females
Ambitious*
Broadminded
Capable
Cheerful
Clean
Courageous
Forgiving*
Helpful
Honest
Imaginative*
Independent
Intellectual
Logical
Loving*
Obedient
Polite
Responsible
Self-controlled
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
6.6
9.7
7.4
7.7
10.1
8.1
6.4
3.2
16.1
10.7
13.2
14.7
8.6
13.1
6.8
9.5
Value
Males
Females
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
7.8
14.6
8.3
3.8
13.6
8.9
4.9
7.9
11.1
12.6
9.2
14.1
9.9
8.2
13.8
9.6
8.5 10
15.8
9.4
3.0
13.5
6.1
7.4
9.8
12.3 15
7.3
9.1
7.7

11. 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”

12. Laddering for
promotional strategy

16. Avoid negatives of alcohol:
Laddering: Hierarchical Value Map for Wine Coolers
Self esteem:
Feel better about self
Self image
Self worth
Family life
Maintain respect
Better family ties
Belonging:
Security
Camaradarie
Friendship
Accomplishment:
Get most from life
Impress others:
Successful image
Socialize:
Easier to talk
Open to
More sociable
Reward:
Satisfying
compensation
Sophisticated image:
Personal status
How others view me
Avoid negatives of alcohol:
Not too drunk
Not too tired
Avoid waste:
Doesn’t get warm
More feminine:
Socially acceptable
Thirst quenching:
Relieves thirst
Not too sour
Consume less:
can’t drink more
Can sip
Quality:
Superior product
Superior quality
Refreshing:
Feel alert & alive
Label
(fancy)
Bottle
(shape)
Less alcohol
Filling
Smaller size
(10 oz.)
carbonation
crisp
expensive

17. Consumer decision-making map for express mail delivery

18. Laddering practice:
form pairs (or triads) and take turns constructing
value ladders for each other’s 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

19. Supplementary Slides
(not for study)

20. Key Elements of the Balanced Scorecard
Financial
Perspective
Customer Satisfaction
Customer
Perspective
Operations
Perspective
Learning & Growth
Perspective

21. Customer Satisfaction
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
> effective advertising
help introduce new products via instant awareness
lower buyer’s risk of trial
+ relationship with key suppliers, distributors & allies
enhance halo effect
insulate against short term adverse events
Repeat Sales
> frequent purchases
> purchase volume
> other goods/services
< switching
Customer Satisfaction

22. Price Elasticity Factors Affecting the Price Elasticity of Demand
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.

23. 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 company’s customer base as an asset over time
information for strategic business applications
a predictor of consumer spending & corporate earnings