1. “Another satisfied customer!” 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? Customer Satisfaction

2. Customer satisfaction means money! 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. 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.

3. Customer (dis)satisfaction 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% 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

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

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

6. 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 < 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 Customer Satisfaction Higher Profit Margins!!!

7. Price Elasticity 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. Price change causes change in demand

8. 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

9. Customer expectations influence the evaluation of quality and forecast (from customers’ pre-purchase perspective) how well the product or service will perform. 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. Perceived value is measured through overall price given quality and overall quality given price; it has somewhat less impact on satisfaction and repeat purchase. 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. Customer Retention 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. ACSI Components

10. Courtesy & respect vs. dissatisfaction Hopes & asks but doesn’t expect it; won’t dissatisfy, but can increase loyalty Proactive in suggesting things a customer can benefit from Tells you what is important, resulting in (dis)satisfaction

11. 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. Pampering Customer Loyalty

12. Rokeach’s Instrumental & Terminal Values (1973) ValueMalesFemales 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 3.8 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 8.3 3.8 6.1 7.4 9.8 12.3 9.8 15 7.3 7.4 15 9.1 7.7 Terminal ValueMalesFemales 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 13.5 10.9 6.6 9.7 7.4 7.7 10.1 9.4 8.1 6.4 8.1 3.2 16.1 10.7 13.2 14.7 8.6 13.1 10.7 6.8 9.5 Instrumental

13. 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”

14. Laddering for promotional strategy

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

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