gavin week 10 2012 bho2434 lecture0

Consumer Behaviour BHO2434 7/1/2013

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Week 10: Satisfaction and Dissatisfaction

Quester et al 2012

East, Wright & Vanhuele (2009)

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Continuing with the implications of consumer behaviour theories

This week we consider ◦ The implications of satisfaction and dissatisfaction

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Customer Satisfaction (CS) & Service Quality (SQ) are the 2 constructs that are central to Customer Retention which leads to business success

Numerically, Customer retention expressed as Customer Lifetime Value (CLV) CLV = time period * (Revenue – Costs) e.g., CLV of golf member: 10 yrs * ($600 - $250) =

$3500 + all the cross-selling opportunities in food & beverages, equipment, clothing…

Customer retention v costs recruiting new

customers

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Some customers “leak away” & we keep replenishing with new customers – “refilling the bucket”

Need to weigh up costs of customer acquisition v retention

Some customers do “leak” to competitors

Some customers simply stop being “spending customers”

Perhaps we can “plug the bucket” better via quality service & satisfying experiences for our spectators, participants

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In addition to customer retention , positive impact of “quality service” via:

◦ Fewer complaints ◦ Increased positive WOM ◦ Cross-selling leads to cross-buying ◦ Reduced “remedial” costs leading to reduced marketing costs;

increased volunteer base, etc

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Service Quality – how close to “excellent” (expectations) service would/did the service experience come?

Customer Services – how pleasurable was the service experience? How satisfied were you?

Difference = that Customer Service is experience dependent whereas Service Quality can be perceived [most of you never been to a corporate box at a stadium but you can imagine (perceive) what the service might be like there]

Service Quality & Customer Services evaluations of: - the service outlet itself [Technical Quality] - contact personnel [process quality] - other customers [process quality]


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1. Quality and satisfaction

2. Models of consumer satisfaction ◦ 1. Confirmation Model

◦ 2. Disconfirmation Model

3. Responses to customer satisfaction and dissatisfaction

4. Complaining

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1. Quality Issues

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Customer satisfaction and dissatisfaction (CSD) has become increasingly important in marketing

TQM and CQI have been driven ◦ Largely by the importance of satisfying customers

Improve quality of goods and services increases satisfaction ◦ Actual or perceived quality?

◦ High quality products: more profits?

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Total quality management (TQM) and Constant quality improvement (CQI)

◦ Philosophy of management based on continual

improvement and responding to customer needs and expectations

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What is it? – Definition?

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The ability of the product to deliver satisfaction to the customer?

A relative characteristic ◦ Production versus aesthetic quality/Level versus

consistency

E.g. Toyota versus BMW

Customer defined

Assumption that it is crucial to have quality as a competitive advantage

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Most companies assume that consumers are willing to pay a premium for quality products

Therefore we would expect the quality leaders to perform better than others over the long term e.g. Stock market

Schilit (1994) points out that more than half of ‘quality award winners’ had loses after winning the award

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2. Models of Consumer Satisfaction

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It is a post-consumption evaluation that a chosen alternative at least meets or exceeds expectations.

(Engel et al., 1995)

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The buyers cognitive state of being adequately or inadequately rewarded for the sacrifice he/she has undergone

Oliver (1981) definition of disconfirmation ◦ Summary psychological state

◦ Disconfirmed expectations (prior feelings)

◦ Short duration of surprise/excitement

◦ Change of attituides

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Customers switch ‘away’ from service providers rather than ‘to’ providers.

In one study the reasons were: ◦ Core service failure (44%)

◦ Service encounter failures (34%)

◦ Inconvenience (21%)

◦ Response to service failures (17%)

◦ Attraction to competitors (10%)

◦ Ethical problems (7%)

◦ Involuntary switching (6%)

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Satisfaction = Performance – Expectation

Customer satisfaction depends on their:

◦ Perception of the product performance

◦ Expectations of the product performance beforehand

When you achieve or exceed expectations, you have a satisfied customer

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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)

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Possible outcomes of a negative purchase evaluation:

◦ Taking no action

◦ Switching brands, products or stores

◦ Warning friends and colleagues

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Passives (14%) ◦ Seldom take action, younger group, don’t see a benefit

from complaining

Voices (37%) ◦ Seldom take private or public action, usually complain

directly to the firm, older group, believe they are providing a social benefit

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Irates (21%) ◦ Take above average levels of private response and

average levels of direct action, but low levels of public action

Activists (28%) ◦ Likely to get involved in private, direct and public

action, believe they are providing social benefits by complaining

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Marketers need to satisfy consumer expectations by: ◦ creating reasonable expectations through

promotional efforts

◦ maintaining consistent quality so that these reasonable expectations are fulfilled

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Confirmation Model ◦ Meeting consumer expectations

Disconfirmation Model ◦ Disconfirmed expectation

Exceeding expectation (satisfaction)

Not fulfilling expectation (dissatisfaction)

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Consumption

Expected negative outcome

Discontent

Little complaint or product avoidance

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We often have habits that lead to dissatisfaction but take no action ◦ Do we fix leaking taps immediately?

◦ Do we avoid going to Coles/Safeway when we know there will be long queues?

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Consumption

RESPONSE (word of mouth, complaint, switch, nothing

Expectation about attributes

Perception of actual attributes

Disconfirmation Perception – expectation

Dissatisfaction (modified by explanation such as bad luck, responsibility etc.

Expectation, attitude, loyalty and consumption are affected.

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Most products perform at out about our level of expectation ◦ E.g. Customers of fast food restaurants are largely

satisfied

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Define in your own words what satisfaction and dissatisfaction are ◦ Give an example of a situation when you have been

surprised as a consumer:

Were you satisfied?

Were you dissatisfied?

What did you do?

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3. Responses to satisfaction and dissatisfaction

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Most consumers are reluctant to complain ◦ As many as 95% of respondents indicate they did

not complain when dissatisfied

Risk of Negative Word of Mouth (NWOM) is not high ◦ Not only do very few people complain, very few

people react to NWOM

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Think about the last time you actually took the time to complain to a company ◦ Describe the situation

Was the complaint handled well?

If so, why?

If not, what could have been done better?

Was there a successful service recovery?

Did you tell others?

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Reduces the negative comments to other potential customers?

After a successful service recovery is the consumer more likely to repeat purchase?

Will service recovery raise loyalty?

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Common in airlines, trains and wherever queues form

In the past very little communication ◦ Now more common to communicate honestly with

the customer

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Prime relevant expectation ◦ Forewarning customers about problems (price

increases)

Reveal hidden benefits ◦ Focus on certain characteristics

Cue negative beliefs about competitors ◦ Competitive advertising

Don’t draw attention to the unnoticed ◦ Do not apologise for minor shortfalls

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Measuring Customer Satisfaction and Service Quality

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Satisfaction and dissatisfaction are often measured ◦ Market researchers are often hired to conduct a

company’s satisfaction tracking

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Qualitative measurement techniques

Focus groups

Monitoring surveys

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SERVQUAL is a service quality measurement instrument ◦ Measures expectations versus perception

Other measures include ◦ Importance and performance scoring

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Indirect measures – monitoring customer complaints; monitoring customer retention rates

Direct measures – by market research – personal or self

completion surveys using rating scales with “why” (open-ended”) & “how” might we improve questions

- by “free-to-consumer” communication opportunities – web discussion sites, toll-free numbers, postage-paid cards, phone follow-ups

Service recovery & follow-up – complaint resolution

sometimes can cement greater loyalty

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Concluding thought: Note how market research is used to

inform organisation of its customers’ views…”keeping a finger on the pulse”

Generally one conducts Service Quality measures for facilities, & Customer Service measures for more global issues – whole experience, vis-à-vis competition

Research (van Leeuwen 2001) shows product extensions contribute more to Customer Service than “contest” – “luckily” as marketers have more control over “product extensions”


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Segmentation, targeting and positioning

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gavin week 10 2012 bho2434 lecture0

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