Customer satisfaction has a significant impact on business profits and performance. A 5% increase in customer retention can boost profits by 25-125%, and highly satisfied customers are more likely to remain loyal customers and make repeat purchases. Losing existing customers is much more costly than acquiring new customers. Effectively resolving customer complaints is important for maintaining high satisfaction and loyalty. Meeting and exceeding customer expectations is key to delivering quality, value and an overall positive customer experience.

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. 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
General Measures in a Customer Satisfaction Survey

6. 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 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.
ACSI
Components
(American
Customer
Satisfaction Index)

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

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. 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

10. Rokeach’s Instrumental & Terminal Values (1973)
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
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
Value 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
13.5
10.9
6.6
9.7
7.4
7.7
10.1
9.4
8.1
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

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. Laddering: Hierarchical Value Map for Wine Coolers
carbonation crisp expensive 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

19. Supplementary
Slides
(not for study)

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

21. • 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!!!

22. 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

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