Marketing Management

Dawn Iacobucci

© 2010 South-Western, a part of Cengage Learning

Customer Evaluations

Chapter 12

Marketing Framework

Customer Evaluations

• Marketers are interested in – Customer satisfaction

– Customer perceptions of quality

– Customer intention to repurchase– Customer likelihood of word of mouth, etc.

• Marketers want to convert new customers to satisfied, to customers who purchase frequently and finally to loyal customers

Comparative Evaluation

Low Involvement Purchases

• Comparison process may be instantaneous and quickly forgotten– Purchasing toothpaste

• Expectations are usually latent

• If do not receive what expected, expectations become more explicit– Toothpaste tastes different

High Involvement Purchases

• Comparison process is deliberative and conscious– Purchasing athletic shoes

• Customers think about purchases

• Customers have expectations that must be met

Discussion Questions

• Using the comparative evaluation model..– Can you describe a low involvement

purchase that prompted you to experience dissatisfaction?

– Can you describe a high involvement purchase that prompted you to experience dissatisfaction?

Search Purchases

• Qualities are obvious from visual examination– Purchasing shoes

• Comparative process is straightforward– holistic, attribute-by-attribute, etc.

Experiential Purchases

• Evaluation cannot be completed until there is trial or consumption– Purchasing a travel package

• Expectations may not be fully formed prior to purchase

• Experience and expectations simultaneously shape the evaluation

Credence Purchases

• Customers don’t have the expertise to evaluate– Purchasing dental services

• Customers evaluate what they can– Can’t evaluate dentist’s abilities so evaluate

timeliness of appointment, courtesy of staff, appearance of offices, etc.

Sources of Expectations

1. Your own experience

2. Your friends’ advice

3. Marketing information

4. Third party communications

1. Own Experiences

• Direct experiences– Visited the coffee shop previously, expect a

similar experience

• Indirect experiences– Visited the same coffee shop in another city,

expect roughly the same experience– First time using a realtor, expect it to be a

cross between dealing with a bank manager and salesperson

2. Friends’ Advice

• If have little expertise, ask friends– Friends have similar preferences, and they

receive no commercial gain

• People may also seek experts’ opinions

• Companies actively try to prompt positive word of mouth

3. Marketing Information

• Marketing mix information originating with the company– Positioning claims made in ads– Suggestions of quality inferred from price

point– Frequency of sales/coupons– Exclusivity of distribution outlets– Performance descriptions from salespeople

• Least trusted source

4. Third Party Communications

• Customers can get expectations from – Movies, internet, Consumer Reports, etc.

– These sources are usually out of the marketers control

• Customerd consider this information to be especially valid and objective

Discussion Questions

• Which of the four sources of expectations influences you the most? Why?

• Which source influences you the least? Why?

Customer Experiences

• Customers evaluate the core of the purchase– Reliable performance, tangible cues to

quality, etc.

• Customers also evaluate the interpersonal aspects of service when applicable– Responsiveness, competence, empathy, etc.

Customer Experiences

• Both core and supplemental components contribute to satisfaction but differently– If the core is good, satisfaction is not

affected much because the customer expects the core to be good

– If the core is bad, dissatisfaction occurs

– Supplemental components can affect both satisfaction and dissatisfaction

Customer Experiences

• Every point of interaction between company and customer is evaluated

• Flowcharts are used to depict interactions

• Flowcharts have been used to – Generate quality measures at each stage– Identify points of likely repeated problems– Suggest system redesigns for efficiency

Example: Hotel

Discussion Question

• Can you develop a high level flowchart for your interactions with your university?

Three Levels of Expected Quality

• Ideal– Some segments are demanding

• Predicted (expected)– Most expect average-level quality

• Adequate– For unimportant purchases, many expect

only a basic market offering

• Zone of tolerance– Range of performance deemed acceptable

Value

• Value is the tradeoff of the quality of the purchase compared with the price paid and other costs incurred

Discussion Question

• What has more value a Honda Civic or a Honda Accord? Why?

Expectations Are Dynamic

• Expectations vary across time– “What have you done for me lately”

• Every industry experiences this

• Expectations vary across cultures

Measuring Quality & Satisfaction

• Marketers can rarely set precise measures of quality standards and expect to conform – Marketing involves measuring perceptions

• Marketers’ measures are subjective and imperfect, but the numbers can be used to gauge performance relative to past or competitive performance

Measuring Quality & Satisfaction

• Information obtained from measurement should be actionable– Not just a single question, “are you satisfied”

• To assess and improve performance, information needs to be available in each market for each segment on a number of criteria

Example: Measuring Satisfaction

Measuring Quality & Satisfaction

• Some researchers have found that greater sales can lead to lower levels of customer satisfaction – Positive word of mouth converts more

buyers, the segment becomes larger with a greater variety of expectations which may lead to dissatisfaction

Dissatisfaction

• When customers are dissatisfied, empowered front-line employees should– Redress the problem

– Empathize with the customer

– Offer a perk for the customers troubles

Customer Relationships

• Marketers want to go beyond satisfaction to loyalty– Repeat purchasing, word of mouth,

attachment to the brand

• Customer satisfaction is first step in a longer-term relationship

RFM

• RFM: recently, frequently, monetary value– Most desirable customers have bought the

most recently, buy the most frequently and have the highest monetary value

• Process– RFM is evaluated and coded– The importance of R vs. F vs. M is judged– A single score for each customer is

computed

Example: RFM

Discussion Question

• Think about your relationships with retailers. Of these relationships, which do you think you are most valuable in terms of RFM?

CRM

• Customer Relationship Management– Takes planning, money and constant work– Requires ongoing monitoring of customers

• Incoming calls, website viewing habits, purchasing, catalogs and emails sent to them, returns, etc.

• Companies need to design information systems that – Integrate inputs from all relevant touchpoints– Make information available in useful formats

for managerial usage

CRM Database Variables

CLV

• Customer lifetime value– Assessing customers in terms of their worth

to a company

• When calculating CLV– Get the assumptions as right as possible– Use the numbers as guides as to which

customers to try to please and which customers to let defect

CRM and CLV

• Calculating CLV is important because – It fits a strategic initiative to serve certain

segments of customers better

– It begins to identify those segments

Example: CLV

Example: CLV

Discussion Question

• Can you define satisfaction and express the importance of satisfaction in terms of RFM and CLV?