Why satisfied customers defectBy-Thomas O Jones. and W. EarlSasser

Presented byIpsita Ojha

Kapil RustagiNeha YadavPrinku Jain

3 Beliefs

It is sufficient merely to satisfy a customer, as long as the customer responds with at least a satisfied rating.

Investment required for changing customers from satisfied to completely satisfied is not a wise use of resource.

Each division with a relatively high career rating(3.5 to 4.5) should focus on customers on its lower satisfaction categories.

Research FindingsExcept in a few rare instances , complete customer satisfaction is the key to securing customer loyalty and generating superior long term financial performance.

Even in markets with relatively little competition, providing customers with outstanding value may be the only reliable way to achieve sustained customer satisfaction and loyalty.

Very poor service or products are not the only cause-and not even be the main cause-of high dissatisfaction.

Different satisfaction levels reflect different issues and, therefore require different actions.

Even though the results of the customer satisfaction surveys are an important indicator of the health of a business, relying solely on them can be fatal.

Listen to your customerCustomer Satisfaction Indices : Quantify level of customer satisfaction to compare results from different time periods ,locations and business units.

Feedback: Recovery strategy can only be implemented when complaints and negative feedback are clearly known to the company.

Market Research: Identify those attributes of the product or company that are making customers to leave. During survey make a last ditch attempt to retain the customer. Customer should be interviewed both at time of arrival and at the time of departure.

Frontline Personnel: Train frontline personnel to listen effectively and try to amend when customers have bad experience . Establish flow of this information through the organization by carrying customer oriented integration .

Strategic Activities: Co-create product and services with the customer by involving the customer in every level of the business.

Listen to your customer

A Satisfied Customers—a

sure sign of the company’s success?

Actually not…….

Xerox Corporation discovered, Its merely satisfied customers, were six times less likely to buy again

from Xerox than its totally satisfied

customers.

Few Companies which lost their market share

Industries or companies that experienced a rapid

change in customer loyalty

• Telecommunications, Airlines.

• Nokia, BSNL• American Express

• IBM, Digital equipment Corporation

Reason for shift in customer loyalty.

• Deregulations.

• Entry of New competitors. • Reduction in brand

dominance• Advent of new technology.

LOYALTY: Loyalty is the share of purchase in respective category. The feeling of

loyalty gets manifested in many forms of customer behavior.

Loyalty is a higher-order measure of customer attachment than satisfaction. Loyalty involves an emotional commitment to a brand. It usually has an attitude component ("I feel better about it, so I'll keep using it") and A behavior component ("I'll keep buying it, regardless.").

Attitudes are important because re-purchase alone doesn't always mean a customer is emotionally invested. For example, you may not like your insurance agent, but you renew with him each year because you don't have the time to look for a new one. Then you get a great referral for a new agent and you switch.

In this case Perceived loyalty is nothing much more than convenience.

There’s a tremendous difference in loyalty between merely and totally satisfied customers. Whether in highly competitive markets (e.g., cars), virtual monopolies (e.g., local phone service), or industries with strong loyalty-promotion programs (e.g., airlines), customers will stray the instant they’re no longer completely satisfied—and have a choice.

Totally satisfying customers requires some investment and ingenuity—but it pays for itself many times over. Here’s how to keep your best—i.e., most profitable—customers delighted and devoted.

Measure of Loyalty

•Ask customer about their future intentions to repurchase a given product or services.

•Can also link this intention with customer satisfaction.

•Intention to repurchase is very strong indicator of future behavior.

Intent of repurchase.

•There are five categories that show actual repurchasing behavior.

•Recency, Frequency, Amount, Retention and Longevity.

•But only provide a glimpse of overall share and are most useful as an indication of change over time.

Primary Behavior.

•Customer Referrals•Endorsement•Spreading positive word

of mouth.•Although these are soft

measures of behavior that link to customer

•Repurchasing intention however they significantly affect positive experiences of customer.

Secondary Behavior

Measure of Loyalty

The Satisfaction Loyalty LinkResearch conducted by selecting 5 markets

1.Automobiles: Highly Competitive Market.

2.Personal Computers for businesses: The user is not the actual buyer, highly competitive with considerable barriers.

3.Hospitals: Shifting from a market dominated by semi-monopolies to one characterized by Intense Competition with significant barriers.

4.Airlines: Varying level of competition on routes and strong loyalty Programs affect purchasing decisions.(Route is virtual monopoly).

5.Local Telephone Services: Actual or virtual monopoly, in which satisfaction seems to have a little impact on loyalty.

How the Competitive Environment Affects the Satisfaction Loyalty Relationships

Research Findings1.Local Telephone Services Monopoly- Customers remained Loyal no matter how dissatisfied

they were.

What in case the source of a monopoly’s hold on customers suddenly disappears??

2. Loyalty increases with satisfaction, but the relationship is neither linear nor simple.

3.AutomobilesCompetitive market – Steep Curve

Even a slight drop from complete satisfaction created an enormous drop in loyalty

Continued4. Personal Computers for businessesMidrange market- End user satisfaction may impact

customer loyalty.

5. Hospital IndustryMidrange market- Curve becomes steeper as competition

intensifies.

6.Airlines IndustryMixed Market- Relationship between satisfaction and

loyalty resembles competitive markets on several routes

Conclusion of the research• Customers are reasonable, but they need to be

completely satisfied else when provided with other choices they will be lured easily.

• It is necessary to understand that what percent of seeming loyalty is true and what part is artificial.

• Managers should concerned if the majority of customers fall into the satisfied category.

USING CUSTOMER SATISFACTION INFORMATION

STEP 1:

• Measure customer satisfaction systematically by ensuring that the process: • is unbiased, i.e., not distorted by interest groups within your company, • lets you compare products, locations, and business units, • lets you capture and store information on individual customers, so you can tailor improvements to their needs.

The key is to understand what the Customer is saying when he provides a certain response:

Continued:

Step 2:

• Deriving focused conclusions by:• Creating a curve by plotting the individual customer responses.• Comparisons between the company’s performance and the

industry standards and the factors that are taken into consideration

• False Loyalty Mechanism or True Loyalty. (e.g., airline frequent-flier plans) or high costs of switching to a rival (e.g., hospitals when a patient is in the midst of treatment; computer companies with proprietary technologies) can create “false loyalty.”

Continued:

Step 3:

• Determine the most appropriate strategies to raise Customer Satisfaction:• The Basic Product and the evolutionary trends and attempts to be

made to continually map the trends.• A well designed Support Service System can ensure the usage of the

basic product more convenient. • An extremely responsive Recovery System, to ensure a speedy

recovery.• Example: Lexus dealers provide the basics—and much more.• A satisfied customer is much more than just cash inflows.

APOSTLES AND TERRORISTSA

COMPANY’S BEST

FRIENDS AND

WORST ENEMIE

S

•To understand the customer as an individual is as important as understanding them as individual.

•This is dependant on the following factors:•Unique behavioral

attributes •Intensity of satisfaction

or dissatisfaction•Ability to act on their

satisfaction and dissatisfaction.

Customers Behave In The Following Four Ways

The Loyalist

•He is completely satisfied with company and returns back.

•He is the company’s bedrock.

•Service offering are extremely suitable for him.

The Apos

tle

•Within the Loyalists camps, those who are so satisfied, they share their strong feelings with others. They vouch for the company.

•Eg: Intuit, maker of Quicken

Continued…

The Defector

•The customers are more than dissatisfied, quite satisfied and neutral.

•The “merely satisfied” defect too.

•The company should make attempts to not let them defect for the company has many a resources at its disposal.

•But “fire” the ones who make unreasonable demands

The Terrorist

•They spread bad word of mouth about the company.

•They are more committed than apostles to do so.

•They became so because once they had the problem they were not to attended to or listened to.

Continued

The Mercenar

y

•They defy the satisfaction-loyalty rule.

•Expensive to acquire and quick to depart.

The Hostage

•They experience the worst the company has offered and they accept it.

•Monopolistic environment.

•They should be taken care of for various reason.

A WORD OF CAUTION

FIRST: Different actions are required to raise the satisfaction of customers of a family of products or services whose level of satisfaction differs.

SECOND: It is absolutely critical to accomplish the 3 Stages in order.

THIRD: For a Quantum leap concentrate on the Support Services and redesigning them.

FOURTH: Constantly strive to understand the relationship between satisfaction and loyalty for the customers of each of it business unit.

THANK YOU