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Chapter Seven: Post-purchase processes, customer satisfaction and consumer loyalty 7-1

BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

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Page 1: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

Chapter Seven:Post-purchase processes, customer satisfaction and

consumer loyalty

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Page 2: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

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Post-purchase processes, customer satisfaction and consumer loyalty

Final consideration in the consumer decisionmaking process

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Postpurchase processes, customer satisfaction and consumer loyalty

• Postpurchase process• Postpurchase dissonance• Why product use is important to

marketers• Why product disposal is important to

consumers• Concept of customer satisfaction• Concept of consumer loyalty

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Postpurchase processes

• Postpurchase dissonance• Product use and non-use• Disposal• Purchase evaluation• Customer satisfaction, repeat purchase

behaviour and consumer loyalty

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Post purchase dissonance

• Some purchases are followed by post purchase dissonance

• Probability of post purchase dissonance and the magnitude of dissonance is a function of the:– degree of commitment and/or whether the

decision can be revoked– importance of the decision to the consumer– difficulty of choosing among the alternatives– individual’s tendency to experience anxiety

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Post-purchase consumer behavior

Page 7: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

Postpurchase DissonancePostpurchase Dissonance

After the purchase is made, the consumer may utilize one or more of the following to reduce dissonance:

� Increase the desirability of the brand purchasedIncrease the desirability of the brand purchased

�� Decrease the desirability of rejected alternativesDecrease the desirability of rejected alternatives

�� Decrease the importance of the purchase decisionDecrease the importance of the purchase decision

�� Reverse the purchase decision (return before use)Reverse the purchase decision (return before use)

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Page 8: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

Postpurchase DissonancePostpurchase Dissonance

Consumption guiltConsumption guilt - when guilt feelings are aroused by the product/service use.

Marketers need to focus on validating the consumption for “high guilt” products.

Indulging in chocolate for some can cause Indulging in chocolate for some can cause consumption guiltconsumption guilt

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Page 9: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

Postpurchase DissonancePostpurchase Dissonance

What If?What If?

Marketers often encourage counterfactual and prefactual thinking (e.g., in state lottery ads).

Counterfactual thinkingCounterfactual thinkingrefers to imaging the outcome if a different decision had been made in the past.

Prefactual thinkingPrefactual thinking is the same as counterfactual except it occurs before a decision is made.

What ethical issues, if any are there with state lotteries encouraging counterfactualcounterfactual and prefactual prefactual thinking about winning the lottery?

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Product use and non-use

• Product use– use innovativeness– regional variations– multiple vs single use

• Packaging• Defective products

– product recalls

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Product-usage index for VCR, microwave and PC

Page 12: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

Product Use and NonuseProduct Use and Nonuse

Use innovativenessUse innovativeness refers to a consumer using a product in a new way.

Marketers who discover new uses for their products can greatly expand sales.

Product UseProduct Use

Marketers need to understand how consumers use their products.

Classic example of how use Classic example of how use innovativeness helped A&M innovativeness helped A&M increase sales!increase sales!

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Applications in Consumer BehaviorApplications in Consumer Behavior

The Arm & Hammer web site provides another avenue for marketers to communicate new uses!

Courtesy Church & Dwight Co., Inc.

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Unique packaging for competitive advantage

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Product Use and NonuseProduct Use and Nonuse

Product UseProduct Use

Many firms attempt to obtain relevant information on product usage via surveys using standard questionnaires.

Surveys can provide useful information, but often deeper insights can be produced via

• observation

• depth interviews, and

• case studies

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Page 16: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

Product Use and NonuseProduct Use and Nonuse

Product UseProduct Use

Retailers can promote such items

• jointlyjointly

•• display them together, ordisplay them together, or

•• train sales personnel to maketrain sales personnel to makerelevant complementary salesrelevant complementary sales

Retailers can frequently take advantage of the fact that the use of one product may require or suggest the use of other products , e.g., dresses and shoes.

Displaying complementary products Displaying complementary products togethertogether

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Product Use and NonuseProduct Use and Nonuse

Product UseProduct Use

Stringent product liability laws have made firms responsible for harm caused by products not only

�when the product is used as specified by the manufacturer, but

�in any reasonably foreseeable use of the products.

When marketers discover confusion about proper use, they should engage in communications to increase the chances of proper use.

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Product Use and NonuseProduct Use and Nonuse

Product nonuseProduct nonuse occurs when a consumer actively acquires a product that is not used or used only sparingly relative to its potential use.

The division between the initial purchase decision and the decision to consume is particularly strong with catalog and online purchases.

Product NonuseProduct Nonuse

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Incidence of product recalls in Australia

Year Consumergoods

Food Therapeutic Motorvehicles

2005-6 187 69 325 156

2004-5 160 62 381 155

2003-4 165 80 436 128

2002-3 179 81 448 99

2001-2 209 73 265 95

2000-1 111 36 172 115

1999-2000 95 55 141 89

Ref: www.recalls.gov.au/stats_recall.php

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DispositionDisposition

A physical product often continues to exist even though it may no longer meet a consumer’s needs.

Exploding demand and short product spans for high-tech items is creating a growing concern over ee--waste.waste.

Disposition of product or product container may occur before, during, or after use. Or, for products that are completely consumed, no disposition may be involved.

Refrigerator dump site in the United KingdomRefrigerator dump site in the United Kingdom

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Product-disposal alternatives

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Product disposal andmarketing strategy

• Recycling– product– package

• Trade-ins– to motivate replacement

• Second-hand markets– E.g. textbooks, clothes– ‘Cash converters’

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DispositionDisposition

Five major ways disposition decisions that can affect a firm’s marketing strategy:

Product Disposition and Marketing StrategyProduct Disposition and Marketing Strategy

1. Reluctance to purchase a new item until they have “gotten their money’s worth” from the old one.

2. Requiring disposition to occur before acquiring a replacement due to space or financial limitations.

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Page 24: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

DispositionDisposition

Product Disposition and Marketing StrategyProduct Disposition and Marketing Strategy

3. Consumer selling, trading, or giving away used products may result in a large used-product market.

4. Many consumers are concerned with waste and how their purchase decisions affect waste.

5. Environmentally sound disposition decisions benefit society as a whole, including the firms that are part of that society.

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Purchase evaluation

• Evaluation of a purchase is influenced by:

–Expectations–Perceived performance

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Purchase Evaluation and Customer Purchase Evaluation and Customer SatisfactionSatisfaction

The Evaluation ProcessThe Evaluation Process

Expectations, Performance, and SatisfactionExpectations, Performance, and Satisfaction

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Expectations, performance and satisfaction

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Purchase Evaluation and Customer Purchase Evaluation and Customer SatisfactionSatisfaction

The Evaluation ProcessThe Evaluation Process

Determinants of Satisfaction and DissatisfactionDeterminants of Satisfaction and Dissatisfaction

��Instrumental performanceInstrumental performance relates to the physical functioning of the product.

��Symbolic performanceSymbolic performance relates to aesthetic or image-enhancement performance.

��Affective performanceAffective performance is the emotional response that owning or using the product or outlet provides

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Dissatisfaction responses

• Possible outcomes of a negative purchase evaluation:

1. Taking no action2. Switching brands, products or stores3. Warning friends and colleagues

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Dissatisfaction ResponsesDissatisfaction Responses

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Actions taken by consumers in response to product dissatisfaction

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Dimensions of performance

• 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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Four types of response styles associated with dissatisfaction have been identified:

• 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

• 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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Marketing strategy and dissatisfied consumers

• Marketers need to satisfy consumer expectations by:

1. creating reasonable expectations through promotional efforts

2. maintaining consistent quality so that these reasonable expectations are fulfilled

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Dissatisfaction ResponsesDissatisfaction Responses

Marketing Strategy and Dissatisfied ConsumersMarketing Strategy and Dissatisfied Consumers

When a consumer is dissatisfied, the most favorable consequence is for the person to communicate this dissatisfaction to the firm but to no one else.

Unfortunately, many individuals do not communicate their dissatisfaction to the firm involved.

Companies often make it difficult to complain or are unresponsive to complaints.

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Dissatisfaction ResponsesDissatisfaction Responses

Marketing Strategy and Dissatisfied ConsumersMarketing Strategy and Dissatisfied Consumers

Toll free call centers and hotlines are one approach used by many companies.

Consumers increasingly expect to be able to express complaints via email - firms that respond quickly to such complaints can great increase customer satisfaction.

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Importance of customer satisfaction

• 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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Customers Satisfaction, Repeat Purchases, Customers Satisfaction, Repeat Purchases, and Customer Commitmentand Customer Commitment

Customer Satisfaction OutcomesCustomer Satisfaction Outcomes

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Customers Satisfaction, Repeat Purchases, Customers Satisfaction, Repeat Purchases, and Customer Commitmentand Customer Commitment

Creating Committed CustomersCreating Committed CustomersIs Increasingly the Focus of Marketing StrategyIs Increasingly the Focus of Marketing Strategy

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Page 40: BB Chapter Seven : Post Purchase Processes, Customer Satisfaction and Loyalty

Customers Satisfaction, Repeat Purchases, Customers Satisfaction, Repeat Purchases, and Customer Commitmentand Customer Commitment

Repeat purchasersRepeat purchasers continue to buy the same brand though they do not have an emotional attachment to it.

Switching costsSwitching costs are the costs of finding, evaluating, and adopting another solution.

Brand loyaltyBrand loyalty involves commitment to the brand –it is a biased behavioral response expressed over time.

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Customers Satisfaction, Repeat Purchases, Customers Satisfaction, Repeat Purchases, and Customer Commitmentand Customer Commitment

Repeat Purchasers, Committed Customers, and ProfitsRepeat Purchasers, Committed Customers, and Profits

A churn churn is a turnover in a firm’s customer base.

Reducing churn is a major objective of many firms today. Reducing churn is a major objective of many firms today.

It typically costs more to obtain a new customer th an It typically costs more to obtain a new customer th an to retain an existing one, and new customers genera lly to retain an existing one, and new customers genera lly are not as profitable as longerare not as profitable as longer --term customers!term customers!

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Customers Satisfaction, Repeat Purchases, Customers Satisfaction, Repeat Purchases, and Customer Commitmentand Customer Commitment

Sources of Increased Customer Profitability over TimeSources of Increased Customer Profitability over Time

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Customers Satisfaction, Repeat Purchases, Customers Satisfaction, Repeat Purchases, and Customer Commitmentand Customer CommitmentRepeat Purchasers, Committed Customers, and Marketing Repeat Purchasers, Committed Customers, and Marketing StrategyStrategy

1.1. Attracting Attracting new usersnew users to the product categoryto the product category

2.2. Capturing competitorsCapturing competitors’’ current customerscurrent customers

3.3. Encouraging current customers to Encouraging current customers to use moreuse more

4.4. Encouraging current customers to become Encouraging current customers to become repeat repeat purchaserspurchasers

5.5. Encouraging current customers to become Encouraging current customers to become committed committed customerscustomers

Developing a marketing strategy for a particular segment includes identifying specific objectives to be pursued, such as

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Repeat purchase behaviourNote the difference between:

• Brand loyalty– Implies a psychological commitment to the brand

and

• Repeat purchase behaviour– simply involves the frequent repurchase of the

brand

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Brand loyalty is

• Biased• A behavioural response• Expressed over time• A consumer selects a brand over

alternative brands • A function of psychological processes

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Value of customer loyalty

1. Increased purchases of the existing product

2. Cross-purchases of your other products3. Price premium due to their appreciation of

your added-value services

4. Reduced operating cost because of familiarity with your service system

5. Positive word-of-mouth that refers other customers to your firm

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“Loyal customers expect a good price, but they crave value most of all.”

(Palmer, 1996)

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• Rule No. 1The customer is always right.

• Rule No.2If the customer is not right, then refer to Rule No. 1!

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Customers Satisfaction, Repeat Purchases, Customers Satisfaction, Repeat Purchases, and Customer Commitmentand Customer Commitment

Relationship MarketingRelationship Marketing

Relationship marketing Relationship marketing is an attempt to develop an ongoing, expanding exchange relationship with a firm’s customers.

Relationship marketingRelationship marketing involves:

• databasesdatabases•• customized mass communicationscustomized mass communications, and , and •• advanced advanced employee trainingemployee training and motivationand motivation

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Customers Satisfaction, Repeat Purchases, Customers Satisfaction, Repeat Purchases, and Customer Commitmentand Customer Commitment

Relationship MarketingRelationship Marketing

Customer loyalty programs, Customer loyalty programs, such as frequent-flier programs, are designed to generate repeat purchases. However, they do not necessarily create committed customers.

Generating committed customers requires a customercustomer--focused focused attitude in the firm.

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Relationship marketing

Five key elements:1. Developing a core product/service on which

to build

2. Customising the relationship to the individual customer

3. Augmenting the core product/service with extra benefits

4. Pricing in a manner that encourages loyalty

5. Marketing to employees so that they perform well for customers

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Using technology

• Modern information technology makes possible these close, ‘customised’relationships that add customer perceived-value to the product/service

– E.g. preferred seats on a airline, – Type of hotel suite

– Car servicing details

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Measuring customer satisfaction

1. Qualitative measurement techniques

2. Focus groups

3. Monitoring surveys

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Summary of key topics in the chapter:

We have discussed:• The post purchase process

• The post purchase dissonance• Why product use is important to marketers

• Why product disposal is important to consumers

• Concept of customer satisfaction

• Concept of consumer loyalty