MKT 3301 Satisfaction and Dissatisfaction Video Link:… PDF FIle: Attached Below the post Answer the

MKT 3301 Satisfaction and Dissatisfaction Video Link:…

PDF FIle: Attached Below the post

Answer the following questions:

1. According to the video, explain the relationship between satisfaction and retention (repurchase). Make sure that you touch on the factors which causes the relationship.

2. Why is the correlation between dissatisfaction and defection so strong?

3. Given the implications between the relationship between customer satisfaction and retention, explain why a marketer (company) should continue to strive for high customer satisfaction?

Answer the questions to Microsoft Word. Satisfaction’s Consequences
Prof. Robert East
Satisfaction’s Consequences
Prof. Robert East
We focus on the behavioural consequences
of satisfaction that relate to profit
Three key behav ioural measures:
1. Customer retention; This is measured as:
• Repeat purchase with durables such as cars
• Continuity of use with utilities and a v ariety of serv ice prov iders
2. Share of category requirement (SCR)
This is the proportion of category spending
that goes to a particular brand
This applies in repertoire categories
such as groceries, hotels and supermarkets
3. Voice
• Positiv e word of mouth to other consumers
• Compliment to the prov ider
Dissatisfaction produces
opposite behaviours
1. Defection, the customer stops buy ing the brand
2. Share of category requirement (SCR) decreases
3. Voice
• Negativ e word of mouth to other consumers
• Complaint to the prov ider
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
Satisfaction: what is measured?
Global measure: ov erall satisf action with the product
Attribute measures: ev aluations of the dif f erent f eatures
of the product
The global measure should relate
to the sum of the attribute measures
• This f its Fishbein’s (1963) treatment of attitude to a product
as a bundle of ev aluations of the probable properties
of the product
Satisfaction is measured as a particular ty pe of attitude
Fishbein, M. (1963) An investigation of the relationships between beliefs about an object
and attitudes to that object, Human Relations 16: 233-40
Features of the satisfaction attitude
It is retrospectiv e, not prospectiv e
• Because they relate to past experience, measures of satisf action
may not be a sound guide to f uture behav iour such as retention
It is personal
• How satisfied you were with the product?
This means that y our satisf action
may not relate well to other users’ needs
Recommendation takes account of other users’ needs
Mangold et al. (1999) f ound that 50% of word of mouth
was triggered by the needs of the receiv er
Mangold, W.G., Miller, F., and Brockway G. R. (1999) Word-of-mouth communication
in the service marketplace, Journal of Services Marketing, 13(1): 73-89
Does satisfaction relate to retention?
Reichheld (1993) reported that “between 65 percent
and 85 percent of customers who def ect say they
were satisf ied with their f ormer supplier”
A rev iew by Hennig-Thurau and Klee (1997) showed
that the correlation between satisf action and retention
is generally positiv e but f airly weak
In many studies, the intention to retain a supplier is used
instead of actual retention
Such studies show stronger relationships
between satisf action and the intention to retain
• But intentions are of ten not f ulf illed in later behav iour
Hennig-T hurau, T. and Klee, A. (1997)
F.F. (1993)and
T he impact of Reichheld,
customer satisfaction
relationship management
quality on customer retention:
Harvard Business
71(2): 64-73
a critical reassessment
and modelReview,
Psychology and Marketing, 14(8): 737-764
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
Dissatisfaction is related to defection
Andreasen (1985) studied ten patients who reported
serious dissatisf action with their medical care and f ound
that six of them switched phy sicians
Bolton (1998) f ound that dissatisf action among recently
acquired cell phone customers was quite strongly
related to def ection
Keav eney (1995) f ound that about 50% of serv ice def ections
related to dissatisf action with serv ice deliv ery
Huef ner and Hunt (1994) reported strong consumer responses
of thef t and v andalism when dissatisf action was high
the duration
to dissatisfaction
in loose
a of
of the
of satisfaction
59: 71-82
Journal Science,
of Satisfaction,
17(1): 45-65
Dissatisfaction and Complaining Behavior, 7: 267-270
Why is the relationship
between satisfaction and retention weak?
1a. The retrospective nature of satisfaction
Needs and brands change
The greater the delay between the measurement
of satisf action and the time of repurchase,
the more scope f or needs and brands to change
• Shares
• Finance
• Family
Why is the relationship
between satisfaction and retention weak?
1b. When people report their satisfaction, they
cannot anticipate some failures that induce defection
• In serv ices, Keav eney (1995) showed that def ection
of ten occurs because of a f ailure in serv ice deliv ery
Keaveney, S.M. (1995) Customer switching behavior in service
industries: an exploratory study, Journal of Marketing, 59: 71-82
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
Why is the relationship
between satisfaction and retention weak?
2. The satisfaction measure is usually
not relative to alternatives
• People may f ind sev eral brands satisf actory
and buy any one of them
• Relativ e measures should pick this up
• But such measures need dev elopment
Why is the relationship
between satisfaction and retention weak?
3. Customers may not have much choice
about switching
– see next slide
Sometimes there is little choice
Reasons for supermarket defection
(East et al. 2000)
Little choice (49%)
• New store opened
• Mov ed house
• Other
Voluntary (51%)
• Sav e money , loy alty card
• Just f or a change
• Better quality
• Wider choice
East, R., Hammond, K. Harris, P. and Lomax, W. (2000)
First-store loyalty and retention, Journal of Marketing Management, 16(4): 307-325
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
Why is the relationship
between dissatisfaction and defection strong?
1. Dissatisf action may inv olv e loss
and “losses loom larger than gains”
(Kahneman, Knetsch and Thaler 1991)
• Loss av ersion is well established
• But not really explained
Kahneman, Knetsch and Thaler (1991), in: Kahneman, D. and Tversky, A. (2000)
Choices, Values and Frames, Cambridge, UK, Cambridge University Press, 159-170
Why is the relationship
between dissatisfaction and defection strong?
Satisf action and dissatisf action are not equally common
Peterson and Wilson (1992) conducted a comprehensiv e
rev iew of satisf action studies in the USA;
in one table, they show that 83 per cent of customers
were satisf ied, with the remaining 17 per cent
distributed between neutrality and dissatisf action
Roughly , f or ev ery 10 satisf ied customers
there is one dissatisf ied customer
Why is the relationship
between dissatisfaction and defection strong?
2.The rarity of negativ e experience af f ects its impact
• If goods and services are normally satisfactor y,
this is the working assumption of most consumer s
• Therefore, more positive evidence
would have little effect on their thinking
• But negative evidence is different from their assumption s
and can have more effect
• Exceptionally, a person may have negative assumptio n s
so that positive evidence has more effect
• It is the gap between a person’s position
and the evidence that determines the effect (Fiske, 1980)
Fiske, S. T. (1980) Attention and weight in person perception: the impact of negative
and extreme behavior, Journal of Personality and Social Psychology, 38(6): 889-906
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
New research
At Kingston and Massey univ ersities, we studied
the predictors of recommendation and retention
(East et al., 2005)
This was done f or supermarkets in the UK and New Zealand,
and f or cars in the UK
We used past behav ioural loy alty and relativ e attitude
(f or satisf action) as predictors
East, R., Gendall, P., Hammond, K., and Lomax, W. (2005) Consumer loyalty:
singular, additive or interactive, Australasian Marketing Journal, 13(2): 10-26
Past behav ioural loy alty :
For supermar ket s we used SCR, the proportion
of supermar ket spending in the consumer’s main store
The higher the proportion, the greater the past behaviour al loyalty
For cars, we establish ed the make of their present car (C3)
and the two previous cars (C1 and C2)
If C1 was the same brand as C2 the customer had
high behavi oural loyalty, if different, it was low
Relativ e attitude to the main store or to C2 was measured
by asking how good the store/car was, compared to alternatives
Then we used multiple regression to f ind out
how these two v ariables predicted retention and recommendation
Relativ e attitude predicted recommendation f or both products
but it did not predict the retention of the supermarket
a y ear later and only weakly predicted repeat purchase
of the current make of car
Past behav ioural loy alty was related to retention
but not to recommendation f or both categories
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
Findings on the bases of loyalty behaviour
Past behavioural loyalty
Relative attitude
• Day (1962) found that retention was predicted better
when attitude was used as well as past behaviour
This evidence does not give much support to his finding
Day, G.S. (1969) A two-dimensional concept of brand loyalty, Journal of Advertising Research, 9: 29-35
This evidence>
Conf irms that ev en relativ e attitude giv es
a poor prediction of retention
Why does relativ e attitude strongly predict recommendation?
• W hen we recommend , we give reasons and these reasons
are often the ones that make us appreciate the product
• So there is a common basis to attitude and recommen dat ion
Further work
East et al. (2005) conducted f urther work on serv ices
to test the link between relativ e attitude and recommendation
23 serv ices were studied and there was a signif icant correlation
between relativ e attitude and recommendation
in 18 of these studies
(mean correlation, 0.26)
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
Do not expect loy al customers to giv e more recommendations
In relationship marketing, there is an emphasis on retention
and an assumption that this is improv ed
by increasing customer satisf action
• This assumption is not well supported in the evidence
that has been reviewed, or in our findings
• However, increases in satisfactio n may bring in new
customers via recommend atio n
Satisfaction and company performance
In the USA, Sweden and some other countries,
indexes of satisf action hav e been established
• For exampl e, the American Consumer Satisfaction Index (ACSI)
These are reported by Fornell (1992) and by Fornell et al. (1996)
• Telephone surveys
• Multiple indicators to produce an index,
the measur e leads to satisfaction scores for firms
Researchers hav e used these indexes to see whether a company
that scores high on satisf action shows a later gain in prof itability
Fornell, C. (1992) A national customer satisfaction barometer: the Swedish experience,
Journal of Marketing, 56(1): 6-21;
Fornell, C., Johnson, M.D., Anderson, E.W., Cha, J. and Bryant, B.E. (1996)
T he American customer satisfaction index: nature, purpose and findings,
Journal of Marketing, 60(October), 7-18
Key research on the link
between satisfaction and profit
A number of papers hav e shown a positiv e link
between satisf action and later prof it and some are listed below
But how does satisf action lead to more prof it?
Anderson, Fornell and Mazvancheryl (2004) Customer satisfaction and shareholder value,
Journal of Marketing, 68(October): 172-185
Anderson, Eugene W., Fornell, Claes and Lehmann, Donald R. (1994)
Customer satisfaction, market share and profitability, Journal of Marketing, 56(July): 53-66
Anderson, Eugene W. and Mittal, Vikas (2000) Strengthening the satisfaction-profit chain,
Journal of Service Research, 3(2): 107-120
Zeithaml, Valerie (2000) Service quality, profitability, and the economic worth of customers:
what we know and what we need to learn, Journal of the Academy of Marketing Sciences,
28(1): 67-85
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
How satisfaction could raise profit
Increased satisfaction
More customers
More purchases
per customer
Higher margin
Higher price
Reduced cost
Increased profit
So which is the main route
to increased profits?
Some papers suggest that the main ef f ect is via retention
The ev idence that we hav e rev iewed suggests
that satisf action has limited ef f ect on retention
• But it may increase recommend atio n
so that more customer s are acquired
More ev idence is needed
• May depend on the categor y
• B2B markets may differ from B2C
Invest in the satisfactory companies
Fornell et al. (2006) examined the growth obtained
f rom portf olios of high satisf action companies
(drawn f rom the top 20% of the ACSI)
Buy ing and selling rules f or the portf olio were based
on ACSI scores; They f ound that:
• The market was imperfect and did not take account
of the better prospects implied by a high ACSI score
• There were high returns from the portfolio
when compared with standard indexes
For example, over a 5-year period when the Dow Jones
fell by 5% , the ACSI portfolio gained 75%
• No greater risk
Fornell, C., Mithas, S., Morgeson III, F.V. and Krishnan, M.S. (2006) Customer satisfaction
and stock prices: high returns, low risk, Journal of Marketing, 70(January): 3-14
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
ASCI measures are firm-level
When the company name and the brand(s) it owns
are not the same (e.g., Procter & Gamble)
there will be less consumer knowledge of the company
A study by Netemey er and Maxham (2007) suggests
that superv isor ratings of company perf ormance predicted
customer assessments
• So this may be an alternative way of predicting compan y
performance when the compan y is less well known
Netemeyer, R.C. and Maxham, J.G. (2007) Employee versus supervisor ratings
of performance in the retail customer service sector: differences in the predictive
validity for customer outcomes, Journal of Retailing, 83(1): 131-145
Evidence on complaining
Dissatisf action and complaining show a modest relationship
Many dissatisf ied customers do not complain
• Oliver (1981) claimed a correlation of 0.4
• Dissatisfact ion seems a necessar y
but not sufficient basis for complaining
Oliver, R. L. (1981) Measurement and evaluation of satisfaction
processes in retail settings, Journal of Retailing, 57(3): 25-48
Evidence on complaining
People may both complain and def ect
(Solnick and Hemenway 1992)
But some studies show that complainers
are less likely to switch
• This may be a service recover y effect
• Those who are going to stay complain
to improve their outcomes
Solnick, S.J. and Hemenway, D. (1992) Complaints and disenrolment at a health
maintenance organization, Journal of Consumer Affairs, 26(1): 90-103
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
What affects complaining
• Particularly ref und and replacement (Singh, 1990)
• To restore equity , to improv e serv ice;
Richins (1981) noted that consumers sometimes f elt
that they ought to complain
• Grønhaug (1977) f ound more complaints
f rom those liv ing near a consumer protection agency
K. (1977),
of the
a model
J. (1990)
an investigation
in: Mitchell,
in: Perreault,
(ed.) Advances
Jr. (ed),
in Consumer
9: 502-6
the Academy
of Marketing
Complaint policy
Managements should encourage dissatisf ied customers
to complain by prov iding a clear and f air procedure
that takes account of outcomes, justice and opportunity
By making complaining easy they may :
• Recover customer s
• Reduce negative W OM
• Sometimes sell more
• Gain market intelligen ce
Complaints should be analysed and reported
to management for action (TARP, 1979)
TARP (1979) Consumer Complaint Handling in America: a Summary of Findings
and Recommendation, Washington, DC, US Office of Consumer Affairs
Investigating consumer dissatisfaction
Use complaints as research data
Conduct def ection analy sis to establish its root cause
(Reichheld, 1996)
Determine what is particularly liked/disliked
and what can be improv ed
In serv ices, f ocus on the customer interf ace
and make senior management aware of customer experience
Examine what competitors are doing,
because they help to set expectations
Reichheld, F.F. and Sasser, W.E. (1990) Zero defections: quality comes to services,
Harvard Business Review, 68 (5, September-October): 105-111
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
Managing consumer dissatisfaction
Manage beliefs
• Manage expectations
• Rev eal hidden benef its
• Rev eal competitor f ailures
• Ignore minor f ailures
Service recovery
• Listen to complaints, admit f aults, accept responsibility
f or third party error and apologise
• Explain what went wrong and any steps to av oid recurrence
• Compensate or replace
Review: what satisfaction
and dissatisfaction predict
Satisf action is measured as an attitude
about past experience with an object
It predicts positiv e word of mouth quite strongly
It predicts retention rather weakly
• Retention is better predicted by past behavioural loyalt y
But dissatisf action does predict def ection
Review: explaining why the relationship
between satisfaction and retention is weak
Satisf action deals with past, not f uture, experience
• The mishaps that cause dissatisf act ion and defection
cannot easily be predicted by earlier measures of satisfaction
The measure should be relativ e
• Satisfaction compared with alternatives
Customers may lack choice
• Particularly with retail services that are delivered
at particular times and places
The screen versions of these slides have full details of copyright and acknowledgements
Satisfaction’s Consequences
Prof. Robert East
Review: impact on profit
A series of studies has shown that f irms that get
high satisf action scores tend to make more prof it
• And a portfolio of shares from the companies in the top 20%
of the ACSI gained in share value substantially more
than the standard index of share performan ce
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