Marketing Management

Dawn Iacobucci

© 2010 South-Western, a part of Cengage Learning

Customer Evaluations
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?