Building Customer Satisfaction

Dr. Vikram Sharma

Session Coverage

Defining Customer Value and Satisfaction

Customer Satisfaction ThroughQualityServiceValue

Delivering Customer Value and Satisfaction

Profit through customer satisfaction

Most companies adopt marketing concept only when driven by adverse circumstances:

• Sales decline• Slow market growth rate• Changing buying patterns• Increasing competition• Increasing expenditures

How can companies increase value to Customer?

• Most obvious answer..reduce price !!

• Different sources of value

• Quality Improvement

• Add attribute that enhance performance– Identify purchase patterns

• Observe how customers use product?

Organizational ChartsCustomer as True Profit

Centers

...a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.

Satisfaction is...

•Consumer Expectations Come from:•Past Buying Experiences •Friends & Associates advice •Competitor's Information and Promises

Satisfied Customers:

Buy more (new products & upgrades)

• Spread favorable word-of-mouth

• Pay More (less price sensitive)

• Offer feedback

• Reduce transaction costs

• Stay Longer-Make companies more profitable.

It is no longer enough to satisfy customers. You must delight them.

Building Customer Satisfaction, Value, Building Customer Satisfaction, Value, and Retentionand Retention

Kotler on Marketing

Defining Customer Value and Satisfaction

• Customer Perceived Value (CPV)– Total customer value– Total customer cost

Defining Customer Value and Satisfaction

• Customer Perceived Value (CPV)– It is the difference between the prospective customer’s

evaluation of all the benefits & all the costs of an offering and the perceived alternatives

• Total Customer Value:– Perceived Value is combination of economic , functional

and psychological benefits

• Total Customer Cost:– Bundle of costs customer incurs in evaluating, obtaining,

using & disposing market offering

Determinants of Customer Delivered Value

CPV-HP V/S DELL

• HP beginning to outpace Dell in Customer Perceived Value.

• Dell highly successful in low priced computers-logistic efficiency, after sales service (LOW COST)

• Co shifted its Customer Centric Call Center to India and Philippines to cut cost.

• Understaffed call centers led to 30 min wait for customers.

• To discourage customers, Toll Free Number, removed from the website.

HP V/S DELL

• Customer Satisfaction Dips, competitors match its quality and prices and offered improved services.

• Dell MS and Stock Price Decline Sharply• Michael Dell Confesses “Team was managing

cost instead of managing quality”• HP “Perusing solution approach based on

strengthening channel relationships.• “HP-One of the easiest sales methods is to go

into an account that has been serviced by Dell”

HP on Customer Satisfaction

• A very satisfied customer is 6x more likely to repurchase than a satisfied one

• The average customer with a problem eventually tells 9 other people

• Acquiring a new customer costs 5-7x more than retaining one

• An increase in customer retention of 5% can boost profits 25-85%

Virgin Atlantic-Value EnhancementAn Advertisement-A customer says

• VA picks me up from home, gives me a boarding pass at my car window. I go straight to VA lounge. On the flight, I can get my hair cut, my shoes polished. I am asked how and when I want my meal. When I get off, I don’t have to queue for taxi in a strange place.

Measuring Satisfaction

Periodic SurveysPeriodic Surveys

Customer Loss RateCustomer Loss Rate

Mystery ShoppersMystery Shoppers

Monitor competitive performance

Monitor competitive performance

Tools for Tracking and Measuring Customer Satisfaction

Complaint and suggestion systems:

Customer satisfaction surveys:

A customer-centered organization makes it easy for customers to register suggestions and complaints. Some customer-centered companies-P&G, General Electric, Whirlpool—establish hot lines with toll-free numbers. Companies are also using Web sites and e-mail for quick, two-way communication.

Studies show that if customers are dissatisfied with purchases, less than 5 percent will complain. Most customers will buy less or switch suppliers. Responsive companies measure customer satisfaction directly by conducting periodic surveys. While collecting customer satisfaction data, it is also useful to ask additional questions to measure repurchase intention and to measure the likelihood or willingness to recommend the company and brand to others.

Customer-Product Profitability Analysis

•20-80-30

•20% of Customers, generate 80 % of profit.

•Half of your profit is lost in serving bottom 30% of your customer base

Estimating Lifetime Value

• Annual customer revenue: $500

• Average number of loyal years: 20

• Company profit margin: 10

• Customer lifetime value: $1000

Five Levels of Relationships

• Basic

• Reactive

• Accountable

• Proactive

• Partnership

• The company sells the product but does not follow-up

• The company sells the product and encourages the customer to call when they have problems or questions.

• The company’s representative checks on customer after the sales and the event to make sure things were satisfactory and to get feedback.

• The salesperson or others in the company phone customers from time to time to seek suggestions.

• The company works continuously with the customer to discover ways to develop better value.