Customer Value,
Satisfaction and Loyalty
The New “Managerial Paradigm”
Amazon epitomizes the
“Customer-Oriented” Model
So does Jones Soda…
So does Threadless…
Value
• Benefits (actual or perceived)
– Come from features or product attributes
– May be economic, social or personal
• Costs (actual or perceived)
– Economic/Financial
• Money
• Time
• Resources
– Social/Personal
• Aggravation, worry, feelings of uncertainty, distress
• Social embarrassment, inferiority
• The Value Equation:
Value = Benefits - Costs
The Value Proposition
The whole cluster of benefits the
company promises to deliver less the associated total cost.
Loyalty
A deeply held commitment to re-buy
or re-patronize a preferred product
or service in the future despite exposure
to situational influences and marketing
efforts that have the potential to cause
switching behavior.
The Customer-Development Process
Suspects
Prospects
First-time
customers
Disqualified
Repeat
customers
Clients
Members
Partners
Ex-customers
JetBlue has loyal customers
Question du Jour
Is it better to reward your most or least loyal customers?
Customer Satisfaction
• Two components
– Cognitive (thinking, reasoning, logic)
– Affective (emotional)
• Driven by Performance vs. Expectations Gap
• Articulation Issues
– Consumers can almost always articulate the reasons for their
dissatisfaction
– Sometimes harder for consumers to articulate why they are
satisfied
Measuring Satisfaction
Periodic Surveys
Customer Loss Rate &
Returns
Mystery Shoppers
Word of Mouth
Product and Service Quality
Quality is the totality of features and
characteristics of a product or
service that bear on its
ability to satisfy
stated or implied needs.
Quality
Conformance
quality
Performance
quality
Customer Acquisition & Retention
• Acquisition of new customers is almost always
far more expensive than retaining current
customers.
• Consumers aren’t as brand loyal as they used
to be.
• Small reductions in customer churn can have
huge implications for profit gain.
• Customer profitability tends to increase over
the life of a retained customer.
Quality Exercise
• How do consumers typically define QUALITY
for the following products?
– Flights
– Dinner Out
– Cars
– Computers
– Medical Services
– Artwork
– Hotel Stays