Linking customer satisfaction and loyalty for profits Dr. Stefan Michel CH-6330 Cham

Transcription

1 Linking customer satisfaction and loyalty for profits Dr. Stefan Michel CH-6330 Cham

2 2 Agenda The new marketing paradigm The full satisfaction-loyalty-profits model The satisfaction link The customer loyalty link Service recovery for customer retention Discussion

3 3 Defensive marketing - a new paradigm cost savings defensive marketing customer satisfaction customer loyalty amount purchased price premium margin quality word of mouth profits offensive marketing image market share revenues advertising sales promotion

4 4 The full model Product quality Customer value Service quality Customer bondings Customer satisfaction Customer loyalty Higher revenues Lower costs Employee productivity Employee loyalty Better image Higher profits

5 5 The satisfaction link Product quality Customer value Service quality Customer bondings Customer satisfaction

6 6 Tolerance zone for customer satisfaction quality tolerance zone customer evaluation desired quality expected quality delighted satisfied dissatisfied

7 7 Implication of must have, should have, and could have factors and customer satisfaction customer satisfaction very low low high very high quality must have should have could have

8 8 The customer loyalty link Customer bondings Customer satisfaction Customer loyalty

9 9 Customer Lifetime Value (CLV) Industry Car manufacturing Telecommunication Customer lifetime spending (US$) Average loyalty in years CLV for the company Grocery store Consumer goods Banking Beer brewery Source: Rapp 1992, in Peter 1999: 44

10 10 The strengths of the satisfaction-loyalty link depends on customer bondings and competition customer satisfaction very low low high very high Local telephone Airlines Hospitals Business PC Cars Loyalty Source: Jones/Sasser 1995 in Bothe 1996: 36

11 11 The Loyalty-Profits Link Customer loyalty Higher revenues Lower costs Higher profits

12 12 Loyal customers are more profitable 300 Profits per customer (US$) Insurance Car repair Logistics B2B loundry Credit cards st year 2nd year 3rd year 4th year 5th year Loyalty Source: Reichheld 1996: 38

13 13 Calculating the loyalty effect Customer base t Growth p.a. 10% Initial costs $ 100 Profits t0 $ 50 Profit growth p.a. $ 10 The file can be downloaded on Retention 90% Loyalty (years) 10,00 Year 1 Year 2 Year 3 Customer base Lost customers New Customers Profit per Custom. $ 100 $ 100 $ 100 Total Profits $ $ $ Initial Costs $ $ $ % $ $ $ Net Profits 10 years $

14 14 The impact of product and service failures on customer satisfaction and word-ofmouth Product quality Customer value Service quality Customer satisfaction

15 15 Study design Swiss financial service provider 3852 valid telephone interviews with customers 6 core process pre-definied Average length of interview 14 minutes

16 % of the customers did not report a failure/error, 475 did report a core process failure, 638 reported other problems No core process failure Core process failure No other problem 2791 (72.5%) 423 (11.0%) Other problem 586 (15.2%) 52 (1.3%)

17 17 The satisfaction rate drops from 4.47 to 3.51 if a failure/error occured without failure with failure without failure with failure

18 % of the failures were regarded as absolutely not acceptable, 23.8% as not acceptable Count 50 0 acceptable not acceptable absolutely not acc.

19 19 Dissatisfaction increases when failures are not acceptable Satisfaction acceptable not acceptable absolutely not acc. no failure

20 20 It s a dog s world

21 21 Service Recovery Service Recovery refers to the actions a service provider takes in response to service failures Grönroos 1988 Service Recovery may be defined as the process of returning an aggrieved/dissatisfied customer to a state of satisfaction with the company/service and making a special effort to get things right for the customer when something is wrong Lewis 1993

22 22 Tolerance zone for customer satisfaction desired quality tolerance zone expected quality customer evaluation after failure

23 23 Recovery paradox Positive recommendation Service Recovery no error much better better as expected worse much worse Customer group

24 24 57% of the customers were satisfied or very satisfied with the speed of service recovery % Count 5 0 very sat. neutral very dis.

25 % of the customers were satisfied or very satisfied with the outcome of service recovery % Count 0 very sat. neutral very dis.

26 26 Service Recovery process Acknowledge that the customer is experiencing an inconvenience and apologize for it Listen, empathize, and ask open questions Offer a fair fix to the problem Offer some value-added atonement for the inconvience Follow up and keep your promises Source: Zemke 1995

27 27 Acknowledge that the customer is experiencing an inconvenience and apologize for it

28 28 Listen, empathize, and ask open questions

29 29 Offer a fair fix to the problem Offer some value-added atonement for the inconvience

30 30 Follow up and keep your promises

31 31 Discussion