mktg3340

customer lifetime value

total revenues gained by a company over the lifetime of a consumer

loyalty, sales, and profits

doesnt hold up in the short-term, happens in the long-term

what is the importance of satisfaction

unhappy customers will share their dissatisfied experience with other consumers

over __% of unhappy customers will not do business with the company again

90

__ in __ unsatisfied customer will stop doing business with a company if an alternative can be found

1 in 4

only __% of dissatified customers complain

5%

what is satisfaction

extent to which consumers are happy with their purchases

post-choice evaluative judgement about a specific purchase (attitude-based)

satisfaction is long-term and creates loyalty

true

false

true

how do you ensure satisfaction

-high-quality products

-communication with customers

-monitoring product characteristics to ensure good quality

-monitor the brand, be alert

what is key in customer retention?

satisfaction

-companies should continually measure for satisfaction

-monitor the health of the brand

satisfaction: expectation theory

o E < O... positive disconfirmation, high satisfaction

o E = O... confirmation, moderate satisfaction

o E > O... negative disconfirmation, low satisfaction

how is satisfaction meausred?

· Instruments

· Time

· Compensation

· Survey Questions

customer satisfaction scales should not reflect what the consumer thinks

true

false

false

-should reflect what the consumer thinks

what is the link between satisfaction and loyalty

"casual" link/complex relationship

· Dissatisfied consumers will leave

· Problem is that most firms will only detect a problem when here is a major exiting of consumers

o Most don't measure satisfaction appropriately and continuously

delight curve (1994)

relationship between satisfaction and performance

what are the zones of the delight curve?

-Zone of pain

-Zone of mere satisfaction

-Zone of delight (high performance and high satisfaction)

what zone does long-term loyalty reside on the delight curve?

zone of delight

delight has no guarantee

true

false

true

what are the 3 loyalty influencers

o Switching

o Predisposition

o Competition

what are the 4 types of customers?

- loyalist/apostle

- defector/terrorist

- mercenary

- hostage

loyalist/apostle

o Completely satisfied

o Highly loyal

o More forgiving of errors

defector/terrorist

o Very dissatisfied, not happy

o Will switch brands

o Spread negative WOM

mercenary

o Enjoy switching brands

o No commitment

o Price sensitive, promotionally sensitive

hostage

o Dissatisfied

o Stuck with the firm, since no alternative

o Will switch if there is an alternative

managerial significance

satisfaction is critical

what are the implications of managerial significance

o loyalty

o word of mouth

o lifetime customer value

service paradox

those consumers who have experienced service failure, and have experienced the correction of it, are more satisfied than consumer who have never experienced a service failure

heuristic

a mental shortcut used to simplify problems and avoid cognitive overload

· An example in consumers' minds = high price = high quality

does price impact brand?

The price impacts the BRAND as a whole and must correlate with the brand image and pricing strategy

segmented pricing: some consumers may be charged more than others based on... (3)

o How expensive the customer is to serve

o How well the consumers are served by the competition

o How price sensitive the consumer segment is

price discrimination

o charging different prices to different consumers for the same product

o senior or student discounts is an accepted form of this

price tiers

different brands fall into these and cluster around different levels of price

perceived value / reservation price

is the maximum amount that consumers are willing to pay

there is a inverse relationship between price and quantity demanded

true

false

true

-higher price, higher quantity

price elasticity of demand

𝑬=% 𝒄𝒉𝒂𝒏𝒈𝒆 𝒊𝒏 𝒅𝒆𝒎𝒂𝒏𝒅% 𝒄𝒉𝒂𝒏𝒈𝒆 𝒊𝒏 𝒑𝒓𝒊𝒄𝒆

price is inelastic if...

· the absolute value of E < 1.0

-Perfect Inelasticity is completely vertical, y=0

price is elastic if...

· if the absolute value of E > 1.0

-Perfectly elasticity is completely horizontal, x=0

due to the inverse relationship between price and quantity demanded, when price changes ____ will also change

quantity demanded

price floor

· an established lower boundary on the price of a commodity in the market

- Includes the costs that must be fulfilled by the business

· Problematic because it ignores the mind of the consumer in the pricing strategy

in penetration pricing, pricing is ___

low

in skimming pricing, pricing is ___

high

prentration pricing

- Intent is to rapidly build market share due to more quantity demanded, often used in product introduction

- Introduce at the start of the product life cycle

- Results in less market for the competition

- limited flexibility, hard to change price later

skimming

- Useful for segments that care about price-quality relationship, or where there is limited competition

- May attract competition

competitive pricing

pricing products with the competition

reference price

o Is a standard that exists in the mind of the consumer of what he/she deems to be fair and appropriate.

o Comes from the consumers knowledge, competitors pricing, and the marketers pricing

reference prices are standard, fair, and appropriate