lecture 6(1)

Question 1

Key determinants of the gap between company perceptions of consumer expectations and expected service

Answer 1

Lack of market segmentation (assume preference homogeneity

Focuson on transactions rather than relationships
Short term focus, sales force

Focus on new customers rather than existing customers
Attraction instead of retention

Question 2

Relationship management

Answer 2

A business relationships with current customers to maximize their profitability across the customer life cycle

Question 3

Motivation of organization

Answer 3

longer relations spend more

Longer relations cost less: fixed + variable

Longer relations become ambassadors: W-O-M

Longer cust. rel’s –> longer employee rel’s

Longer relations affect price sensitivity

Increase in values of shares

Question 4

Relationship management
Motivation of customers:

Answer 4

Higher quality /gets // extras received

Lower purchase costs // rebates, price-cuts

Lower search costs // free up time

Lower psychological costs // less stress, needs known

Question 5

Relationship management
Customer lifetime value

Answer 5

Duration relationship, amount spent, mouth to mouth communication

NOT: Retain customers to all costs
Target all customers (expensive or risky encounters)

Question 6

Why customers are more profitable over time

Answer 6

Company profit exists on

Base profit
Profit from increased purchase and higher balances

Profit from reduced operating costs

Profit from referrals

Profit from price premium

Question 7

Loyalty

Answer 7

Deeply held commitment to re-buy a preferred service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior

Question 8

From quality to loyalty (a hierarchy of effects)

Answer 8

PS quality “get” and Price “give” –> Value –> satisfaction –> loyalty

Question 9

loyalty is

Answer 9

Cognitive (brand preference based on attributes)

Affective (feel better than towards competitors, NPS (Net promotor score) measure

Conative (repeat behavioral intentions)

Question 10

NPS Net promoter score (introduced in 2003 by reichheld)

Answer 10

One question on a scale from 0 - 10 to measure loyalty and the number one question you need to grow

How likely is it that you would recommend our company to a friend or colleague

Score 0 -6 Detractor
score 7-8 passives
score 9-10 promoters

Question 12

Practice vs academics

Answer 12

Embraced by many companies such as philips, google and apple as the corporate metric due to its ease of asking only one question

Question 13

Electronic WOM

Answer 13

WOM is important in consumers purchase decisions and as a result many companies have deflected traditional marketing approaches in favor of WOM

Low costs
Interactivity
Speed
lack of commercials
higher sense of credibility

Question 14

Online word of mouth has some advantages over traditional WOM

Answer 14

Fast and convenient
Available for an indefinite period of time
Can reach far beyond the local community

This makes companies more dependent than ever on cultivating positive WOM and getting rid of negative WOM

Question 15

stay or switch

Answer 15

Stay if:

service = excellent,

or

service is sufficient and alternatives are low and/or cost of switching is high

Question 16

Implications of stay or switch

Answer 16

Only complete satisfaction guarantees loyaltyT

Question 17

The effect of incomplete satisfaction on loyalty depends on

Answer 17

1. Value of alternatives (service and market characteristics)
2. Switch costs (Relationship, service and market characteristics)