Post Decision Processes

Question 1

What makes repeat purchases more likely?

Answer 1

• Price reduced to below-competition levels.
• Lack of competition.
• Customer is satisfied.

Question 2

What are the benefits of customer satisfaction for a firm?

Answer 2

• Managerial control
• Higher profits (from repeat purchases).
• Lower customer-attraction costs (advertising/discounts).

Question 3

Define Satisfaction and how is it measured?

Answer 3

Attitudes based on actual experience;
measured w/ customer surveys.

Question 4

Can satisfaction be based on advertising?

Answer 4

No, only attitudes can be based on virtual experiences
(e.g. advertising).

Question 5

Describe the Disconfirmation Model of customer satisfaction

Answer 5

Customer (Dis)Satisfaction caused primarily by disconfirmation, which occurs when performance far higher/lower than expectations.

• Performance of brand on product attributes.
• Expectations of customers about product attributes.

Question 6

Distinguish between a hook and a surprise.

Answer 6

Hook

Set high expectations on attribute(s) through advertising & consistently meet expectations set, which creates satisfaction.

Surprises

Set low/no expectations on attribute(s) &
exceed these expectations, which creates disconfirmation.

Question 7

What are the cons of using hooks and surprises.

Answer 7

Hooks don’t achieve disconfirmation & difficult to sustain increasingly higher expectations.

Surprises hard to maintain as customers’ expectations adjust & continue to increase. Org can’t withdraw prior surprises either.

• Curse of Success: As brand succeeds, customers gain…
  
  • More knowledge
  • Higher expectations
  • Lower satisfaction.

Question 8

Describe the Attribution Model

Answer 8

Customers attribute (–) disconfirmation to 1 of 3 factors, which influences satisfaction.

• Focus: Who’s responsible?
• Stability: How frequent?
• Control: What’s planned?

Question 9

How to curtail customers from attributing to disconfirmation?

Answer 9

Focus: Explaining why issue arose helps fights against availability heuristic of blaming brand (which is more vivid).

Stability: Showing favourable records helps fight framing heuristic of focusing on negatives (even if exceptional).

Control: Updating customers.

Question 10

Why is it important to manage complaints?

Answer 10

• Improve customer loyalty → repeat purchases → CLV.
• Social media dramatically grew reach → faster spread of (+) & (–) word-of-mouth.
• Framing makes (–) info impact more than (+) info, making it even more important to limit (–) experiences.
• Exceeding upset customers’ expectations of solution may lead to (+) disconfirmation.

Question 11

Customer complaints are managed based on a customer’s…?

Answer 11

Customer Lifetime Value (CLV)

Influence on other customers.

Question 12

Define Customer Lifetime Value (CLV) and its uses.

Answer 12

Net profit from a repeat customer over time, discounted to present moment, representing LT financial value of repeat purchases of a particular customer/group.

• Measures customer segment profitability/attractiveness.
• Indicates amount to invest in new segments or in current segments (including not at all)
• Fire/Upsell current unprofitable customers.

Question 13

How can CLV be retained/improved?

Answer 13

Customer incentives

Personalized service

Unexpected solutions to dissatisfaction

Question 14

What are the two methods of calculating CLV?

Answer 14

Cohort & Incubate Method

Track the revs & costs associated to a particular set of customers for some periods after a chosen base period, then discount profit to the base period.

Churn Rate Method

Customer lifetime value is the difference between customer/group’s total contribution to org’s sales and the cost of acquiring said customer.

Question 15

What are the assumptions made by the Cohort & Incubate Method of calculating CLV?

Answer 15

Past customers behave like future customers.

• Same price sensitivity
• Same additional services purchased.
• Same repeat-purchase rates.

Similar/Same VC & FC in the future.

Question 16

Describe the components of the Churn method of calculating CLV

Answer 16

CLV = mL - AC

• Contribution Margin (m) = (Sales/year – VC/year)
  ———————————— #customers served
• Acquisition Cost (AC) = Marketing Costs
  —————————
  ∆Customers
• E[Customer lifetime] (L)

Question 17

Define the Churn/Defection Rate and what does it imply about customer’s expected lifetime (L)?

Answer 17

The % of customers leaving each year;
the higher the %, the lower the L.

Question 18

What factors affect a samples’ accuracy in predicting population behaviours?

Answer 18

Sampling method (must be random)

Sample size (optimal n is ≈ 1000)

Question 19

Define Sampling Frame and what it should contain.

Answer 19

A master list of the entire pop of interest (nobody else).

Question 20

What is the linear regression equation for overall customer (dis)satisfaction?

Answer 20

(Dis)Satisfaction = α + Σx_iβ_i

Question 21

How should orgs use importance-performance analysis?

Answer 21

Improve performance on attributes with high I / low P.

Advertise/raise awareness for attributes with low I / high P.

Question 22

What are the benefits of analysing customer satisfaction?

Answer 22

Comprehensive insights on (dis)satisfaction drivers + outcomes

Objectively suggests how brand can maximize
customer satisfaction.

Applies to large & small segments

Allows comparision across deps/segments/competitors/etc.