Quality, Satisfaction, Loyalty

Question 1

4 Dimensions of Quality

Answer 1

1) Reliability/Durability
2) Performance
3) Features
4) Aesthetics

Question 2

2 considerations of the dimensions of quality

Answer 2

1) dimension importance varies across product categories
2) dimension importance also varies across consumers with the same category

Question 3

3 Strategic implications of quality

Answer 3

1) Learn how CONSUMERS define quality
2) Identify tradeoffs
3) Dimension of quality how firms compete will change over time

Question 4

Managerial Behavior around quality and why?

Answer 4

Not as important because…
Empirical Returns: ROI on quality is poor and has become table stakes.

Question 5

2 Implications of Perceived Quality vs Objective (Engeering) Quality

Answer 5

1) Overinvestment in Engineering: value to engineer but not to consumer (code refactoring)
2) Underinvestment in Marketing: Buying perception of quality. Powerful when quality is ambiguous. (Beer, doctor)

Question 6

2 Factors that correlate to make up Satisfaction

Answer 6

1) Perceived quality
2) Price paid

Question 7

4 Returns of Satisfaction

Answer 7

1) Loyalty
2) Reduce price elasticity
3) Facilitates cross selling
4) Word of mouth (both good and bad)

Question 8

4 Satisfaction Caveats

Answer 8

1) Dynamics of satisfaction: Consumers adapt
2) ROI: Long term play. Cost and time high to get/keep consumers satisfied to convert them to loyal
3) Segmentation: Average is misleading. De-market the people you can’t make happy.
4) Satisfaction does not equal preference.

Question 9

How can you evaluate satisfaction to preference?

Answer 9

Rank your consumer satisfaction against competitors’.

Question 10

Characteristics of Loyalty

Answer 10

Defensive approach
Financially: Lifetime value increases as defection rate declines

Question 11

6 Drivers of Loyalty

Answer 11

1) Consumption Utility
2) Search or switching costs (cellphones)
3) Risk aversion (OTC drugs)
4) Inertia/Habits (Tide)
5) Consumer Overconfidence (beer)
6) Personal Attachment (Harley Davidson)

Question 12

2 Graphs of the Loyalty-Satisfaction Relationship

Answer 12

1) High Loyalty, Low Satisfaction (switching costs). Will switch at first viable opportunity.
2) Low Loyalty, High Satisfaction (Caused by something in competitive environment). Will only get loyal with extreme satisfaction.

Question 13

Why are customers who do not complain more likely to switch?

Answer 13

They have lower switching costs. Customers that complain stay.

Question 14

Net Promotor Score

Answer 14

Reflects likelihood current customer would recommend firm to others.

Question 15

2 Considerations of loyalty

Answer 15

1) Loyalty can result from high satisfaction
2) Dissatisfied customers can go viral

Question 16

Firm strategy to deal with Loyal Cusomters “Cheating”

Answer 16

If cost is not prohibitive, keep that loyal customer highly satisfied and fix that dissatisfied. Otherwise you risk losing a very profitable customer or hurting your brand.

Question 17

Why “marketing is the most important subject in the MBA program?”

Answer 17

Everyone in firm bears responsibility for satisfaction and loyalty.

Question 18

How to address commodification tactically and strategically? (Thirds)

Answer 18

1) Address the strategic approach: differentiation, tradeoffs
2) Product Development: uniqueness,
3) Subjective Differentiation: perception (advertising)

Question 19

2 requirements to keep consumers uninformed.

Answer 19

1) Quality ambiguous
2) Consumer motivation (prevent information)