Quality, Satisfaction, Loyalty

Question 1

The original importance of ______ was superseded by a focus on _______. This is now giving way to _______.

Answer 1

quality; satisfaction; loyalty

Question 2

What are 4 questionable dimensions of quality?

Answer 2

1. Reliability/Durability (Cray; crystal)
2. Performance? (light bulbs)
3. Features? (bloatware; consumer electronics*)
4. Aesthetics?

Question 3

Firms need to know how _______ define quality. Ex. phones

Answer 3

consumers

Question 4

Physical realities may require the firm to _______ one dimension for another, with the upside being that different firms could be uniquely differentiated. Ex. pianos, cars

Answer 4

trade-off

Question 5

The dimension of quality on which a firm competes may _______ _______ _______. Ex. Japanese cars use to rust

Answer 5

change over time

Question 6

Why has quality not been as prominent in corporate America?

Answer 6

Returns are no longer there as evidenced by managerial behavior and empirical returns (superior returns for mktg orientation vs. quality orientation)

Question 7

Problems arise when engineers and consumers define quality along _______ ________.

Answer 7

different dimensions

Question 8

managerial implications to the possibility that customer perceptions can _________ engineering measures of the same dimension

Answer 8

mismatch

Question 9

What is the first managerial implication of perceived quality?

Answer 9

Overinvestment in Engineering: Quality improvements that are salient to the engineer (and costly to the firm) may be invisible to the consumer. Research also indicates that there can be a long lag between a change in true quality and consumer perceptions of the change. Ex. code refractoring

Question 10

What is the second managerial implication of perceived quality?

Answer 10

Underinestment in Marketing: Small investments in marketing may produce large changes in perceptions of quality, especially when quality is ambiguous. When ambiguity about quality exists, a firm may attempt to “manage” the consumer’s perceptions by manipulating the peripheral cues (price, warranty, advertising, etc.) that signal quality to the consumer. Ex. beer; doctors/lawyers; pilots

Question 11

Satisfaction incorporates both perceived _____ and ______.

Answer 11

quality; price

Question 12

Customer satisfaction improves retention, market share, wallet share, and shareholder value because satisfaction:

Answer 12

1. increases loyalty
2. reduces price-elasticity/increases WTP
3. facilitates cross-selling
4. lowers customer acquisition costs via positive WoM

Question 13

What are the 4 satisfaction caveats?

Answer 13

1. Dynamics of Satisfaction: Consumers adapt.(“hedonic adaption” & “the hedonic treadmill”)
2. Return on Investment
3. Segmentation
4. Satisfaction doesn’t = Preference

Question 14

Loyalty is an ________ of financial performance

Answer 14

Antecedent

Question 15

Loyalty is the defining characteristic of a ________ _________.

Answer 15

defensive approach

Question 16

Loyalty lead to _________ if the firm misunderstands the basis for its customers’ loyalty

Answer 16

catastrophe

Question 17

What are 6 drivers of loyalty?

Answer 17

1. Consumption Utility
2. Search or Switching Costs Ex. cellphones
3. Risk Aversion Ex. OTC drugs
4. Inertia Ex. Tide
5. Overconfidence Ex. beer
6. Personal Attachment Ex. Harley-Davidson; NASCAR

Question 18

What are the two nonlinear relationships between satisfaction and loyalty?

Answer 18

1. High Loyalty, But Low Satisfaction: they may be highly dissatisfied and will defect if the constraint on switching is loosened
2. Low Loyalty, But High Satisfaction: Customers may be satisfied but switch with little hesitation. Ex. Those who score 5 vs. those who score 4

Question 19

It makes economic sense to encourage _________.

Answer 19

complaining

Question 20

Non-complainers defect ______ quickly than dissatisfied complainers.

Answer 20

more

Question 21

_______ from customers are an attempt to change the firm’s policies. _______ is an escape from those policies.

Answer 21

Complaints; Defection

Question 22

The net promoter score asks customers to do what?

Answer 22

Asks customers if they would recommend the firm to another customer.

Question 23

What are the three ways that a firm avoids commodification? All are designed to push the date of commodification as far into the future as possible.

Answer 23

1. Strategic Approach: Done through differentiation combined with tradeoffs across elements and fit among elements. Also by developing assets that are inimitable due to physical uniqueness, path dependence, causal ambiguity, and economic deterrence
2. Product Development: prioritizing continuous innovation in order to reduce objective similarity across brands.
3. Tactics to cause consumers to perceive differentiation: effective when quality is ambiguous and consumers lack the knowledge or motivation to understand the true level of differentiation

Question 24

What addresses the objective differentiation force that drives commodification?

Answer 24

Innovation

Question 25

What address the subjective differentiation force that drives commodification?

Answer 25

Marketing tactics

Question 26

What two forces drive commodficiation?

Answer 26

Objective and Subjective differentiation