MARK 5320: Advanced Marketing Fundamentals
Chapter 14: Customer Satisfaction, Loyalty, and Empowerment
Care more than others think wise.
Risk more than others think safe.
Dream more than others think practical.
Expect more than others think possible.
-Howard Schultz, CEO Starbucks Coffee
Customers rely on word-of-mouth feedback when making some purchases. With the Internet, word-of-mouth feedback has evolved into entire web sites devoted to recording customers' opinions of a vast array of products. Companies actively try to create positive "buzz" about their products by sending press releases, holding events, offering free samples, writing blogs, or through podcasts.
A marketing strategy being increasingly used is influencer marketing, or targeting people known to influence others for special attention so that they will use their influence in the marketer's favor. The idea is that new offerings should be co-created with influencers because they are more likely to be both lead users, early adopters of new offerings, and influence other people's decisions to buy them. Community or social network in the marketing sense is the form of social group that centers its attention around a particular brand or product category. Formal communities are known as influencer panels and are organized by the company. Informal communities are generally organized by customers or users and are more loosely formed. Members of the panel may come from people who responded to surveys or customers that had complaints resolved. Company should answer the following questions before activating an influencer panel:
McDonald's Moms
Social media is a catchall phrase describing online channels of communication that build communities. Social media spending for marketing purposes doubled in 2008 and is predicted to top over $50 billion. Social networking sites such as Facebook and MySpace are being used to create communities to promote products. A company targets consumers by placing ads on a person's site based on what Facebook or MySpace knows about the person—just as ads are placed on a radio or TV station and matched to certain audiences. Consumers also send other consumers links and information and communities can form around the Facebook or MySpace page. Facebook, along with GiveReal, an online service that allows people to give one another real gifts online, has teamed up to be able to provide Facebook users the ability to give real coupons (downloadable to a credit card) to their friends. Viral marketing and "going viral" are phrases coined to describe messages that quickly spread throughout the online community. Blogs are another form of online communication that help spread viral marketing messages. Some blogs are written by corporate marketing officers who "spin" the information. Twitter is another online environment that allows people to "follow" an organization or person. When the company posts something to Twitter, the post is sent as a text message to all the people signed up as followers of that company.
Coke and Pepsi - Social Friends
Top 10 Virals
Two dimensions to loyalty - attitudinal and behavioral.
Behavioral loyalty means the customer buys the product regularly and does not respond to competitors' offerings. Results in sales, but doesn't mean that the customer is immune to competitors' offerings or will pay more for the brand if the price goes up. Habitual purchases are the most common form of behavioral loyalty. These are low involvement purchases. Competitors' coupons, price promotions or incentive programs can break behavioral loyalty.
Attitudinal loyalty refers to how much someone likes a brand and is willing to act on that preference. A person's willingness doesn't translate to a sale if the person can't afford the product. Cause-related marketing fosters attitudinal loyalty as does sponsorships.
Loyalty programs are marketing efforts that reward a person or organization for frequent purchases and the consumption of offerings. Examples include frequent flyer miles, discount programs, and grocery store shopping cards. When consumers sign up for these programs, the company gathers a lot of demographic information about them. The information is used improve the company's offerings and track consumers' behavior. Some companies will combine efforts to offer a cross-promotion; which offers consumers something extra and introduces another company to the customer community. A loyalty program isn't necessary to create loyalty.
When loyalty programs work they result in four effects of loyalty:
The Good The Bad The Ugly Loyalty
Just having a loyalty program doesn't mean it is successful. Of eight studies of more than a dozen grocery-store loyalty programs in the U.S. and Europe, five programs had no impact on the loyalty of customers, two increased sales but not profits, two had mixed results, and five had positive results.
Characteristics of successful loyalty programs include:
Trends
Customer satisfaction is typically defined as the feeling or belief that a person experiences when an offering meets his or her expectations. Companies evaluate their salespeople in part based on how well they satisfy their customers. Satisfying customers is a minimal level of performance; however, it isn't a good predictor of a customer's future purchases or brand loyalty. Sales revenues may increase with customer satisfaction but additional spending costs associated with satisfying customers leads to marginal or even negative profits.
Satisfaction
Two critical ways to improve customer satisfaction: establish appropriate expectations in the minds of customers and deliver on those expectations.
"Customer complaints are the schoolbooks from which we learn." Unknown
With the Internet, customers have a new way to complain about products or companies. Verbal terrorists are people who use every Internet site possible to bash a company they are dissatisfied with. A recent study indicates that customer satisfaction scores could be less important to a firm's success or failure than the number of complaints it gets. Customer service guru Fred Reicheld developed the "net promoter score." This score is the number of recommenders of an offering minus the number of complainers. "Studies show that if a company can resolve a customer's complaint well, then the customer's attitude toward the company is improved, possibly even beyond the level of his or her original satisfaction. Customers often judge companies as much for whether their response processes seem fair as whether they get what they wanted. Some companies create customer service departments with specially trained personnel who can react to complaints.
Federal Trade Commission is considering re-writing rules regarding endorsements and whether companies need to announce their sponsorships of messages. This is in response to Sugging (selling under the guise), where sales messages are disguised as market research or unbiased opinions posted by users; in reality, the messages are from employees, sponsors, or paid respondents of the company. "Let the buyer beware" has never been more important than with reviews of products posted online. Readers have no way of knowing the true identity of reviewers.Over 60% of buyers look for online reviews for their most important purchases, including over 45% of senior citizens. Sugging isn't illegal as of now, but the consequences of being caught sugging are high. Even if the information posted was actually an accurate depictions of the offering's capabilities and benefits, consumers are less likely to believe it or any other marketing communications for that matter.
There are regulations governing the use of email to sell:
Can-SPAM Act prohibits the use of email, faxes and other technology to randomly push a message to a potential customer. Spam is a term used to describe unwanted commercial emails. It is legal to send sales messages via email, fax and other technologies if the seller has the permission of the receiver to send the messages. Permission marketing is a term created to suggest that marketers should always ask for permission to sell or to offer buyers marketing messages. Many companies offer consumers something for free in order to get their permission to send them sales messages. Consumers often have dump accounts or email addresses that they use whenever they need to register for something online. All spam from marketers go into these accounts instead of clogging up the consumers' regular email accounts. Privacy laws in the U.S. limit the amount and type of information a company can collect about a consumer and how that information can be used or shared. Europe, for the most part, has stricter rules. Gramm-Leach-Bliley Act of 1999 requires financial institutions to provide written notice of their privacy policies, or how the company will use and protect a consumer's private data. In 2003, the policy was widened to include other companies. Regardless of the Gramm-Leach Bliley Act, a company is required by the FTC to follow its privacy policy if it has one. So, even if a company doesn't fall under the Act, if it has a privacy policy, it must follow it or be in violation of FTC rules. Companies want to know everything about you in order to determine if you are a likely customer for their products. Sometimes the information they collect or have access to could lead to identity theft if it falls into the wrong hands.
The Uniform Commercial Code governs commercial sales transactions in the U.S. The UCC defines many aspects of sales relationship, including warranties.
A warranty is a promise by the seller that the offering will perform as the seller said it would. There are two types of warranties under the UCC:
Just as there are unscrupulous companies out there, there also are buyers who want to take advantage of companies. Some tools to protect companies include: