10--consumption and satisfaction %28student%290

8/10/2019 10--Consumption and Satisfaction %28student%290

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Consumption andSatisfaction

(Post-purchase Phase)Dr. Kelly Haws


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Key Questions

How can we increase customer satisfaction?

And decrease regret?

What is the role of comparisons?

What is the endowment effect and how does

it impact our view of our possessions?

How can we increase consumption? And whatis the role of pricing in doing so?


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Readings Slide #1

Hart, Christopher W. (2007), Beating the Market withCustomer Satisfaction, Harvard Business Review

Straightforward look at why customer satisfaction isimportant

Paradox of Choice, Chapter 7, If Only: The Problemof Regret, pp. 147-165.

Understanding and managing consumer regret

Predictably Irrational, Chapter 7, The High Price ofOwnership, pp. 127-138. (Book)

Endowment effect: Prospect theory at work once we areowners of products


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Readings Slide #2

Paradox of Choice, Chapter 9, Why EverythingSuffers from Comparison, pp. 181-200. (Book)

What do we compare our outcomes to in order to

understanding our own satisfaction Hedonic Treadmill

Gourville, John, and Dilip Soman (2002), Pricingand the Psychology of Consumption, Harvard

Business Review, September, pp. 91-96. (Library) The importance of increasing consumption and how

pricing mechanisms can help


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Our choices and our satisfaction aredriven by the comparisons we make

1. The endowment effect

Ownership creates satisfaction

2. Loss aversion

People are more motivated by avoiding a loss than

acquiring a similar gain

Kahneman and TverskysProspect Theory describes how people

evaluate gains and losses; it includes concepts such as status quo bias,

loss aversion, and the endowment effect


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Convert Nonusers of product category toUsers

Make Users switch brands

Retain consumers (e.g., with loyaltyprograms)

Have Current Users Consume More Per usage occasion

Heavy, moderate, and light users

Wine: 16% Americans88% consumption

Fast Food: 20% customers60% visits

At different times

In different situations

How to Increase Consumption


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Convert Nonusers To Users

Make users switch brands

Retain consumers

Have Current Users Consume More Per usage occasion

Heavy, moderate, and light users

Wine: 16% Americans88% consumption

Fast Food: 20% customers60% visits

At different times In different situations

How Is The Product Consumed? Make sure consumers use it correctly

Uncover new benefits / uses for product

How to Increase Consumption


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What Is Satisfaction?

Satisfaction = positive evaluation of decision, associatedwith positive affect

Dissatisfaction = negative evaluation of decision,associated with negative affect

Evaluation of product after consumption

1/3 of marketing research expenditures go to customer

satisfaction studies Why?

One Reason: SatisfactionCustomer Retention

Customer Satisfaction


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Customer Retention Benefits

It costs 7 to 9 times more for a company to attract a new

customer than to retain one.

A sustained 5% improvement in a companys retention rate

can double profits in 5 years.

Reducing customer defections by as little as 2% per year is

equivalent to cutting costs by over 10%.

Referred customers have a 25% higher retention rate within

the first 3 years than customers who come from any other

source.

However, you need to retain the right (profitable)

customers!!!


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Consequences of Customer(Dis)Satisfaction

Satisfaction

Repeat purchase

intention

Increase positiveWOM

Positive emotional

connection to thebrand

Dissatisfaction

Voice Response

Complain to Firm

Product returns Private Response

Complain to friends,boycott firm

Third-Party Response File official complaint,

take legal action


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Hart, Christopher W. (2007), Beatingthe Market with Customer Satisfaction,

Harvard Business Review, 85(3), 30-2.

Why is good customer service so important?


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Paradox of Choice, Chapter 7, IfOnly: The Problem of Regret

How might anticipated regret be even worse

than post-decision regret?*

What is counterfactual thinking and how does

it contribute to regret?*


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Paradox of Choice, Chapter 7, IfOnly: The Problem of Regret

Do you believe that regret is a consequenceof manydecisions or that it is a causeof many decisions?Explain.*

P. 164: he quotes Janet Landmansbook: Regret maythreaten decisions with multiple attractive alternativesmore than decisions offering only one or a morelimited set of alternativesIronically, then, the greaterthe number of appealing choices, the greater the

opportunity for regret. Explain.

Do you agree or disagree?*


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An experiment with two digital videoplayer versions

Before use, which had higher rating of How

satisfied would you be if you subscribed to

the digital player?a) Few features (7)

b) Many features (21)

c) No difference


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3

3.5

4

4.5

5

5.5

6

Expected satisfaction

Low Features

High Features

D. Thompson (U. Maryland), R. Hamilton (U. Maryland), R. Rust (U. Maryland), 2005, Feature fatigue: Whenproduct capabilities become too much of a good thing.Journal of Marketing Research, 42, 432-442.

An Experiment with Digital Video Players


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An experiment with two digital videoplayer versions

After use, which had higher rating of How

satisfied were you with the digital player

you used?

a) Few features (7)

b) Many features (21)c) No difference


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3

3.5

4

4.5

5

5.5

6

Expected satisfaction Actual satisfaction

Low Features

High Features

D. Thompson (U. Maryland), R. Hamilton (U. Maryland), R. Rust (U. Maryland), 2005, Feature fatigue: Whenproduct capabilities become too much of a good thing.Journal of Marketing Research, 42, 432-442.

An Experiment with Digital Video Players


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Choice paradox and satisfaction

No choicecan bebad.

Excessivechoice canbe bad.

Limitedchoicemay bebest.

S

a

t

i

sf

a

c

t

io

n

Choice availability


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Although increased choice is perceived as

desirable, in some circumstances, theprovision of choice either inhibits decision

makers likelihood to make a choice or

detrimentally affects their experienced well-being after the choice is made.

S. Botti (Cornell) & S. Iyengar (Columbia), 2006, The dark side of choice: When choice impairssocial welfare.Journal of Public Policy and Marketing, 25(1), 24-38.


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Reading 10.4: Predictably Irrational, Chapter 7,The High Price of Ownership, pp. 127-138. (Book)

What is the endowment effect and why does

it exist? What is virtual ownership?***


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Loss aversion and endowment effect

Once I own something, not having it

becomes more painful, because it is a

loss.

If I dont yet own it, then acquiring it

is less important, because it is a gain.


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The endowment effect

People value a thing more once it becomes

theirs

Ownership increases utility

Term originated by Richard Thaler (U. ofChicago)

Thaler, R. (University of Chicago), 1980, Toward a positive theory of consumer choice.Journal of

Economic Behavior and Organization, March, 39-60.


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Endowment Effect and theReversibility of Decisions

What happens when our choices are

reversible vs. non-reversible?

As we discuss some examples, think about the

lessons for marketers


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Students ranked 6 art posters. Next, allowed to takehome either 3rdor 4thranked poster. 15 minutes later,they rated their chosen poster again.

Gilbert, D. (Harvard) & Ebert, J. (MIT), 2002, Decisions and revisions: The affective forecasting of

changeable outcomes.Journal of Personality and Social Psychology, 82, 503-514

Group A: if any time

in the next month, youcan just let me knowand we will exchange itfor you.

Group B: Final choice, no

exchanges.


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Gilbert, D. (Harvard) & Ebert, J. (MIT), 2002, Decisions and revisions: The affective forecasting of

changeable outcomes.Journal of Personality and Social Psychology, 82, 503-514


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The High Price of Ownership

What are the three quirks Ariely suggests keep

us from making rational decisions about

ownership?***

What is the Ikea effect? Think of some of

your own examples that illustrate this

principle.***


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Paradox of Choice, Chapter 9, Why EverythingSuffers from Comparison, pp. 181-200. (Book)

According to the author, Comparisons are the

only meaningful benchmark. What

implications does this have on marketing

actions? What are the key comparisons thatconsumers make when they evaluate an

experience?***


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Paradox of Choice,Why Everything Suffers from Comparison

According to the author, Comparisons are the

only meaningful benchmark. What

implications does this have on marketing

actions? What are the key comparisons thatconsumers make when they evaluate an

experience?***


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What is the curse of discernment and how

does it impact our interactions with

products?***


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Hedonic adaptation

Changes in income or

experiences temporarilyaffect

happiness, but as peoplebecome accustomed to the new

situation, the impact diminishes


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Hedonic adaptation in wealth

Happiness level of lottery winners intervieweda few months after winning was notsignificantly different from non-winners

Brickman, P., Coates, D., & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Ishappiness relative? Journal of Personality and Social Psychology, 36(8), 917927.

Greater past consumption leads to higher norms


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Thehedonic

treadmill

Greater past consumption leads to higher norms

causing satisfaction to return to previous levels.

Ad t ti d l ti t di


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Adaptation and relative standing mayprevent overall increases in income fromcreating overall increases in satisfaction

Economic research show*s+ thathappiness is indeed negatively related toothers incomes and to own past income.

A. Clark (Paris School of Economics), P. Frijters (Queensland U.), & M. Shields (U. of Melbourne),

2008, Relative income, happiness, and utility: An explanation for the Easterlin paradox and otherpuzzles.Journal of Economic Literature, 46, 95144

Your Happiness

at Income X

Your Previous

Income

Your Comparison

Group Income


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Hedonic Adaptation and Prospect Theory

Sensitivity to the perception of gains or

losses, rather than the absolute level of

outcomes, reflects the importance of

ones current state in valuing outcomes.


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How can marketers successfully function in an

environment where expectations are so

high?***


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What are upward and downward social

comparisons and how do they work? ***

How are these tapped into by marketers?***


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What is the link between social comparison

and status?

Whats your POND?

Agree or disagree: The way to be happythe way to

succeed in the quest for statusis to find the right

pond and stay in it.


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Standard economics

More money meansgreater consumption

and therefore greater

utility and satisfaction

Relative standing

My level of satisfaction

depends upon my

relativeconsumption v.

those in my comparison

group


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Some goods are more positional

Goods where relative

level is key

Cars

Houses Fashion

Professional attire

Income

Goods where absolute

level is key

Health

Safety Relationships

Vacation time

S. J. Solnick (U. Vermont) & D. Hemenway (Harvard), 2005. Are positional concerns stronger in

some domains than in others?American Economic Review, 95, 147-151


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Conspicuous Consumption

Thorstein Veblen

Theory of the Leisure

Class (1899)

ConspicuousConsumption when

people prefer a good

becauseit is more

expensive. The display

of the item projects

relative standing.


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WAE: Paradox of Choice,Why Everything Suffers from Comparison

Find two examples of ads that use social

comparison. How is it being used in each? Is it

upward or downward? Do you think this is

effective? Why or why not?


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Pricing and the Psychology ofConsumption, Harvard Business Review

Why is consumption important to marketers

and to pricing strategies specifically?***

(Reiterates our previous discussion about

increasing consumption)

Why is the timing of payments important?***

How do you think the often automatic

nature of todays payment systems impact theissues raised in this article?***


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Revisit Key Questions

How can we increase customer satisfaction? And decreaseregret? Focus on consumer, clearly

Manage expectations

Increase consumption

What is the role of comparisons? Benchmarks for gauging our satisfaction

What is the endowment effect and how does it impact ourview of our possessions?

Ownership itself is key How can we increase consumption? And what is the role of

pricing in doing so? Various methods, including pricing mechanisms


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We must care about the

consumer AFTER the sale!!!

10--consumption and satisfaction %28student%290

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