10--consumption and satisfaction %28student%290
TRANSCRIPT
-
8/10/2019 10--Consumption and Satisfaction %28student%290
1/46
Consumption andSatisfaction
(Post-purchase Phase)Dr. Kelly Haws
-
8/10/2019 10--Consumption and Satisfaction %28student%290
2/46
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?
-
8/10/2019 10--Consumption and Satisfaction %28student%290
3/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
4/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
5/46
-
8/10/2019 10--Consumption and Satisfaction %28student%290
6/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
7/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
8/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
9/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
10/46
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!!!
-
8/10/2019 10--Consumption and Satisfaction %28student%290
11/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
12/46
Hart, Christopher W. (2007), Beatingthe Market with Customer Satisfaction,
Harvard Business Review, 85(3), 30-2.
Why is good customer service so important?
-
8/10/2019 10--Consumption and Satisfaction %28student%290
13/46
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?*
-
8/10/2019 10--Consumption and Satisfaction %28student%290
14/46
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?*
-
8/10/2019 10--Consumption and Satisfaction %28student%290
15/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
16/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
17/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
18/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
19/46
Choice paradox and satisfaction
No choicecan bebad.
Excessivechoice canbe bad.
Limitedchoicemay bebest.
S
a
t
i
sf
a
c
t
io
n
Choice availability
-
8/10/2019 10--Consumption and Satisfaction %28student%290
20/46
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.
-
8/10/2019 10--Consumption and Satisfaction %28student%290
21/46
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?***
-
8/10/2019 10--Consumption and Satisfaction %28student%290
22/46
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.
-
8/10/2019 10--Consumption and Satisfaction %28student%290
23/46
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.
-
8/10/2019 10--Consumption and Satisfaction %28student%290
24/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
25/46
-
8/10/2019 10--Consumption and Satisfaction %28student%290
26/46
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.
-
8/10/2019 10--Consumption and Satisfaction %28student%290
27/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
28/46
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.***
-
8/10/2019 10--Consumption and Satisfaction %28student%290
29/46
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?***
-
8/10/2019 10--Consumption and Satisfaction %28student%290
30/46
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?***
-
8/10/2019 10--Consumption and Satisfaction %28student%290
31/46
Paradox of Choice,Why Everything Suffers from Comparison
What is the curse of discernment and how
does it impact our interactions with
products?***
-
8/10/2019 10--Consumption and Satisfaction %28student%290
32/46
Hedonic adaptation
Changes in income or
experiences temporarilyaffect
happiness, but as peoplebecome accustomed to the new
situation, the impact diminishes
-
8/10/2019 10--Consumption and Satisfaction %28student%290
33/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
34/46
Thehedonic
treadmill
Greater past consumption leads to higher norms
causing satisfaction to return to previous levels.
Ad t ti d l ti t di
-
8/10/2019 10--Consumption and Satisfaction %28student%290
35/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
36/46
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.
-
8/10/2019 10--Consumption and Satisfaction %28student%290
37/46
Paradox of Choice,Why Everything Suffers from Comparison
How can marketers successfully function in an
environment where expectations are so
high?***
-
8/10/2019 10--Consumption and Satisfaction %28student%290
38/46
Paradox of Choice,Why Everything Suffers from Comparison
What are upward and downward social
comparisons and how do they work? ***
How are these tapped into by marketers?***
-
8/10/2019 10--Consumption and Satisfaction %28student%290
39/46
Paradox of Choice,Why Everything Suffers from Comparison
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.
-
8/10/2019 10--Consumption and Satisfaction %28student%290
40/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
41/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
42/46
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.
-
8/10/2019 10--Consumption and Satisfaction %28student%290
43/46
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?
-
8/10/2019 10--Consumption and Satisfaction %28student%290
44/46
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?***
-
8/10/2019 10--Consumption and Satisfaction %28student%290
45/46
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
-
8/10/2019 10--Consumption and Satisfaction %28student%290
46/46
We must care about the
consumer AFTER the sale!!!