Consumer Behavior Assignments

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Beyond Consumer Relationships

Chapter 15 – Beyond Consumer Relationships

LEARNING OUTCOMES

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Learning Outcomes

List and define the behavioral outcomes of consumption
Know why and how consumers complain and spread word-of-mouth and know how word-of-mouth helps and hurts marketers
Use the concept of switching costs to understand why consumers do or do not continue to do business with a company

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LEARNING OUTCOMES (continued)

Learning Outcomes (continued)

Describe each component of true consumer loyalty
Link the concept of consumer co-creation of value to consumption outcomes

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Exhibit

15.1What Happens After Consumption

LO 1

This exhibit illustrates post-consumption process. It contains three large boxes connected by arrows. Starting from the left, the first large box is labeled cognitive processes. It contains five small boxes placed one below the other. Starting from the top, the first box is labeled expectations, the second box is labeled disconfirmation, the third box is labeled performance, the fourth box is labeled attributions, and the fifth box is labeled equity. The boxes labeled expectations and performance are connected by a double-ended arrow. An arrow originating from this double-ended arrow points to the box labeled disconfirmation. The second large box is labeled emotions. Two small boxes are placed within this box. The first small box is labeled consumer satisfaction or dissatisfaction. The words joyful, sadness, disgust, anger, frustration, embarrassment, shame, pride, love, and commitment are listed one below the other inside the second box. The components of the two large boxes, cognitive processes and emotions, are connected using arrows. Two arrows originate from the box labeled disconfirmation in the first large box and point to the two small boxes in the second large box. Arrows originate from the boxes labeled attributions and equity in the first large box and point to the second small box in the second large box. The third large box is labeled behavior. Four small boxes are placed within this box. The first small box is labeled complaining; the second small box is labeled word of mouth – positive, negative, personal, social media; the third small box is labeled switching; and the fourth small box is labeled staying – inertia, loyalty. An arrow originates from the second large box and points to the third large box. An arrow originates from the box labeled performance in the first large box and points to the third large box.

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Procedural Justice and Critical Incident

Procedural justice
- Extent to which consumers believe the processes involved in processing a transaction, performing a service, or handling any complaint are fair
Critical incident
- Exchange between consumers and businesses that the consumers view as unusually negative with implications for the relationship

LO 1

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Complaining Behavior

Consumer seeks out someone to share an opinion regarding a negative consumption event
- Seeks action to address a service failure that has resulted in a value deficit
Complainers include:
- Dissatisfied and angry consumers
- Price-sensitive consumers
Consumers from collectivist cultures are less likely to complain

LO 2

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Exhibit

15.2Complainers versus Non-Complainers

LO 2

This exhibit compares the characteristics of complainers and non-complainers. The characteristics are presented in two rectangular boxes. The first box is titled complainers. Four points are listed in this box. The first point reads tell others when company performs poorly; the second point reads potentially valuable source of information; the third point reads more likely to become satisfied with company intervention; and the fourth point reads more likely to return following exchange. The second box is titled non-complainers. Five points are listed in this box. The first point reads may tell others, such as friends or family; the second point reads post negative messages on social network sites; the third point reads not as valuable to firm because they don’t complain; the fourth point reads unlikely to return; and the fifth point reads firm must take preemptive action to create satisfaction.

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Ways to Handle Consumer Complaints Effectively

Thank the customer for providing the information

Listen carefully to understand the facts

Apologize sincerely

Show empathy for the customer

Explain the corrective action that will take place

Empower people to take corrective action quickly

Communicate clearly and professionally

LO 2

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Revenge

Consumer yells insults and makes a public scene in an effort to harm the business in response to an unsatisfactory experience

Rancorous revenge

Consumer becomes violent with employees and/or tries to vandalize a business in response to an unsatisfactory experience

Retaliatory revenge

LO 2

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Word-of-Mouth (WOM)

Consumers pass on negative information about a company from one to another

Negative WOM

Consumers spread information from one to another about positive consumption experiences with companies

Positive WOM

LO 2

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Ways to Handle Negative Public Publicity

Doing nothing

Denying responsibility for any negative event

Taking responsibility and being present in the public eye

Releasing information allowing the public to draw its own conclusion

LO 2

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Implications of Negative WOM

Prevents other consumers from falling victim to a company
Hurts sales and damages the image of the firm
Lowers consumer’s attitude toward the brand and makes firm’s advertising harder to believe
Negative WOM attached to a company can spill over to an entire industry

LO 2

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Third-Party Endorsements

Form of publicity in which an objective outsider provides publicly available purchase recommendations
Types
- Recommendations based on cumulative consumer ratings
- Recommendations from subject experts

LO 2

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Switching Costs

Costs associated with changing from one choice to another
Categories
- Procedural: Lost time and extended effort spent in learning ways of using a product offering
- Financial: Total economic resources that must be spent or invested as a consumer learns how to obtain value from a new product choice
- Relational: Emotional and psychological consequences of changing from one brand/retailer/service provider to another

LO 3

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Exhibit

15.3 Factors Contributing to Switching Costs

LO 3

This exhibit illustrates the factors that contribute to switching costs in the form of a horizontal flow chart. The flow chart contains eight ovals placed in three rows. Starting from the left, in row 1, the ovals are labeled unfair treatment, unfair prices, procedural costs, financial costs, and relational costs. Three arrows originate from the ovals labeled unfair treatment and unfair prices. The first arrow, marked by a plus sign, points to an oval in row 3 labeled switching; the second arrow points to an oval in row 2 labeled dissatisfaction; and the third arrow points to an oval in row 2 labeled anger. Two arrows originate from the ovals labeled dissatisfaction and anger and point to the oval in row 3 labeled switching. Both arrows are marked by a plus sign. Three arrows originate from the ovals labeled procedural costs, financial costs, and relational costs and merge into one to point to the oval in row 3 labeled switching. The arrow is marked by a minus sign.

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Exhibit

15.4 Vulnerability to Defections Based on Consumer Satisfaction or Dissatisfaction

LO 3

This exhibit illustrates the vulnerability of companies to defections based on consumer satisfaction and dissatisfaction in the form of a table. It contains five columns and five rows. Column 1 in rows 1 to 3 are merged and labeled customer are relatively. In row 1, columns 2 and 3 are merged and titled high competitive intensity and columns 4 and 5 are merged and titled low competitive intensity. In row 2, columns 2 and 3 are merged and titled switching costs and columns 4 and 5 are merged and titled switching costs. In row 3, column 2 reads low, column 3 reads high, column 4 reads low, and column 5 reads high. In row 4, column 1 is titled satisfied, column 2 reads vulnerable, column 3 reads low vulnerability, column 4 reads low vulnerability, and column 5 reads no vulnerability. In row 5, column 1 is titled dissatisfied, column 2 reads high vulnerability, column 3 reads vulnerable, column 4 reads vulnerable, and column 5 reads low vulnerability.

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Customer Share

Portion of resources allocated to one brand from among a set of competing brands
- Otherwise referred to as share of wallet
- Represents a behavioral component indicative of customer loyalty
Consumer inertia: Consumer tends to continue a pattern of behavior until some stronger force motivates him/her to change

LO 4

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Customer Share (continued)

Loyalty card/program
- Encourages repeated purchasing
- More spending brings more rewards
- Allows marketers to learn more about customer groups’ demographics and shopping patterns

LO 4

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Customer Commitment and Preferred Customer Perks

Customer commitment: Sense of attachment, dedication, and identification
- Highly committed customers spread positive WOM
- Benefits to a company can be demonstrated using the Customer Lifetime Value concept
Customer perks condition behavior so that consumers repeat good behavior
- Good customers are disproportionately profitable for the companies

LO 4

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Antiloyal Consumers

Will do everything possible to avoid doing business with a particular marketer
Motivated by a bad experience that the marketer could not redress
Have no net positive lifetime value for target firm

LO 4

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Exhibit

15.7Value and Relationship Outcomes

LO 4

This exhibit illustrates value and relationship outcomes in the form of a vertical flowchart. It consists of three boxes. Starting from the top, the first box is titled consumption process. Five points are listed in this box. The first point is labeled needs, the second point is labeled wants, the third point is labeled costs and benefits, the fourth point is labeled exchange, and the fifth point is labeled reactions. An arrow originates from this box and points to the second box. The second box is titled value. Two points are listed in this box. The first point reads utilitarian, and the second point reads hedonic. A double-ended arrow connects the second and third boxes. The third box is titled relationship quality. Four points are listed in this box. The first point reads consumer satisfaction and dissatisfaction, the second point reads switching behavior, the third point reads customer share, and the fourth point reads customer commitment.

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Exhibit

15.8Value and Relationship Outcomes

LO 4

This exhibit illustrates relationship outcomes of two types of values. It consists of two horizontal flow charts. In the first flow chart, the first box is titled functional. Four points are listed under this title. The first point reads maintenance services, the second point reads pharmacies, the third point reads dentist office, and the fourth point reads internet services. An arrow from this box points to another box. The content in the box reads utilitarian value brings them back a bit more than hedonic value. In the second flow chart, the first box is titled experiential. Four points are listed under this title. The first point reads night clubs, the second point reads spa or salon services, the third point reads fine dining, and the fourth point reads resort hotels. An arrow from this box points to another box. The content in the box reads hedonic value brings them back a bit more than utilitarian value.

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Customer Engagement and Co-Creation

Customer engagement in co-creation of value encourages consumers to tell others and exhibit loyalty-related behaviors
Unengaged consumers are more satisfied when less effort is required to get a job done

LO 5

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Consumer–Marketer Relationship and Relationship Quality

Exchange between a business and a consumer constitutes a relationship
- Factors
  - Customers have a lifetime value to the firm
  - True loyalty involves a continuing series of interactions and feelings of attachment
Relationship quality: Degree of connectedness between a consumer and a retailer
- Represents the health of the relationship

LO 5

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Characteristics of Relationship Quality

Competence

Communication

Trust

Equity

Personalization

Gratifying

Customer oriented

LO 5

KEY TERMS

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Key Terms

Procedural justice
Critical incident
Complaining behavior
Rancorous revenge
Retaliatory revenge
Negative word-of-mouth
Positive WOM
Negative public publicity

Third-party endorsement
Switching
Switching costs
Procedural switching costs
Financial switching costs
Relational switching cost

KEY TERMS

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Key Terms (continued)

Competitive intensity
Consumer share
Share of wallet
Consumer inertia
Loyalty card/program
Customer commitment
Antiloyal consumers
Relationship quality

SUMMARY

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Summary

Some businesses are interested in post-consumption consumer behavior
- Dissatisfied consumers engage in complaining behavior and may spread negative WOM
- Companies use loyalty programs to increase customer share and commitment
Types of switching costs - Procedural, financial, and relational
Characteristics of relationship quality include competence, trust, and equity

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