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R E P R I N T N U M B E R 5 4 4 0 9

S U M M E R 2 0 1 3 V O L . 5 4 N O . 4

How to Drive Customer Satisfaction By Rolph E. Anderson, Srinivasan Swaminathan and Rajiv Mehta

INTELLIGENCE

SUMMER 2013 MIT SLOAN MANAGEMENT REVIEW 13COURTESY OF WE FASHION

Savvy company executives

know that some of their greatest

and potentially most enduring

assets are their long-run cus-

tomer relationships. Trying to

sustain a competitive advantage

with new products is a frustrat-

ing game, where short-term

leads often erode quickly. But by

satisfying customers, compa-

nies can nurture long-term

relationships and customer

loyalty. What’s more, a small in-

crease in customer loyalty can

make a big difference in com-

pany profits. McDonald’s, for

example, calculated back in the

1990s that just one additional

visit per week by “heavy users”

would boost annual sales by

more than $10 billion dollars.

Blending Bricks and Clicks In retailing, customer loyalty

cannot be achieved for long by

keeping customer interactions

online distinct and separate from

those offline. Many consumers

have largely merged their shop-

ping to the extent that they go

back and forth between online

and offline retailers. They may

start out by looking at desired

products in a store, go online to

check out the products further,

then decide to buy them from an

online seller such as Amazon. Or

they may start searching online,

then go look at the items offline

at a Wal-Mart or Target store,

and perhaps buy them there

because they’re immediately

available. Since consumers are

fusing their offline and online

shopping habits, retailers must

adapt their systems as necessary

to create seamless “brick-and-

click” stores. Shoppers will

reward companies that do this

well. Many Amazon customers

use brick-and-mortar Best Buy,

Target or Wal-Mart stores to in-

spect products before making

their final purchases online from

Amazon. Consumers treating

offline stores as “showrooms”

prior to purchasing elsewhere

on the Internet present a seri-

ous threat to companies that

have yet to blend their offline

and online stores.

Traditional retailers are fight-

ing back, in part by asking

suppliers to provide designs and

products that are “exclusive” to

their stores. Toys “R” Us, for in-

stance, has many products that

can’t be purchased from other

stores or websites. Target does

likewise with fashion brands

[MARKETING]

How to Drive Customer Satisfaction Companies looking to build a satisfied and loyal customer base need to realize that there are multiple drivers of customer satisfaction. BY ROLPH E. ANDERSON, SRINIVASAN SWAMINATHAN AND RAJIV MEHTA

(Continued on page 14)

Shoppers at WE Fashion stores can use a “Tweet Mirror” to take pictures of outfits they are trying on and post the photos on Twitter.

14 MIT SLOAN MANAGEMENT REVIEW SUMMER 2013 SLOANREVIEW.MIT.EDU

I N T E L L I G E N C E

such as Missoni and Jason Wu.

Retailers need to recognize that

technological devices such as

smartphones are upping the

ante. Apple recognized this early

on and de veloped its ow n

brick-and-mortar stores where

potential customers could see,

hold and try products before

buying them. To attract and re-

tain customers, retailers will need

to meet or exceed customer ex-

pectations throug hout the

shopping and buying experience.

What Customers Want To gain a deeper understanding

of the factors shaping customer

satisfaction and loyalty, two

of the authors conducted in-

depth interviews with 20 online

shoppers and 10 e-commerce ex-

utives to develop a questionnaire.

Then, working with a market re-

search firm, we collected data

from 851 respondents and con-

ducted multivariate data analysis.

We identified six significant driv-

ers of customer satisfaction in

e-business, which in turn influ-

e n c e c u s t o m e r l o y a l t y :

adaptability, commitment to

customers, connection with

other customers, product assort-

ment, easy transactions and

appealing environment. (Details

of our findings were published in

the Journal of Marketing Theory

and Practice.) We will discuss the

role of each factor, and how these

drivers of customer satisfaction

may be relevant not only to e-

businesses but elsewhere.

Adaptability A “one size fits all”

approach is no longer adequate.

Businesses must find ways to

tailor their products, services

and shopping experience to

individual customers. Advances

in data mining and purchase

behavior modeling allow com-

panies to utilize cloud data to

predict and target individual

customers’ purchase interests.

Caesars Entertainment Corpo-

ration, one of the world’s largest

gambling casino operators, col-

lects detailed information on

individuals’ gambling behavior

as they move from machine to

machine (for example, how

many different machines they

play, how many wagers they

place and the total amount of

money they deposit in the

machines). By the time the cus-

tomer leaves the casino, Caesars

has enough information to

know how much the customer is

worth to the company, to build a

detailed profile of the person’s

gambling preferences and to de-

velop a plan for enticing him or

her back to the casino.

Apple is also well known for

adapting product offerings

and services to the needs of its

customers. With airy store in-

teriors, attractive lighting and

attention to small details, it

provides customers with a ca-

sual yet exciting atmosphere.

The company teaches sales

associates not to sell but rather

to help customers solve their

problems. As an Apple training

manual puts it: “Your job is to

understand all of your custom-

ers’ needs — some of which

they may not even realize they

have.” To keep the focus on

finding solutions for custom-

ers, sales associates do not have

to meet sales quotas and do

not receive sales commissions.

They are trained to approach

customers with a personalized

welcome, to gently probe to

understand their needs, to lis-

ten for and attempt to address

their concerns and to invite

them to return in the future.

Commitment to Customers

Commitment to the customer

is displayed by responsiveness

and resolution of customer

concerns, problems and com-

p l a i n t s . In s te a d o f te l l i n g

customers what the company

will do in response to a com-

plaint, a business that’s truly

committed to customers will

ask them how they would like

the problem to be handled or

resolved. Oftentimes, this ap-

proach leads to lower costs,

because many customers ask

for less than the company

might be willing to do to solve a

problem. Solving complaints to

the full satisfaction of custom-

ers is critical in the age of the

Internet and social media. Pre-

viously, unhappy customers

might tell a dozen other people;

today they might go online and

voice complaints that reach

tens of thousands of people.

Product or service failures that

are not resolved promptly and

to the full satisfaction of the

customer affect future business,

because they weaken customer-

company bonds and lower

perceptions of service quality.

Connection with Other Cus-

tomers Customers like being

able to share opinions with

others. Companies can support

this desire by establishing com-

ment links, buying circles, chat

rooms or special events. When

effectively organized and main-

tained, these mechanisms can

engender positive word of

mouth about the company.

According to Opinion Research

Corp., in 2009, more than one

in four adults had rated prod-

ucts or services on some website,

and 84% of U.S. shoppers

claimed that online customer

evaluations had influenced

their decision to purchase a

product or service. Customers

who share experiences tend to

trust information from other

customers more than company-

provided information; they

reinforce each other’s purchase

decisions while sharing insights

on product use.

Some companies achieve im-

portant benefits from organized

c u s to m e r g ro u p s . Ha r l e y -

Davidson customers, for exam-

ple, often have such a strong

identification with the Harley-

Davidson brand that they won’t

e ven consider non-Harle y

accessories. Networks also en-

courage social relationships

among customers built around

a shared interest. Many consum-

ers partially substitute shopping

for recreation and use these

activities to develop social activ-

ities and bonds with others. By

creating and supporting cus-

tomer networks, sellers provide

the opportunity for customers

to interact, identify and develop

social relationships with other

customers that can translate into

greater loyalty toward the busi-

ness and its brands.

How to Drive Customer Satisfaction (Continued from page 13)

SUMMER 2013 MIT SLOAN MANAGEMENT REVIEW 15SLOANREVIEW.MIT.EDU

Product Assortment Custom-

ers are interested in a selection of

products and services tailored to

their lifestyles and personal

preferences. A product assort-

ment that is too extensive can

be confusing and cause cus-

tomers to postpone or cancel

purchases; an assortment that’s

too narrow can lack excitement.

Trader Joe’s, the Monrovia, Cal-

ifornia-based grocer y store

chain, with more than 350

stores in the United States, tries

to find an effective balance. In

contrast to ty pical grocer y

stores, which may carry 50,000

items, a Trader Joe’s store typi-

cally has only about 4,000

items, which are selected to

match the demographic and

psychographic profiles of its

customers (who tend to be

more affluent and more health

and environmentally conscious

than other grocery shoppers).

Trader Joe’s culture promotes

loyalty and customer service by

providing the product assort-

ment and quality its customers

want, as expressed in the com-

pany’s product guarantee: “We

tried it. We like it. If you don’t,

bring it back for a refund or

exchange — no hassles.”

Easy Transactions Consum-

ers respond positively when

the purchasing process is sim-

ple, intuitive and user-friendly.

A brick-and-mortar store that

doesn’t provide information

and prices at product displays

o r o n e t h a t to l e r a te s l o n g

checkout lines may frustrate

customers, causing many to

abandon their shopping carts

and leave the store. The man-

agement of Amazon.com saw

the benefit of this fundamental

customer service concept in

the early days of its business

and acted to develop its pat-

e n t e d “ 1 - C l i c k” p u r c h a s e

system. Despite being the rec-

og nized industr y leader in

transaction ease, Amazon con-

tinues to make improvements

in the transaction process. All

merchants, whether online or

offline, who make the purchase

transaction process faster and

easier increase the likelihood

of customers making repeat

purchases and moving toward

loyalty.

A p p e a l i n g E nv i ro n m e n t

Over and above specific prod-

ucts, customers appreciate

and respond to a stimulating

shopping environment that

offers attractive store layouts

and engaging displays or web-

sites. The selling environment

c a n b e e n h a n ce d t h ro u g h

interesting and entertaining

presentation of products to

capture shopper attention and

encourage interaction. Unless

vendors offer an appealing

shopping or browsing envi-

ronment, attracting shoppers

is often difficult. Bass Pro Shops,

a retailer of hunting, fishing

a n d c a m p i n g e q u i p m e n t

headquartered in Springfield,

Missouri, seems to have taken

this challenge to heart. The

company, with more than 70

current and proposed stores in

the United States and Canada,

sells outdoor gear to more

than 60 million customers a

year, many of whom spend

hours at a time examining the

fishing and hunting displays.

Other retailers provide an

interactive, enjoyable shopping

environment for their custom-

ers by making use of social

media. For example, at WE

Fashion, headquar tered in

Utrecht, the Netherlands, and

with about 250 stores in Europe

and China, customers can try

on stylish clothing, shoes, bags

and accessories and then push a

button on the “Tweet Mirror,”

which allows them to post pic-

tures on Twitter so friends can

see them in the new outfits and

give immediate feedback.

Online retailers are eager to

attract shoppers to their web-

sites through social media.

According to Janrain, a Port-

land, Oregon-based provider

of social media log-in technol-

ogy, in early 2013 more than

50% of online shoppers pre-

ferred to log into retail sites

using Facebook rather than

accessing the company’s own

website directly. Some e-tailers

invite customers to begin their

o n l i n e s h o p p i n g t h i s w ay

u s i n g v i s u a l l u re s s u ch a s

extra-large Facebook buttons.

Shoppers have also shown a

greater willingness to share

more detailed personal infor-

mation about themselves on

Facebook than on other social

networks, allowing e-tailers to

better customize the products

they display for specific Face-

book customers.

Companies looking to gen-

erate a satisfied and loyal group

of customers need to keep in

mind the different drivers that

affect customers’ attitudes. For

each factor, they should mea-

sure, benchmark and compare

their performance with differ-

ent customer groups against

past performance, the company’s

overall goals and the perfor-

mance of major competitors.

The classic approach is to ask

respondents to select an adjec-

tive that reflects their opinion,

typically using a five-point

scale; a similar survey can be

conducted with the customers

of competitors. By monitoring

how well it is doing versus past

performance, competitors and

other benchmarks, a company

can develop insights and early

w a r n i n g s t h a t w i l l e n a b l e

managers to make timely ad-

justments to their customer

relationship strategies.

Rolph E. Anderson is Royal H. Gibson Sr. Professor of Market- ing at Drexel University’s LeBow College of Business in Philadelphia, Pennsylvania. Srinivasan Swaminathan is a professor of marketing at Drexel University. Rajiv Mehta is a professor of marketing in the School of Management at New Jersey Institute of Tech- nology in Newark, New Jersey. Comment on this article at http://sloanreview.mit .edu/x/54409, or contact the au- thors at [email protected].

Reprint 54409. Copyright © Massachusetts Institute of Technology, 2013. All rights reserved.

RELATED RESEARCH R.E. Anderson and S. Swaminathan, “Customer Satisfac- tion and Loyalty in e-Markets: A PLS Path Modeling Approach,” Journal of Marketing Theory and Practice, 19 (spring 2011): 219-233.

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