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Tuesday, March 2, 2021

Nobody Does it Better - How an Australian Denim Brand Wins Globally through Supply Chain Transparency by Kanika Meshram * [118]

Denims are a fundamental part of modern fashion. Everyone seems to own a pair. The massive popularity of denim product has a lot to do with its symbolic value the notion of cowboys, American Wild West, rock ‘n’ roll, punk rebellion (think Mick Jagger, Blondie, and John Lydon aka Johnny Rotten); the hippie movement in the ‘70s; grunge of the ‘90s; and the supermodel brigade. Titans of denim industry sustained competition using linear business models that massively reduced their production costs. But, at the cost of opaque supply chains with questionable working condition of factory workers and environmental damage (Ethical Fashion Report., 2019).

What if we tell consumers who made their clothes?

This is the question Nobody Denim’s CEOs John and Nick Condilis asked each other when they decided to create supply chain transparency as their competency. Born in 1992, Nobody Denim is a Melbourne, Australian based denim company. This legacy brand was initially a denim laundry which gives a denim its ‘distress look’ and ultimately its price value. In mid 90s the Condilis brothers decided to expand their denim laundry into denim manufacturing. In this blog I unpack the business model of Nobody using the dynamic capabilities perspective to demonstrate how this brand competes in the premium denim market (see Figure). A business model is the architecture of an organization that is enabled by its dynamic capabilities (Wirtz, Pistoia, Ullrich, & Göttel, 2016). According to Teece (2018), a dynamically capable organization will rapidly capture, create, and deliver customer value through sensing, seizing and transforming capabilities.

Sensing a value opportunity: Sensing is inherently involved with scanning the business ecosystem to identify and propose new customer values (Teece, 2011). For Nobody, the sensing activity was about educating customers on the value of ethical manufacturing in the fashion industry. To achieve this Nobody, opened their factories for customers to experience denim making from cut to finish and importantly interact with their garment workers. To assure customers about their brand integrity in fair work practices they also obtained Ethical Supply Chain accreditation. The rationale for this approach according to John was, ‘we are nobody, we don’t make a lot of noise, but those who wear us, do’.

Seizing the value opportunity: The seizing activity involves designing a value chain to satisfy customers and capture value (Teece, 2011). This activity also includes securing access to capital and the necessary human resources. Similarly, for Nobody, the seizing activity involved building competency in eco-centric denim production in Australia. For this, Nobody invested in ‘cut and sew operations’, ‘trained workers’ and ‘innovative techniques’ that consume less water during denim washing. To minimize their carbon footprint, Nobody also emphasized a shorter supply chain — their head office, factory, laundry, and retail store are all within a 6-km radius in Melbourne.

Transforming the value opportunity: Transforming capabilities involves shifting firm emphases to radical new opportunities. This activity is also needed periodically to soften rigidities developed over time from standard operating procedures (Teece, 2011). For Nobody Denim, the transformation process took place during the COVID-19 pandemic when the global fashion industry faced a massive drop in sales (Walk Free Foundation, 2020). However, Nobody survived the pandemic by capitalizing on their worker capabilities in stitching, sewing, and designing to make medical protective clothing for health care workers. This transition is not a short-term fix but a long-term strategy for Nobody. According to John, the pandemic has exposed the fragility of Australian supply chains and our heavy reliance on other countries for medical supplies. As part of the solution, Nobody invested in infrastructure that will enable it to make up to four million masks, 300,000 gowns, and 170,000 scrubs per year.

  • Thus, the key takeaways from Nobody’s business model is how this brand kept customers and their workers central to all their value creation activities. Second, how Nobody built consumer trust by caring for their workers, paying fair wages and being transparent about their production process. Nobody also entices customers with lifetime free repair on their denim. 
  • Value added: For readers of this blog, John shares some great advice on the perfect way to wash your jeans, “All jeans should be washed as little as possible, turned inside out and washed on a cold cycle and line dried for the longest life. No dryers please!

                                      Figure - The Business Model of Nobody Denim

VP: What is offered to customers? Sensing opportunities in ethical supply chains that are of value to customers.

VC: How is the value proposition created? Building eco-centric capabilities to seize new customers, business clients and resources

RM: How is revenue created? Using worker capabilities to transform the revenue to a changing environment.


* Dr. Kanika Meshram is a Lecturer in Management and Marketing at the University of Melbourne. She may be reached at kanika.meshram@unimelb.edu.au. This blog is based on the author’s forthcoming paper and interview with John Condillis from Nobody Denim for their research project on modern slavery in fashion industry.

Key Reference:  Meshram, K., Bhakoo, V. & Bove, L. (forthcoming) Building and Sustaining an Anti-Slavery Business Model: A Tale of Two Fashion Brands. Journal of Strategic Marketing.

Additional References

Ethical Fashion Report. (2019). The Truth Behind the Barcode. Retrieved from https://baptistworldaid.org.au/resources/2019-ethical-fashion-report/

Teece, D. J. (2011). Dynamic capabilities: A guide for managers. Ivey Business Journal, 75(2), 29-32.

Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), 40-49.

Walk Free Foundation. (2020). Protecting People in a Pandemic: Urgent collaboration is needed to protect vulnerable workers and prevent exploitation. Retrieved from https://cdn.minderoo.org/content/uploads/2020/04/30211819/Walk-Free-Foundation-COVID-19-Report.pdf

Wirtz, B. W., Pistoia, A., Ullrich, S., & Göttel, V. (2016). Business models: Origin, development and future research perspectives. Long Range Planning, 49(1), 36-54.

 

 

Friday, February 26, 2021

The 7 Foundational Characteristics of Customer Value by Sara Leroi-Werelds * [117]

 


“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” Sam Walton, founder of Walmart

This quote nicely shows the link between value for the customer and value for the firm. Put simply, if there is no value for the customer, there is no value for the firm. For this reason, customer value has been recognized as one of the most fundamental concepts in marketing. Based on recent work (Leroi-Werelds 2019), we can discern seven key characteristics of customer value:

1. Customer value implies an interaction between a subject and an object

Customer value involves a customer (i.e. the subject) interacting with an object. The object can be a product, a service, a technology, an activity, a store, …

2. Customer value involves a trade-off between the benefits and costs of an object

One of the most often cited definitions of customer value is the one offered by Zeithaml (1988, p. 14) defining it as “the consumer’s overall assessment of the utility of a product based on perceptions of what is received and what is given.” This means that customer value involves a cost-benefit analysis made by the customer. The benefits are the positive consequences of using a product, encountering a service, visiting a store, using a technology, performing an activity, … The costs are the negative consequences.

3. Customer value is not inherent in an object, but in the customer’s experiences derived from the object

Customer value is experiential and is thus not embedded in the object. This is in line with the notion of ‘value-in-use’: “value is not created and delivered by the supplier but emerges during usage in the customer’s process of value creation” (Grönroos and Ravald 2011, p. 8).

4. Customer value is personal since it is subjectively determined by the customer

It is the customer and not the supplier who determines if an object is valuable. This implies that customer value is subjective and personal. Each customer has his/her own value perceptions based on personal characteristics such as knowledge, needs, skills, previous experience and financial resources.

5. Customer value is situation-specific

Customer value depends on the situation and is thus context-specific. For instance, if you are in a hurry, the efficiency of a store visit will be more valuable than when you are ‘fun shopping’.

6. Customer value is multi-dimensional

Considerable agreement exists on the multi-dimensional nature of customer value given that the concept is too complex to be conceptualized and operationalized in a one-dimensional way. Hence, customer value consists of multiple value types. A recent update on customer value (Leroi-Werelds 2019) proposed 24 potential value types (see below). However, it is important to note that not all value types are relevant for each object.

 BENEFITS +

COSTS -

Convenience

Price

Excellence

Time

Status

Effort

Self-esteem

Privacy risk

Enjoyment

Security risk

Aesthetics

Performance risk

Escapism

Financial risk

Personalization

Physical risk

Control

Ecological costs

Novelty                

Societal costs

Relational benefits

 

Social benefits

 

Ecological benefits

 

Societal benefits

 

 

7. Customer value is created by the customer by means of resource integration

By means of resource integration, the customer transforms the potential value of the object into real value. The customer thus integrates the resources provided by the firm (e.g. products, services, information) with other resources and skills to create real value. For instance, the value of a car is created by the customer when he/she integrates and combines this car with other resources (such as fuel, public roads, car insurance, maintenance/repair service), but also his/her own driving skills. Without these other resources and the needed skills, the customer cannot create value.

References 

Key Reading: Leroi-Werelds, S. (2019), "An Update on Customer Value: State of the Art, Revised Typology, and Research Agenda," Journal of Service Management, Vol. 30, No. 5, 650-680.

Gronroos, C. and Ravald, A. (2011), "Service as Business Logic: Implications for Value Creation and Marketing," Journal of Service Management, Vol. 22, No. 1, 5-22.

Zeithaml, Z. (1988), "Consumer Perceptions of  Price, Quality, and Value:  A Means-End Model and Synthesis of Evidence, Journal of Marketing, Vol. 52, July, 2-22.

* Dr. Sara Leroi-Werelds is an Assistant Professor of Marketing at Hasselt University, Belgium. She may be reached at sara.leroiwerelds@uhasselt.be 

 


Monday, February 8, 2021

Perceived Value in Business Relationships - It's Not Always Rational by Maja Arslanagic-Kalajdzic * [116]


When we think about the perception of value in business relationships, we usually regard business customers as rational entities that are driven by functional motives. Namely, as the main mantra of  businesses is usually to increase profit, either by increasing the sales or by lowering the costs, we often believe that this is the case with business customers, too. Hence, value propositions in B2B markets are functional in their essence, meaning that they aim at demonstrating benefits (e.g., quality) and/or sacrifices (e.g., costs). However, is this always the case? Is there anything more to the functional value dimension in B2B relationships?

Research findings indicate that perceived value complements business customers’ satisfaction and plays a vital role in various behavioral outcomes. However, most evidence are still made on the functional value dimension only. By focusing on the professional services industry, it can be shown that other dimensions of perceived value exist in business relationships and that they are indeed relevant for relationship outcomes.

Relying on the theory of consumption values that is predominantly used in B2C research, functional, emotional, and social value are defined. The functional value dimension assumes rational, economic and monetary benefits and costs. Utility of choice (taken from the field of economics) and means-end theory serve as justifications for this dimension. Two of the most prominent components of functional value are quality and price of goods/services. Functional value is the utility derived from perceived quality, a perceived reduction in short-and long-term costs, and the expected performance of service offers and processes.

Emotional value is often neglected in business research due to the underlying notion that organizations are rational formations that can only assess functional value elements. When talking about business services, purchase units are operated by people, and service providers need to work with people from client firms. In the context of professional services, people are the key element on both sides. On the side of the provider, they are the key “ingredient” of the services provided. On the side of the client, without expressing needs and conceptions, and without close cooperation with people, the provider will hardly understand the client’s expectations. Emotional value in business relationships is the utility derived from the feelings or affective states that the service generated for the buying-center participants of the client firm.

The third dimension, social value is explained through social self-concept in the theory of consumption values. It has already been researched in the business relationship context, mostly pertaining to the social bonds between a provider and a client. The assessment of the social value of a provider’s services may differ in terms of its relevance to either the client’s products/services or the client’s firm. In terms of professional business services, a client’s product/service may be socially perceived in a certain way since a specific service provider is engaged (e.g., if an advertising agency is known in the market for  highly rated video production, a client’s products/services can be more highly valued if they are using that agency’s services in their new ad campaign). Yet, professional business services may also have a social value in terms of business references for the client’s firm in general, so that a firm is valued more highly (e.g. working with a specific provider may boost the credibility of the client itself). Social value is the utility derived from the acceptance, positive impression and social approval of the business client firm and its products/services that the service relationship generated. Social approval encompasses the approval of different stakeholders (e.g., owners, clients, industry partners).

Research results of the study with ad agencies and their clients show that all three dimensions of value indeed exist and that they have differential effects on relevant outcomes – satisfaction and loyalty. A strong link between perceived functional value and satisfaction is confirmed. However, it is also shown that satisfaction is further explained by perceived social value. Surprisingly, emotional value does not have a direct effect on satisfaction, but it directly influences loyalty. On the one hand, this finding can be interpreted through the view that emotional value has a particular role for loyalty, which is defined as deeply held long-term commitment, and that for that reason, emotional value serves as an argument for continuance or termination of a relationship with a provider. On the other hand, functional and social values primarily elicit satisfaction as an immediate outcome, and influence loyalty only indirectly.

These findings show that service providers cannot solely rely on functional value, and that developing  positive emotional and social value notions in their value proposition should also be considered. By building and sustaining a good corporate reputation, making investments to improve credibility and by ensuring high relationship quality, service providers could improve different facets of perceived value and through them positively impact their clients’ attitudinal and behavioral outcomes. We start with perception of ad agencies as providers of professional services. However, probably similar conclusions could be derived for other professional services industries (e.g., IT services, consultancy services, accounting services, banking and insurance services) and they should also yield consistent results. When it comes to other industries, especially if we talk about manufacturing industries or supply chain relationships, we are of the opinion evidence for emotional and social value existence could be found, too. However, their relevance would probably depend upon various factors, such as the level of knowledge/expertise the provider offers, the length of the purchase phase, the general intensity of the relationship with the provider and the role of the decision-making unit in more complex purchase situations.

* Maja Arslanagić-Kalajdžić, Ph.D. is an Associate Professor of Marketing at the University of Sarajevo. She can be reached on maja.arslanagic@efsa.unsa.ba.

This blog is based on an article:

Arslanagic-Kalajdzic, M., & Zabkar, V. (2017). Is perceived value more than value for money in professional business services? Industrial Marketing Management, 65, 47–58. doi:10.1016/j.indmarman.2017.05.005  

  

Monday, February 1, 2021

Value Creation and Value Capture by Shekhar Misra * [115]


Value creation and value capture have been extensively studied in both management and marketing. Yet, as recent work in this area has grown, their meaning has become ambiguous. I believe that value creation and value capture are distinct yet interlinked constructs. Value creation is determined by customers’ subjective evaluations of a firm’s offerings while value capture is determined by the profits a firm is able to generate.

Value creation is a central concept in marketing as customer perceptions of value are pivotal determinants of product choice and buying behavior. Customer value is based on the principle of utility maximization and is summarized as the customer’s overall assessment of the utility from a product based on her perceptions of what she “gets” in-return for what she must “give” up. The “get” aspect concerns the overall benefits customers derive (or expect to derive) from a product while the “give” aspect pertains to the overall costs customers incur (or expect to incur) to enjoy the product’s expected benefits. From this perspective, customer value can be defined as the “customers’ net valuation of the perceived benefits accrued from an offering that is based on the costs they are willing to give up for the needs they are seeking to satisfy”.

The “give” aspect of value creation is comprised of all the costs incurred by customers to obtain the benefits of product consumption. Customers sacrifice money and other resources such as time, energy, effort, etc. to find, buy and use products. These costs include those related to finding, acquiring, consuming, maintaining, and if necessary disposing of the product.

The “get” dimension of value creation includes the benefits customers derive from a product, which may be functional, experiential, and/or symbolic. Functional benefits are the intrinsic benefit customers derive from a product and are primarily based on its objective and perceived quality. Objective quality is the aggregate performance of all product attributes, while perceived quality is a customer’s subjective evaluation of the product’s overall superiority compared to other products in the customer’s evoked set. Experiential benefits capture customers’ personal experience using a product corresponding to product-related attributes, such as sensory pleasure, stimulation, variety, etc. For example, color is an important product attribute on which customers have varying preferences. Finally, symbolic benefits concern the extrinsic advantages of using the product. These benefits are generally linked to non-product related attribute benefits such as self-expression and social approval. Therefore, perceived value is the consumer's overall assessment of the utility of a product based on perceptions of what is received and what is given. This assessment is based on consumers’ idiosyncratic preferences and choices and as a result, varies from one consumer to another.

However, value creation for customers is only one element of the overall economic value process. The second critical element is the value captured by the firm in return—not least because in the absence of value capture a firm has limited incentives to create customer value. The concept of firm value capture is rooted in the economic principle of profit maximization, and similar to customer value creation, it implies a tradeoff between “give” and “get” elements from firm’s perspective.

The “give” aspect of value capture is the firm’s offering to the marketplace that creates customer value. To deliver a product to the market the firm has to incur various costs related to conceiving, creating, delivering, and communicating the benefits of the product to the market. Broadly, these costs can be broken down into R&D costs, manufacturing costs, distribution costs, and marketing and sales costs. R&D expenses are those operating expenses incurred in the process of searching for new solutions and products or seeking to update and improve existing products and services. Manufacturing costs cover materials, and labor and factory overhead expenses incurred in converting raw materials into finished products. Distribution costs are those incurred to transport and deliver the product from the producer to the end user. Marketing expenses include costs associated with advertising, promotion (such as on-shelf advertisements, floor ads, etc.), public relations, package design, and market research. Finally, selling expenditures includes sales force compensation (such as benefits, profit sharing, etc.), travel costs, consulting fees, etc.

The “get” aspect of firm value capture is the revenue the firm’s offerings generate in the marketplace. Revenues from the firm’s offerings are a function of the number of product units sold and the realized price of each unit. A firm therefore has only two primary mechanisms to increase its revenues—either by selling more units of the product or by selling them at a higher price. A firm can sell higher numbers of units by either attracting more customers to the product or by increasing the usage of the product by existing customers. Alternatively, firms can increase the revenue from a product by achieving a higher realized price for the product. Based on the above, firm value capture is the firm’s appropriation of financial resources based on the difference between the revenues and the total costs of delivering the firm’s offerings to the marketplace. Therefore, value capture can be defined as the firm’s ability to appropriate financial resources from the marketplace, i.e., how effectively a firm can convert the value present in the marketplace into profits.

The central premise is that value creation and value capture are distinct from each other but still interlinked. Value creation is the perceived value in customers’ minds resulting from the firms’ actions; and, value capture is the economic benefits a firm derives. This conceptualization of value creation and value capture enables us to independently look at the impact of firms’ resources and capabilities. Importantly, this view also demonstrates that value creation and value capture are not necessarily a zero-sum game. Both customers’ utility (value creation) and a firm’s profits from providing customer utility (value capture) can be simultaneously increased. Hence, a win-win results for the customer and the company.

* Shekhar Misra, Ph.D., is an Assistant Professor of Marketing at Grenoble Ecole de Management, France. He can be reached at: Shekhar.MISRA@grenoble-em.com


Wednesday, January 27, 2021

The Customer Value Proposition as a Basis for Business Strategy by Ravi Chinta * [114]


Customer Value Proposition (CVP) has become one of the most widely used terms in business in recent years. A CVP is the value perceived by customers in the product mix that your business is offering, in light of competitive options. Most businesses will conduct marketing research to identify benefits and cost savings to customers to induce purchases. Such research focuses on understanding customer needs by asking potential buyers what they want with respect to goods and services.

Product enhancement and new product introductions are often based on a process of continuously “productizing” the needs and wants explicated by customers via research studies. These are in essence market-based innovations driven by addressing the desires explicated by the customer. However, in the pre-automobile era if you asked customers about what they wanted in transportation vehicles; they would have said they would like to have faster horses. And we know how automobiles made their debut and made horses obsolete as transportation vehicles. Thus, technology-based innovations often come in and transform the mindsets of customers in how they assess perceived value. Simply stated, the primary difference between market-based innovations and technology-based innovations is that the former is driven by explicit needs and the latter is driven by both explicit and implicit needs of the customers. Thus, the customer-centric view should be expanded to include both explicit needs (expressed by the customer) and the implicit needs (elicited by a deeper and unobtrusive observations of customer behaviors).

Shadowing the customer and evaluating daily behaviors can help understand the implicit needs of consumers and businesses. For example, in a research project at Hill-Rom company, a hospital beds manufacturer based in Batesville, Indiana, hospital nurses were observed as to how they spend their 8-hour work shifts. And, that analysis led to electronically adding vital signs data entries at the bedside instead of taking notes and then typing in the data at the nursing stations. Addressing the implicit needs of customers also gives businesses a pioneering advantage because these initiatives are more difficult to imitate than product modifications based solely on explicit needs.

I contend that customer value propositions that are properly constructed and delivered make a significant contribution to business strategy and overall performance. To ensure market leadership, I recommend that a firm continuously adds new features to their product/service offerings based on newly uncovered implicit needs of customers. Apple’s market dominance is easy to understand when viewed in this way. That is what sustainable competitive advantage is all about. Thus, customer value propositions must be viewed as a dynamic concept that enables a firm to self-cannibalize its own product lines and keep up its lead in the market. It should be noted that customer intimacy is a prerequisite to product excellence, and it is the responsibility of senior management not just marketing management, to ensure that their customer value propositions reflect both the explicit and implicit needs of the customer. 

* Ravi Chinta, Ph.D., is a Professor of Management at Nova Southeastern University. He can be reached at: rchinta@nova.edu

See "The Value of a Value Proposition" (Post 11) for additional insights on the CVP.

Friday, December 25, 2020

Magical Marketing - Houdini's Secrets [13] *


Harry Houdini, born Ehrich Weiss in 1874, dazzled American and European audiences with spectacular magic and illusion feats until his death on Halloween, 1926. Adapting his name from his hero, J. E. Robert-Houdin, a French magician, Houdini quickly established himself as the top entertainer in the world in the late 19th and early 20th centuries. While everyone knows about his marvels as a legendary magician and escape artist, few know that much of his success was due to superb marketing.
Here are 5 marketing lessons learned from Houdini that you can apply to your entrepreneurial venture (and you don't need to wear a strait-jacket or be handcuffed to pull off this marketing magic).
1. Always be prepared! Houdini always had a plan and was very resourceful. He was ready for any physical or mental challenge. While Houdini clearly took chances, he believed in managing risk. He used his superior intellect to conduct research and obtain knowledge of all situations and always had the right tools to get the job done. It was not uncommon for Houdini to spend up to 10 hours a day practicing challenging escapes.
2. Leap-frog the competition. Houdini constantly studied the market and prepared for imitators and new competitors. He dissected strategies used by his rivals and never let his competitors know what he would do next. He read every book that was published on magic acquiring a personal library of more than 5,000 volumes on the subject. While rivals were content to break out of handcuffs, Houdini did this while suspended upside down from skyscrapers, on top of bridges or immersed in water.
3. Fine-tune your positioning strategy. Houdini understood the sheer power of a brand name a century before this became all the rage in marketing. Quality was at the heart of his value proposition, always exceeding customers' expectations in his live performances. He knew that perception was reality and had every detail worked out in advance to provide a superior customer experience. While other magicians made rabbits disappear, Houdini vanished a full-grown elephant in plain sight. To extend his brand, Houdini went global and conquered Europe, as well as America.
4. Build a world-class product. Houdini carefully guarded his trade secrets and invested in his product. He diversified to build his product line and product mix. An advocate of the kaizen approach (continuous improvement), Houdini regularly sought incredible new offerings while enhancing his existing repertoire of tried and true stunts. His three-minute water torture escape from a steel-encased cabinet was world renowned. This was one of his several signature acts that could not be replicated.
5. Be creative and never stop promoting. Houdini was the consummate sales pro as well as the master showman and publicist. He stimulated word-of-mouth promotion in every city he visited by promising unimaginable events that he later successfully executed. Houdini often dropped in on local police stations during the day in the cities he was visiting and challenged them to keep him from escaping their most secure chains/restraints, handcuffs, jail cells, or locks (his arsenal of four hidden keys/picks always got the job done). The publicity gained from these teaser appearances drew huge interest to his evening shows. The word spread nationally and internationally in an era that had no television or internet!

Art Weinstein, Ph.D., is a Professor of Marketing at Nova Southeastern University. His research interests are customer value, market segmentation and entrepreneurial marketing strategies. He may be reached at art@nova.edu 

* This post is extracted from his article "Houdini's Magical Marketing Strategies" published in the Journal of Strategic Marketing (2020).  Full article: Houdini’s magical marketing strategies (tandfonline.com)

 


Global Customer Satisfaction and Experience Management [12] *


Customer satisfaction (CS) is a key performance measure for global marketers. Recently, there has been a shift to applying newer digital metrics. Others contend that customer delight may be a more relevant construct than customer satisfaction. How has customer satisfaction measurement changed in the past few years? Does it differ by country and industry sector?

Many marketers believe that customer satisfaction is the one customer value metric that matters the most.  A large research study (70,000 customers, 1,068 managers, and 97 countries) revealed that managerial perceptions of CS is not aligned with customer perceptions. Managers overstated CS and loyalty rates and underestimated the impact of customer complaints on future loyalty (Hult, et al., 2016).  The University of Michigan’s American Customer Satisfaction Index (ACSI) has found a strong correlation between CS and firm’s financial performance. Customer satisfaction analysis can predict and improve financial outcomes such as sales growth, gross margin, operating cash flow, market share, and shareholder return (Mittal & Frennea, 2010). 

Customer Satisfaction and Experience Management Applications

HappyOrNot is a Finnish company and innovator in customer satisfaction research. Their experience shows that if product/service assessment is made easy, people will readily provide feedback without the need for consumer incentives. Their core research tool is a terminal with four large buttons -- dark green/smiley (very happy), light green/less smiley (happy), light red/frowny (unhappy) and dark red (very unhappy) – accompanied with a sign asking customers to rate today’s experience by pushing one of the buttons. This simple premise has been used effectively by their global clients. This includes: a European gas station chain which measured managers’ overall performance; a Swedish sofa retailer for understanding why sales varied greatly throughout the day; medical facilities that evaluated doctors’ care and treatment; and the San Francisco 49ers football team to monitor the NFL game-day fan experience. In the latter application, more than 20,000 responses were recorded during the first game of the season via 60 devices – this was equivalent to the total feedback the team received for the entire previous season. The HappyOrNot devices track responses instantaneously to provide data-based, real-time feedback to organizations (Owens, 2018).      

The Temkin Experience Ratings (headed by Bruce Temkin, formerly of Forrester) ranks 331 companies in 20 industries based on feedback from 10,000 U.S. consumers. Three dimensions of customer experience are evaluated -- success, effort, and emotion. For example, in 2017, the wireless industry tied for 16th place with a 65.5% customer experience rating which is up 7.5% from 2011. While AT&T matched the industry average (66%), they did increase their customer experience rating an impressive 10% from 2016 showing a strong commitment to improving customer service. (Their overall rank in the study was number 224). The top wireless carrier was US Cellular at 71%, ranked number 137, overall (Temkin Group, 2017).            

Customer Experience Impacts Business Performance

While under-performing firms may survive in the short term, they will not last long-term unless they change their ways and become truly value creating for customers. Two global billion-dollar companies clearly illustrate this point. A transaction-based company learned that customers with the best experiences spend 140% more than those with the poorest experiences. The second firm was subscription-based; they found that customers with the best experiences had a 74% likelihood of renewing for another year versus 43% of those with the worst experiences. Furthermore, those with the highest customer experience scores were likely to remain members for six more years (Demere, 2017).

METHODOLOGY

The “State of Marketing – Fifth Edition” provides insights and trends on customer satisfaction and related metrics from 4,100 marketing leaders in 17 countries in 13 business sectors (Salesforce Research, 2018). This report identifies the top 13 marketing metrics used by global companies and contrasts high- performing from under-performing organizations. Four metrics – revenue growth (74%), sales effectiveness (64%), web traffic analytics (61%), and customer satisfaction (60%) were used by 60% or more of the respondents. Nine other popular metrics – customer retention, customer acquisition rates, qualified leads, digital engagement, social analytics, customer referrals, customer acquisition cost, mobile analytics, and customer lifetime value – were used by 43-59% of the global marketing organizations.

Research Questions

RQ1. The usage of customer satisfaction as a marketing metric varies by country

RQ2. The usage of customer satisfaction as a marketing metric varies by business sector

RQ3. High-performing organizations are more likely to track customer satisfaction than low- performing organizations.

RQ4. The use of customer satisfaction as a performance measure has declined as global organizations are prioritizing new marketing metrics.

RESULTS AND DISCUSSION                                                                                                           

The following findings are based on the “State of Marketing” report. Customer satisfaction was rated as a top 5 marketing metric in 11 countries - Australia, Belgium, Canada, France, Ireland, Mexico, Netherlands, New Zealand, Singapore, The Nordics, and the United Kingdom. Surprisingly, it was not ranked as a top 5 metric in 6 major countries -  Brazil, Germany, Hong Kong, India, Japan, and the United States (see Table 1). Hence, RQ1 was supported.

Customer satisfaction was rated as a top 5 marketing metric in 9 business sectors – communications, financial services, healthcare, hospitality, life sciences, manufacturing, media, transportation, and travel. It was not ranked as a top 5 metric in automotive, professional services, retail and consumer services, and various business sectors (see Table 2). Hence, RQ2 was supported.

High-performing organizations were 1.4 times more likely to track customer satisfaction than under-performing organizations (RQ3 was supported). The use of customer satisfaction has declined as global organizations are prioritizing new marketing metrics. Overall, CS has slipped from the number 1 marketing metric in 2016 to the number 4 marketing metric in 2018 by global companies (RQ4 was supported).

CONCLUSIONS AND IMPLICATIONS FOR THEORY AND PRACTICE

Undoubtedly, customer satisfaction is a key metric for global marketing. New digital metrics (e.g., customer acquisition and retention, mobile analytics, social engagement, and web traffic)  have grown in  importance in recent years. As a result, CS now shares the marketing dashboard with other insightful performance measures. Nonetheless, the effective use of customer satisfaction tracking is a strong differentiator for how high performing companies outpace their rivals.  Since customer satisfaction usage varies by country and business sector, specialized multi-country, multi-market studies represent  a useful stream of inquiry. Marketing scholars may emulate the research approach used by John L. Graham and his team as they studied international sales negotiations in many countries for more than two decades (e.g., Campbell, Graham, Jolbert, and Meissner, 1988).

In addition, customer delight is related to customer satisfaction and has received much attention in the marketing literature. Barnes & Krallman (2019) advocate that customer delight is a distinct marketing construct – i.e., “an emotional state where customer expectations are exceeded.” Others believe that customer delight is an extreme form of customer satisfaction (i.e., highly satisfied) or a customer-centric business philosophy (marketing strategy). It is  recommended that this variable be incorporated into future studies.

Art Weinstein, Ph.D., is a Professor of Marketing at Nova Southeastern University. His research interests are customer value, market segmentation and entrepreneurial marketing strategies. He may be reached at art@nova.edu 

* This material was presented at the Academy of Marketing Science, Annual Conference (virtual), December 14, 2020. Here's the 10 minute video 2020 AMS Annual Conference (conferencespot.org)

Key References

Barnes, D.C. and Krallman, A. (2019), “Customer Delight: A Review and Agenda for Research,” Journal of Marketing Theory and Practice, 27 (2), 174-195.

Campbell, N.C.G.,  Graham, J.L, Jolbert, A. and Meissner, H.G. (1988), “Marketing Negotiations in France, Germany, the United Kingdom, and the United States,” Journal of Marketing, 52 (2), 49-62.

Demere, N.E. (2017), There’s a Correlation between CX and Revenue – and Here’s the Data to Back it Up”, Medium.com (January 25).

Hult, T., et al. (2016), “Do Managers Know What Their Customers Think and Why?,” Journal of the Academy of Marketing Science, 45 (1), 1-18.

Mittal,V. and Frennea, C. (2010), Customer Satisfaction: A  Strategic Review and Guidelines for Managers, Cambridge, MA: Marketing Science Institute, msi.org/.

Owens, D. (2018), Customer Satisfaction at the Push of a Button,” New Yorker (February 5).

Salesforce Research (2018), State of Marketing – Insights and Trends from over 4,100 Marketing Leaders Worldwide, Fifth Edition.

Temkin Group (2017), Temkin Ranking, Temkin Group Q1 2017 Consumer Benchmark Study, temkingroup.com/.

Table 1.  Customer Satisfaction as a Marketing Metric – A Global Perspective *

 

Countries

Respondents/

Percent of Sample

Customer Satisfaction Rating   in Top 5 Metrics

Belgium

    150 / 3.7 %

1st

Singapore

    150 / 3.7 %

2nd

France, Mexico, Netherlands

    800/ 19.5%

3rd

The Nordics, United Kingdom/ Ireland

                   450/ 11.0%

4th

Australia/New Zealand, Canada

                   600/  14.6%

5th

Brazil, Germany, Hong Kong, India , Japan, United States

                 1,950/ 47.6% 

Not ranked in top 5

17 countries

                 4,100/ 100%

                       Varies

*Adapted from State of Marketing 2018

Table 2. Customer Satisfaction as a Marketing Metric by Global Business Sector *

 

Business Sector

Respondents/

Percent of Sample

Customer Satisfaction Rating   in Top 5 Metrics

Healthcare, Life Sciences

                   320/   7.8 %

2nd

Financial Services, Hospitality, Transportation, Travel

    838/ 20.4%

3rd

Communications, Media, Manufacturing

    674/ 16.4%

                        5th

Automotive, Professional Services, Retail and Consumer Services, Other

                 2,268 /55.3%

Not ranked in top 5

Various Business Sectors

                 4,100/ 100%

                       Varies

*Adapted from State of Marketing 2018

 

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