Customer Satisfaction May be Worse than Worthless

CUSTOMER SATISFACTION MAY BE WORSE THAN WORTHLESS!!!!

UNIVERSITY PARK, PA---Customer satisfaction is out. Customer value is in. "Value in the mind of the consumer has replaced customer satisfaction as the dominant concern among marketing practitioners," says Wayne S. DeSarbo, The Smeal Distinguished Research Professor of Marketing in Penn State's Smeal College of Business.

Value, DeSarbo explains, can be defined as the quality one obtains given the price. Understanding what buyers value within a given offering, creating value for them, and then managing it over time have been recognized as essential elements of every market-oriented firm's core business strategy.

"A major goal for firms, as they being to design their value-delivery programs, is to conclusively assess how customer accord weights to the various benefits they receive versus the price they pay," says DeSarbo. In price sensitive markets, satisfied customers often switch to competitors who offer better value, even customers who have been traditionally loyal to the firm.

Not surprisingly, more and more firms therefore have been performing Customer Value Analysis (CVA) as part of their overall customer management programs to articulate the "voice of the customer" in managerial decision-making. Firms such as Federal Express, AT&T, and Xerox have been able to improve firm performance through enhancing customers' loyalties and reduce their churn rates.

"But value also means different things to different consumers, and that one can make serious marketing errors in not understanding this," says DeSarbo. He notes that one key aspect that is missing in many existing CVA approaches is that they do not explicitly account for buyer heterogeneity and effectively assume that buyers are all affected by the antecedent factors in the same manner. An aggregate analysis ignoring heterogeneity can yield misleading estimates of these impacts and provide an erroneous view of the market.

In the study, DeSarbo introduces some novel methodology in that automatically detects this phenomena with respect to a model of how consumers perceive value in terms of what is important to them. The methodology also permits different functional forms of value to be specified and tested.

"The net utility of this approach is a better modeling tool that firms can apply to understand how their buyers integrate different factors to arrive at their value perceptions," says DeSarbo.

The study, "Customer Value Analysis in a Hetergeneous Market," will appear in a forthcoming issue of Strategic Management Journal. The study was co-authored by Kamel Jedidi, professor of marketing at Columbia University; and Indrajit Sinha, assistant professor of marketing, at Temple University.

DeSarbo has published over 100 articles in such journals as the Journal of Marketing Research, Psychometrika, Journal of Consumer Research, Journal of Mathematical Psychology, to name a few. He was awarded the 1988 Raymond B. Cattell Award for his outstanding research contributions in mathematical psychology and nominated as President of the Psychometric Society. In addition, Wayne was awarded the University of Michigan Senior Research award for his research performance at the School of Business. He was one of a few prominent Marketing scholars to be selected by the Royal Swedish Academy to serve on the Nobel Prize Nomination Committee. He was the Chair of the Statistics in Marketing Section of the American Statistical Society. Wayne is a member of AMA, ORSA/TIMS, Psychometric Society, ASA, RSS, Classification Society, INSNA, IMS, Econometric Society, ACR, DSI, and APA.

DeSarbo serves on the review boards of Marketing Science, the Journal of Consumer Research, and the Journal of Marketing Research. He has ten years of work experience in Marketing Research at AT&T and Bell Laboratories; and has been a consultant for such diverse firms as AMERITECH, AT&T, Ad Audit, Pfizer Drug, SENMED, Pacific Bell, Ethicon, General Motors, Hughes Aircraft, GTE, Motorola, Marketing Metrics, Blue Cross, Eli Lilly Co., and Merck Pharmaceuticals. He is CEO and owner of ANALYTIKA Marketing Sciences, Inc.

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Editors: Wayne DeSarbo is at 814-364-2568 or e-mail at [email protected]. For a copy of the paper, contact Steve Infanti in the Smeal College Media Relations Office at 814-863-3798 or [email protected].