Transcript Collaborative Business Networks and Technology Companies

Chapter Seven:
Customer Satisfaction,
Retention, and Loyalty
Text: Quality Management 5th edition
Authors: David Goetsch & Stanley Davis
Where appropriate reference text page numbers will
be on bottom of slides
Customer Satisfaction, Retention, and
Loyalty
MAJOR TOPICS

Understanding Who Is a Customer

Understanding Customer-Defined Quality

Customer Satisfaction

Customer Focus

Identifying Customer needs

Retention & Loyalty

Customer Loyalty Model
Customers

Historically, customers were
considered who used a company’s
products and suppliers were
outsiders who provided the
materials needed to produce the
products.

A more contemporary view is that
every organization has both internal
and external customers.
An organization’s survival depends upon customers
Customers

An external customer is the one referred to in the
traditional definition.

An internal customer is any employee whose
work depends on that of employees whose work
precedes his or hers.
Total Quality Perspective – External Customers
define quality; Internal Customers produce it
Customer Defined Quality

Only Customers can tell you what they want and
how they want it.

Must work with customers to determine their needs
and collaborate with suppliers & operations to
deliver them.

Components of Customer defined quality

Identifying Customer needs

Customer focus

Customer Satisfaction
Customer Satisfaction

In a total quality setting, customers define quality.
Therefore, customer satisfaction must be the highest
priority.

Customer satisfaction is achieved by producing highquality products that meet or exceed expectations.

It must be renewed with each purchase.

Focus must be on the customer

The key to establishing a customer focus is to put
employees in touch with customers so that customer
needs are known and understood.
Customer Satisfaction

To ensure customer satisfaction, it must be
renewed with every new purchase.

This cannot be accomplished if quality, even
though it is high, is static.

Satisfaction implies continual improvement.

Continual improvement is the only way to
keep a customer satisfied and loyal.
Keys to Customer Satisfaction

Establishing a customer focus.
 put employees in touch with customers so that
customer needs are known and understood.

Continual improvement

Process improvement throughout the supply
chain; from raw materials to delivery

Making things better, even when they are not
broken
Customer Satisfaction
Customer Satisfaction is critical, but it is not the end
of the race. It is a means to an end, not the end.
The goal is Customer Retention
What is a reliable customer?

Reliable customers are the most important
customers. A reliable customer is one who buys
repeatedly from the same organization.
Customers who are satisfied with the quality of
their purchases from an organization become
reliable customers
Customer Focus

Traditional management practices that take the
management by results approach are inwardlooking. An organization with a customer focus
is outward-looking.

The key to establishing a customer focus is
putting employees in touch with
customers/customer information and
empowering those employees to act as
necessary to satisfy the customers.
Customer Focus
The employee-customer interaction is a critical element in
establishing a customer focus.

Customer needs are not static. Therefore, constant
contact with customers is essential in a total quality
setting.

Whenever possible, this contact should be in
person or by telephone.

Actual contact may be in person, by telephone, or
through reviewing customer- provided data.

Written surveys can be used, but they will not
produce the level of feedback that personal contact
can generate.
Identifying Customer Needs

Scholtes’ six-step strategy for identifying customer
needs is as follows:
–
speculate about results,
–
develop an information-gathering plan,
–
gather information,
–
analyze the results,
–
check the validity of conclusions,
–
and take action.
Six-Step Strategy
1.
2.
3.
Speculate About Results
–
Before gathering information about customer needs, spend some
time speculating about what might be learned.
–
The purpose of this step is to help representatives of the
organization determine if they are in touch with customer needs.
Develop an Information Gathering Plan
–
Before implementing the entire information-gathering plan,
conduct a smaller pilot study involving just a few customers.
–
This will identify problems with the information-gathering
methodology that should be corrected before you proceed on a
larger scale.
Gather Information
–
After the methodology has been appropriately refined, gather
information in a timely manner.
Six-Step Strategy
4.
Analyze the Results
–
Results should be analyzed carefully and objectively.

Do they match the speculated results from the first step?

How do they agree and disagree?

What problems did customers identify?

What strong points?

Were there trends?

How many customers complained of the same problem?

What changes in the product or services relating to it were
suggested?
Six-Step Strategy
5.
Check the Validity of Conclusions
–
–
–
6.
Customers can be a valuable source of help. Select several customers
and share the conclusions with them.
Do they agree with the conclusions? Share the conclusions with other
people in the organization and get their feedback.
Adjust your conclusions as needed based on this external and internal
feedback.
Take Action
–
–
–
–
–
Based on the conclusions, what changes need to be made?
Which of these changes are short-term in nature, and which are longterm? Which can be made immediately and which will require longer
time?
Take any corrective action that can be done immediately, and lay out a
plan for completing any that are long-term in nature.
Meet with customers and let them know what is going to be done and
when.
Make sure that changes are made to the extent possible, in the same
order of priority as that dictated by customer needs.
Customer Feedback
Should never rely solely on Customer feedback
Feedback processes have three major weaknesses
1.
Feedback is activated by problems the customer already is
experiencing
2.
Assume the customer will contact you
3.
•
Most never do
•
Do not buy product again
•
Tell other people
Information is typically not complete
•
Product may no longer be available
•
Missing code information
•
Potential for fraud
Retention and Loyalty

Customer satisfaction alone is not enough.

Many customers who defect are satisfied.

Organizations should, in addition, measure customer
retention.

Organizations should go beyond satisfying customers
to creating value for them in every supplier-customer
interaction.
Retention and Loyalty

The goal of organizations should be more than just
earning customer loyalty;

it should be earning the loyalty of profitable
customers.

Organizations should never assume a positive
correlation between customer loyalty and
profitability,

nor should they assume that a customer who is
initially profitable will always be profitable.
Customer Loyalty Model
The customer loyalty model consists of four components:

business performance,

global perceptions,

loyalty behaviors, and

financial outcomes.
Customer Loyalty Model
Business Performance
When evaluating the performance of an organization they
do business with, customers consider a variety of factors:

product quality – attributes, features, usability,
compatibility, reliability

service quality – sales, after-purchase service, billing

relationship quality – communication, availability,
responsiveness

image strength – when other performance indicators
are equal, the organization’s image can be an important
consideration

Price perceptions – initial purchase price, cost of
maintenance and repairs, cost of upgrades
Customer Loyalty Model
Global (general) Perceptions
When evaluating an organization, customers take into consideration
factors which may not be easily measured…which maybe a general
feeling or perception rather than empirical data

customers might form good or bad feelings about
overall satisfaction,

their willingness to recommend the organization to
other potential customers,

their willingness to do business with the
organization,

the extent to which the organization met their
needs,

or the value they received for their money.
Customer Loyalty Model
Loyalty Behaviors

Measure the defection rate of its customers.

The business volume of individual customers.

Is the volume of business for the customer going up
or down?
Customer Loyalty Model
Financial Outcomes





Market share – high customer loyalty leads to a larger
market share which, in turn, leads to better financial
outcomes.
Reduced costs – repeat customers cost less to deal with
than new customers, which means that customer loyalty
decreases the cost of doing business.
Employee attitudes – positive employee attitudes promote
positive customer relations.
Profit – increased market share can results in increased
profits provided the cost of doing business is held level or
even decreased by customer loyalty.
Shareholder value – customer loyalty can result in higher
profits which, in turn, are a key driver of shareholder value.