Chapter 4 Focusing on Customers

THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 1

Importance of Customer Satisfaction and Loyalty

• “Satisfaction is an attitude; loyalty is a behavior” • Loyal customers spend more, are willing ot pay higher prices, refer new clients, and are less costly to do business with.

• It costs five times more to find a new customer than to keep an existing one happy.

2 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

American Customer Satisfaction Index

• Measures customer satisfaction at national level • Introduced in 1994 by University of Michigan and American Society for Quality • Continual decline in index from 1994 through 1998 with a small improvement into 2000 suggests that quality improvements have not kept pace with consumer expectations 3 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

ACSI Model of Customer Satisfaction

Perceived quality Customer complaints Perceived value Customer expectations Customer satisfaction Customer loyalty

4 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

Customer-Driven Quality Cycle

Customer needs and expectations (expected quality) Identification of customer needs Translation into product/service specifications (design quality) Output (actual quality) Customer perceptions (perceived quality)

measurement and feedback

PERCEIVED QUALITY = ACTUAL - EXPECTED THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 5

Leading Practices

(1 of 2)

• Define and segment key customer groups and markets • Understand the voice of the customer (VOC) • Understand linkages between VOC and design, production, and delivery THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 6

Leading Practices

(2 of 2)

• Build relationships through commitments, provide accessibility to people and information, set service standards, and follow-up on transactions • Effective complaint management processes • Measure customer satisfaction for improvement THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 7

Key Customer Groups

• Organization level – consumers – external customers – employees – society • Process level – internal customer units or groups • Performer level – individual internal customers THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 8

Identifying Internal Customers

• What products or services are produced?

• Who uses these products and services?

• Who do employees call, write to, or answer questions for?

• Who supplies inputs to the process?

THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 9

AT&T Customer-Supplier Model

Your Suppliers

Inputs

Your Processes

Outputs

Your Customers

Requirements and feedback Requirements and feedback THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 10

Customer Segmentation

• Demographics • Geography • Volumes • Profit potential THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 11

Key Dimensions of Quality

• Performance • Features – primary operating characteristics – “bells and whistles” • Reliability – probability of operating for specific time and conditions of use • Conformance – degree to which characteristics match standards • Durability - amount of use before deterioration or replacement • Serviceability of repair – speed, courtesy, and competence • Aesthetics – look, feel, sound, taste, smell THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 12

Key Dimensions of Service Quality

• Reliability – ability to provide what was promised • Assurance – knowledge and courtesy of employees and ability to convey trust • Tangibles – physical facilities and appearance of personnel • Empathy – degree of caring and individual attention • Responsiveness – willingness to help customers and provide prompt service 13 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

Kano Model of Customer Needs • Dissatisfiers

: expected requirements

• Satisfiers

: expressed requirements

• Exciters/delighters

: unexpected features THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 14

Customer Listening Posts

• Comment cards and formal surveys • Focus groups • Direct customer contact • Field intelligence • Complaint analysis • Internet monitoring THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 15

Tools for Classifying Customer Requirements

Affinity diagram Tree diagram THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM 16

Customer Relationship Management

• Accessibility and commitments • Selecting and developing customer contact employees • Relevant customer contact requirements • Effective complaint management • Strategic partnerships and alliances 17 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

Measuring Customer Satisfaction

• Discover customer perceptions of business effectiveness • Compare company’s performance relative to competitors • Identify areas for improvement • Track trends to determine if changes result in improvements 18 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

Example: The Olive Garden

• • •

The Lobby

– Was the lobby staff friendly and did they welcome you to the restaurant?

– Were you seated in a timely, efficient manner?

The Table Area

– Was your table area clean when you were seated?

The Server

– Was your server attentive and there when you needed him/her?

– Was your server knowledgeable and able to answer your questions about our food and beverages?

• – How was the pace of your meal?

The Food

– How would you rate the taste of your food?

– Please rate the temperature of your food, hot food being piping hot.

– Please rate your visit on the value for the money.

– Overall, how would you rate your visit – Would you recommend this Olive Garden to a close friend or relative?

Scale: 1 = poor ….5 = excellent

19 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

Example: The Olive Garden

• Open-ended questions: – What one thing did you like most about your visit?

– What one thing could we do to improve your experience at The Olive Garden?

• Survey form provides address, 800 number, FAX, and TDD number for hearing impaired 20 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

Performance-Importance Analysis

Performance Low High Low Importance High

Who cares?

Vulnerable Overkill Strengths

21 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

Difficulties with Customer Satisfaction Measurement

• Poor measurement schemes • Failure to identify appropriate quality dimensions • Failure to weight dimensions appropriately • Lack of comparison with leading competitors • Failure to measure potential and former customers • Confusing loyalty with satisfaction 22 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM

Customer and Market Focus in the Baldrige Criteria

The Customer and Market Focus category examines how an organization determines requirements, expectations, and preferences of customers and markets; and how it builds relationships with customers and determines the key factors that lead to customer acquisition, satisfaction, and retention, and to business expansion.

3.1 Customer and Market Knowledge 3.2 Customer Relationships and Satisfaction a. Customer Relationships b. Customer Satisfaction Determination 23 THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson Learning TM