Transcript Chapter 4 Focusing on Customers 1

Chapter 4
Focusing on
Customers
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Key Idea
To create satisfied customers, the
organization needs to identify customers’
needs, design the production and service
systems to meet those needs, and
measure the results as the basis for
improvement.
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Importance of Customer
Satisfaction and Loyalty
• “Satisfaction is an attitude; loyalty is a
behavior”
• Loyal customers spend more, are willing to 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.
• A firm cannot create loyal customers without
first creating satisfied
customers.
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Key Idea
Customer wants and needs drive
competitive advantage, and statistics
show that growth in market share is
strongly correlated with customer
satisfaction.
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American Customer Satisfaction
Index
• Measures customer satisfaction at a national
level
• Introduced in 1994 by University of Michigan
and American Society for Quality
• Index continually declined from 1994 through
1997 with small improvements into 2004,
when it declined again, suggesting that
quality improvements have not kept pace
with consumer expectations
• www.theacsi.org
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ACSI Model of Customer
Satisfaction
Perceived
quality
Perceived
value
Customer
expectations
Customer
complaints
Customer
satisfaction
Customer
loyalty
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Key Idea
The econometric model used to produce
ACSI links customer satisfaction to its
determinants: customer expectations,
perceived quality, and perceived value.
Customer satisfaction, in turn, is linked to
customer loyalty, which has an impact on
profitability.
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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 is a comparison of ACTUAL QUALITY
to EXPECTED QUALITY
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Key Idea
Many organizations still focus more on
processes and products from an internal
perspective, rather than taking the
perspective of the external customer.
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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
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Leading Practices (2 of 2)
• Build relationships through commitments,
provide accessibility to people and
information, set service standards, and
follow-up on transactions
• Develop effective complaint management
processes
• Measure customer satisfaction for
improvement
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Key Customer Groups
• Organization level
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consumers
external customers
employees
society
• Process level
– internal customer units or groups
• Performer level
– individual internal customers
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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?
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AT&T Customer-Supplier Model
Your
Suppliers
Inputs
Requirements
and feedback
Your
Your
Outputs
Processes
Customers
Requirements
and feedback
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Key Idea
The natural customer-supplier linkages
among individuals, departments, and
functions build up the “chain of
customers” throughout an organization
that connect every individual and function
to the external customers and
consumers, thus characterizing the
organization’s value chain.
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Customer Segmentation
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Demographics
Geography
Volumes
Profit potential
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Key Idea
Segmentation allows a company to
prioritize customer groups, for instance
by considering for each group the
benefits of satisfying their requirements
and the consequences of failing to satisfy
their requirements.
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Key Dimensions of Manufacturing
Quality
• Performance – primary operating characteristics
• Features – “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 – speed, courtesy, and
competence of repair
• Aesthetics – look, feel, sound, taste, smell
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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
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Kano Model of Customer Needs
• Dissatisfiers: expected requirements
that cause dissatisfaction if not
present
• Satisfiers: expressed requirements
• Exciters/delighters: unexpected
features
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Key Idea
As customers become familiar with them,
exciters/delighters become satisfiers over
time. Eventually, satisfiers become
dissatisfiers.
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Customer Listening Posts
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Comment cards and formal surveys
Focus groups
Direct customer contact
Field intelligence
Complaint analysis
Internet monitoring
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Key Idea
Companies use a variety of methods, or
“listening posts,” to collect information about
customer needs and expectations, their
importance, and customer satisfaction with
the company’s performance on these
measures.
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Tools for Classifying Customer
Requirements
Affinity diagram
Tree diagram
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Using Customer Information
• Link customer needs and expectations to
design, production, and service delivery
processes
• Empower employees to listen and take
appropriate action to meet customer
needs
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Key Idea
An organization builds customer loyalty
by developing trust, communicating with
customers, and effectively managing the
interactions and relationships with
customers through approaches and its
people. Companies must carefully select
customer contact employees, train them
well, and empower them to meet and
exceed customer expectations.
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Moments of Truth
• Every instance in which a customer comes in
contact with an employee of the company.
• Example (airline)
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Making a reservation
Purchasing tickets
Checking baggage
Boarding a flight
Ordering a beverage
Requests a magazine
Deplanes
Picks up baggage
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Customer Relationship
Management
• Accessibility and commitments
• Selecting and developing customer contact
employees
• Relevant customer contact requirements
• Effective complaint management
• Strategic partnerships and alliances
• Exploiting CRM technology
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Importance of Complaint
Management
• The average company never hears from
96 percent of its unhappy customers
• Of the customers who make a
complaint, more than half will do future
business if the complaint is resolved
• The average customer who has had a
problem will tell 9 or 10 others.
• Dissatisfied customers increasingly post
their feelings on the Web
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Key Idea
To improve products and processes
effectively, companies must do more than
simply fix the immediate problem. They
need a systematic process for collecting
and analyzing complaint data and then
using that information for improvements.
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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
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Key Idea
An effective customer satisfaction
measurement system results in reliable
information about customer ratings of
specific product and service features and
about the relationship between these
ratings and the customer’s likely future
market behavior.
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Survey Design
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Identify purpose
Determine who should conduct the survey
Select the appropriate survey instrument
Design questions and response scales
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Key Idea
The types of questions to ask in a survey
must be properly worded to achieve
actionable results. By actionable, we
mean that responses are tied directly to
key business processes, so that what
needs to be improved is clear; and
information can be translated into
cost/revenue implications to support the
setting of improvement priorities.
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Analyzing Feedback: Performance
- Importance Analysis
Low
Low
Performance
High
Who cares?
Overkill
Vulnerable
Strengths
Importance
High
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Key Idea
Appropriate customer satisfaction
measurement identifies processes that
have high impact on satisfaction and
distinguishes between low performing
processes low performance and those
that are performing well.
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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
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Customer Perceived Value
• CPV measures how customers assess
benefits—such as product performance, ease
of use, or time savings—against costs, such
as purchase price,installation cost or time,
and so on,in making purchase decisions.
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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, loyalty, and
retention, and to business expansion.
3.1 Customer and Market Knowledge
3.2 Customer Relationships and Satisfaction
a. Customer Relationship Building
b. Customer Satisfaction Determination
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