Focusing on Customers

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.

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.

Key Idea

Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer satisfaction.

American Customer Satisfaction Index

Measures customer satisfaction at national level (1994 by University of Michigan and American Society for Quality)

Continual decline in index from 1994 through 1998 with a small improvement into 2000.

European Customer Satisfaction Index (April 2000)

ACSI Model of Customer Satisfaction

Perceivedquality

Customer

expectations

Perceived

value Customer

satisfaction

Customer

complaints

Customer

loyalty

Customer-Driven Quality Cycle

Customer needs and expectations (expected quality)

Identification of customer needsTranslation into product/service specifications (design quality)Output (actual quality)Customer perceptions (perceived quality)

PERCEIVED QUALITY = ACTUAL - EXPECTED

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

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

Key Customer Groups

Organization level consumers external customers employees society

Process level internal customer units or groups

Performer level individual internal customers

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?

AT&T Customer-Supplier Model

Requirementsand feedback

Requirementsand feedback

Your Suppliers

YourProcesses

YourCustomers

Inputs Outputs

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.

Customer Segmentation

Demographics Geography Volumes Profit potential

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.

Key Dimensions of 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

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

Kano Model of Customer Needs

Dissatisfiers: requirements that are expected in a product or a service. In an automobile, a radio, heater, required safety features are examples, which are generally not stated by customer but assumed as given.

Satisfiers: expressed requirements. Customers say they want. Many car buyers want a sunroof...

Exciters/delighters: unexpected features.new or innovative features that customers do not expert.

Customer Listening Posts

Comment cards and formal surveys

Focus groups Direct customer contact Field intelligence Complaint analysis Internet monitoring

Moments of Truth(Jan Carlzon, SAS)

Every instance in which a customer comes in contact with an employee of the company.

Example (airline) Making a reservation Purchasing tickets Checking baggage Boarding a flight Ordering a beverage Requests a magazine Deplanes Picks up baggage

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.

Customer Relationship Management

Accessibility and commitments Selecting and developing customer

contact employees Relevant customer contact

requirements Effective complaint management Strategic partnerships and alliances

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

Survey Design

Identify purpose Determine who should conduct the

survey Select the appropriate survey

instrument Design questions and response

scales

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.

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?

Scale: 1 = poor ….5 = excellent

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?

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

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

Customer and Market Focus

in the Baldrige CriteriaThe 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 Knowledge3.2 Customer Relationships and Satisfaction

a. Customer Relationshipsb. Customer Satisfaction Determination