1 Customer and Market Focus in the Baldrige Criteria 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 Relationship Building b. Customer Satisfaction Determination

2 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.

3 Characteristics of Satisfied Customers (1 of 2) A happy and satisfied customer would tell five other people about the company; many of them would become customers of the business. 50% to 75% of the customers who complain and have their problems resolved would again do business with the company.

4 Characteristics of Satisfied Customers (2 of 2) If the complaints are resolved quickly, 95% would return to do business with the company. How a customer is treated and how rapidly customer complaints are resolved is one of the most powerful tools shaping customers’ perception of overall quality.

5 Characteristics of Dissatisfied Customers The average “unhappy” customer tell nine other people about the poor service he/she received. The cost of losing a customer is equal to five times the annual value of that customer’s account. Most (over 90%) of a company’s dissatisfied customers never complain. Most of them just stop doing business with the company.

6 Customer-Driven Quality Cycle measurement and feedback Customer needs and expectations (expected quality) Identification of customer needs Translation into product/service specifications (design quality) Output (actual quality) Customer perceptions (perceived quality) PERCEIVED QUALITY = ACTUAL - EXPECTED

7 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 (i.e., tell a consistent and compelling story)

8 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

9 Key Customer Groups Organization level consumers (end-users) external customers (direct, partners, suppliers) employees society Process level internal customer units or groups Performer level individual internal customers

10 Customer Segmentation Products Demographics Geography Volumes Profit potential

11 Performance-Importance Analysis Performanc e Importance Low High Low High Who cares?Overkill Vulnerable Strengths

12 Kano Model of Customer Needs Dissatisfiers (Basic): expected requirements Satisfiers (Performance): expressed requirements Exciters/delighters: unexpected features

13 Customer Satisfaction vs. Degree of Achievement (1 of 2) Basic (expected) Features Customers are dissatisfied if they are missing. Performance Features Customers tell you what they want, and are happier if you can do a better job for them

14 Customer Satisfaction vs. Degree of Achievement (2 of 2) Exciting Features Customers don’t know about them, but will be delighted when the features are offered.

15 Methods for Getting Customer Feedback (Listening Posts) (1 of 2) Satisfaction Surveys (Telephone, Mail, Web) Focus Group Studies Customer Visits Transaction-Based Response Cards Hot lines numbers, Fax, Web, Roundtable Discussions with Customers

16 Methods for Getting Customer Feedback (2 of 2) Employee Surveys Discussions with Front-Line Staff Complaint Tracking (Informal & Formal) “Mystery Shopper” Thank-you Calls or Notes Lost-Sales Follow-Up

17 Customer Satisfaction Survey Process (1 of 2) Determine target customer group Establish survey objectives Identify customer needs Determine survey method and resource requirements Design survey instrument

18 Customer Satisfaction Survey Process (2 of 2) Conduct trial survey and revise instrument Notify and train customers Conduct survey Analyze results Report results to customers Establish and implement follow-up procedures

19 Consideration of Response Cards Are the survey cards visible to customers? Is the card easy to fill out and submit? How are the cards collected, reviewed and responded? Is there enough space for comments? Will the cards be able to capture source of satisfaction/dissatisfaction?

20 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

21 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

22 Customer Relationship Management Commitments to customers Relevant customer-focused service standards Training and empowerment of front-line staff Effective complaint management Identifying and creating new customer values Establishing strategic partnerships and alliances

23 Purpose of Measuring and Tracking 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

24 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