Module 4 Focusing on Customers

Quiz What is the difference between explicit and tacit knowledge? Deming’s 14 Points: Which ones can you name/remember?

Deming’s 14 Points (Abridged) (1 of 2) 1. Create and publish a company mission statement and commit to it. 2. Learn the new philosophy. 3. Understand the purpose of inspection. 4. End business practices driven by price alone. 5. Constantly improve system of production and service. 6. Institute training. 7. Teach and institute leadership. 8. Drive out fear and create trust.

Deming’s 14 Points (2 of 2) 9. Optimize team and individual efforts. 10. Eliminate exhortations for work force. 11. Eliminate numerical quotas and M.B.O. Focus on improvement. 12. Remove barriers that rob people of pride of workmanship. 13. Encourage education and self-improvement. 14. Take action to accomplish the transformation. www.deming.org

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 between five-ten times more to find a new customer than to keep an existing one happy.

Importance of Customer Satisfaction and Loyalty Johnson Controls 91% contract renewals from satisfied or very satisfied customers 1% point increase in overall satisfaction = $13 million in service contract renewals annually Research in 2008 revealed that companies with a 98% customer retention rate were twice as profitable than those with 94%.

American Customer Satisfaction Index

ACSI Model of Customer Satisfaction Perceived quality Customer complaints Perceived value Customer satisfaction Customer expectations Customer loyalty

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

Leading Practices (1 of 2) Define and segment key customer groups and markets Understand the voice of the customer (VOC)

Leading Practices (2 of 2) Understand linkages between VOC and design, production, and delivery 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

Experiment Have one of your classmates time you while you wait for varying amounts of time between 2 to 4 minutes. Try not to count the seconds! Estimate the amount of time you waited. What does this experiment mean for organizations that are trying to set service standards?

Key Customer Groups Organization level Process level Performer 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 Requirements and feedback Your Suppliers Processes Customers Inputs Outputs

Customer Segmentation Demographics Geography Volumes Profit potential

Key Dimensions of Quality Performance – primary operating characteristics Features – “bells and whistles” Reliability – probability of operating for specific time under 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 Can you think of a product that is reliable but contains low durability?

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 (rendering authenticity) Responsiveness – willingness to help customers and provide prompt service

Service Quality

Kano Model of Customer Needs Dissatisfiers: expected requirements Satisfiers: expressed requirements Exciters/delighters: unexpected features

Customer Listening Posts Comment cards and formal surveys Focus groups Direct customer contact Field intelligence Complaint analysis Internet monitoring

Tools for Classifying Customer Requirements Affinity diagram

Tools for Classifying Customer Requirements (Cont.) Tree diagram

Customer Relationship Management Accessibility and commitments Selecting and developing customer contact employees Relevant customer contact requirements Effective complaint management Strategic partnerships and alliances Customer Integration*

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

Measuring Customer Satisfaction Effective customer satisfaction measurement systems result in? Reliable Information About? Customer Ratings Future Behavior

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

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 Travel Websites / Applications

Performance-Importance Analysis Low High Vulnerable Strengths High Low Importance Who Cares? Overkill

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