© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 Focusing on Customers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 2

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 3

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Idea Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer satisfaction. 4

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 5

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ACSI Model of Customer Satisfaction Perceived quality Customer complaints Perceived value Customer satisfaction Customer expectations Customer loyalty 6

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 7

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 is a comparison of ACTUAL QUALITY to EXPECTED QUALITY 8

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Idea Many organizations still focus more on processes and products from an internal perspective, rather than taking the perspective of the external customer. 9

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 10

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 11

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Customer Groups Organization level consumers external customers employees society Process level internal customer units or groups Performer level individual internal customers 12

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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? 13

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. AT&T Customer-Supplier Model Requirements and feedback Requirements and feedback Your Suppliers Your Processes Your Customers InputsOutputs 14

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 15

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Customer Segmentation Demographics Geography Volumes Profit potential 16

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 17

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 18

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 19

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Kano Model of Customer Needs Dissatisfiers: expected requirements that cause dissatisfaction if not present Satisfiers: expressed requirements Exciters/delighters: unexpected features 20

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Idea As customers become familiar with them, exciters/delighters become satisfiers over time. Eventually, satisfiers become dissatisfiers. 21

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Customer Listening Posts Comment cards and formal surveys Focus groups Direct customer contact Field intelligence Complaint analysis Internet monitoring 22

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 23

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Tools for Classifying Customer Requirements Affinity diagram Tree diagram 24

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 25

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 26

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Moments of Truth 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 27

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 28

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 29

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 30

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 31

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 32

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Survey Design Identify purpose Determine who should conduct the survey Select the appropriate survey instrument Design questions and response scales 33

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 34

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Analyzing Feedback: Performance - Importance Analysis Performance Importance Low High Low High Who cares?Overkill Vulnerable Strengths 35

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 36

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 37

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. 38

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Customer Focus in the Baldrige Criteria The Customer Focus category examines an organization’s processes for determining product offerings and mechanisms to support customers’ use of products, and how an organization builds a customer-focused culture. 3.1 Customer Engagement a. Product Offerings and Customer Support b. Building a Customer Culture 3.2 Voice of the Customer a. Customer Listening b. Determination of Customer Satisfaction and Engagement c. Analysis and Use of Customer Data 39