1. © 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. Chapter 6 Quality in Customer-Supplier Relationships 1 Dr. Mahnmood AsadMGT433

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. Outline Demonstrate the importance of customer- supplier relationships Identify the principles and practices of quality customer-supplier relationships Give examples of effective partnerships between customers and suppliers Compare a quality-focused approach to customers and suppliers to conventional organizational theories 2 Dr. Mahnmood AsadMGT433

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. The Value of Customers “The only value your company will ever create is the value that comes from customers—the ones you have now and the ones you will have in the future. Businesses succeed by getting, keeping, and growing customers. Customers are the only reason you build factories, hire employees, schedule meetings, lay fiber-optic lines, or engage in any business activity. Without customers, you don’t have a business.” – Don Peppers and Martha Rogers 3 Dr. Mahnmood AsadMGT433

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. Deming’s Emphasis on Customers 4 Dr. Mahnmood AsadMGT433

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. The Customer-Supplier Chain 5 Dr. Mahnmood AsadMGT433

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. Business Case for Customer Focus “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. Dissatisfied customers tell at least twice as many friends about bad experiences than they tell about good ones 6 Dr. Mahnmood AsadMGT433

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 Engagement Customer engagement – customers’ investment in or commitment to a brand and product offerings Characteristics – customer retention and loyalty – customers’ willingness to make an effort to do business with the organization – customers’ willingness to actively advocate for and recommend the brand and product offerings 7 Dr. Mahnmood AsadMGT433

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. The Importance of Suppliers Quality of the supply chain affects the quality that customers receive “Superior quality, consistent service, and competitive pricing are just the price of entry to get into the game.” Suppliers must continually improve and align their operations with customer needs. 8 Dr. Mahnmood AsadMGT433

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. Principles for Customer-Supplier Relationships Recognition of the strategic importance of customers and suppliers Development of win-win relationships between customers and suppliers Establishing relationships based on trust 9 Dr. Mahnmood AsadMGT433

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. Practices for Dealing With Customers Collect information constantly on customer expectations Disseminate this information widely within the organization Use this information to design, produce, and deliver the organization’s products and services. Manage customer relationships Exploit CRM technology Don’t ignore internal customers 10 Dr. Mahnmood AsadMGT433

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. Collect Customer Information Comment cards and formal surveys Focus groups Direct customer contact Field intelligence Complaint analysis Internet monitoring 11 Dr. Mahnmood AsadMGT433

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. Understand Customer Needs – the Kano Model Dissatisfiers: expected requirements Satisfiers: expressed requirements Exciters/delighters: unexpected features 12 Dr. Mahnmood AsadMGT433

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. Disseminate Customer Information Share information with employees Provide data to product designers and service managers 13

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. Use Customer Information 14 Dr. Mahnmood AsadMGT433

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. Manage Customer Relationships Develop close relationships and understand moments of truth - every instance in which a customer comes in contact with an employee of the company Train customer contact employees Develop good service standards Deal with complaints 15 Dr. Mahnmood AsadMGT433

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. Exploit CRM Technology (1 of 2) Segmenting markets based on demographic and behavioral characteristics. Tracking sales trends and advertising effectiveness by customer and market segment. Identifying and eliminated non-value-adding products that would waste resources as well as those products that better meet customers’ needs and provide increased value. Identifying which customers should be the focus of targeted marketing initiatives with predicted high customer response rates. 16 Dr. Mahnmood AsadMGT433

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. Exploit CRM Technology (2 of 2) Forecasting customer retention (and defection) rates and providing feedback as to why customers leave a company. Studying which goods and services are purchased together, leading to good ways to bundle them. Studying and predicting which Web characteristics are most attractive to customers and how the Web site might be improved. Streamlining processes around customers rather than traditional functions, resulting in improved flow of information and cycle times. 17 Dr. Mahnmood AsadMGT433

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. Guiding Principles in Supplier Relationships Recognizing the strategic importance of suppliers in accomplishing business objectives, particularly minimizing the total cost of ownership, Developing win-win relationships through partnerships rather than as adversaries, and Establishing trust through openness and honesty, thus leading to mutual advantages. 18 Dr. Mahnmood AsadMGT433

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. Practices for Dealing With Suppliers Base purchasing decisions on quality as well as cost Reduce the number of suppliers Establish long-term contracts Measure and certify supplier performance Develop cooperative relationships and strategic alliances 19 Dr. Mahnmood AsadMGT433

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. Relationships to Organization Theory Roles for customers – Resource – Worker (or coworker) – Buyer – Beneficiary (or user) – Outcome or product of value-creating transformation activities Resource dependence perspective Integrative bargaining 20 Dr. Mahnmood AsadMGT433