Focusing on Customers

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

Chapter 4

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.

 A firm cannot create loyal customers without first creating satisfied customers.

Key Idea

Customer wants and needs drive

competitive advantage, and statistics show that growth in market share is strongly correlated with customer

satisfaction

Michigan and American Society for Quality

 Continual decline in index from 1994

through 1998 with a small improvement into 2000 suggests that quality

improvements have not kept pace with

consumer expectations

ACSI Model of Customer

Satisfaction

Perceived quality

Customer complaints

Perceived value Customer satisfaction

Customer

loyalty

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

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

Key Idea

Many organizations still focus more on processes and products from an internal perspective, rather than taking the

perspective of the external customer

 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

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

Requirements and feedback

Your

Suppliers

Your Processes

Your Customers

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

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

 Responsiveness – willingness to help

customers and provide prompt service

Key Idea

As customers become familiar with them, exciters/delighters become satisfiers over time Eventually, satisfiers become

dissatisfiers

Customer Listening Posts

 Comment cards and formal surveys

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

Tools for Classifying

Customer Requirements

Affinity diagram Tree diagram

Moments of Truth

 Every instance in which a customer comes

in contact with an employee of the

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

 Exploiting CRM technology

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

 Identify areas for improvement

 Track trends to determine if changes result in improvements

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

Key Idea

The types of questions to ask in a survey must be properly worded to achieve

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

Performance-Importance Analysis

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

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 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

Customer and Market Focus

in the Baldrige Criteria

The 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, loyalty, 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