Total quality management Introduction to quality management Presented by N.vigneshwari

Review of class Customer perception of quality

Today’s topic Translating needs into requirement and customer retention

Translating needs into requirements Translating needs into requirements is another vital part of the quality management. Requirements management is concerned with meeting the needs of end users through identifying and specifying what they need. Requirements may be focused on where the main concern is to describe what is wanted rather than how it should be delivered. The important issue is that those specifying the requirement have an adequate understanding of what the users need and how the market is likely to meet that need; they also need to be able to keep any changes to the requirement to an appropriate minimum and to document the requirement in such a way that the market will be able to understand what is required

Requirements are capabilities and objectives to which any product or service must conform and are common to all development and other engineering activities. In reality customer doesn’t buy a specification; the customer buys the product or service to fulfill a need. Customers are loyal to whatever best helps them achieve their desired outcome. Just meeting the customer’s needs are not enough; the organization must exceed the customer’s needs.

Customer retention Repeat customers or people who buy from you again and again. Customer Retention is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organisation has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across themarketplace.

Importance of customer retention Why are customers more profitable for service firms over a period of time? There are a number of reasons for this. To begin with, to acquire a customer a company spends promotional costs like advertising, sales promotion etc. It is said that it costs five times more to attract a new customer than retaining one. Services being rich in experience and credence qualities, it takes some time for customers to get accustomed to it and once they are used to the service and are satisfied with the service provider ,they tend to purchase more over a period of time. As they remain satisfied with a service provider, they spread a positive word of mouth, which is very effective in case of services for attracting new customers. Longer the customer stays with an organization, more the organization knows about him, which enables it to offer customized services which make it difficult for the customer to defect.

Transactional buyers Transactional buyers are concerned about today’s purchase. They do a lot of research investigating the product they are considering buying and consider himself or herself a product expert. They are not concerned about service, trust or relationship. They are concerned primarily about price and terms. They enjoy negotiating and trying to extract as many concessions out of the salesperson as possible. They see what they are doing as a game. A game where they win and the salesperson loses. They will “milk” the salesperson for free information, technical data, etc. Because of their “I win you lose” approach they have no loyalty.

Relationship buyers Relationship Buyers consider today’s transaction as one in a series of many. They do not enjoy playing the “shopping game.” They don’t enjoy comparison shopping or negotiating. They are looking for a Business Partner or Trusted Advisory who is an expert that they can trust. Once they find someone they trust they are loyal and tend to be the best repeat customers.

How to find relationship buyers Lowprice offers will attract transaction buyers You cannot make a profit from them Relationship buyers are interested in good service, high value and two way loyalty They will stick with you and provide a profitable bottom line

Privilege card You may receive a plastic card with your name on it. The card is used whenever you shop in a retail store, on the phone or on the web. The card provides you with some benefit that you could not get without the card. It provides you with valuable information that you can use to understand the customer and build her loyalty.

How do privilege card boost retention? This helps you to keep track of customer behavior You can see if valuable customers are reducing their orders or spending You can proactively call them, write them, or make them offers

Cross sales build retention Customers who have more than one product have a higher retention rate. Two reasons for second product: Profit from the new product Retain customers for the existing one. An insurance company with independent agents used a model to predict the Next Best Product for each customer Offered a 10% discount on first product if second is purchased

Creating a club on the internet A company selling sporting goods created an internet member club. When it was built they learned that: Club members bought 11 times more than non club members. In two years, 81% of club members became multi-buyers. The club boosted retention

Club Members Retention

Cataloger Customer Retention Miles Kimball sent 20,000 emails with three different catalogs, and 20,000 with the three catalogs alone. Those who got the emails bought 18% more than those who got the catalogs alone.

Retailer Customer Retention Video retailer sent email newsletters to 170,000 customers for 6 months. Control group of 14,000 got no emails Retail sales to test group was 28% more than to those without emails.

One Click Ordering

Every marketing promotion should always be a test Test those who get the promotion against the performance of those who do not get the promotion If you are sending birthday cards or a newsletter, select 50,000 who do not get birthday cards or the newsletter. Look at the control’s spending rate, and retention rate. If there is no difference, your cards or newsletters are a waste of money.

What should you do to increase retention? right customers to start with Communicate with them & reward them Determine their lifetime value Create customer segments with a marketing strategy for each segment Sell them a second product Get them to become multi-channel buyers Use Tests and Controls Calculate return on investment

References Total quality management – V.Jayakumar

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