Chapter 4 Focusing on Customers

Importance of Customer Satisfaction and Loyalty “Satisfaction is an attitude; loyalty is a behavior” Loyal customers spend more, are willing ot 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.

American Customer Satisfaction Index Measures customer satisfaction at national level Introduced in 1994 by University of 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 complaints Perceived quality 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) 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 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 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

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

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 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

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

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

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

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 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, and retention, and to business expansion. 3.1 Customer and Market Knowledge 3.2 Customer Relationships and Satisfaction a. Customer Relationships b. Customer Satisfaction Determination