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.

Key Idea Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer satisfaction.

American Customer Satisfaction Index Measures customer satisfaction at national level (1994 by University of Michigan and American Society for Quality) Continual decline in index from 1994 through 1998 with a small improvement into 2000. European Customer Satisfaction Index (April 2000)

ACSI Model of Customer Satisfaction Perceived quality Perceived value Customer complaints 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) 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

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.

Customer Segmentation Demographics Geography Volumes Profit potential

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

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: requirements that are expected in a product or a service. In an automobile, a radio, heater, required safety features are examples, which are generally not stated by customer but assumed as given. Satisfiers: expressed requirements. Customers say they want. Many car buyers want a sunroof... Exciters/delighters: unexpected features.new or innovative features that customers do not expert.

Customer Listening Posts Comment cards and formal surveys Focus groups Direct customer contact Field intelligence Complaint analysis Internet monitoring

Moments of Truth (Jan Carlzon, SAS) 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

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.

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

Survey Design Identify purpose Determine who should conduct the survey Select the appropriate survey instrument Design questions and response scales

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.

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?

Scale: 1 = poor ….5 = excellent 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?

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

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