Quality in Customer-Supplier Relationships Chapter 4 Quality in Customer-Supplier Relationships

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

Deming’s Emphasis on Customers

The Customer-Supplier Chain

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

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.

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

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

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

Understand Customer Needs – the Kano Model Dissatisfiers: expected requirements Satisfiers: expressed requirements Exciters/delighters: unexpected features

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

Use Customer Information

Manage Customer Relationships Develop close relationships Provide convenient access to information and to employees Train customer contact employees Develop good service standards Deal with complaints Exploit CRM technology Don’t ignore internal customers

Moments of Truth 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

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.

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.

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.

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

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