1. Chapter 4
Focusing on Customers

2. 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.

3. 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

4. ACSI Model of Customer Satisfaction
complaints
Perceived
quality
Perceived
value
Customer
satisfaction
Customer
expectations
Customer
loyalty

5. 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

6. 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

7. 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

8. 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

9. 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?

10. AT&T Customer-Supplier Model
Requirements
and feedback
Your
Suppliers
Processes
Customers
Inputs
Outputs

11. Customer Segmentation
Demographics
Geography
Volumes
Profit potential

12. 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

13. 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

14. Kano Model of Customer Needs
Dissatisfiers: expected requirements
Satisfiers: expressed requirements
Exciters/delighters: unexpected features

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

16. Tools for Classifying Customer Requirements
Affinity diagram Tree diagram

17. Customer Relationship Management
Accessibility and commitments
Selecting and developing customer contact employees
Relevant customer contact requirements
Effective complaint management
Strategic partnerships and alliances

18. 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

19. 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

20. 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

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

22. 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

23. 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