1. The Voice of the Customer
Chapter 5
The Voice of the Customer
S. Thomas Foster, Jr.
Boise State University
PowerPoint
prepared by
Dave Magee
University of Kentucky
Lexington Community College
©2004 Prentice-Hall

2. Chapter Overview Slide 1 of 2
Customer-Driven Quality
What Is the Voice of the Customer?
Customer-Relationship Management
The “Gap” Approach to Service Design
Segmenting Customers and Markets
Strategic Alliances between Customers and Suppliers
Communicating with Customers

3. Chapter Overview Slide 2 of 2
Actively Solicited Customer Feedback Approaches
Passively Solicited Customer Feedback Approaches
Managing Customer Retention and Loyalty
Customer Relationship Management (CRM) Systems
A Word on Excellent Design

4. Customer Facts
Customers will tell twice as many people about bad experiences as good experiences.
A dissatisfied customer will tell 8 to 10 people about bad experiences.
Seventy percent of upset customers will remain your customer if you resolve the complaint satisfactorily.
It’s easier to get customers to repeat than it is to find new business.
Service firms rely on repeat customers for 85% to 95% of their business.
Eighty percent of new product and service ideas come from customer ideas.
The cost of keeping an existing customer is one-sixth of the cost of attracting a new customer.

5. Customer Defined A customer is the receiver of goods or services.
Typically, this involves an economic transaction in which something of value has changed hands.
Internal customers
Employees receiving goods or services from within the same firm.
External customers
Bill-paying receivers of work.
The ultimate people we are trying to satisfy.
End user
Another term that describes customers.

6. Customer-Driven Quality Slide 1 of 3
Customer-Driven Approach
Customer driven quality represents a proactive approach to satisfying customer needs that is based on gathering data about our customers to learn their needs and preferences and then providing products and services that satisfy the customer.

8. Customer-Driven Quality Slide 2 of 3
The Pitfalls of Reactive Customer-Driven Quality
One of the difficulties in satisfying customer requirements is that in a dynamic environment customer needs are constantly changing.
Problems occur when customer requirements increase at a faster rate than quality and service improvement. This places the firm in reactive mode and may signal the need for major process and service redesign.

9. Customer-Driven Quality Slide 3 of 3
Reactive Customer-Driven Quality Model
Figure 5.1
Quality
Region of satisfaction
Customer expectations
Region of complacency
Supplier performance
Time t T

10. What is the Voice of the Customer?
The voice of the customer represents the wants, opinions, perceptions, and desires of the customer.
Quality Function Deployment (QFD)
“House of quality,”
Translates customer wants into a finished product design.

11. Customer-Relationship Management Slide 1 of 8
This view of the customer asserts that he or she is a valued asset to be managed.
The tangibles meet the intangibles to provide a satisfying experience for the customer.
Four important design aspects
Complaint resolution
Feedback
Guarantees
Corrective action or recovery

12. Customer-Relationship Management Slide 2 of 8
Components of a Customer-Relationship Management Process
Complaint
resolution
Feedback
Customer
Relationship
Management
Guarantees
Corrective
action
Figure 5.2

13. Customer-Relationship Management Slide 3 of 8
Complaint Resolution
Complaint resolution is an important part of the quality management system.
Three common types of complaints
regulatory complaints
employee complaints
customer complaints.
The complaint-resolution process involves the transformation of a negative situation in one in which the complainant is restored to the state existing prior to the occurrence of the problem.
Complaint-recovery process

14. Customer-Relationship Management Slide 4 of 8
Complaint Resolution (or recovery) Process
Compensate people for losses
Apologize to the customer (contrition)
Make it easy for the complainant to resolve his or her problem

15. Customer-Relationship Management Slide 5 of 8
Feedback
There are two main types of feedback
feedback to the customer
feedback to the firm as a basis for process improvements
Feedback to the firm should occur on a consistent basis with a process to monitor changes resulting from the process improvement.
Some customer data is solicited and other data is provided without solicitation.

16. Customer-Relationship Management Slide 6 of 8
Guarantees
A guarantee outlines the customer’s rights.
The guarantee is both a design and an economic issue that must be addressed by all companies before the first sale occurs.
To be effective, a guarantee should be:
Unconditional
Meaningful
Understandable
Communicable
Painless to invoke

17. Customer-Relationship Management Slide 7 of 8
To be effective, guarantees should be:
Unconditional
Understandable
Meaningful
Communicable
Painless to invoke

18. Customer-Relationship Management Slide 8 of 8
Corrective Action
When a service or product failure occurs, the failure is documented and the problem is resolved in a way that it never happens again.
Corporate teams or committees should be in place to regularly review complaints and to improve processes so the problems don’t recur.

19. The Gap Approach to Service Design
Typically, the gap refers to the differences between desired levels of performance and actual levels of performance.
The formal means for identifying and correcting these gaps is called gap analysis.

20. The Gap Approach to Service Design
Word of mouth
communications
Personal needs
Past experience
Expected service
Gap 5
Perceived service
Marketer
Gap 4
Service delivery
External
communications
to consumers
Gap 3
Gap 1
Translation of
perceptions into
service quality specs
Gap 2
Management
perceptions of
consumer expectations
Figure 5.3

21. The Gap Approach to Service Design
Gaps Model
Customer Perceptions
Good
Wasted time
Relative strength IV I
Relative Importance
Low
High
Areas for
improvement II
Minor annoyances
III
Poor

22. Segmenting Customers and Markets
Segmenting Data
To segment markets means to distinguish customers or markets according to common characteristics.
Segmentation implies that data is gathered separately for each segment and analyzed separately.

23. Strategic Alliances Between Customers and Suppliers
Strategic Partnerships
Increasingly, sole sourcing arrangements are developing into strategic partnerships where the suppliers become de facto subsidiaries to their major customers.
In these arrangements, not only are suppliers sole source providers, but also they integrate information systems and quality systems that allow close interaction at all levels.

24. Communicating With Customers
Customer Rationalization
Results from agreement between marketing and operations as to which customers add the greatest advantage and profits over time.
Annuity Relationship
An annuity relationship is one in which the customer provides a long-term, steady income stream to the provider.
Gathering Data From Customers
Active data gathering
Passive data gathering

25. Actively Solicited Customer Feedback Approaches Slide 1 of 6
Includes all supplier initiated contact with customers.
The three most common arenas
telephone customers
conducting focus groups
sending out surveys
Types of Data
Soft data
Hard data
Ordinal data

26. Actively Solicited Customer Feedback Approaches Slide 2 of 6
Soft Data
Phone contacts, focus groups, and survey results.
Hard Data
Hard data are measurements data such as height, weight, volume, or speed that can be measured on a continuous scale.
Ordinal Data
Are ranked so that one measure is higher than the next.

27. Actively Solicited Customer Feedback Approaches Slide 3 of 6
Different Methods of Soliciting Customer Feedback
Telephone Contact
Focus Groups
Customer Service Surveys

28. Actively Solicited Customer Feedback Approaches Slide 4 of 6
Focus Group Steps
Figure 5.5
Identify Purpose
Narrow Scope of Questions
Select Target Population
Develop Questions
Run Multiple Groups
Summarize and Develop Common Themes

29. Actively Solicited Customer Feedback Approaches Slide 5 of 6
Steps in Developing a Useful Survey
Identifying customer requirements
Developing and validating the instrument
Implementing the survey
Analyzing the results

30. Actively Solicited Customer Feedback Approaches Slide 6 of 6
Reliability and Validity
Figure 5.8

31. Passively Solicited Customer Feedback Approaches
Customer initiated contact, such as filling out a restaurant complaint card, calling a toll-free complaint line, or submitting an inquiry via a company’s Web site.
Examples
customer research cards
customer response lines
web site inquires.

32. Managing Customer Retention and Loyalty
Customer retention is measured as the percentage of customers that return for more service.
Customer retention will increase by application of the service tools and concepts contained in this chapter such as tools for data gathering and analysis.
Customer Loyalty
Customer loyalty can be instilled by offering specialized service not available from competitors.
This can take many forms including high customer contact or technology advancements.

33. Customer Relationship Management Systems
Systems created to mine data including personal, internet, process and customer preference information to improve customer service and retention.
Manage 3 phases of CRM
Acquisition
Retention
Enhancement

34. Customer Relationship Management Systems
CRM Functions by Category
Customer-centric activities
Enterprise capabilities
Customer acquisition
Sales management
Customer retention and enhancement

35. A Word on Excellent Design
Not all good ideas come from customers.
Ready-Fire-Aim
A method that focuses on getting new technology to the market and then determining how to sell the product.
Good customer intelligence coupled with innovative research and development programs appears to be the best marriage of resources.

36. Summary Slide 1 of 2 Customer-Driven Quality
What Is the Voice of the Customer?
Customer-Relationship Management
The “Gap” Approach to Service Design
Segmenting Customers and Markets
Strategic Alliances between Customers and Suppliers
Communicating with Customers

37. Summary Slide 2 of 2 Actively Solicited Customer Feedback Approaches
Passively Solicited Customer Feedback Approaches
Managing Customer Retention and Loyalty
Customer Relationship Management (CRM) Systems
A Word on Excellent Design