Chapter 4

Customer Satisfaction

Faculty of Industrial Management

Universiti Malaysia Pahang
26300 Gambang, Pahang Darul Makmur
Tel: +609 549 2166 Fax: +609 549 2167
www.fim.ump.edu.my
Learning Outcomes
• Understand the importance of customer satisfaction.
• Differentiate between traditional & modern organizational pyramids.
• Illustrate customer satisfaction model.
• Differentiate between internal & external customers.
• Understand the concept of customer feedbacks.
• Able to collect customer feedback & deal with customer complains.
• Explain the concept of service quality.
• Elaborate Kano Model.
• Describe the concept of customer retention.
 Customer is the most important asset of any organization.
Its success depends on how many customers it has, how much they
buy, & how often they buy.
Satisfied customers will buy more, buy more frequently, & pay bills
promptly.
Organization Pyramid

CEO Customer

Senior
Front-line representatives
manager
s
Functional
operational
VS Functional
operational
areas areas
Senior
Front-line representatives manager
s
Customer CEO
Traditional Organization Pyramid
New product is decided based on what top
CEO management wants.
Senior
manager
s
Functional operations issued orders to the
Functional front-liners who will interact with
operational customers.
areas
Front-line representatives
Thus, customers were at the last of the
organizational pyramid, & decision making
Customer resided on top management.
Modern Customer-Oriented
Organization Pyramid
Customer New product is decided based on the
customer’s perspectives.
Front-line representatives
Customers are on the top. Front-liners
Functional received importance because they interact
operational
areas
regularly with customers.
Senior
manager
s The senior managers & CEO are at the
CEO lowest level.
Modern Customer-Oriented
Organization Pyramid
Customer
Now, the marketing process starts with the
question “What will the customers really like
Front-line representatives
or want?”
Functional
operational
areas Because customers are willing to pay extra
Senior for extra values, but they want value in
manager
s
everything.
CEO
 TQM implies an organizational obsession with meeting or
exceeding customer expectations, so that they are delighted.
Customer Satisfaction Model (Teboul, 1991)

Company’s offer Customer’s

(product or service) Expectation

Needs not Customer

fulfilled satisfaction

Customer satisfaction is achieved when the offer matches the

needs/expectations.
Circle is superimposed on the square.
What should an organization do?

Understand the customer’s needs & expectations

Provide high quality products/services that meet

customer’s expectations

Continually examine its quality system, to ensure its

responsiveness to ever-changing customer needs &
expectations
It is important…
To define quality from customer perspective.
To produce/provide services based on
customer’s perspective.
To anticipate future needs of customer.
Who are the Customers?
• Directly connected to organization.
Internal • Usually inside the organization (i.e., internal
stakeholder).
Customers • Next workstation is customer of previous
workstation.

• Not directly connected to organization.

External • Outside the organization.
Customers • The one who uses/purchases the product/service,
or influences the sale of it.
 Satisfaction of internal customers is a precursor to, &
a prerequisite for, external customer satisfaction
~Joseph M. Juran~

Thus, when internal customers are satisfied, satisfaction of external

customer should be assured.
External Customers

Prospective Current Lost

customers customers customers

Each provides valuable customer satisfaction

information for an organization
Wrong practice…

Thinking too much about external customers,

while ignoring internal customers.

Most employees know about the external

customers or end users, but may not think of
other employees as internal customers of their
output.
 #1 Performance
Customer Perception of #2 Features
Quality
#3 Service
Ranking of factors influencing purchases
based on end users perception #4 Warranty
(A survey by American Society for
Quality)
#5 Price

#6 Reputation
#1. Performance

Probability that a The ease of

"must-be quality" Failure free over
product will keeping the
& "attractive time
operate when product operable
quality"
needed
Fitness for use Availability Reliability Maintainability
#2. Features

Secondary characteristics of products &

services.

Example:
The primary function of car is transportation,
whereas a car stereo system is a feature of a
car.
#3. Customer Service

A method to give the customer-added value.

Organization must not stop looking for the ways

to serve customers better.

Example: A hospital, after cleaning the room, asks

if there is anything they can do for the
patient.
#4. Warranty
A promise of a quality product is backed up by a
guarantee for customer satisfaction.

It is commitment to guarantee high

customer satisfaction.
 #5. Price
Today, people are willing to pay a higher price to obtain
value.
People are now thinking; who can provide the greatest
value.

#6. Reputation
It is about experience with the organization.
People are willing to pay premium for a trusted brand name.
Customer Feedback
It is a proactive approach to gather information
regarding the customers’ perceptions.

It must be frequently asked & monitored,

because customers continually change their
minds, expectations, etc.

It is not a one-time effort; it is ongoing & active

probing of customers’ mind.
 Benefits of Customer Feedback
Discover customer dissatisfaction.
Discover relative priorities of quality.
Compare performance with the competition.
Identify customers’ needs.
Determine opportunities for improvement.
Tools for Collecting Customer Feedback

✓ Comment cards.
✓ Questionnaires (e.g., customer satisfaction survey).
✓ Customer focus group.
✓ Toll-free telephone lines.
✓ Customer visits (i.e., visit the customer & gather information).
✓ Internet.
✓ Employee feedback.
Using Customer Complains
Customer dissatisfaction could be used for improvement effort.

Every single complain should be accepted, analyzed & acted

upon.

Front-line employees should know how to

handle a wide range of situations that arise
in the customer relationship.
 The importance of well-handling
complains:

More than half of dissatisfied customers

will buy again, if they believe their
complains have been heard & resolved
~ Besterfield et al. (2008) ~
Actions taken to handle complains
1. Investigate customers’ experiences by actively soliciting feedback,
both positive & negative. Then, acting on it promptly.
2. Develop procedures for complaint resolution, including
empowering front-line personnel.
3. Analyze complains, but understand; not all complains are usable.
4. Identify & eliminate the root cause. “More inspection” is not
corrective actions.
Actions taken to handle complains
5. Establish customer satisfaction measures & constantly monitor them.
6. Communicate complain information, the investigation results, & solutions
to all people in organization.
7. Provide a report for evaluation. If needed, assign an improvement team.
8. Identify customers’ expectations beforehand through complain analysis.
 Service Quality
A comparison of perceived
expectations (E) of a service
with perceived performance (P)

SQ = P - E
 Communication Front-line
Organization Customer Care Leadership
people

Elements of Customer Service

#1. Organization
1. Identify each market segment.
2. Write down the requirements.
3. Communicate the requirements
with all employees.
4. Organize processes.
5. Organize physical spaces to
better serve customers.
#2. Customer Care

1. Meet the customer’s expectations

2. Get the customer’s point of view
3. Deliver what is promised
4. Make customers feel valued.
5. Respond to all complaints.
6. Over-respond to customers
7. Provide a clean & comfortable customer reception area.
#3. Communication
1. Optimize the trade-off between
time & personal attention.
2. Minimize the number of contact
points.
3. Provide pleasant, knowledgeable &
enthusiastic employees.
4. Write document in customer-
friendly language.
#4. Front-line people
1. Hire people who like people
2. Challenge them to develop better methods
3. Give them authority to solve problems
4. Serve them as internal customers
5. Be sure they are adequately trained
6. Recognize & reward performance
#5. Leadership
1. Lead by example.
2. Listen to the front-
line people.
3. Strive for continuous
process
improvement.
Characteristics of service quality &
customer expectations
Characteristics Expectations
Delivery Delivered on schedule in undamaged condition.
Installation Proper instructions on setup or technicians supplied for complicated
products.
Use Clearly-written training manuals provided on proper use.
Field repair Properly-trained technicians to promptly make quality repairs
Customer service Friendly service representatives to answer questions
Warranty Clearly stated with prompt service on claims
Translating Needs
into Requirements

Kano Model : Conceptualizes Customer

Requirements
Kano Model: 3 major areas of customer
satisfaction
✓ Include written & verbal ✓ Customer may unaware of
requirements, & are easily these requirements or
identified. Unexpected, so the creative assume it will be
ideas often excite & delight automatically supplied.
✓ Expected to be met & the customers
typically performance ✓ Hardest to define but
related proven very costly if
ignored
Unstated or
Explicit
Innovations unspoken
requirements
requirements
Translating Needs into Requirements

Customer Voice Diagram

[McDonnell-Douglas,
1993]
Customer Retention
Activities that produce the necessary customer satisfaction that
creates customer loyalty.
Customer Retention
How to move customer satisfaction
to the next level.
Main Focus of Customer
Retention
1. Determine what is truly
important to the customers.

2. Make sure that the organization

focuses its valuable resources
on things that really matter to
customers.
 Pre-requisite of Customer Retention
High employee retention has a significant positive impact on customer
retention.

To manage customer retention, the organization must pay attention to its

present employees & to who they are hiring
~ Goodman et al. (1996) ~
 Faculty of Industrial Management
Universiti Malaysia Pahang
26300 Gambang, Pahang Darul Makmur
Tel: +609 549 2166 Fax: +609 549 2167
www.fim.ump.edu.my