Focusing on

Customers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1
 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.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
 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.
 A firm cannot create loyal customers without
first creating satisfied customers.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3
 Key Idea
Customer wants and needs drive
competitive advantage, and statistics
show that growth in market share is
strongly correlated with customer
satisfaction.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
4
 American Customer Satisfaction
Index
 Measures customer satisfaction at a national
level
 Introduced in 1994 by University of Michigan
and American Society for Quality
 Index continually declined from 1994 through
1997 with small improvements into 2004, when
it declined again, suggesting that quality
improvements have not kept pace with
consumer expectations
 www.theacsi.org
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
5
 ACSI Model of Customer
Satisfaction
Perceived Customer
quality complaints

Perceived Customer
value satisfaction

Customer
expectations Customer
loyalty

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
6
 Key Idea
The econometric model used to produce
ACSI links customer satisfaction to its
determinants: customer expectations,
perceived quality, and perceived value.
Customer satisfaction, in turn, is linked to
customer loyalty, which has an impact on
profitability.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
7
 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 is a comparison of ACTUAL QUALITY
to EXPECTED QUALITY
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
8
 Key Idea
Many organizations still focus more on
processes and products from an internal
perspective, rather than taking the
perspective of the external customer.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
9
 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

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
10
 Leading Practices (2 of 2)
 Build relationships through commitments,
provide accessibility to people and
information, set service standards, and
follow-up on transactions
 Develop effective complaint management
processes
 Measure customer satisfaction for
improvement

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
11
 Key Customer Groups
 Organization level
 consumers
 external customers
 employees
 society
 Process level
 internal customer units or groups
 Performer level
 individual internal customers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
12
 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?

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
13
 AT&T Customer-Supplier Model

Your Inputs Your Outputs Your

Suppliers Processes Customers

Requirements Requirements
and feedback and feedback

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
14
 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.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
15
 Customer Segmentation
 Demographics
 Geography
 Volumes
 Profit potential

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
16
 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.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
17
 Key Dimensions of Manufacturing
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
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18
 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
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
19
 Kano Model of Customer
Needs
 Dissatisfiers: expected requirements
that cause dissatisfaction if not
present
 Satisfiers: expressed requirements
 Exciters/delighters: unexpected
features

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
20
 Key Idea
As customers become familiar with them,
exciters/delighters become satisfiers over
time. Eventually, satisfiers become
dissatisfiers.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
21
 Customer Listening Posts
 Comment cards and formal surveys
 Focus groups
 Direct customer contact
 Field intelligence
 Complaint analysis
 Internet monitoring

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
22
 Key Idea
Companies use a variety of methods, or
“listening posts,” to collect information about
customer needs and expectations, their
importance, and customer satisfaction with
the company’s performance on these
measures.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
23
 Tools for Classifying Customer
Requirements
Affinity diagram Tree diagram

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
24
 Using Customer Information
 Link customer needs and expectations to design,
production, and service delivery processes
 Empower employees to listen and take appropriate
action to meet customer needs

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
25
 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.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
26
 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

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
27
 Customer Relationship
Management
 Accessibility and commitments
 Selecting and developing customer contact
employees
 Relevant customer contact requirements
 Effective complaint management
 Strategic partnerships and alliances
 Exploiting CRM technology

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
28
 Importance of Complaint
Management
 The average company never hears from 96 percent
of its unhappy customers
 Of the customers who make a complaint, more
than half will do future business if the complaint is
resolved
 The average customer who has had a problem will
tell 9 or 10 others.
 Dissatisfied customers increasingly post their
feelings on the Web

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
29
 Key Idea
To improve products and processes
effectively, companies must do more than
simply fix the immediate problem. They
need a systematic process for collecting
and analyzing complaint data and then
using that information for improvements.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
30
 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

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
31
 Key Idea
An effective customer satisfaction
measurement system results in reliable
information about customer ratings of
specific product and service features and
about the relationship between these
ratings and the customer’s likely future
market behavior.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
32
 Survey Design
 Identify purpose
 Determine who should conduct the survey
 Select the appropriate survey instrument
 Design questions and response scales

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
33
 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.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
34
 Analyzing Feedback: Performance -
Importance Analysis
Performance
Low High

Low Who cares? Overkill

Importance

High Vulnerable Strengths

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
35
 Key Idea
Appropriate customer satisfaction
measurement identifies processes that
have high impact on satisfaction and
distinguishes between low performing
processes low performance and those
that are performing well.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
36
 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

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
37
 Customer Perceived Value
 CPV measures how customers assess
benefits—such as product performance,
ease of use, or time savings—against costs,
such as purchase price,installation cost or
time, and so on,in making purchase
decisions.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
38
 Customer Focus in the
Baldrige Criteria
 The Customer Focus category examines an organization’s
processes for determining product offerings and mechanisms
to support customers’ use of products, and how an
organization builds a customer-focused culture.
3.1 Customer Engagement
a. Product Offerings and Customer Support
b. Building a Customer Culture
3.2 Voice of the Customer
a. Customer Listening
b. Determination of Customer Satisfaction and
Engagement
c. Analysis and Use of Customer Data
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
39