Lecture 2B Focusing on Customers

Customers, satisfaction vs. loyalty, leading practices, customer groups, dimensions of quality, tools and measurement
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What is a customer?

Richard Schonberger: The customer is the next process Final Customer vs. next customer

The Big C vs. the little c

Who is/are my customer(s)? Who is/are your customer(s)?

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Voice of the Customer

(Foster)

Wants, opinions, desires, or perceptions by the customer, or A standardized, disciplined, and cyclical approach to obtaining and prioritizing customer preferences

Cyclical vs. continual?

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What Do Customers Want?

Quality Price Lead-time Service Flexibility Variability

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What Do Customers Want?

High Low Low High High Low

Quality Price Lead-time Service Flexibility Variability

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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

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.
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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

MOD 02/24/06 DAB

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 1997 with a gradual improvement into 2004, dip in 2005, record high in 2007 Quality improvements have exceeded pace consumer expectations during recent years
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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

ACSI Model of Customer Satisfaction

Perceived quality Perceived value Customer complaints

Customer satisfaction Customer loyalty

Customer expectations

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J. D. Power & Associates

(jdpower.com)

a global marketing information services firm that provides clients with relevant and actionable market research, forecasting, consulting and training primary catalyst in bringing the language of customer satisfaction to numerous industries
Survey customers and provide quality and customer satisfaction ratings for autos, boats, finance, travel, telecom, homes, international
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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

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

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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

Leading Practices - 1

Define and segment key customer groups and markets Understand the voice of the customer (VOC) Understand linkages between VOC and design, production, and delivery

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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

Leading Practices - 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
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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

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?
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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

AT&T Customer-Supplier Model

Your Suppliers

Inputs

Your Processes

Outputs

Your Customers

Requirements and feedback

Requirements and feedback

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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

Mod. 10/21/02 DAB

Model of Customer Needs - Noriaki Kano

(review)

Dissatisfiers: expected requirements (usually implied) Satisfiers: expressed requirements (usually explicit) Exciters/delighters: unexpected features (pleasant surprise)
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Operations Management, Seventh Edition, by William J. Stevenson Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Kano Model

Kano Model

(review)

Customer Satisfaction

Excitement Expected Must Have

Customer Needs
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Customer Relationship Management (CRM)

Customer Relationship Management

Complaint Resolution Feedback Guarantees Corrective Action Salesforce.com (Salesform.com CRM Professional) Oracle (Siebel CRM) Sage (SageCRM.com and ACT!) SAP (SAP CRM)
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Dozens of CRM systems, including

THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

Customer Listening Posts

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

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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

Mod. 10/21/02 DAB

Tools for Classifying Customer Requirements

Affinity diagram
(Kawakita Jiro)
Communication
Timely Reports Notification Of Indy Stds.

Tree diagram
Communicn

Effective Service

Reliability

Flexibility

Timely Closings

Effective Service

Accurate Information
Mutual Job Understanding Modem Link

Prior Approvals
Expeditious Processes Buyer Orientation Loan Products

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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

Customer Relationship Management

Accessibility and commitments Selecting and developing customer contact employees Relevant customer contact requirements Effective complaint management Strategic partnerships and alliances

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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

Measuring Customer Satisfaction

Discover customer perceptions of business effectiveness Compare companys performance relative to competitors Identify areas for improvement Track trends to determine if changes result in improvements
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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

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? Was your table area clean when you were seated? 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

The Table Area

The Server

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

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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

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
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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

Performance-Importance Analysis
Performance
Low High

Low

Who cares?

Overkill Strengths
24

Importance
High

Vulnerable

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Total Customer Experience

I believe that HP owes our customers a superior Total Customer Experience (TCE) when dealing with us, and I am personally committed to improving TCE and making it a competitive differentiator for HP.

Carly Fiorina Former President and CEO, Hewlett-Packard

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Total Customer Experience

Customers are our most important assets Customers always define their own desired experience Need to be close enough to anticipate their needs and flexible enough to meet them Important to develop deeper relationships with end users

Carly Fiorina

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Making a TCE
To truly hear customers be: To remove barriers To create solutions from customers be: for customers be:

Attentive Aware Involved Committed

Flexible Responsive Efficient Dependable

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Competitive Cost-effective Imaginative Capable

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The Malcolm Baldrige National Quality Award

Awarded by US Department of Commerce Result of 1987 congressional legislation Named after Secretary of Commerce Promotes awareness of performance excellence Awarded in business, education, health care, non-profit sectors
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THE MANAGEMENT AND CONTROL OF QUALITY, 5e, 2002 South-Western/Thomson LearningTM

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
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