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1 Chapter 4 Focusing on Customers. Key Idea Introduction To create satisfied customers, the...
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Transcript of 1 Chapter 4 Focusing on Customers. Key Idea Introduction To create satisfied customers, the...
Key IdeaKey IdeaIntroductionIntroduction
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.
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Importance of Customer Importance of Customer Satisfaction and LoyaltySatisfaction and Loyalty
““Satisfaction is an attitude; loyalty is a Satisfaction is an attitude; loyalty is a behavior”behavior”
Loyal customers spend more, are willing Loyal customers spend more, are willing to pay higher prices, refer new clients, to pay higher prices, refer new clients, and are less costly to do business with.and are less costly to do business with.
It costs five times more to find a new It costs five times more to find a new customer than to keep an existing one customer than to keep an existing one happy.happy.
A firm cannot create loyal customers A firm cannot create loyal customers without first creating satisfied customers.without first creating satisfied customers.
Key IdeaKey IdeaImportance of customer satisfactionImportance of customer satisfaction
Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer satisfaction.
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American Customer American Customer Satisfaction IndexSatisfaction Index
Measures customer satisfaction at Measures customer satisfaction at national levelnational level
Introduced in 1994 by University of Introduced in 1994 by University of Michigan and American Society for Michigan and American Society for QualityQuality
Measures national index, seven industrial Measures national index, seven industrial sectors, 40 industries, 203 companiessectors, 40 industries, 203 companies
Continual decline in index from 1994 Continual decline in index from 1994 through 1998 with a small improvement through 1998 with a small improvement into 2000 suggests that quality into 2000 suggests that quality improvements have not kept pace with improvements have not kept pace with consumer expectationsconsumer expectations
ACSI Model of Customer ACSI Model of Customer SatisfactionSatisfaction
Perceivedquality
Customercomplaints
Perceivedvalue
Customer satisfaction
Customerexpectations Customer
loyalty
Key IdeaKey IdeaACSIACSI
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.
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Customer-Driven Quality Customer-Driven Quality CycleCycle
measurement and feedback
Customer needs and expectations (expected quality)
Identification of customer needs
Translation into product/service specifications (design quality)
Output (actual quality)
Customer perceptions (perceived quality)
PERCEIVED QUALITY is a comparison of ACTUAL QUALITY to EXPECTED QUALITY
Key IdeaKey IdeaCreating Satisfied CustomerCreating Satisfied Customer
Many organizations still focus more on processes and products from an internal perspective, rather than taking the perspective of the external customer.
Leading Practices Leading Practices (1 of 2)(1 of 2)
Define and segment key customer Define and segment key customer groups and marketsgroups and markets
Understand the voice of the Understand the voice of the customer (VOC) customer (VOC)
Understand linkages between VOC Understand linkages between VOC and design, production, and and design, production, and deliverydelivery
Leading Practices Leading Practices (2 of 2)(2 of 2)
Build relationships through Build relationships through commitments, provide accessibility commitments, provide accessibility to people and information, set to people and information, set service standards, and follow-up service standards, and follow-up on transactionson transactions
Effective complaint management Effective complaint management processesprocesses
Measure customer satisfaction for Measure customer satisfaction for improvementimprovement
Identifying CustomersIdentifying CustomersKey Customer GroupsKey Customer Groups
Organization levelOrganization level– consumersconsumers– external customersexternal customers– employees employees – societysociety
Process levelProcess level– internal customer units or groupsinternal customer units or groups
Performer levelPerformer level– individual internal customersindividual internal customers
Identifying Internal Identifying Internal CustomersCustomers
What products or services are What products or services are produced?produced?
Who uses these products and Who uses these products and services?services?
Who do employees call, write to, or Who do employees call, write to, or answer questions for?answer questions for?
Who supplies inputs to the Who supplies inputs to the process?process?
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AT&T Customer-Supplier AT&T Customer-Supplier ModelModel
Requirementsand feedback
Requirementsand feedback
Your Suppliers
YourProcesses
YourCustomers
Inputs Outputs
Key IdeaKey IdeaIdentifying CustomersIdentifying Customers
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.
Customer SegmentationCustomer Segmentation
DemographicsDemographics GeographyGeography VolumesVolumes Profit potentialProfit potential
Vital few & useful many
Key IdeaKey IdeaCustomer SegmentationCustomer Segmentation
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.
Understanding Customer Understanding Customer NeedsNeedsKey Dimensions of QualityKey Dimensions of Quality
PerformancePerformance – primary operating – primary operating characteristicscharacteristics
FeaturesFeatures – “bells and whistles” – “bells and whistles” ReliabilityReliability – probability of operating for – probability of operating for
specific time and conditions of usespecific time and conditions of use ConformanceConformance – degree to which – degree to which
characteristics match standardscharacteristics match standards DurabilityDurability - amount of use before - amount of use before
deterioration or replacementdeterioration or replacement ServiceabilityServiceability – speed, courtesy, and – speed, courtesy, and
competence of repaircompetence of repair AestheticsAesthetics – look, feel, sound, taste, smell – look, feel, sound, taste, smell
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Key Dimensions of Key Dimensions of Service QualityService Quality
ReliabilityReliability – ability to provide what was – ability to provide what was promisedpromised
AssuranceAssurance – knowledge and courtesy of – knowledge and courtesy of employees and ability to convey trustemployees and ability to convey trust
TangiblesTangibles – physical facilities and – physical facilities and appearance of personnelappearance of personnel
EmpathyEmpathy – degree of caring and – degree of caring and individual attentionindividual attention
ResponsivenessResponsiveness – willingness to help – willingness to help customers and provide prompt servicecustomers and provide prompt service
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Kano Model of Customer Kano Model of Customer NeedsNeeds
DissatisfiersDissatisfiers: expected : expected requirementsrequirements
SatisfiersSatisfiers: expressed : expressed requirementsrequirements
Exciters/delightersExciters/delighters: : unexpected featuresunexpected features
Key IdeaKey IdeaUnderstanding Customer NeedsUnderstanding Customer Needs
As customers become familiar with them, exciters/delighters become satisfiers over time. Eventually, satisfiers become dissatisfiers.
Key IdeaKey IdeaGathering Customer Gathering Customer InformationInformation
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.
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Gathering Customer Gathering Customer Information-- Information-- Customer Listening PostsCustomer Listening Posts
Comment cards and formal Comment cards and formal surveyssurveys
Focus groupsFocus groups Direct customer contactDirect customer contact Field intelligenceField intelligence Complaint analysisComplaint analysis Internet monitoringInternet monitoring
Tools for Classifying Tools for Classifying Customer RequirementsCustomer Requirements
Affinity diagram Tree diagram
Key IdeaKey IdeaCustomer Relationship ManagementCustomer Relationship Management
An organization needs to build customer loyalty by
•developing trust,
•communicating with customers, and
•effectively managing the interactions and relationships with customers.
Moments of TruthMoments of Truth
Every instance in which a customer Every instance in which a customer comes in contact with an employee of comes in contact with an employee of the company. the company.
Example (airline)Example (airline)– Making a reservationMaking a reservation– Purchasing ticketsPurchasing tickets– Checking baggageChecking baggage– Boarding a flightBoarding a flight– Ordering a beverageOrdering a beverage– Requests a magazineRequests a magazine– DeplanesDeplanes– Picks up baggagePicks up baggage
Customer Relationship Customer Relationship Management Management
Accessibility and commitmentsAccessibility and commitments Selecting and developing customer Selecting and developing customer
contact employeescontact employees Relevant customer contact Relevant customer contact
requirementsrequirements Effective complaint managementEffective complaint management Strategic partnerships and alliancesStrategic partnerships and alliances Exploiting CRM technologyExploiting CRM technology
Key IdeaKey IdeaCustomer Contact Customer Contact EmployeesEmployees
Companies must carefully Companies must carefully selectselect customer contact employees, customer contact employees, traintrain them well, and them well, and empowerempower them to meet and exceed them to meet and exceed customer expectations.customer expectations.
Key IdeaKey Idea Effective Complaint MgmtEffective Complaint Mgmt
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.
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Measuring Customer Measuring Customer SatisfactionSatisfaction
Discover customer perceptions of Discover customer perceptions of business effectivenessbusiness effectiveness
Compare company’s performance Compare company’s performance relative to competitorsrelative to competitors
Identify areas for improvementIdentify areas for improvement Track trends to determine if Track trends to determine if
changes result in improvementschanges result in improvements
Key IdeaKey IdeaMeasuring Customer Measuring Customer SatisfactionSatisfaction
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.
Survey DesignSurvey Design
Identify purposeIdentify purpose Determine who should conduct Determine who should conduct
the surveythe survey Select the appropriate survey Select the appropriate survey
instrumentinstrument Design questions and response Design questions and response
scalesscales
Key IdeaKey IdeaSurvey DesignSurvey Design
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.
Key IdeaKey IdeaAnalyzing Customer FeedbackAnalyzing Customer Feedback
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.
Performance-Importance Performance-Importance AnalysisAnalysis
Performance
Importance
Low High
Low
High
Who cares? Overkill
Vulnerable Strengths
Difficulties with Difficulties with Customer Satisfaction Customer Satisfaction MeasurementMeasurement
Poor measurement schemesPoor measurement schemes Failure to identify appropriate quality Failure to identify appropriate quality
dimensionsdimensions Failure to weight dimensions appropriatelyFailure to weight dimensions appropriately Lack of comparison with leading Lack of comparison with leading
competitorscompetitors Failure to measure potential and former Failure to measure potential and former
customerscustomers Confusing loyalty with satisfactionConfusing loyalty with satisfaction
Customer Perceived Customer Perceived ValueValue
CPV measures how customers CPV measures how customers assess benefits—such as product assess benefits—such as product performance, ease of use, or time performance, ease of use, or time savings—against costs, such as savings—against costs, such as purchase price,installation cost or purchase price,installation cost or time, and so on,in making purchase time, and so on,in making purchase decisions.decisions.
Customer and Market Customer and Market Focus in the Baldrige Focus in the Baldrige CriteriaCriteriaThe Customer and Market Focus category The Customer and Market Focus category examines how an organization determines examines how an organization determines requirements, expectations, and preferences of requirements, expectations, and preferences of customers and markets; and how it builds customers and markets; and how it builds relationships with customers and determines the relationships with customers and determines the key factors that lead to customer acquisition, key factors that lead to customer acquisition, satisfaction, loyalty, and retention, and to business satisfaction, loyalty, and retention, and to business expansion.expansion.
3.1 Customer and Market Knowledge3.1 Customer and Market Knowledge3.2 Customer Relationships and Satisfaction3.2 Customer Relationships and Satisfaction
a. Customer Relationship Buildinga. Customer Relationship Buildingb. Customer Satisfaction b. Customer Satisfaction
DeterminationDetermination