SJSU Bus. 142 - David Bentley 1

Lecture 2B – Focusing on Customers

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 Quality Low Price Low Lead-time High Service High Flexibility Low Variability

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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.

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

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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

THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson LearningTM MOD 02/24/06 DAB

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ACSI Model of Customer Satisfaction

Perceivedquality

Customercomplaints

Perceivedvalue

Customer satisfaction

Customerexpectations Customer

loyalty

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

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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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Customer-Driven Quality Cycle

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 = ACTUAL - EXPECTED

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

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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

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

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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

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

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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?

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

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AT&T Customer-Supplier Model

Requirementsand feedback

Requirementsand feedback

Your Suppliers

YourProcesses

YourCustomers

Inputs Outputs

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

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Model of Customer Needs (review) - Noriaki

Kano Dissatisfiers: expected

requirements (usually implied) Satisfiers: expressed

requirements (usually explicit) Exciters/delighters:

unexpected features (pleasant surprise)

THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson LearningTM Mod. 10/21/02 DAB

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The Kano Model (review)

Kano Model

Customer Needs

Cu

sto

mer

Sati

sfa

cti

on

Excitement

Expected

Must Have

Kano Model

Customer Needs

Cu

sto

mer

Sati

sfa

cti

on

Excitement

Expected

Must Have

Operations Management, Seventh Edition, by William J. Stevenson

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Customer Relationship Management (CRM)

Customer Relationship Management Complaint Resolution Feedback Guarantees Corrective Action

Dozens of CRM systems, including Salesforce.com (Salesform.com CRM

Professional) Oracle (Siebel CRM) Sage (SageCRM.com and ACT!) SAP (SAP CRM)

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Customer Listening Posts

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

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

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Tools for Classifying Customer Requirements

Affinity diagram Tree diagram

Effective ServiceCommunication

ModemLink

TimelyReports

AccurateInformation

NotificationOf Ind’y Stds.

Mutual JobUnderstanding

BuyerOrientation

Reliability

PriorApprovals

Flexibility

ExpeditiousProcesses

TimelyClosings

EffectiveService

Communic’n

LoanProducts

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

(Kawakita Jiro)

Mod. 10/21/02 DAB

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Customer Relationship Management

Accessibility and commitments Selecting and developing customer

contact employees Relevant customer contact

requirements Effective complaint management Strategic partnerships and alliances

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

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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

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

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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?

The Table Area Was your table area clean when

you were seated? The Server

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 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

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

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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

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

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Performance-Importance Analysis

Performance

Importance

Low High

Low

High

Who cares? Overkill

Vulnerable Strengths

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

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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 TCETo truly hearcustomers be:

To remove barriersfrom customers be:

To create solutionsfor customers be:

Attentive Flexible Competitive

Aware Responsive Cost-effective

Involved Efficient Imaginative

Committed Dependable 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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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 Knowledge3.2 Customer Relationships and Satisfaction

a. Customer Relationshipsb. Customer Satisfaction Determination

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