THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 1
Chapter 4
Focusing on
Customers The Management & Control of Quality, 7e
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 2
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 3
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 4
Key Idea
Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer satisfaction.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 5
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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 6
ACSI Model of Customer Satisfaction
Perceivedquality
Customercomplaints
Perceivedvalue
Customer satisfaction
Customerexpectations Customer
loyalty
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 7
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 8
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 is a comparison of ACTUAL QUALITY to EXPECTED QUALITY
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 9
Key Idea
Many organizations still focus more on processes and products from an internal perspective, rather than taking the perspective of the external customer.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 10
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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 11
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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 12
Key Customer Groups
Organization level consumers external customers employees society
Process level internal customer units or groups
Performer level individual internal customers
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 13
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 & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 14
AT&T Customer-Supplier Model
Requirementsand feedback
Requirementsand feedback
Your Suppliers
YourProcesses
YourCustomers
Inputs Outputs
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 15
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 16
Customer SegmentationDemographicsGeographyVolumesProfit potential
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 17
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 18
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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 19
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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 20
Kano Model of Customer Needs
Dissatisfiers: expected requirements that cause dissatisfaction if not present
Satisfiers: expressed requirementsExciters/delighters: unexpected
features
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 21
Key Idea
As customers become familiar with them, exciters/delighters become satisfiers over time. Eventually, satisfiers become dissatisfiers.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 22
Customer Listening Posts
Comment cards and formal surveysFocus groupsDirect customer contactField intelligenceComplaint analysis Internet monitoring
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 23
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 24
Tools for Classifying Customer Requirements
Affinity diagram Tree diagram
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 25
Using Customer InformationLink customer needs and expectations
to design, production, and service delivery processes
Empower employees to listen and take appropriate action to meet customer needs
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 26
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 27
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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 28
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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 29
Importance of Complaint ManagementThe 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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 30
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 31
Measuring Customer Satisfaction
Discover customer perceptions of business effectiveness
Compare company’s performance relative to competitors
Identify areas for improvementTrack trends to determine if changes
result in improvements
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 32
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 33
Survey Design
Identify purposeDetermine who should conduct the
surveySelect the appropriate survey
instrumentDesign questions and response scales
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 34
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 35
Analyzing Feedback: Performance - Importance Analysis
Performance
Importance
Low High
Low
High
Who cares? Overkill
Vulnerable Strengths
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 36
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 37
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
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 38
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.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 39
Customer and Market Focus in the Baldrige CriteriaThe 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, loyalty, and retention, and to business expansion.
3.1 Customer and Market Knowledge3.2 Customer Relationships and Satisfaction
a. Customer Relationship Buildingb. Customer Satisfaction Determination