Focusing on Customers

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Focusing on Customers

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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

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Chapter 4 Focusing on Customers 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.
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. 3
Key Idea Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer satisfaction.
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 1998 with a small improvement into 2000 suggests that quality improvements have not kept pace with consumer expectations 5
ACSI Model of Customer Satisfaction Perceived Customer quality complaints Perceived Customer value satisfaction Customer expectations Customer loyalty
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.
CustomerDriven 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 8 QUALITY to EXPECTED QUALITY
Key Idea Many organizations still focus more on processes and products from an internal perspective, rather than taking the perspective of the external customer.
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
Leading Practices (2 of 2)  Build relationships through commitments, provide accessibility to people and information, set service standards, and followup on transactions  Effective complaint management processes  Measure customer satisfaction for improvement
Key Customer Groups  Organization level – consumers – external customers – employees – society  Process level – internal customer units or groups  Performer level – individual internal customers
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?
AT&T CustomerSupplier Model Your Inputs Your Outputs Your Suppliers Processes Customers Requirements Requirements and feedback and feedback 14
Key Idea The natural customersupplier 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 Segmentation  Demographics  Geography  Volumes  Profit potential
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.
Key Dimensions of 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
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 19
Kano Model of Customer Needs  Dissatisfiers: expected requirements  Satisfiers: expressed requirements  Exciters/delighters: unexpected features 20

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