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Unformatted text preview: Chapter Chapter 5
Focusing on Customers 1 Importance Importance of Customers
The The only value your company will ever create is the value that comes from customers—the ones you have now and customers— the the ones you will have in the future. Businesses succeed by getting, keeping, and growing customers. Customers are the the only reason you build factories, hire employees, schedule meetings, lay fiber-optic lines, or engage in any fiberbusiness business activity. Without customers, you don’t have a business.
- Don Peppers and Martha Rogers, “Customers Don’t Grow on Trees,” Fast Fast Company magazine, July 2005 magazine,
2 Creating Customers Creating Customers
To create satisfied customers, the organization needs to:
1. Identify customers’ needs, needs 2. design the production and service systems to meet those needs,
3. and measure the results as the basis for improvement.
3 Importance Importance of Customer Customer Satisfaction and Loyalty
Satisfaction Satisfaction is an attitude - - loyalty is a behavior! Loyal Loyal customers spend more, are willing to pay higher prices, refer new clients, and are less costly to do business with It 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 firm creating satisfied customers
4 Importance of Customer satisfaction
Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer strongly correlated with customer satisfaction. 5 Key Customer-Focused Practices for Key Customer Focused Practices for (1 Identify Performance Identify Performance Excellence (1 of 2) the most important customer groups and markets, considering
competitors competitors and other potential customers, and segment the customer base to better meet differing needs. Understand Understand both near-term and longer-term customer needs and expectations nearlonger(the (the “voice of the customer”) and employ systematic processes for listening and learning from customers, potential customers, and customers of competitors to obtain actionable information about products and customer support. support. Understand Understand the linkages between the voice of the customer and design, production, and delivery processes; and use voice-of-the-customer voice-of-theinformation to identify and innovate product offerings and customer support id processes to meet and exceed customer requirements and expectations, to expand relationships, and to identify and attract new customers and markets. 6 Key Customer-Focused Practices for Key Customer Focused Practices for Performance Performance Excellence ((2 of 2) 2
Create Create an organizational culture and manage customer relationships to ensure a consistently positive customer experience that contributes to customer engagement, the ability to meet and exceed their expectations, and the ability to to acquire new customers. Develop Develop effective complaint management processes that ensure that customers receive prompt resolution of their concerns and that lead to recovery recovery of their confidence, and enhance their satisfaction and engagement, and that enable aggregation and analysis of complaints to facilitate improvement. Measure Measure customer satisfaction, engagement, and dissatisfaction; compare the results relative to competitors and industry benchmarks; and use the information to evaluate and improve organizational processes. 7 Customer Satisfaction & The The Bottom Line A study showed that companies with 98% customer retention rate were twice profitable as those with 94% twice as profitable as those with 94% 8 Customer Satisfaction Customer Satisfaction & The Bottom Line A study showed that dissatisfied customer tells twice as many about their bad experience than good their bad experience than good experience
9 Customer Customer Satisfaction & The Bottom Line Johnson Controls found that 91% of contract renewal came 91% of contract renewal came from customer who were satisfied or very satisfied
10 Customer Customer Satisfaction & The Bottom Line 1% increase in JC customer satisfaction score was worth satisfaction score was worth about $13 million in contract renewals
11 11 Customer Customer Satisfaction & The The Bottom Line To achieve strong profitability and market share companies and market share companies requires loyal customers
12 Loyal customers Loyal customers
• Spend more • Are willing to pay higher prices • Refer new customers • Less costly to do business with.
13 Customer Customer Satisfaction & The Bottom Line The
• Price is not the only factor • Perceived value - - Consumer benefit package • Ease of dealing, support, accurate delivery, warranty, tech support
14 Key Idea Key Idea
Customer engagement refers to customers investment in or commitment customers’ investment in or commitment to a brand and product offerings. 15 Characteristics Characteristics of Customer Engagement
Customer Customer retention and loyalty Customers’ Customers’ willingness to make an effort to do business with the organization, and Customers’ Customers’ willingness to actively advocate for and recommend the brand and product offerings 16 Key Idea Key Idea
Customer satisfaction results from an organization ability to meet and exceed organization’s ability to meet and exceed expectations and deliver higher value than competitors than competitors. 17 American Customer Satisfaction Index American Customer Satisfaction Index
Measures Measures customer satisfaction at national level Introduced Introduced in 1994 by University of Michigan and American Society for Quality One One of the goals was to raise public perception and understanding of quality and understanding of quality Continual Continual decline in index from 1994 through 1998 with with a small improvement into 2000 suggests that quality improvements have not kept pace with consumer expectations 1994 1994 as the baseline 18 American Customer Satisfaction Index American
National National CS index Indexes Indexes for 7 industrial sectors 40 40 specific industries 203 companies 203 Telephone Telephone interviews national sample of 46,000 consumers who recently bought or used a company’s product or service 19 American American Customer Satisfaction Index Index
Questions answered by ACSI:
1. Are customer satisfaction and evaluations improving or declining for the nation’s improving or declining for the nation output output of good and services? 2. Are they improving or declining for particular sectors of industries and industries?
20 American American Customer Satisfaction Model
Perceived quality Customer complaints Perceived value Customer expectations Customer satisfaction Customer loyalty
21 American Customer Satisfaction Index American Customer Satisfaction Index
The data is used to:
1. Assess customer loyalty 2. Identify potential barriers to entry within within markets 3. Predict the ROI 4. Pinpoint areas where customer needs are not met? Market opportunities?
22 The Links! The Links!
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
23 23 CustomerCustomer-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) perceptions (perceived quality)
measurement and feedback PERCEIVED QUALITY is a comparison of ACTUAL QUALITY to EXPECTED QUALITY 24 Ke Key Idea
Many organizations still focus more on processes and more on processes and products from an internal perspective, rather than taking the perspective of the external the perspective of the external customer.
25 Reasons for dissatisfaction! di
Product Product not easy to use Product not available Product not available Building Building unreasonable expectations Marketing Marketing making promises they can not keep not keep False False advertising
26 Leading Customer Oriented Practices
(1 (1 of 2) 1. Define and segment key customer groups and markets( Geographic, Volume, etc…) mar
2. 2. Understand the voice of the customer (VOC) (Whirlpool(Whirlpool-158) (long and short term needs) 3. Understand linkages between VOC and design, Understand linkages between VOC and design production, and delivery
27 Leading Customer Oriented Practices Leading Customer Oriented Practices
(2 (2 Of 2) Build relationships through commitments, provide accessibility to people and information, provide accessibility to people and information, set set service standards, and follow-up on followtransactions (CRM) transactions (CRM) 5. Effective complaint management processes 6. Measure customer satisfaction for improvement
4. 28 Key Customer Groups Key Customer Groups
Organization Organization level
consumers consumers external external customers employees employees society society Process Process level
internal internal customer units or groups Performer Performer level
individual individual internal customers
29 Identifying Internal Customers Identifying Internal Customers
Ask the following questions: What What products or services are produced? Who Who uses these products and services? Who do employees call write to or answer Who do employees call, write to, or answer questions questions for? Who supplies inputs to the process? Who supplies inputs to the process? 30 AT&T Customer AT&T Customer-Supplier Model Model Your Suppliers Inputs Your Your Outputs Processes Customers
Requirements and feedback Requirements and feedback 31 Chain Chain of Customers
The natural customer-supplier linkages among individuals departments and functions build up the individuals, departments, and functions build up the chain of customers throughout an organization that connect every individual and function to the connect every individual and function to the external customers and consumers, thus characterizing the organization’s value chain. va 32 Customer Customer Segmentation
Demographics Demographics Geography Geography Volumes Volumes Profit Profit potential 33 Customer Customer Groups
Segmentation allows a company to prioritize customer groups, for instance by considering for each group the benefits of satisfying their for each group the benefits of satisfying their requirements and the consequences of failing to satisfy their requirements to satisfy their requirements. 34 Key Dimensions of Product Quality Key Dimensions of Product Quality
1. Performance – primary operating characteristics operating characteristics 2. Features – “bells and whistles” 3. Reliability – probability of operating for specific probability of operating for specific 4. 5. 6. 7. time 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 competence of repair Aesthetics – look, feel, sound, taste, smell 35 Key Dimensions of Service Quality Key Dimensions of Service Quality
1. 1. 2. 3. 4. 5. Reliability – ability to provide what was promised Assurance – knowledge and courtesy of employees employees and ability to convey trust Tangibles – physical facilities and appearance of physical facilities and appearance of personnel personnel Empathy – degree of caring and individual attention Responsiveness – willingness to help customers and provide prompt service
36 36 Kano Kano Model of Customer Needs
Three Three classes of customer requirements Dissatisfiers Dissatisfiers: expected requirements Satisfiers expressed requirements Satisfiers: expressed requirements Exciters/delighters Exciters/delighters: unexpected features 37 As customers become As customers become familiar with them, exciters/delighters become satisfiers over time. Eventually, satisfiers become dissatisfiers! become dissatisfiers!
38 Customer Listening Posts Customer
Comment cards and formal surveys Comment cards and formal surveys Focus Focus groups Direct customer contact Di Field Field intelligence Complaint Complaint analysis Internet monitoring Internet monitoring 39 Listening Listening Posts
Companies use a variety of methods, or “li “listening posts,” to collect information about customer needs and expectations, their importance, and customer satisfaction with the company performance on these with the company’s performance on these measures.
40 Example: North Mississippi Medical Mi Center Center 41 Tools Tools for Classifying Customer Requirements
See Figure 4.4 page 170 Affinity diagram 42 42 Key Idea Key Idea
Many organizations still focus more on processes and products from an internal processes and products from an internal perspective, rather than taking the perspective of the external customer perspective of the external customer. 43 Customer-Driven Quality Cycle PERCEIVED QUALITY is a comparison of ACTUAL QUALITY to EXPECTED QUALITY 44 Key Idea Key Idea
An organization fosters customer engagement by developing trust, communicating with customers, and effectively managing the interactions and relationships with customers through th approaches and its people. 45 45 Moments of Truth
Customer Customer satisfaction or dissatisfaction takes place during moments moments of of truth—every interaction between a customer and the organization. Example Example (airline) Making a reservation Purchasing Purchasing tickets Checking baggage Checking baggage Boarding Boarding a flight Ordering a beverage Orderin Requests Requests a magazine Deplanes Deplanes Picks Picks up baggage
46 Building CustomerBuilding a Customer-Focused Culture Culture
Commitments Commitments and customer support Selecting Selecting and developing customer contact employees Customer Customer contact requirements Complaint Complaint management and service recovery Strategic Strategic partnerships and alliances CustomerCustomer-focused technology
47 Example: Example: Customer Contact Requirements Requirements 48 Key Idea Key Idea
To improve products and processes effectively companies must do more than effectively, companies must do more than simply fix the immediate problem. They need systematic process for collecting need a systematic process for collecting and analyzing complaint data and then using that information for improvements. 49 Example: BI Service Recovery Process Process 50 Customer Customer Relationship Management Moments of Truth
Every instance in which customer comes in contact Every instance in which a customer comes in contact with with an employee of the company. Example airline: Example - - airline:
Making Making a reservation Purchasing Purchasing tickets Checking Checking baggage Boarding Boarding a flight Ordering beverage Ordering a beverage Requests Requests a magazine Deplanes Deplanes Picks Picks up baggage
51 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 and its people. Companies must carefully select customer contact employees, train them well, and empower them meet and exceed customer empower them to meet and exceed customer expectations. 52 Customer Customer Relationship Management Depends Depends on Five Aspects
1. Accessibility and commitments 2. Selecting and developing customer contact Selecting and developing customer contact employees employees 3. Relevant customer contact requirements customer contact requirements 4. Effective complaint management 5. Strategic partnerships and alliances Examples
53 To improve products and processes effectively, companies must do more than simply fix the immediate problem. They need a systematic bl Th process for collecting and analyzing complaint data and then using that complaint data and then using that information for improvements. 54 Measuring Measuring Customer Satisfaction
Measuring Customer Satisfaction will allow a business to: Discover Discover customer perceptions of business effectiveness Compare Compare company’s performance relative to competitors Identify Identify areas for improvement Track Track trends to determine if changes result in improvements improvements 55 Measuring Customer Satisfaction Satisfaction
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.
56 Survey Design Survey Design
Identify Identify purpose and respondent Determine who should conduct the Determine who should conduct the survey survey Select the appropriate survey th instrument Design Design questions and response scales 57 Constructing Constructing & Refining the Measurement Measurement Questions
Communication instruments normally includes 3 types of questions: -Target questions: Facts, attitudes, preferences, and expectations about the central topic of the study expectations about the central topic of the study. -Classification questions: Gender, age, income,… -Administrative questions: respondent and interviewer ID’s, date, place, and conditions of the interview
58 Constructing Constructing & Refining the Measurement Measurement Questions
There are four major question areas: 1. Question contents
Should this questions be asked? Purposeful vs. interesting Scope and coverage Incomplete and Unfocused Can the respondent answer the question as asked the respondent answer the question as asked Will the respondent willingly answer the question as asked (sensitive information) Presumed Knowledge (gross margin) Recall and memory decay Objectivity
59 Constructing Constructing & Refining the Measurement Measurement Questions
2- Questions wording
- Shared vocabular y - Biased wording (distorting the response) - Personalization - Adequate alternatives 60 Constructing Constructing & Refining the Measurement Measurement Questions
3- Response strateg y -The structure -closed response response
Dichotomous Multiple choice -open ended with free choice of words - Respondent’s motivation 4- Question sequence
61 The types of questions to ask in a survey must be properly worded to achieve actionable results where the 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 support the setting of improvement priorities. 62 • Avoid leading questions • Avoid compound questions • Avoid Acronyms and Jargon that may not be understood • Avoid double negative
63 PerformancePerformance-Importance Analysis
Low Performance High Low Importance High Who cares? Vulnerable Overkill Strengths 64 Analysis Analysis and Use of Consumer 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 that are performing well.
65 Difficulties Difficulties with Customer Satisfaction Measurement
Poor measurement schemes Failure Failure to identify appropriate quality dimensions (address issues important to customer not what (address issues important to customer not what the the company think it is important) Failure to weight dimensions appropriately Failure to weight dimensions appropriately Lack Lack of comparison with leading competitors Failure to measure potential and former Failure to measure potential and former customers customers Confusing loyalty with satisfaction Confusing loyalty with satisfaction
66 Customer Perceived Value Customer Perceived Value
CPV measures how customers assess benefits CPV measures how customers assess benefits - such such as product performance, ease of use, or time savings against costs such as purchase time savings—against costs, such as purchase price,installation price,installation cost or time, and so on,in making purchase decisions making purchase decisions. 67 The The Customer Focus category examines an organization’s processes for determining product offerings and mechanisms to support support customers’ use of products, and how an organization builds a customer-focused culture. customer3.1 Customer Engagement a. Product Offerings and Customer Support b. Building a Customer Culture 3.2 Voice of the Customer Voice of the Customer a. Customer Listening b. Determination of Customer Satisfaction and Engagement c. Analysis and Use of Customer Data Analysis and Use of Customer Data
68 Customer Customer Focus in the Baldrige Criteria Criteria Customer Focus in ISO 9000 ISO 9000
“Top management shall ensure that customer requirements are Top management shall ensure that customer requirements are determined determined and are met with the aim of enhancing customer satisfaction.” Th The standards require that the organization determine customer th th requirements, requirements, including delivery and post-delivery activities, and any postrequirements not stated by the customer but necessary for specified or intended use. The The organization must establish procedures for communicating with customers about product information and other inquiries, and for obtaining obtaining feedback, including complaints. The The standards require that the organization monitor customer perceptions as to whether the organization has met customer requirements; that is, customer satisfaction.
69 Customer Focus in Six Sigma Si Si
A fundamental aspect of Six Sigma methodology fundamental aspect of Six Sigma methodology is is identification of critical to quality (CTQ) characteristics that are vital to customer characteristics that are vital to customer satisfaction. satisfaction. Many common Six Sigma projects revolve Many common Six Sigma projects revolve around around developing appropriate customer satisfaction measurement processes as well as satisfaction measurement processes, as well as trying trying to improve the design and delivery of CTQs identified through voice of the customer CTQs identified through voice of the customer processes. processes. 70 ANSWERS TO √ REVIEW QUESTIONS Some 71 1. 1. Explain the difference between satisfaction and loyalty. Why is loyalty more important? Wh
Customer satisfaction occurs when products and occurs services services meet or exceed customer expectations. Loyal customers spend more, refer new clients, and are less costly to do business with. Poor Poor quality products and services, on the other hand, lead to customer dissatisfaction in the form of complaints returns and unfavorable word mouth complaints, returns, and unfavorable word-of-mouth publicity. publicity. Dissatisfied customers purchase from competitors.
72 10. What is the voice of the customer? vo custo The voice of the customer is an expression of the product or service characteristics that are considered considered important by customers. They are often expressed in “layman’s terms” and must be be “translated” into product specifications that can be used in design, manufacture, and delivery delivery of the product or service. 73 73 22. 22. How can CRM software help companies develop and improve focus on customers?
CRM software is designed to help companies increase customer loyalty, target their most profitable customers, and streamline customer communication processes typical CRM system includes market communication processes. A typical CRM system includes market segmentation segmentation and analysis, customer service and relationship building, effective complaint resolution, cross-selling goods and services, order crossprocessing, and field service. CRM helps firms gain and maintain processing, and field service. CRM helps firms gain and maintain competitive competitive advantage by:
Segmenting markets based on demographic and behavioral characteristics Segmenting markets based on demographic and behavioral characteristics Tracking Tracking sales trends and advertising effectiveness by customer and market segment Identifying Identifying which customers should be the focus of targeted marketing initiatives with predicted high customer response rates hi Forecasting Forecasting customer retention (and defection) rates and provides feedback as to why customers leave a company Study Studying which goods and services are purchased together, leading to good ways goods se pu toget to good ways to bundle them Studying Studying and predicting what Web characteristics are most attractive to 74 74 customers and how the Web site might be improved 24. 24. Describe the key steps that must be addressed in designing customer satisfaction surveys designing customer satisfaction surveys
Steps in designing effective customer surveys include: Determine Determine the purpose Address Address who should conduct the survey Define Define the sample frame Select the appropriate survey instrument Select the appropriate survey instrument Design Design proper questions with proper wording Develop Develop measurable service characteristics (when applicable) applicable) Design Design a reporting format and data entry methods 75 ...
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This note was uploaded on 08/22/2010 for the course ESI 6224 taught by Professor Ahmadelshennawy during the Spring '10 term at University of Central Florida.
- Spring '10