Customer Management CHAPTER NINE. Article discussion 9–2 Please read an article in Harvard Business Review posted on my website before the class.

Customer Management

CHAPTER NINE

Article discussionArticle discussion

9–9–22

• Please read an article in Harvard Business Review posted on my website before the class

Customer ManagementCustomer Management

9–9–33

• Intense focus on understanding and providing customers with products/service they desire

Customer ServiceProduct availability

Lead time performanceService Reliability

Customer SatisfactionMeet or exceed customer

expectations

CustomerSuccess

Assist customersin meeting objectives

Figure 9-1

Real world exampleReal world example

9–9–44

• BMW customer service

Customer ServiceCustomer Service

9–9–55

• Product Availability: inventory available when and where desired by customer

Orders Lines UnitsOrders Lines Units Delivered Delivered Delivered1,000 5,000 20,000 910 4,800 19,500

– Order Fill Rate: orders shipped complete = 910/1000 = 91%

– Line Fill Rate: order lines filled in total = 4,800/5,000 = 96%

– Unit Fill Rate: % of ordered units delivered = 19,500/20,000 = 97.5%

Lead Time PerformanceLead Time Performance

9–9–66

• Lead Time: time between start and end of an activity

–Design: conceptualize, design & test

–Order: place and schedule for production

–Procurement: source and arrive

–Production: start to end of production

–Delivery: warehousing & transportation to customer

Lead Time Performance cont’dLead Time Performance cont’d

9–9–77

• Differing market orientations have different elements of Order-to-Delivery (OTD) lead time

–Engineer to Order (ETO): design and make to customer specifications

–Make to Order (MTO): make to customer demand from raw materials and components

–Assemble to Order (ATO): assemble to customer demand from generic subassemblies

–Make to Stock (MTS): build and stock in anticipation of customer demand

Lead Time Performance cont’d Lead Time Performance cont’d

9–9–88Figure 9-2

Service Reliability & The Perfect OrderService Reliability & The Perfect Order

9–9–99

• Service Reliability: performance of all order related activities error-free

• If a firm has 97% reliability on four attributes, the probability of a perfect order is .97x.97x.97x.97=88.5%

• The Perfect Order: delivered without failure in any order attribute–Complete–On time–Damage free–Documentation correct

Limitations of Customer ServiceLimitations of Customer Service

9–9–1010

• Customer Service involves specifying the firm’s commitment to availability, operational performance and reliability

– Order winners, qualifiers and losers

– Meeting or beating competitor levels

– Link to competitive strategy

– Link performance to customer satisfaction

Customer wants and needs Customer wants and needs Customer wants and needs Customer wants and needs

• Assessing Customers wants and needs:–Order Winners: why customers choose your firm. i.e.

These products traits cause customers to choose a product over a competitor’s offering

–Order Qualifiers: minimum standards to be met. i.e. product traits that must meet a certain level in order for the product to even be considered by customers

–Order Losers: why customers avoid your firm. i.e. poor performance on these product traits can cause the loss of either current or future business

2–2–1111

Customer wants and needsCustomer wants and needsCustomer wants and needsCustomer wants and needs

Example: Dell Computers –Order Winner: Flexibility (Customization - A million

combinations!) –Order Qualifier: Affordable price, high level of quality

and reasonable delivery estimates

2–2–1212

ActivityActivityActivityActivity

• Identify the order winners and qualifiers for:

–A mini-van

–A sports car

–A fast food restaurant

–The ‘finest’ restaurant in your town

–A recent purchase of your choice

2–2–1313

Customer SatisfactionCustomer Satisfaction

9–9–1414

• Customer Satisfaction: meeting or exceeding customer expectations, including:

–Reliability: performance as promised

–Responsiveness: prompt reply and resolution

–Access: easy to use communication channels

–Communication: proactive order notifications

–Credibility: believable and honest

Customer SatisfactionCustomer Satisfaction

9–9–1515

• Customer Satisfaction: meeting or exceeding customer expectations, including:

–Security: low risk and confidential

–Courtesy: polite, friendly and respectful

–Competence: able to perform

–Tangibles: physical appearance

–Knowing the customer: responsive to unique customer needs

Customer Satisfaction Model GapsCustomer Satisfaction Model Gaps

Gaps occur at differences between1.Knowledge: understanding of customer needs

2.Standards: internal performance and customer expectations

3.Performance: standard and actual performance

4.Communication: actual performance and communications about performance

5.Perception: customer’s view of performance and actual performance

6.Satisfaction: customer’s perceptions and expectations of performance

9–9–1616

Customer Satisfaction Model GapsCustomer Satisfaction Model Gaps

9–9–1717

Word of Mouth Communication

Requirements Past Experience

Expectations

Perceived Performance

Actual Performance

External Communications

Performance Standards

Management Perceptions of Expectations

Service Quality Gaps

1

2

34

5

6

Limitations of Customer SatisfactionLimitations of Customer Satisfaction

9–9–1818

• Beyond basic service to relationship building

• ‘Happy’ customer ≠ satisfied, loyal customer

• Customers are individual in their expectations

ActivityActivity

9–9–1919

Think of a time you were dissatisfied with a supplier’s performance

• Which of your expectations were not met?

• Which ‘gap’ resulted in your dissatisfaction?

• What did you do from the frustration?

Customer SuccessCustomer Success

• Customer success requires a supplier to:

–Have a long-term relationship focus

–Comprehensive knowledge of customer needs

–Consideration of customer’s customers

–Adapt product production and distribution

9–9–2020

Customer Relationship ManagementCustomer Relationship Management

• Customer Relationship Management (CRM): technology enabled data gathering about customers to develop strategic relationships

9–9–2121

Homework for ch 9Homework for ch 9

• Do problems of 1, 3, 6 on page 277

9–9–2222