Lecture 7 - Establishing a Customer Focus _ Customer Satisfaction an Retention

7/30/2019 Lecture 7 - Establishing a Customer Focus _ Customer Satisfaction an Retention

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Lecture 7

Establishing a Customer Focus:

Customer Satisfaction and Retention

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Understand who is a Customer

Who is an external customer?

The external customer is someone who signs a check,pays our employer, and ultimately makes our paycheck

possible.

External customers have choice, and if they dont likeyour product or service , they can take their business

elsewhere.

http://www.donnaearltraining.com/Articles/InternalCustomerService.html

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Who is a CustomerContd

Who is an internal customer?

An internal customer or internal service provider can beanyone in the organization.

An internal customer can be a co-worker, another

department, or a distributor who depends upon us toprovide products or services which in turn are utilized

to create a deliverable for the external customer.

http://www.donnaearltraining.com/Articles/InternalCustomerService.html

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Understand Customer-Defined Quality

According to Peter Scholtes:

If customers are people who receive your

work, only they can determine what qualityis, only they can tell you what they want andhow they want it. Thats why a popular sloganof the quality movement is quality begins with

the customer.You must work with internal and

external customers to determine their needs,

and collaborate with internal and external

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Customer Focus

The key to establishing acustomer focus is puttingemployees in touch withcustomers and empowering

those employees to act asnecessary to satisfy thecustomers.

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Keeping in touch with customers

What are the ways to put employeesin touch with customers?

actual contactmay be in person, by telephone, or through reviewing

customer-provided data.

identifying customer needs and communicating with customers(will be cover in later chapter)

establishing customer focusunderstanding employee-customer interaction

Read textbook on Total Quality Tip: Satisfying customers and Profits,pg 157.

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Identifying External Customer Needs

Should customers be excluded fromthe product development process?

In a competitive marketplace, if customers wereexcluded from the product developmentprocess, such an approach can be disastrous.

In total-quality setting, customer needs areidentified clearly as part of productdevelopment.

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Identifying External Customer Needs

The goal should be to exceed customer expectation,not merely meet them. Your customers should boastabout how much they benefit from what you do for

them.

To attain this goal, you mustcollect reliableinformation on what they need and want from yourproduct or service. In doing so, you will find out

whether your processes are on target. This strategycan be used to identify potential improvementprojects or just to clarify a projects goals.

by Peter. Scholtes

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Identifying External Customer NeedsContd

Six-step strategy for identifyingcustomer needs.

1. Speculate about the results

2. Plan how to gather the information

3. Gather the Information

4. Analyze the Results

5. Check the Validity of Conclusions

6. Take Action as indicated

by Peter. Scholtes

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Identifying Internal Customer Needs

Mechanism for improving communicationamong internal customers and suppliers.

quality circles self-managed teamscross-departmental teamsimprovement teams training that promotes and helps to improve

communication skills communication that occurs over a cup of coffee in the

break room or during lunch can be equally effective

teamwork

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Communicating with Customers

Is there a need for continualcommunication?

Continual communication is required because customer

needs change and at times, they can change rapidly.

Communication with customers must extend to bothexternal and internal of customers. What applies on

the outside also applies within the organization.

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Instituting Quality Function Deployment

A product must meet the needs ofcustomers before you put it into production.

Quality Function Deployment (QFD) wasdeveloped to ensure that products entering

production would fully satisfy the needs of

their customers by building in the necessary

quality levels as well as maximum suitabilityat every stage of product development.

by Giogio Merli

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Instituting Quality Function Deployment

QFD allows for the systematic incorporation of customer needs, production capabilities and

capacity, and all other relevant parameters into product development.

According to Merli, QFD consists of the following basic activities:

deployment of customer requirements (quality needs) deployment of measurable quality characteristics determination of the correlation between quality needs and

characteristics

assignment of numerical values to each quality characteristicintegration of quality characteristics into the productdetailed design, production, and quality control of the product

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Service Quality

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Service Quality

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Customer satisfaction

Expressing Dissatisfaction

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Customer Feedback & Word

of mouth.The average business only hears from 4% of theircustomers who are dissatisfied with their products or

services. Of the 96% who do not bother to complain,

25% of them have serious problems.

The 4% complainers are more likely to stay with the

supplier than are the 96% non-complainers.

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Customer Feedback & Word ofmouth - Contd

About 60% of the complainers would stay as customers if theirproblem was resolved and 95% would stay if the problem wasresolved quickly.

A dissatisfied customer will tell between 10 and 20 other people abouttheir problem.

A customer who has had a problem resolved by a company will tellabout 5 people about their situation.

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Service Recovery

APPROACHES TO SERVICERECOVERY

Case-by-case addresses each customers complaint individuallybut could lead to perception of unfairness.

Systematic response uses a protocol to handle complaints butneeds prior identification of critical failure points and continuousupdating.

Early intervention attempts to fix problem before the customer isaffected.

Substitute service allows rival firm to provide service but couldlead to loss of customer.

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20Adopted from Zeithaml & Bitner 2009, p.227


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Customer Satisfaction Process

Customer focus is more than just sendingout surveys. Customer focus is part of a

process that leads to continual

improvements in the organization which,

in turn, result in customer satisfaction. Determine who your customers are Determine what attributes of your product/service are most importance to your

customers

arrange these attributes in the order of importance indicated by your customerstie results of customer feedback to your processes develop a set of metrics (measurements) that tell how you are performing and

which areas within the process are having the greatest impact on performance.

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Customer Satisfaction ProcessContd

implement measurements at the lowest possible level in the organization. work on those processes that relate to attributes that have high importance,

but customer satisfaction rating

work on those areas within the process that offer the greatest opportunity to

improve

update customer input and feedback on a continual basis. Then as processimprovements correspondingly improve customer satisfaction, move on to the

next most important process improvements

maintain open continual communication with all stakeholders on what is being

done, why, what results are expected, and when

aggregate metrics organization-wide into a format for management review ona continual basis. Adjust as necessary

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Customer-Defined Value

How customers define value?The value of a product or service is the sum of customers

perceptions of the following factors.

product / service quality service provided by the organization the organizations personnel the organizations image selling price of the product / service overall costs of the product / service

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Customer Value Analysis

What is it that customers want from ourorganization? What is it about our productsservices that customers value?

The customer value analysis (CVA) process consists of thefollowing five steps:

determine what attributes customers value most rate the relative importance of the attribute assess your organizations performance relative to the

prioritized list of attributes

ask customers to relate all attributes of yourproduct/service against the same attributes of a

competitors product

repeat the process periodically.

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Customer Retention

A customer satisfied is not always acustomer retained.

According to Michael W. Lowenstein, the desired end is

customer retention. An organization shouldmeasure success based on customer retention data

rather than on customer satisfaction data.

The issue is not whether customers are satisfied with theorganizations products or services. It is whether they

are satisfied enough to be retained.

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Customer RetentionContd

How can an organization go beyond justsatisfying its customers?

In order to retain customers over the longterm, organizations must turn them into

partnersand proactively seek theirinputrather than waiting for and reacting to

feedback provided after a problem has

occurred.

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Customer Retention Strategy 1

Relying solely on feedback from customers for identifyingproblems (customer-complaint process) has three glaringweaknesses.

1. They are activated by problems customers already

experienced customer who complains has already had a negative experience even if

these problems are solved quickly

customers remembered such experiences even if only subconsciously

no matter how well the organization responds.

2. Weakness of feed back-oriented processes are based on the often invalid assumption that dissatisfied customers will

take the time to lodge a complain. Some will, but many wont. Some

people are just too busy to take the time to complain. Others give their

feed back by simply going elsewhere.

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Customer RetentionStrategy 1

3. The information provided is often too sketchy to yield anaccurate picture of the problem Leads to organization wasting valuable resources chasing after symptoms rather than

solving root causes.

Focus GroupsFocus groups can provide a mechanism for overcoming all three of the

weaknesses associated with feed back systems.

Participants point out weaknesses or potential issues to the

organizations representative so that they can be dealt with

preemptively.

Focus-group input does not depend on the willingness of customers to

lodge complaints.

Participants agree to provide input at periodic meetings before

becoming members of the group.3

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Other MethodsOther methods for collecting customer input include hiring test

customers and conducting period surveys of a representative sample

of the customer base.

Test customers are individuals who do business with the organization and

report their perceptions to designated representatives of the

organization.

Customer surveys conducted periodically can help identify issues that may

become problems. Each time a survey is conducted, care should betaken to select a different group of customers. Asking the same people

to complete surveys over and over is sure to turn off even the most

loyal customers.

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Collect Both Registered andUnregistered Complaints

Many organizations make the mistake of acting solely

on what customers say in complaints instead of

going beyond what is said to include what is not

being said. Lowenstein calls this phenomenon the

Iceberg Complaint Model.

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Customer RetentionStrategy 2 (Contd)

Collect Both Registered and UnregisteredComplaintsContd

(1) Focus groups are excellent way to solicit unregistered complaints.

(2) Customer surveys and (3)test customers can also service this

purpose. Another way to get at the part of the iceberg that floats

beneath the surface is the (4) follow-up interview. With this method,

customers who have registered complaints are contacted either in

person or by telephone to discuss their complaint in greater depth. This

approach gives representatives of the organization the opportunity to

ask clarifying questions , and to ask for suggestions

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Customer RetentionStrategy 2 (Contd)

Collect Both Registered and UnregisteredComplaintsContd

Another way to get unregistered complaints is to use the organizations

(5) sales representatives as collectors of customer input.

Sales representatives have the most frequent face-to-face contact with

customers and they can bring back invaluable information from every

sales call. In addition toproviding sales personnel with the necessary

training, organizations should also provide them with appropriate

incentives for collecting customer input. Otherwise they may fall into

the trap of simply agreeing with the customer about complaints

received, thereby undermining the customer relationship even further.

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Establishing a Customer Focus

Richard C. Whitely suggests that the common characteristicscan be divided into seven clusters:

1. Vision, commitment, and climate

2. Alignment with customers

3. Willingness to find and eliminate customersproblems

4. Use of customer information

5. Reaching out to customers

6. Competence, capability and empowerment ofpeople

7. Continuous improvement of products and

processes

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Lecture 7 - Establishing a Customer Focus _ Customer Satisfaction an Retention

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