Creating Value Through Customer Satisfaction And Quality

Contemporary Marketing Wired, 9th Edition © 1998 The Dryden Press

Chapter 2

Creating Value Through Customer Satisfaction and Quality


Chapter 2 ObjectivesChapter 2 Objectives

• Explain the relationships between value, customer satisfaction, and quality.

• Identify the major components of customer satisfaction.

• List the goals of internal marketing.

• Explain the primary methods by which marketers measure customer satisfaction.

• Outline the historical development of the quality movement.

• Explain the relationships between value, customer satisfaction, and quality.

• Identify the major components of customer satisfaction.

• List the goals of internal marketing.

• Explain the primary methods by which marketers measure customer satisfaction.

• Outline the historical development of the quality movement.


Chapter 2 ObjectivesChapter 2 Objectives

• Discuss the roles of top management and employees in implementing total quality management (TQM).

• Outline the objectives of a marketing audit.

• Explain the benchmarking process and its role in improving a marketing strategy.

• Describe how an organization can work toward continuous improvement in its marketing activities.

• Explain how marketing managers can deliver value to customers by balancing the marketing mix elements.

• Discuss the roles of top management and employees in implementing total quality management (TQM).

• Outline the objectives of a marketing audit.

• Explain the benchmarking process and its role in improving a marketing strategy.

• Describe how an organization can work toward continuous improvement in its marketing activities.

• Explain how marketing managers can deliver value to customers by balancing the marketing mix elements.


The customer’s perception of the balance between the quality of goods or services that a firm provides and their prices.

Value


Increased worth of a good or service resulting from added features, lower price, enhanced customer service, a strengthened warranty or other marketing mix improvements that increase customer satisfaction.

Value-added


The degree of excellence or superiority of an organizations goods and services.

Quality


The result of a good or service meeting or exceeding the buyer’s needs and expectations.

Customer Satisfaction



Gasoline-service stations Texaco 82

Department stores Nordstrom 83

Long-distance telephone service AT&T 83

Consumer electronics Zenith 84

Household appliances Whirlpool 85

Personal care and cleaning Dial; Procter & Gamble* 85

Soft drinks Coca-Cola 87

Parcel delivery UPS 87

Automobiles

Food processing

Cadillac

H.J. Heinz

88

90

Product Category Company Score

Table 2.1 Industry Leaders in Customer Satisfaction


National Average 72

Government agencies Internal Revenue Service 50

Fast-food restaurants Wendy’s International 73

Airlines Southwest 76

Personal computers Hewlett-Packard 77

Athletic shoes Nike 77

Beer Anheuser-Busch 79

Apparel

Supermarkets

Liz Clairborne

Publix

81

82

Product Category Company Score

Table 2.1 Industry Leaders in Customer Satisfaction

* First place tie.Source: Data reported in “Americans are More Finicky Than Ever,” Fortune, February 3, 1995, pp. 108-110.




Applebee’s 식당 손님의 반복 방문 이유

• 맛 있는 음식

• 반겨주는 주인과 종업원

• 신속한 서비스

• 주요 요소 : 분위기 , 개인 존중 , 성과 , 조명 , 음식


A person or organization that buys or uses another firm’s good or services.

External Customer


An employee or department within an organization whose job performance depends on the work of another employee or department.

Internal Customer


Management actions that help all members of an organization to understand, accept and fulfill their respective roles in implementing its marketing strategy.

Excellent Co.’s Employees informed of goals, strategies and customer’s needs.

Internal Marketing


An internal network that conforms to internet standards in order to support two-way organizational communications.

대상 : 종업원 , 공급자 (Chrysler)

Intranet


Understanding Customer Needs

Customer Feedback

Ongoing Measurement

CustomerSatisfaction

Figure 2.4 Three Steps to Measure Customer Satisfaction


고객으로부터의 피드백

• 반동적 방법 (reactive):

080 전화 , 위장쇼핑 + 설문지 ,

• 진취적 방법 (proactive):

방문 , 전화 만족도 조사(AT&T, Pizza Hut), 설문조사



A set of ongoing procedures for measuring customer feedback against customer satisfaction goals and developing an action plan for improvement.

MicroScan 의료장비 : 고객의 반응에 대한 대응의 유무가 사업의 부침을 초래

Customer Satisfaction Measurement (CSM) Program


An effort to involve all employees in a firm to continually improve products and work processes with the goal of achieving customer satisfaction and world-class performance.

Total Quality Management (TQM)


Applying Total Quality Management

Drive out fear. Eliminate quotas and numerical goals. Breakdown all barriers between departments. Eliminate inspections. Learn to build products right the first time. Institute a vigorous program of education. Remove barriers that rob workers of their right to pride of workmanship. Institute leadership. The objective of leadership should be to help workers do a

better job. Eliminate slogans, exhortations, and production targets. Adopt a new philosophy. Managers must awaken to the challenge, learn their

responsibilities, and take on leadership for a change. End the practice of awarding business based on the price tag. Move toward a

single supplier for any one item. Base this long-term relationship on loyalty and trust.

Improve constantly and forever the system of production, marketing, and service. Put everybody to work to accomplish the transformation. Institute job training. Create constancy of purpose toward the improvement of goods and services in

order to become competitive, to stay in business, and to provide jobs.

Figure 2.6


External QualityImprovements

External QualityImprovements

Internal QualityImprovements

Internal QualityImprovements

IncreasedCustomer

Satisfaction

IncreasedCustomer

Satisfaction

IncreasedProductivity

IncreasedProductivity

IncreasedMarketplace

IncreasedMarketplace

IncreasedEarnings & Profits

IncreasedEarnings & Profits

LowerCosts

LowerCosts

LowerPrices

LowerPrices

How Quality Improvements Benefit and OrganizationFigure 2.7


A set of methods for applying statistical techniques to locate and measure quality problems in production and marketing activities.

- Walter Shewhart, W. Edward Deming - Joseph Juran, A.V. Feigenbaum(TQC)

Statistical Quality Control


Business ResultsThe results in quality achievement and quality improvement, demonstrated through quantitative measures

450

Process ManagementThe effectiveness of systems and processes for assuring the quality of all operations

100

Human Resource Development and Management

The success of efforts to develop and realize the full potential of the workforce for quality

100

Information and AnalysisThe effectiveness of information collection and analysis for quality improvement and planning

80

Strategic PlanningThe effectiveness of integrating quality requirements into business plans 80

LeadershipThe senior executives’ success in creating and sustaining a quality culture

110

Customer and Market Focus

The effectiveness of systems to determine customer and market requirements and enhance customer satisfaction

80

Criteria Description Points

Malcolm Baldrige National Quality Award CriteriaFigure 2.8


A set of standards for quality management and quality assurance developed by the International Standards Organization in Switzerland for countries in the European Union.

ISO 9000


• Top Management Involvement

• Employee Involvement

• Conducting a Marketing Audit

• Benchmarking

• Continuous Improvement

Key Components of Effective TQM Programs


Motivating employees to improve the job performance through internal marketing: empowerment, training and teamwork.

Employee Involvement



Giving employees authority to make decisions about their work without supervisory approval.

생산직 : 라인 스톱 , 판매직 : 고객불만 해결

Sears: 점포별 , 부서별 처리 후 보고 . 고객은 자신의 제안이 2 주 만에 반영되었다고 의기 양양 .

Empowerment


종업원 교육

• 목표 , 전략 , 전술에 대한 이해• 고객의 필요와 기대에 대한 인식과 해결• 작업품질을 측정 검토 하는 기술• 투자효과

Motorola: 수익 $30 / 교육비 $1Edy’s Ice Cream: 생산성 : 57%

향상 재고 : 66% 감소 매출 : 830% 증가


A small group of employees from one work area or department who meet regularly to identify and solve problems.

Sears: foreign language speaker list 작성

Quality Circle


A group of employees from different departments who work together on a specific project.

예 : 신제품 개발 팀

Cross-functional Team


A group of employees who work with little or no supervision.

팀원들이 작업계획 , 업무파악 연구 , 작업책임 , 결과 책임 : Kodak 의 Zebras

Self-managed Team


A thorough objective evaluation of an organizations marketing philosophy goals, policies, tactics, practices, and results.

Marketing Audit


Customer Philosophy

Does management recognize the importance of designing the company to serve the needs and wants of chosen markets?

0 Management primarily thinks in terms of selling current and new products to whoever will buy them

1 Management thinks in terms of serving a wide range of markets and needs with equal effectiveness

2 Management thinks in terms of serving the needs and wants of well-defined markets chosen for their long-term growth and profit potential for the company.

Does management develop different offerings and marketing plans for different segments of the market?

0 No.1 Somewhat.2 To a good extent.

Does management take a whole marketing system view (suppliers, channels, competitors, customers, environment) in planning its products?

0 No. Management concentrates on selling and servicing its immediate customers.

1 Somewhat. Management takes a long view of its channels,although the bulk of its effort go to selling and servicing the immediate customers

2 Yes. Management takes a whole marketing view, recognizing the threats and opportunities created for the company by changes in any part of the system.

A Sample Marketing Audit OutlineFigure 2.10a


Integrated Marketing Organization

Is there high-level marketing integration and control of the major marketing functions?

0 No. Sales and other marketing functions are not integrated at the top and there is some unproductive conflict.

1 Somewhat. There is formal integration and control of the major marketing functions but less than satisfactory coordination and cooperation.

2 Yes. The major marketing functions are effectively integrated.

Does marketing management work well with management in research, manufacturing, physical distribution, and finance?

0 No. There are complaints that marketing is unreasonable in the demands and costs it places on the other departments.

1 Somewhat. The relations are amicable although each department pretty much acts to serve its own power interest.

2 Yes. The departments cooperate effectively and resolve issues in the best interest of the company as a whole.

How well organized is the new product development process?

0 The system is ill-defined and poorly handled.

1 The system formally exists, but lacks sophistication.

2 The system is well-structured and professionally staffed.

A Sample Marketing Audit OutlineFigure 2.10b


Adequate Marketing Information

When were the latest marketing research studies of customers, buying influences, channels, and competitors conducted?

0 Several years ago.1 A few years ago.2 Recently.

How well does management know the sales potential and profitability of different market segments, customers, territories, products, channels, and order sizes?

0 Not at all.1 Somewhat.2 Very well.

What effort is expended to measure the cost effectiveness of different marketing expenditures?

0 Little or no effort.1 Some effort.2 Substantial effort.

A Sample Marketing Audit OutlineFigure 2.10c


Strategic Orientation

What is the extent of formal marketing planning?

0 Management does little or no formal marketing planning.

1 Management develops an annual marketing plan.

2 Management develops a detailed annual marketing plan and a careful long-range plan that is updated annually.

What is the quality of the current marketing strategy?

0 The current strategy is not clear.1 The current strategy is clear and

represents a continuation of traditional strategy.

2 The current strategy is clear, innovative, data-based and well-reasoned.

What is the extent of contingency thinking and planning?

0 Management does little or no contingency thinking.

1 Management does some contingency thinking, although little formal contingency planning.

2 Management formally identifies the most important contingencies and develops contingency plans.

A Sample Marketing Audit OutlineFigure 2.10d


Operational Efficiency

How well is the marketing thinking at the top communicated and implemented down the line?

0 Poorly.1 Fairly well.2 Successfully.

Is management doing an effective job with marketing resources?

0 No. The marketing resources are inadequate for the job to be done.

1 Somewhat. The marketing resources are adequate, but they are not employed optimally.

2 Yes. The marketing resources are adequate and are deployed efficiently.

Does management show a good capacity to react quickly and effectively to on-the-spot developments?

0 No. Sales and market information is not very current and management reaction time is slow.

1 Somewhat. Management receives fairly up-to-date sales and market information; management reaction time varies.

2 Yes. Management has installed systems yielding highly current information and fast reaction time.

Source: Philip Kotler, “From Sales Obsession to Marketing Effectiveness,” Harvard Business Review, (November-December 1977), pp. 70-71.

A Sample Marketing Audit OutlineFigure 2.10e


Process in which an organization continuously compares and measures itself against business leaders anywhere in the world to learn how it could improve performance.

99.9% 신뢰 : 미국에서 비행기가 매일 18 대 추락

매시간 17,000 우편물 잘못 배달매주 500 명 수술 사고매 시간 $2,480 만불 이체 잘못

Benchmarking


Figure 2.11 The Benchmarking Process

IDENTIFYProcesses for Improvement

ANALYZEInternal

Processes

IMPLEMENT

Improvements

Feedback


Product or process characteristic that most powerfully affects efforts to gain competitive advantage and achieve long-term success.

예 : 고객을 만족시킬 최고의 서비스 ? 신속한 신제품 도입 ?

주요 영역 : 인력자원 , 정보시스템 , 구매 , 고객서비스

Critical Success Factor


Xerox 의 Benchmarking 사례

• 대금청구 및 회수 : American Express

• 품질 공정 : Florida Power and Light

• 보관 , 유통 : L.L. Bean, Hershy Foods, Mary Kay cosmetics

• 시행기업 : AT&T, Mariott, IBM


Figure2-12 Using Chrysler as a Benchmark of Best Practices in Supplier

Relations


Process of constantly studying and making changes in work activities, called kaizen in Japan.

Reducing Cycle time: Sears 50,000 page 규정집을 16 page 로

Reducing Variation: Elo Toutch Systems 결함률 25% 에서 1% 로

Eliminating Waste: 품질비용 ( 설물 , 재작업 , 고객 상실 ) 절감

Continuous Improvement


The time required to complete a work process or activity from beginning to end.

Cycle Time


The total of costs associated with poor quality such as scrap, rework, and loss of customers.

Cost of Quality


Continuous improvement sequence of planning, doing, checking, and acting.

PDCA Cycle


ActingFinalize changes in work activities to protect the improvements

The new tray line setup was made into a permanent arrangement.

CheckingObserve effects of the changes

They measured the results of change, and found that complaints about the food fell from 12 % to 2 %. Overall patient satisfaction with food increased, even though the meals themselves tasted the same.

Doing Implement need changesThe staff experimented with reorganizing the tray lines to reduce the chances of error.

PlanningAnalyze work to determine what changes might improve it

Employees analyzed the hospital’s food-service operations and found that the inefficient layout of the cafeteria’s tray lines sometimes led to food mix-ups. A patient on a restricted diet might receive a tray intended for one on a regular diet and vice versa.

Step Description Example

Table 2.2 Applying the PDCA Cycle at Florida Hospital


그림 2-14 품질보증을 통한 제품이미지 창조


Providing high-quality competitively priced goods and services tailor-made to customers specifications or needs.

Mass Customization


세계적인 적시 배달 : 고객의 부가가치 원천


품질을 강조하는 가치 - 가격전략 광고


Key TermsKey Terms

value

value added

quality

customer satisfaction

external customer

internal customer

internal marketing

intranet

customer satisfaction measurement (CSM) program

total quality management (TQM)

statistical quality control

value

value added

quality

customer satisfaction

external customer

internal customer

internal marketing

intranet

customer satisfaction measurement (CSM) program

total quality management (TQM)

statistical quality control

ISO 9000

employee involvement

empowerment

quality circle

cross-functional team

self-managed team

marketing audit

benchmarking

critical success factor

continuous improvement

PDCA cycle

cycle time

cost of quality

mass customization

ISO 9000

employee involvement

empowerment

quality circle

cross-functional team

self-managed team

marketing audit

benchmarking

critical success factor

continuous improvement

PDCA cycle

cycle time

cost of quality

mass customization


Discussion Questions


According to one study, nearly half of the subscribers to online service providers such as America Online and CompuServe plan to switch to new service providers within a year. Reasons given for wanting to switch include desire for faster service (25%), preference for flat monthly fees (20%), and availability of local dial-in access. Assuming that service providers can find new customers to replace lost subscribers, should they still worry about this trend? Why? What actions would you recommend?

Discussion Question


Apply the continuous improvement principle to a service or procedure at your college or university. Does this service currently satisfy customers as much as it could? If not, why not? How might you reduce the gap between actual and desired service levels?

Discussion Question


Describe a situation in which you as a customer experienced poor quality in either a good or a service. How did this experience affect your feelings toward the company? What advice would you give to that company’s managers?

Discussion Question


Identify a firm in your city or state that you consider to be a world-class competitor in each of the following marketing mix elements:

a. Product

b. Distribution

c. Promotion

d. Price

Briefly defend your choice.

Discussion Question


You’ve been chosen to design and staff a 400-room hotel in New York City. Explain how you would apply the concepts and tactics discussed in this chapter to attract repeat visitors to the hotel. How would your plans affect the hotel’s financial performance?

Discussion Question