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Chapter 7Chapter 7

Focusing on Customers

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Customer and Market Focus in the Baldrige Criteria

The Customer and Market Focus category examines how an organization determines requirements, expectations, and preferences of customers and markets; and how it builds relationships with customers and determines the key factors that lead to customer acquisition, satisfaction, and retention, and to business expansion.

3.1 Customer and Market Knowledge

3.2 Customer Relationships and Satisfaction

a. Customer Relationships

b. Customer Satisfaction Determination

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Process Vs. Customer

Three-part customer satisfaction system1. company processes (operation)I. company employees II. customer expectation

Listen to the voice of the customer

Predict customer behavior

Determine customerQuality expectations

Listen to the voiceOf the process

Predict process behavior

Determine optimumProcess outcomes

Propose and test Process improvement

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Key Customer Groups

• Organization level– consumers– external customers– employees – society

• Process level– internal customer units or groups

• Performer level– individual internal customers

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Internal Customers Conflict• 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?

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Defining QualityThe several dimensions of quality:• People-focused management system• Focus on increasing customer satisfaction

and reducing costs• A systems approach that integrates

organizational functions and the entire supply chain

• Stresses learning and adaptation to change• Based on the scientific method

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A Quality focus• “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.

• Marker break points, where improving performance will change customer behavior.

• Common theme: integrate the many individual or group efforts that may have their own priority.

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A Quality Focus

Perceivedquality

Customercomplaints

Perceivedvalue

Customer satisfaction

Customerexpectations Customer

loyalty

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The Driver of Customer Satisfaction (1 of 2)Key excellence indicators for customer satisfaction• Service standards derived from customer requirements• Understanding customer requirement

– Thoroughness/objectivity– Customer types– Product/service features

• Front-line empowerment (resolution)• Strategic infrastructure support for front-line employees• Attention to hiring, training, attitude, morals for

employees• High levels of satisfaction – customer awards

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The Driver of Customer Satisfaction (2 of 2)• Proactive management of relationships with

customer• Use of all listening posts

– Surveys– Product/service follow ups– Complaints– Turnover of customers– Employees

• Quality requirements of market segments– Survey go beyond current customers– Commitment to customer

(trust/confidence/making good on word)

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Getting Employee Input• Employee input can be solicited concurrent with

customer research• Identify barriers and solution to service and product

problem• Serving as a customer-company interface

Employee surveys can measure(1)TQM effectiveness (2) skill and behaviors improvement (3) effectiveness of team problem-solving process (4) outcomes of training (5) needs of internal customer

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Measuring Customer Satisfaction

• Discover customer perceptions of business effectiveness

• Compare company’s performance relative to competitors

• Identify areas for improvement

• Track trends to determine if changes result in improvements

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Difficulties with Customer Satisfaction Measurement

• Poor measurement schemes• Failure to identify appropriate quality

dimensions• Failure to weight dimensions appropriately• Lack of comparison with leading competitors• Failure to measure potential and former

customers• Confusing loyalty with satisfaction

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The Role Of Marketing And SalesMarketing and sales are function charged with gathering customer input but in many firms the people in these function are unfamiliar with quality improvement. Shortcomings in marketing as identified by critics include:

• Partnering arrangement with dealers and distribution channels• Focusing on the physical characteristics of products and

overlooking the related services• Losing a sense of customer price sensitivity• Not measuring or certifying suppliers such as advertisers• Failing to perform cost/benefit analyses on promotion costs• Losing markets to generics and house brands

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The Sales Process TQM become a part of sales and marketing

processes -- Selling, advertising, promoting, innovating, distribution, pricing, and packaging – as they relate to customer satisfaction. sales a process that lends itself to analysis and improvement for customer satisfaction.

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Service Quality And Customer RetentionService companies measure cost of customers who will not come back because pf poor services. These are customer defections and they have a substantial impact on cost and profit. Indeed, it is estimated that customer defections can have a greater impact than economies of scale, market share, or unit cost. Many companies fail to measure defections, determine the cause of defections, and improve the process to reduce defections.

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Customer Retention And Profitability

Internal Service Quality

Employee Retention

External Service Quality

Customer Satisfaction

Profitability and customer Retention

Employee Satisfaction

Customer Retention

Profit

System

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Buyer-Supplier Relationships

Requirementsand feedback

Requirementsand feedback

Your Suppliers

YourProcesses

YourCustomers

Inputs Outputs