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1
Chapter 4
Focusing on
Customers
Key Idea
To create satisfied customers, the
organization needs to identify customers’
needs, design the production and service
systems to meet those needs, and
measure the results as the basis for
improvement.
3
Importance of Customer
Satisfaction and Loyalty

“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.

A firm cannot create loyal customers without first
creating satisfied customers.
Key Idea
Customer wants and needs drive
competitive advantage, and statistics
show that growth in market share is
strongly correlated with customer


satisfaction.
5
American Customer Satisfaction
Index

Measures customer satisfaction at national level

Introduced in 1994 by University of Michigan and
American Society for Quality

Continual decline in index from 1994 through
1998 with a small improvement into 2000
suggests that quality improvements have not
kept pace with consumer expectations
ACSI Model of Customer
Satisfaction
Perceived
quality
Customer
complaints
Perceived
value
Customer
satisfaction
Customer
expectations
Customer
loyalty
Key Idea
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.
8
Customer-Driven Quality Cycle

measurement and feedback
Customer needs and expectations
(expected quality)
Identification of customer needs
Translation into product/service specifications
(design quality)
Output (actual quality)
Customer perceptions (perceived quality)
PERCEIVED QUALITY is a comparison of ACTUAL
QUALITY to EXPECTED QUALITY
Key Idea
Many organizations still focus more on
processes and products from an internal
perspective, rather than taking the
perspective of the external customer.
Leading Practices (1 of 2)

Define and segment key customer
groups and markets

Understand the voice of the customer

(VOC)

Understand linkages between VOC and
design, production, and delivery
Leading Practices (2 of 2)

Build relationships through commitments,
provide accessibility to people and
information, set service standards, and
follow-up on transactions

Effective complaint management processes

Measure customer satisfaction for
improvement
Key Customer Groups

Organization level

consumers

external customers

employees

society

Process level

internal customer units or groups


Performer level

individual internal customers
Identifying Internal Customers

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?
14
AT&T Customer-Supplier Model
Requirements
and feedback
Requirements
and feedback
Your
Suppliers
Your
Processes
Your
Customers
Inputs Outputs
Key Idea
The natural customer-supplier linkages
among individuals, departments, and

functions build up the “chain of
customers” throughout an organization
that connect every individual and function
to the external customers and
consumers, thus characterizing the
organization’s value chain.
Customer Segmentation

Demographics

Geography

Volumes

Profit potential
Key Idea
Segmentation allows a company to
prioritize customer groups, for instance
by considering for each group the
benefits of satisfying their requirements
and the consequences of failing to satisfy
their requirements.
Key Dimensions of Quality

Performance – primary operating characteristics

Features – “bells and whistles”

Reliability – probability of operating for specific
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

Aesthetics – look, feel, sound, taste, smell
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Key Dimensions of Service
Quality

Reliability – ability to provide what was
promised

Assurance – knowledge and courtesy of
employees and ability to convey trust

Tangibles – physical facilities and
appearance of personnel

Empathy – degree of caring and individual
attention

Responsiveness – willingness to help
customers and provide prompt service
20

Kano Model of Customer Needs

Dissatisfiers: expected requirements

Satisfiers: expressed requirements

Exciters/delighters: unexpected
features
-> key idea :As customers become
familiar with them, exciters/delighters
become satisfiers over time. Eventually,
satisfiers become dissatisfiers.
21
Customer Listening Posts

Comment cards and formal surveys

Focus groups

Direct customer contact

Field intelligence

Complaint analysis

Internet monitoring
Key Idea
Companies use a variety of methods, or
“listening posts,” to collect information
about customer needs and expectations,

their importance, and customer satisfaction
with the company’s performance on these
measures.
Moments of Truth

Every instance in which a customer comes in
contact with an employee of the company.

Example (airline)

Making a reservation

Purchasing tickets

Checking baggage

Boarding a flight

Ordering a beverage

Requests a magazine

Deplanes

Picks up baggage
Key Idea
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
customer contact employees, train them
well, and empower them to meet and
exceed customer expectations.
Customer Relationship
Management

Accessibility and commitments

Selecting and developing customer
contact employees

Relevant customer contact requirements

Effective complaint management

Strategic partnerships and alliances

Exploiting CRM technology

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