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Illustration by: David
By Timothy L. Keiningham, Melinda K. M. Goddard, Terry G. Vavra, and Andrew J. laci
hroughout this decade, interest in monitoring and improving customer satisfaction has
intensified among both academics and practitioners. For practitioners in particular, customer satisfaction matters only to the extent that it affects customer behavior, through higher customer retention, favorable word-of-mouth, or increased purchases (e.g., increased share-of-wallet). As a result, considerable research has been done to understand the relationship between customer satisfaction and perceived service quality and consequences, including behavioral intentions, customer retention and product/service usage, word-of-mouth, and financial outcomes.
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Diagnostic o f
t h e Easel,
Switzerland-based F. HoffmannLa Roche Ltd. health care company, transformed itself by f o c u s i n g o n i m p r o v i n g customer satisfaction. After the
division rarely met profit objectives for nearly 20 years, its new focus heloed the comoanv
exceed all profit expectations within a five-year period and become the fastest-growing
competitor in its industry and in F. Hoffmann-La Roche’s worldwide health care group.
Recently, researchers and practitioners started to theorize that different levels exist beyond “mere satisfaction” that can result in significantly better behavioral outcomes (i.e., retention, word of mouth, and shareof-wallet) and therefore have important financial implications for businesses. It has been proposed that customers have a range of satisfaction, referred to as a “zone of tolerance,” and within which differences between firms with regard to customers’ satisfaction doesn’t produce much change in customer behavior, and therefore business results. However, it is believed that moving satisfaction scores beyond the upper thrcshold of this zone of tolerance creates exccptional results. For managers, this level of customer satisfaction commonly is referred to as “customer delight.” And for many companies, customer delight has become a strategic imperative. For instance, Michael Bonsignore, CEO of Honeywell Inc. has said: “Only when we were able to link quality process means to the customer delight end were we finally able to integrate TQM (Total Quality Management) into our culture.” Colby 11. Chandler, former chairman and CEO, Eastman Kodak Co. has said: “Going beyond satisfaction to customer delight will provide a distinct advantage to the company that does it first and does it well consistently.” Some evidence supports the behavioral benefits of moving customers beyond mere satisfaction. As reported in Jones and Sasser’s much cited Review article (see Additional Readings, page 631, for example, researchers found that Xerox Corp.‘s “totally satisfied” customers were six times more likely to repurchase the company’s products over the following 18 months than customers who rated themselves as merely “satisfied.” Despite the increasing managerial emphasis on customer delight’s benefits, however, little exists in corresponding research in the academic literature. Academics have long believed that customer satisfaction tends to become more positive as expectations are exceeded, and corresponding emotions become highly positive (frequently noted as a “pleasant surprise”). But the concept of delight as a separate construct has been vague and only recently examined in academic research.
The lack of a clear scientific construct for customer delight has left managers with little guidance from which they can operationalize what they believe is a strategic imperative-moving customers beyond the threshold of mere satisfaction. Furthermore, there is little evidence that such an approach will actually result in increased market share and profits. It would be helpful then, for both practitioners and academics, to have empirical evidence of the success or failure of such an approach and an understanding of some of the operational issues affecting its implementation. We present the case of the U.S. affiliate of II Itoffmann-La Roche, Roche Diagnostic Systems. Some of the tactics, as well as results, are presented here to serve as a guide to and evidence of the company’s customer service strategy. Roche Diagnostics adopted a strategy focused on moving customers’ reported level of satisfaction beyond “satisfied” to the “very satisfied” level. It can be argued that very satisfied customers are not necessarily delighted (although delighted customers should, by their very nature, be “very satisfied”). Ilowever, it is reasonable to believe that by increasing percentages of “very satisfied” customers, truly delighted customers also could increase in number. Also, academic researchers and practitioners have proposed and used such approximations for measuring customer delight.
In 1069 Roche Diagnostic Systems began as a small, yet global division of F. Hoffmann-La Koche. with headquarters in Switzerland and its largest affiliates in the United States, Italy, France, and Japan. The division’s business centered on diagnostic instrumentation and test reagents for clinical and drug testing professionals. By lYY0, the lines included blood cultures, chemistry (and later, hematology) instruments, drug testing kits, pregnancy tests, and tumormonitoring assays. Initially, Roche Diagnostics pursued a product-driven strategy, focusing on innovation as its key source of differentiation. Unfortunately, while the products intellectually could be considered as part of the same market, they actually addressed the needs of very different customer segments. The result
responsible for installing the new analytic system. During instalwas that Roche Diagnostic was rarely a primary vendor or “partner” to customers in any one segment, except for drug testing in lation, the customer’s staff traveled to the Roche home office for U.S. criminal justice, drug treatment, and workplace testing sectraining, then were visited in their laboratory by the Roche installation team. The Roche installation team was responsible tors Not surprisingly, the company seldom achieved its profit objectives after its founding. for validating the clinical system according to established qualiBut after Jean-Luc Belingard assumed responsibility for the ty control and performance standards. During use of the system, global division at the worldwide headquarters in Switzerland in the customer called a toll-free number for ordering and account 1990, he focused on customer-driven strategies to achieve servservices assistance, for first-line technical assistance, and, if needed, to dispatch on-site technical or repair specialists to ice quality, product design excellence, and profitability improvement. He set up the necessary management infrastructure to assist them through a typical instrument life cycle of five to help carry out this mission. In 1991 he created a new position, seven years. It was understood that each of these “moments of truth” would shape customers’ opinions of Roche, as well as “head of global service quality and satisfaction,” and appointed Robert-Denis Moulloud, who had consulting experience in this affecting personal recommendations of the company to others. area including prior work with Roche. to The moments of truth that were estabfill it. Later that same year, Belingard lished in the qualitative phase were used as appointed Carlo Medici as president of the the underlying structure for developing a cusAT HIS FIRST U.S. MANAGEMENT U.S. affiliate, following his success with tomer satisfaction questionnaire. It was not MEETING, THE NEW PRESIDENT customer satisfaction initiatives in the possible to know from the qualitative research Italian affiliate. the degree of influence each moment of truth FOCUSED HIS PRESENTATION had on customers’ levels of satisfaction, and ON THE STRATEGY OF “ACHIEVING the original survey included more than 75 The First Ste Medici quickly established his vision aspects of these identified processes. LEADERSHIP AND PROFITABILITY for Roche Diagnostic Systems in the Once the questionnaire structure was THROUGH CUSTOMER United States. At his first U.S. managedetermined, the appropriate scale was conment meeting, the new president focused sidered. A frequent problem with satisfacSATISFACTION.” THAT SAME his presentation on the strategy of tion scales is a skewed distribution of YEAR, MDULLDUD WORKED WITH “achieving leadership and profitability responses, with an inordinate number of through customer satisfaction.” That same THE U.S. ORGANIZATION TO BEGIN responses at the most favorable end of the year, Moulloud worked with the U.S. scale. As a result, Roche decided to use a A SYSTEMATIC APPROACH TO organization to begin a systematic scale weighted to the lower extreme. The CUSTOMER SATISFACTION approach to customer satisfaction measrationale was to give customers ample urement and initiatives. (Before that time, opportunity to rate the company as realistiMEASUREMENT AND INITIATIVES. the U.S. organization had not systematically as possible. The scale selected was a cally measured customer satisfaction.) five-point, negatively biased Likert scale: The first step was a qualitative, exploratory phase of focus very satisfied, satisfied, somewhat dissatisfied, dissatisfied, and groups with customers. The goal of the focus groups was to gain very dissatisfied. understanding of the critical interactions (those from which cusThe last design issue to be considered was the appropriate tomers form their opinions of the company’s level of service) means of administering the survey. Because of timeliness issues between Roche Diagnostic and its customers. Such interactions, and the need to interactively probe customers for explanations frequently referred to as “moments of truth,” represented implicof some answers, telephone interviewing was selected. The it promises by the company to the customer. length of the survey, however, required setting appointments, The company then turned to the front-line employees to especially with physicians, and offering honoraria to keep typicompare and confirm their findings. It conducted more focus cally busy professionals on the phone long enough (about an groups, this time with sales representatives, instrument repair hour) to complete the survey. and service engineers, on-site technical specialists, home-office training staff, telephone technical specialists, customer service Setting Benchmarks and Goals representatives, and account services and credit specialists. In The initial interviews, which included those with 508 cusshort, everyone who had direct customer contact and responsitomers across the various lines of the business, were completed bility was involved. by the fourth quarter of 1992. On their face, the results did not From the customer’s perspective, the business relationship appear condemningly poor. While 36% of customers expressed began (and ended) with the decision to purchase and/or tell colthey were “very satisfied” (the top-category level of satisfaction leagues to do the same. During the relationship, the customer on a five-point scale), 15% described themselves as “somewhat” interacted with a Roche business development representative to to “very dissatisfied” overall. And, 39% said they would “definitesupport the buying decision and then met with the Roche team ly buy again,” while 57% said they would “definitely recommend”
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the company’s products, based on similar five-point Likert scales. In response to tvese results, the internal question became, “How do we use this information to improve our processes?” The problem for satisfaction information to provide a clear mandate for change is it must be comparable against some benchmark-either the performance of a competitor or performance goals intuitively established by management. It also in some way must be linked to the business processes that are managed and monitored on a day-to-day basis within a company. To gain the perspective needed to understand both satisfaction and process measurements, the company participated in an industrywide audit of global health care manufacturers conducted by Coopers & Lybrand. The audit analyzed hundreds of internal metrics, and it established the industry-relative ranking in each aspect of service. These metrics corresponded well with the moments of truth measured in the customer satisfaction surveys for Roche. As with the satisfaction surveys, the process metrics included numerous factors, such as the speed of arrival for engineers and technical representatives, the speed of hotline response, the “first-time fix rate” for the hotline and the field staff, and dozens more. These metrics then were matched to the survey dimensions (based on prima facie validity) to construct a “parallel universe” in which the customers’ perspective could be analyzed from an operational level for each process affecting the service levels they experienced. Approximately 70 metrics were selected for routine review, with each main process owner established as an “owner” of a portion of the metrics. It was incumbent upon the process owner to compare the industry performance for Roche on each of these metrics with the relative satisfaction score collected from customers. There were many metrics on which Roche fell short of industry practice and on which Roche customers gave particularly low satisfaction ratings. Performance goals then were set based on these concurrences. One of the earliest satisfaction survey challenges came when some departments began to realize that their procedures needed to achieve higher levels of efliciency and customer satisfaction. In defense, the water cooler question became, “Aren’t all customers hard to please?” followed by the reassuring refrain, “Maybe we aren’t so bad, after all.” To answer these questions, a survey of competitive, best-in-class companies’ customers was conducted to compare competitors’ results with the Roche satisfaction results. Of those leading companies’ customers, 60% reported that they were “very satisfied” overall: only 8% expressed any level of dissatisfaction. This was approximately half the level of dissatisfaction expressed by Roche customers.
tions proposed, and implementation approved based on three main considerations: 1) gap analysis (“worst first”), 2) quick hits (“low hanging fruit”), and 31 available resources, given a highly volatile financial scenario, while first steps to improve profits were being taken. With each improvement, the established customer survey provided continuous feedback on key initiatives and helped maintain the customer focus in the organization at a national level. For the first two years, the survey results were analyzed in relatively conventional ways, limited to aggregate statistics and simple listings of the verbatim responses to tho open-ended questions in the survey. This aggregated data prompted a rather predictable process of rationalization among the departments or regions. Wherever suboptimal processes were shared, it was reasonably easy to focus on another entity with an equally poor or poorer performance. More specific analyses were needed to build further process ownership.
Amplifying the Customer’s Voice
It became apparent that additional analytic and reporting capability was required, so in 1994, Roche Diagnostic Systems transferred the data analysis to an external marketing consulting firm. The consulting firm not only was adept at conducting rnultivariate analyses of numerical data, but it also had an expertise in processing responses to open-ended questions. One of the first improvements implemented was adding the means to order attributes by their connection with key criteria variables. This process, called a “key-driver analysis,” helped the regions and departments focus on improving those particular practices that mattered most. “Drill-downs” also were provided whereby explanatory verbatims were associated with certain levels of dissatisfaction on the most important attributes. This new level of analysis enabled Roche to provide a high degree of specificity in process feedback at the regional and departmental level with associated verbatim details. The explanatory verbatims brought the “voice of the customer” directly to the responsible employees and gave them feedback about their processes that none of the financial statements could. Furthermore, “key-word searching” of verbatim responses to the more general questions in the survey enabled the company to eliminate dozens of more specific questions from the survey. This streamlining allowed customers to be interviewed in a shorter, 15-minute interview. Another benefit was the elimination of appointment scheduling. Most of the U.S. Roche customers were willing to speak for 15 to 20 minutes upon first contact without requiring a scheduling call and without expecting an honorarium (due in large part to their relative investment in and dependence on their Roche system in performing their work). The key-driver analyses were used to demonstrate definitive relationships between top-category satisfaction, repurchase intentions, referral intentions, and root causes. This information reinforced the compelling business case that “proved” (to all employees) the importance of striving for “top category” satisfac-
Implementing Customer-Driven Change
In 1993, the combina.tion of relatively low rankings in key performance measures, customer satisfaction, and overall market share and revenues culminated in Medici’s decision to form a “benchmarking task force” that included the Roche key stakeholders in each major service quality process. Every facet of customer support was analyzed. Improvements were pursued, solu-
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tion. It was dramatically evident that merely “satisfied” customers were far less likely to buy again or give referrals to their colleagues than their delighted counterparts.
A Process improvement
As departments or regions implemented (or completed) data-based customer satisfaction initiatives, the key-driver analysis also helped answer the question, “What do we work on next?” One tool used to assist in identifying the best opportunities for improvement and communicating their significance was the importance-performance quadrant chart. Here the importance of a moment of truth (in this case, as measured by its correlation to overall satisfaction) was plotted versus the percent of customers who rated themselves as delighted with Roche in each process (see Exhibit 1). The quadrant chart showed that the toll-free telephone support represented an opportunity for improvement because it had high relative importance and yet, at the time, was relatively low in performance satisfaction. While the importance of telephone support was intuitively understood, the causes of customers’ dissatisfaction required more investigation. When customers called into Roche Diagnostic Systems in the United States, they were immediately greeted by an automated voice response system and given prompts to select either technical assistance, ordering assistance, paging (for a service engineer), or product information. By selecting technical assistance, customers were greeted by a second set of prompts to determine
Delight (% “Very Satisfied”)
1. 2. 3. 4. 5.
Training Phone support Instrument support Onsite tech support Orders/deliveries
the product category. After selecting the product category, customers were forwarded to one of six dedicated technical service operators who only took messages. These messages were put into a computerized queuing system for medical technologists, who were to call customers back and assist them. None of these calls was transferred “live” to a medical technologist. (Internally, Roche measured the “quality” of its technical assistance by “time to call back.“) Customers who selected “ordering assistance” were sent to one of 14 customer service representatives. If a customer had a question about a product, however, he or she was transferred to a technical service operator. Likewise, if a customer had an ordering question when speaking to a technical service operator, they were transferred to a customer service representative. In any given month, between 20% and 40% of calls required transfers between operators and customer service representatives. If customers selected “paging for an engineer,” they immediately were transferred to a technical service operator who paged a field engineer through a remote paging system-regardless of the situation. The field engineer would interrupt a service call with another customer, or wait for the next phone booth on the road to call the customer from the field. Those customers requesting “product information” never got the opportunity to speak with anyone. They were transferred into a message mailbox to leave their request for a follow-up mailing. Looking at the telephone support process, it quickly became apparent that, like many processes within companies, this process had evolved incrementally and was piecemeal, tying different Roche functional areas together. The result was an internal focus to customer communication, not an external (customer) focus. This readily can be seen in internal metrics like “time to call back” (used to measure technical assistance). While the measure was true to the process, customers did not want to have to be called back. They wanted immediate, live access to assistance. In improving customers’ satisfaction, it was a useless metric. It was obvious that a customer-focused solution required a change in the process. It was decided that customers’ questions should be answered in a timely manner, with personal interaction and as few transfers as possible. To eliminate the 20% to 40% of transfers between departments, a single group of representatives was created. The group consisted of customer service representatives who were cross-trained to provide ordering assistance when needed, give basic product information, and transfer callers to the medical technologists for further product and technical service information. Medical technologists also were grouped into product teams. This let customer service representatives make “live” transfers for customers requesting highly detailed technical assistance to each product line team.
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The medical technologists could also often provide routine instrument assistance without the customer having to wait for the engineer to call back. This had the added benefit of centralizing knowledge about specific problems. Also, field engineers worked at the call center on a rotating basis to assist with telephone support throughout the day; thus, only the most complex problem required paging a field engineer for an on-site service call. Customer service representatives recorded and transferred customers’ product information requests to the mailing queue. Customers, however, were given the opportunity to speak with a medical technologist if they had questions and preferred not to wait for product literature to be mailed. The result of this improvement effort was an end to the automated voice response system during normal business hours. More importantly, it resulted in a significant increase in the number of customers who were “very satisfied” with Roche telephone support. Likewise, the number of customers who were “very satisfied” with Roche Diagnostic Systems overall increased (see Exhibit 2). It is important to note that increases in overall satisfaction were also a function of increases in satisfaction with a number of improvement efforts, including telephone support, which occurred simultaneously. Because of the strength of the relationship, however, it is clear that improvements in telephone support played a significant role in improving overall satisfaction with Roche Diagnostic Systems in the United States.
rail satisfaction and profitability
-3% Very satisfied
+ Profit index
IBIT 2 ent very satisfied and very satisfied overall
60% z c= v) 'S $ P 3 40%
“9I When Roche Diagnostic began its customer service focus, most customers would have rated themselves as “satisfied” with the service from Roche. The division’s new management quickly learned, however, that having “satisfied” customers was not generating expected profits. The management realized that satisfaction was not enough-customers had to be “delighted” with Roche for the division to succeed. But efforts to move customers beyond mere satisfaction would have been for naught if they were not demonstrably linked to division profitability. However, Roche carefully prioritized its improvement efforts, focusing improvement initiatives on the most important issues (as identified by the “key-driver analyses”). Consequently, its proportion of “very satisfied” customers grew, as did its sales and profits (see Exhibit 3). Roche Diagnostics went from a low-growth division to the fastest growing competitor within its industry and in the F. Hoffmann-La Rocho worldwide health care group.
30% 1995 1996 1997
++ Telephone support
Numbers are for Roche
While many customer satisfaction initiatives end up on the bookshelf and often measurement is undertaken on its own behalf, this case study is a clear departure from such futile efforts. Here, business profitability dictated a serious study of the survey results to identify improvement opportunities, And with scarce resources, it was critical that these opportunities be accurately prioritized according to their potential impact on customer
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satisfaction and their ultimate impact on the corporate bottom line. A perspective applied productively (and relatively uniquely) here is the distinction between satisfaction and delight. In this case, only business practices that caused delight were identified as key drivers and key opportunities for improvement. It was also imperative to overcome the slow and reluctant buy-in which improvement initiatives traditionally receive. This case study shows how more conventional methods of numerical analysis were teamed with processes for “mining” verbal responses of customers. While the numerical results provided management reassurance that priorities had been properly established, the verbal responses served as convincing arguments to line personnel showing how important their performance was to customers’ satisfaction. In short, dedicated process management and insightful executive guidance harnessed the information discovered through customer satisfaction surveys and used this information to successfully transform a company by improving the value offered to customers. n
Vavra, Terry (1992) Aftermarketing: How to Keep Customers for Life through Relationship Marketing. Homewood, IL: Irwin Professional Publishing.
The authors would like to acknowledge Carlo Medici, former president of Roche Diagnostic Systems U.S., now corporate vice president and general manager of Clinical Services North America of Covance Inc., and Robert-Denis Moulloud, corporate vice president and head of global service quality and customer satisfaction of the Roche Diagnostics division, for their support and leadership during the implementation of the quality improvement initiatives at Roche Diagnostic Systems. Tim Keiningham and Terry Vavra are writing a book using this case and others to document the importance of customer delight and how managers can achieve it.
About the Authors Additional Reading
Bonsignore, Michael (1996). “How Total Quality Became a Framework for Honeywell,” (April 15) 3D. Chandler, Colby H. (1989), “Quality: Beyond Customer Satisfaction,” Quality Progress, 22 (February), 30-32 Deming, W. Edwards (1986), Out of the Crisis. Cambridge: MA: Massachusetts institute of Technology, Center for Advanced Engineering Study. Jones, Thomas 0. and W. Earl Sasser, Jr. (1995) “Why Satisfied Customers Defect,” Harvard Business Review, 73 (November/December), 88-99. Oliver, Richard L. (1997) Satisfaction: A Behavioral Perspective on the Consumer. Boston: Irwin/McGraw-Hill. -, Roland T. Rust, and Sajeev Varki (1997) “Customer Delight: Foundations, Findings, and Managerial Insight,” Journal of Retailing, 73 (Fall), 31 l-36. Roland T. Rust, Anthony J. Zahorik, and Timothy Keiningham (1994). Return on Quality (ROQ): Measuring the Financial Impact of Your Company’s Quest for Quality. Burr Ridge, IL: Irwin Professional Publishing. and - (1994). Service Marketing. New York: HarperCollins.
Timothy L. Keiningham is senior vice president of Marketing Metrics Inc., a marketing consulting and customer retention firm based in Paramus, N.J. He co-wrote two books, Return on Quality: Measuring the Financial Impact of Your Company’s Quest for Quality and Service Marketing (both co-written by Roland T. Rust and Anthony J. Zahorik). He also serves on the editorial review board of the Journal of Service Research. Melinda K. M. Goddard is director, service quality and customer satisfaction of Roche Laboratories Inc. based in Nutley, N.J. She is a speaker on the topic of customer satisfaction, having been a guest speaker at the Lubin Graduate School of Business at Pace University and numerous conferences sponsored by the International Quality and Productivity Center (IQPC) and the International Institute for Research (IIR). Terry G. Vavra is president and co-founder of Marketing Metrics Inc. and is an associate professor of marketing at the Lubin School of Business, Pace University. He was one of the first consultants urging businesses to balance their marketing efforts between attracting new customers and keeping current ones. His book Aftermarketing: How to Keep Customers for Life Through Relationship Marketing describes this strategy. His latest book is Improving Your Measurement of Customer Satisfaction (ASQ). Andrew J. Iaci is vice president client services of Marketing Metrics Inc. His clients include Roche Pharmaceuticals, Laboratory Corporation of America, and Rolls-Royce and Bentley Motor Cars. He manages the Worldwide Owner Satisfaction Programme for Rolls-Royce & Bentley Motor Cars and serves on internal Rolls-Royce committees.
-, -. and - (1995) “Return on Quality (ROQ): Making Service Quality Financially Accountable,” Journal of Marketing, 59 (April), 58-70.
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