CUSTOMER FOCUS IN

QUALITY
Chapter: 3
IMPORTANCE OF CUSTOMERS
 “Without customers, you don’t
have a business.”
- Don Peppers and Martha Rogers, “Customers Don’t Grow on
Trees,” Fast Company magazine, July 2005

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AT&T CUSTOMER-SUPPLIER MODEL

Your Your Your

Suppliers
Inputs Processes
Outputs Customers

Requirements Requirements
and feedback and feedback

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IDENTIFYING CUSTOMERS
 Consumers - those people who ultimately
purchase and use a company’s products.

 Internal customers - the recipient of

another’s output (which could be a product,
service or information)
 External customers - those who fall between
the organization and the consumer, but are
not part of the organization.

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CUSTOMER SEGMENTATION
 Demographics
 Geography
 Volumes
 “Vital few” and “useful many”
 Profit potential
 Net Present Value of the customer
• …the total profits (revenues associated with a customer minus
expenses needed to serve a customer) discounted over time.
 NPVC is often used to segment customers by profit potential.

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KEY CUSTOMER GROUPS
 Organization level
 consumers
 externalcustomers
 employees
 society
 Process level
 internal customer units or groups
 Performer level
 individual internal customers

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IDENTIFYING 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?

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CUSTOMER SEGMENTATION
 Demographics
 Geography
 Volumes
 Profit potential

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CUSTOMER SEGMENTATION
 Demographics
 Geography
 Volumes
 “Vital few” and “useful many”
 Profit potential
 Net Present Value of the customer
• …the total profits (revenues associated with a customer minus
expenses needed to serve a customer) discounted over time.
 NPVC is often used to segment customers by profit potential.

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CUSTOMER-DRIVEN QUALITY CYCLE

PERCEIVED QUALITY is a
comparison of ACTUAL
QUALITY to EXPECTED
QUALITY
UNDERSTANDING CUSTOMER NEEDS

Key Product Quality Dimensions

 Performance – primary operating characteristics

 Features – “bells and whistles”- attractive
 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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EXAMPLE OF QUALITY DIMENSIONS

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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

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KANO MODEL OF CUSTOMER REQUIREMENTS

 Dis-satisfiers (“must haves”): expected

requirements that cause dissatisfaction if not present
Allows a company to remain in the market.

 Satisfiers (“wants”): expressed requirements

Allows a company to get into the market.

 Exciters/delighters (“never thought of”):

unexpected features
Allows a company to excel, to be world class.

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KANO MODEL
 TOOLS FOR CLASSIFYING CUSTOMER REQUIREMENTS

Affinity diagram* Tree diagram

*KJ method, developed in the 60s by Kawakita Jiro

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AFFINITY DIAGRAMS
 Affinity Grouping or Affinity Diagrams is a tool used to
organize and present large amounts of data (ideas, issues,
solutions, problems) into logical categories based on user
perceived relationships and conceptual frame working.
These diagrams reveal new patterns and relationships
between ideas, leading to more creative solutions.

 Affinity diagrams are used to organize ideas and data during a

brainstorming session. The ideas are grouped and segmented by
various topics and/or relationships. Affinity diagrams are usually
completed on yellow post notes.
EXAMPLE
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EXAMPLE

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EXAMPLE:
WHEN IS IT USED?

 Use an affinity diagram when you can answer “yes” to all of

the following questions:

 Is the problem (or issue) complex and hard to understand?

 If the problem or issue is relatively simple or easy to understand, a
cause-and-effect diagram may be more appropriate.

 Is the problem uncertain, disorganized, or overwhelming?

 Complex issues often feel overwhelming due to their size.

 Does the problem require the involvement and support of

a group?
 The process a group goes through to make an affinity diagram helps
the group develop its own system of thought concerning the
problem and builds consensus among the members.
TREE DIAGRAM
 The tree diagram starts with one item that branches
into two or more, each of which branch into two or
more, and so on. It looks like a tree, with trunk and
multiple branches.

 It is used to break down broad categories into finer

and finer levels of detail. Developing the tree diagram
helps you move your thinking step by step from
generalities to specifics.
WHEN TO USE A TREE DIAGRAM
 When an issue is known or being addressed in broad
generalities and you must move to specific details, such as
when developing logical steps to achieve an objective.
 When developing actions to carry out a solution or other
plan.
 When analyzing processes in detail.
 When probing for the root cause of a problem.
 When evaluating implementation issues for several
potential solutions.
 After an affinity diagram or relations diagram has
uncovered key issues.
 As a communication tool, to explain details to others.
VOICE OF THE CUSTOMER
 …customer requirements, as expressed
in the customer’s own terms

 Organizations 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.

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CUSTOMER LISTENING POSTS

 Comment cards and formal surveys

 Focus groups
 Direct customer contact
 Field intelligence
 Complaint analysis
 Internet monitoring

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SATISFYING CUSTOMERS
 To meet or exceed customer expectations, organizations
must fully understand all product and service attributes
that contribute to customer value and lead to satisfaction
and loyalty.
 Meeting specifications, reducing defects and errors, and
resolving complaints.
 Designing new products that truly delight the customer
 Responding rapidly to changing consumer and market demands
 Developing new ways of enhancing customer relationships

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IMPORTANCE OF CUSTOMER SATISFACTION
AND LOYALTY

 “Satisfaction is an attitude; loyalty is a

behavior”.
 Loyal customers spend more, are willing ot
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.

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KEY CUSTOMER-FOCUSED PRACTICES FOR
PERFORMANCE EXCELLENCE (1 OF 3)
 Identify the most important customer groups and
markets, considering competitors and other potential
customers, and segment the customer base to better
meet differing needs.

 Understand both near-term and longer-term customer

needs and expectations (the “voice of the customer”)
and employ systematic processes for listening and
learning from customers, potential customers, and
customers of competitors to obtain actionable
information about products and customer support.

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KEY CUSTOMER-FOCUSED PRACTICES FOR
PERFORMANCE EXCELLENCE (2 OF 3)
 Understand the linkages between the voice of the
customer and design, production, and delivery
processes; and use voice-of-the-customer information
to identify and innovate product offerings and
customer support processes to meet and exceed
customer requirements and expectations, to expand
relationships, and to identify and attract new
customers and markets.

 Create an organizational culture and support

framework that allows customers to easily contact
an organization to conduct business, receive a
consistently positive customer experience, provide
feedback, obtain assistance, receive prompt resolution
of their concerns, and facilitate improvement.
KEY CUSTOMER-FOCUSED PRACTICES FOR
PERFORMANCE EXCELLENCE (3 OF 3)

 Manage customer relationships that build loyalty,

enhance satisfaction and engagement, and lead to the
acquisition of new customers.

 Measure customer satisfaction, engagement, and

dissatisfaction; compare the results relative to
competitors and industry benchmarks; and use the
information to evaluate and improve organizational
processes.

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Park Place Lexus and K&N
Management

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QUALITY PROFILE: PARK PLACE
LEXUS
 Client-relationship management database that
tracks all aspects of the PPL-Client interaction
and provides the resulting information to
members (employees)
 Empowers members to resolve client complaints
on the spot by allowing them to spend up to
$250 to resolve a complaint, or up to $2,000 by
committee.
 A focus on personal and organizational learning
motivates members, which then results in
exceptional understanding of client’s needs and
the ability to deliver service to meet those needs.

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QUALITY PROFILE: K&N MANAGEMENT
 Vision “to become world famous by delighting one guest
at a time.”
 Builds and maintains a focus on “guest delight,”
relying on innovation and technology to create
product offerings that meet or exceed guest
requirements.
 All leaders carry a personal digital assistant (PDA) that
alerts them of guest comments and complaints and daily
performance results.

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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

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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

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CUSTOMER SATISFACTION
 …“the result of delivering a product or
service that meets customer requirements.”

 Customer satisfaction drives profitability.

The typical company gets 65 percent of its
business from existing customers, and it
costs five times more to find a new
customer than to keep an existing one
happy.

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CUSTOMER ENGAGEMENT
 .. customers’ investment in or commitment
to a brand and product offerings.
 Characteristics:
 customer retention and loyalty,
 customers’ willingness to make an effort to do
business with the organization, and
 customers’ willingness to actively advocate for
and recommend the brand and product offerings.

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ACSI MODEL OF CUSTOMER
SATISFACTION

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BUILDING A CUSTOMER-FOCUSED
ORGANIZATION

1. Making sincere commitments to customers

2. Ensuring quality customer contact
3. Selecting and developing customer contact
employees
4. Managing complaints and service recovery

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SERVICE RECOVERY AND COMPLAINT
MANAGEMENT
 The average company never hears from 96 percent of its
unhappy customers. Dissatisfied individual and business
customers tend not to complain. For every complaint
received, the company has 26 more customers with
problems, six of whom have problems that are serious.

 Of the customers who make a complaint, more than half will

again do business with that organization if their complaint is
resolved. If the customer feels that the complaint was
resolved quickly, the figure jumps to 95 percent.

 Customers who remain unsatisfied after complaining result in

substantial amounts of negative word of mouth.

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 CUSTOMER RELATIONSHIP MANAGEMENT

 Accessibility and commitments

 Selecting and developing customer contact
employees
 Relevant customer contact requirements
 Effective complaint management
 Strategic partnerships and alliances

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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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MANAGE CUSTOMER RELATIONSHIPS
 Customer-supplier partnerships - long-term
relationships characterized by teamwork and
mutual confidence

 Customer-focused technology
 Customer relationship management (CRM) software, which
typically includes market segmentation and analysis,
customer service and relationship building, effective
complaint resolution, cross-selling goods and services,
order processing, and field service.

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 Let customers know what you are doing for them.
(Communicate with Customers)
 Provide Great Customer Service
 Provide Customer Incentives
 Train Employees Thoroughly
 Build a Reputation for Reliability
 Be Flexible with Policies
 Act quickly when there is an issue
 Remember special occasions.
 Consider follow-up calls business development calls.
 Example: The Olive Garden
• The Lobby – How was the pace of your meal?
– Was the lobby staff friendly and did they • The Food
welcome you to the restaurant?
– Were you seated in a timely, efficient – How would you rate the taste of
manner? your food?
• The Table Area – Please rate the temperature of your
– Was your table area clean when you were food, hot food being piping hot.
seated? – Please rate your visit on the value
• The Server for the money.
– Was your server attentive and there when – Overall, how would you rate your
you needed him/her?
visit
– Was your server knowledgeable and able to
– Would you recommend this Olive
answer your questions about our food and
beverages? Garden to a close friend or relative?

Scale: 1 = poor ….5 = excellent

THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson LearningTM 50

EXAMPLE: THE OLIVE GARDEN
 Open-ended questions:
 What one thing did you like most about your visit?
 What one thing could we do to improve your
experience at The Olive Garden?
 Survey form provides address, 800 number, FAX,
and TDD number for hearing impaired

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