Chapter 5
The Voice of the Customer
S. Thomas Foster, Jr.
Boise State University
Slides Prepared by
Bruce R. Barringer
University of Central Florida
©2001 Prentice-Hall
Chapter Overview
Slide 1 of 2
•
•
•
•
•
•
Customer-Driven Quality
What Is the Voice of the Customer?
Customer-Relationship Management
The “Gap” Approach to Service Design
Segmenting Customers and Markets
Strategic Alliances between Customers and
Suppliers
© 2001 Prentice-Hall
Transparency 5-2
Chapter Overview
Slide 2 of 2
• Communicating with Customers
• Actively Solicited Customer Feedback
Approaches
• Passively Solicited Customer Feedback
Approaches
• Managing Customer Retention and
Loyalty
• A Word on Excellent Design
© 2001 Prentice-Hall
Transparency 5-3
Introduction
• Different employees have different views of
their customers.
• A customer is the receiver of goods or services.
• This involves an economic transaction in
which something of value has changed hands.
© 2001 Prentice-Hall
Transparency 5-4
Introduction
• Customer service is important because:
1. Customer will tell twice as many people about
bad experiences as good experience.
2. A dissatisfied customer will tell 8 to 10 people
about the bad experience.
3. Seventy percent of upset customers will remain
your customer if you resolve the complaint
satisfactorily.
© 2001 Prentice-Hall
Transparency 5-5
Introduction
• Customer service is important because:
4. It’s easier to get customers to repeat than it is to
find new business.
5. Service firms rely on repeat customers for 85%
to 95% of their business.
6. Eighty percent of new product and service ideas
come from customer ideas.
7. The cost of keeping an existing customer is onesixth of the cost of attracting a new customer.
© 2001 Prentice-Hall
Transparency 5-6
Introduction
• Often customers are defined as internal or
external customers.
• Internal customers are employees receiving goods
or services from within the same firm.
• Some have used an abstraction of the term
internal customer to include the person at the
next step in a process.
• External customer are the bill-paying receivers of
our work.
© 2001 Prentice-Hall
Transparency 5-7
Introduction
• The external customers are the ultimate people
we are trying to satisfy with our work.
• If we have satisfied external customers, chances
are we will continue to prosper, grow, and fulfill
the objectives of the firm.
• Another term that describes customers is end
user.
• An end user is the final recipient of a product or
service.
• The term often used by software developer.
© 2001 Prentice-Hall
Transparency 5-8
Introduction
• Service firms have many titles for customers.
• These titles include patient, registrant,
stockholder, buyer, patron, and many others.
© 2001 Prentice-Hall
Transparency 5-9
Customer-Driven Quality
Slide 1 of 3
• Customer-Driven Quality
– Customer driven quality represents a proactive
approach to satisfying customer needs that is
based on gathering data about our customers to
learn their needs and preferences and then
providing products and services that satisfy the
customer.
– A Closer Look at Quality 5.1 shows that
companies have varying degrees of success in
responding to customers. ( see Table 5.1)
© 2001 Prentice-Hall
Transparency 5-10
E-Mail Reponses
© 2001 Prentice-Hall
Transparency 5-11
Customer-Driven Quality
Slide 2 of 3
• The Pitfalls of Reactive Customer-Driven Quality
– There are some companies that implement
customer feedback mechanisms incorrectly.
– These companies are placed in a reactive
rather than a proactive mode with their
customers.
– One of the difficulties in satisfying customer
requirements is that in a dynamic environment
customer needs are constantly changing.
© 2001 Prentice-Hall
Transparency 5-12
Customer-Driven Quality
• The Pitfalls of Reactive Customer-Driven Quality
– One potential pitfalls is falling into a reactive
mode. A reactive mode, illustrated by the
Reactive Customer-Driven Quality (RCDQ)
model shown in Figure 5.1, signals the need for
major process and service redesign.
© 2001 Prentice-Hall
Transparency 5-13
Customer-Driven Quality
© 2001 Prentice-Hall
Transparency 5-14
Customer-Driven Quality
• The RCDQ model demonstrates conceptually and
graphically the primary pitfalls and dangers of
RCDQ.
• Although a supplier to a customer might desire to
provide high-quality service to the customer, the
reactive posture engendered in the RCDQ
approach will cause the supplier to fall further
and further behind the moving target over time.
© 2001 Prentice-Hall
Transparency 5-15
What is the Voice of the Customer?
• The Voice of the Customer (VOC)
– The voice of the customer represents the wants,
opinions, perceptions, and desires of the
customer.
– Customers are also a source of knowledge
concerning the performance of the production
and service systems.
© 2001 Prentice-Hall
Transparency 5-16
What is the Voice of the Customer?
• Quality Function Deployment
– It has to do with a standardized, disciplined,
and cyclical approach to obtaining and
prioritizing customer preferences for use in
design products and services.
– This definition of the voice of the customer is
sometimes associated with quality function
deployment (QFD) or the “house of quality, ”
– QFD translates customer wants into a finished
product design.
© 2001 Prentice-Hall
Transparency 5-17
What is the Voice of the Customer?
• Quality is as the customer see it.
• In spite of all of our efforts and work, if we do
not adequately please the customer, we will
cease to be economically viable.
• Therefore, companies spend a great deal of
resources attempting to understanding the
customer.
© 2001 Prentice-Hall
Transparency 5-18
Customer-Relationship Management
Slide 1 of 7
• Customer-Relationship Management
– This view of the customer asserts that he or she
is a valued asset to be managed.
– There are four important design aspects (see
Figure 5.2) to customer relationship
management. These are:
• Complaint resolution
• Feedback
• Guarantees
• Corrective action or recovery
© 2001 Prentice-Hall
Transparency 5-19
Customer-Relationship Management
Slide 2 of 7
Complaint
resolution
Customer
Relationship
Management
Figure 5.2 Four
Components of a
Customer-Relationship
Management Process
© 2001 Prentice-Hall
Feedback
Guarantees
Corrective
action
Transparency 5-20
Customer-Relationship Management
Slide 3 of 7
• Complaint Resolution
– Complaint resolution is an important part
of the quality management system. Three
common types of complaints are
regulatory complaints, employee
complaints, and customer complaints.
– All three types of complaints as potential
sources of information for improvement.
© 2001 Prentice-Hall
Transparency 5-21
Customer-Relationship Management
• Complaint Resolution
- Donald Beaver states that you should love
complaints more than compliments. A
complaint is someone letting you know that
you haven’t satisfied them yet. They have gold
written all over them.
- Complaints should be viewed as opportunities
to improve.
© 2001 Prentice-Hall
Transparency 5-22
Customer-Relationship Management
• Complaint Resolution
-- The complaint-resolution process involves the
transformation of a negative situation in one in
which the complainant is restored to the state
existing prior to the occurrence of the problem.
-- In extreme cases, the complaint has incurred a
loss.
-- Typically, losses incurred by customer are not
quite so dramatic.
© 2001 Prentice-Hall
Transparency 5-23
Customer-Relationship Management
• Complaint Resolution
- The components of complaint-resolution process:
1. Compensate – for people losses
2. Contrition – apologize to the customer, see A
Closer Look at Quality 5.2 for Macy’s mantra “
The customer is always right.”
3. Complainants must be easy to reach resolution
process
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Transparency 5-24
Customer-Relationship Management
Slide 4 of 7
Complaint Resolution (or recovery) Process
Compensate
people for
losses
© 2001 Prentice-Hall
Apologize
to the
customer
Make it easy
for the
complainant
to resolve
his or her
problem
Transparency 5-25
Customer-Relationship Management
• Complaint Resolution
- The process associated with resolving complaints
is call the complaint-recovery process.
- The recovery process must be developed for
documenting complaints, resolving the complaint,
documenting recovery, and feedback for system
improvement.
© 2001 Prentice-Hall
Transparency 5-26
Customer-Relationship Management
Slide 5 of 7
• Feedback
– One way to gather data is to receive customer
feedback.
– There are two main types of feedback feedback to the customer and feedback to the
firm as a basis for process improvements.
– Feedback to the firm should occur on a
consistent basis with a process to monitor
changes resulting from the process
improvement.
© 2001 Prentice-Hall
Transparency 5-27
Customer-Relationship Management
Slide 6 of 7
• Guarantees
– Another important aspect of customer service
is the guarantee. Many firms offer service
guarantees. A guarantee outlines the
customer’s rights.
– The guarantee is both a design and an
economic issue that must be addressed by all
companies before the first sale occurs.
© 2001 Prentice-Hall
Transparency 5-28
Customer-Relationship Management
• Guarantees
– High Street Emporium sells products on
United Airlines flights via catalog and extends
a simple guarantee:”The Best Products from
the Best Catalogs at the Best Prices –
Guaranteed.”
– This is a nice example of a simple,
understandable guarantee.
© 2001 Prentice-Hall
Transparency 5-29
Customer-Relationship Management
Slide 7 of 7
To be effective, guarantees should be:
Unconditional
Understandable
Meaningful
Communicable
Painless to invoke
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Transparency 5-30
Customer-Relationship Management
• Corrective Action
- When a service or product failure occurs, the
failure is documented and the problem is resolved
in a way that it never happens again.
© 2001 Prentice-Hall
Transparency 5-31
The Gap Approach to Service Design
• The Gap
– Typically, the gap refers to the differences
between desired levels of performance and
actual levels of performance.
– The formal means for identifying and
correcting these gaps is called gap
analysis.
© 2001 Prentice-Hall
Transparency 5-32
The Gap Approach to Service Design
• The Gap
– There are two gap analysis methods:
1. PZB model, it define 10 determinants
service quality (see Table 5.2), its
relationship is shown in Figure 5.3, and the
survey instrument is call SERVQUAL (see
Chapter 8)
2. Two-dimensional gaps model, shown as
Figure 5.4.
© 2001 Prentice-Hall
Transparency 5-33
The Gap Approach to Service Design
• P133
• Table 5.2, Determinants of Service Quality
© 2001 Prentice-Hall
Transparency 5-34
The Gap Approach to Service Design
• Figure 5.3 Gaps and the service Quality model
© 2001 Prentice-Hall
Transparency 5-35
The Gap Approach to Service Design
Figure 5.4 Two-Dimension Gaps Model
Customer
Perceptions
Good
Wasted
time
IV
Relative Low
Importance
Relative
strength
I
High
Areas for
improvement
II
Minor
annoyances
III
Poor
© 2001 Prentice-Hall
Transparency 5-36
Segmenting Customers and Markets
• Segmenting Data
– One of the preliminary steps that many analysts
overlook is segmenting data. To segment markets
means to distinguish customers or markets according
to common characteristics.
– Sometimes segmentation is more complex involving
customer characteristics and demographics.
– Table 5.3 shows examples of segments for consumer
markets.
© 2001 Prentice-Hall
Transparency 5-37
Segmenting Customers and Markets
• Table 5.3 example of consumer markets.
© 2001 Prentice-Hall
Transparency 5-38
Segmenting Customers and Markets
• Segmenting Data
– Segmentation implies that data is
gathered separately for each segment
and analyzed separately.
- Table 5.4 shows examples of segments for
commercial markets.
© 2001 Prentice-Hall
Transparency 5-39
Segmenting Customers and Markets
• Table 5.4 example of commercial market.
© 2001 Prentice-Hall
Transparency 5-40
Strategic Alliances Between
Customers and Suppliers
• The customer obtains advantage over the supplier by
exercising the ability to change suppliers.
• The supplier attempts to gain power over the
customer by increasing switching costs, thereby
making it difficult for customer to switch to another
supplier.
• The theory behind this arrangement is essentially a
competitive model because competition among the
suppliers drives costs lower and quality higher.
© 2001 Prentice-Hall
Transparency 5-41
Strategic Alliances Between
Customers and Suppliers
• However, this theory ignores the costs associated with
variability created by using multiple suppliers.
• If different suppliers are used, there will be increased
variability in the physical properties of the materials
such as tensile strength.
• For example, one manufacturer found that by limiting
the number of suppliers of sheet steel, it reduced its
defects by 40%.
• This demonstrated that variability in sourced materials
was a major cause of defects.
© 2001 Prentice-Hall
Transparency 5-42
Strategic Alliances Between
Customers and Suppliers
• Today many Japanese and American companies
use sole sourcing as a way to reduce the number
of suppliers.
• Sole sourcing is a process for developing
relationships with a few suppliers for long
contract terms.
• Japanese JIT purchasing methods are now
synonymous with world-class purchasing
practice.
© 2001 Prentice-Hall
Transparency 5-43
Strategic Alliances Between
Customers and Suppliers
• Strategic Partnerships
– Increasingly, sole sourcing arrangements are
developing into strategic partnerships where the
suppliers become de facto subsidiaries to their
major customers.
– In these arrangements, not only are suppliers
sole source providers, but also they integrate
information systems and quality systems that
allow close interaction at all levels.
© 2001 Prentice-Hall
Transparency 5-44
Strategic Alliances Between
Customers and Suppliers
• Sole source suppliers to GM and Ford are
increasingly trained by their customer
concerning the preferred and required
organizations, processes, and delivery systems.
• Suppliers also enter into agreements to reduce
costs and improve productivity and are graded
on an annual basis concerning the attainment of
these targets.
© 2001 Prentice-Hall
Transparency 5-45
Strategic Alliances Between
Customers and Suppliers
• Toyota employs an extensive supplier development
program for each of its suppliers.
• As a result, variability to Toyota is reduced as the
relationship between customer and suppliers is
enhanced over time.
• It is to the benefit of both parties to continue this
relationship over a long period of time.
• Some Japanese companies actually include their
suppliers on their organization charts.
• The task of managing suppliers is simplified over time
• Variability and complexity are reduced.
© 2001 Prentice-Hall
Transparency 5-46
Communicating With Customers
• It is less expensive to produce one item that
satisfies a larger segment of the market than it
is to produce several products that please
niche markets.
• Operations professional does not view a dollar
of income from diverse customer equally.
© 2001 Prentice-Hall
Transparency 5-47
Communicating With Customers
• Customer Rationalization
– Results from agreement between marketing and
operations as to which customers add the
greatest advantage and profits over time.
– Customer rationalization from agreement
between marketing and operations as to which
customers add the greatest advantage and profit
over time.
– It could means pursuing customers that cause
the company to improve in ways necessary for
continued survival.
© 2001 Prentice-Hall
Transparency 5-48
Communicating With Customers
• Customer Rationalization
– Customer rationalization ensures a high-quality
product is provided and that the service provider
stays within its field of expertise.
– This allow firms to focus on a smaller number of
key customers and to develop an annuity
relationship.
– An annuity relationship is one in which the
customer provides a long \-term steady income to
the provider.
© 2001 Prentice-Hall
Transparency 5-49
Communicating With Customers
• As suppliers focus on satisfying their
customers, these customer are re-cognized as
primary sources of information.
• To batter understand the customer , data
about the customer must be gathered,
analyzed, and used for improvement.
© 2001 Prentice-Hall
Transparency 5-50
Communicating With Customers
• Gathering Data From Customers
– There are a variety of means for gathering
data from customers.
– These include active data gathering
techniques such as focus groups and
surveys, and passive data gathering
techniques such as customer comment
cards.
© 2001 Prentice-Hall
Transparency 5-51
Actively Solicited Customer
Feedback Approaches
Slide 1 of 6
• Actively Solicited Customer Feedback
– Includes all supplier initiated contact with
customers.
– The three most common arenas for this are
telephone customers, conducting focus
groups, and sending out surveys.
© 2001 Prentice-Hall
Transparency 5-52
Actively Solicited Customer
Feedback Approaches
Slide 2 of 6
• Types of Data
– Soft Data
• Phone contacts, focus groups, and survey results are
referred to as soft data.
• Soft data are not continuous and are, at best, ordinal.
– Hard Data
• As opposed to soft data, hard data are measurements
data such as height, weight, volume, or speed that can
be measured on a continuous scale.
– Ordinal Data
• Are ranked so that one measure is higher than the next.
© 2001 Prentice-Hall
Transparency 5-53
Actively Solicited Customer
Feedback Approaches
• Because of ordinal scale is based on conception,
measurements using ordinal data are subject to
greater error than hard measurement data.
• Soft data is useful in measuring the perceptions
of customers.
• One use of this soft data is to compare employee
and customer perceptions of quality.
• Another important use of soft data is to provide
an external source of data.
© 2001 Prentice-Hall
Transparency 5-54
Actively Solicited Customer
Feedback Approaches
• Hard external measures include returns,
refund, and warranty work.
• Sales data can be considered an external
indicator of customer satisfaction.
• When measuring quality, we are interested in
understanding the many dimensions of quality
that are important to our customers.
© 2001 Prentice-Hall
Transparency 5-55
Actively Solicited Customer
Feedback Approaches
Slide 3 of 6
Different Methods of Soliciting Customer Feedback
Telephone
Contact
Focus Groups
Customer Service
Surveys
© 2001 Prentice-Hall
Transparency 5-56
Actively Solicited Customer
Feedback Approaches
• Telephone surveys are often used to gather
information related to customer.
• The major problem with telephone surveys is
bias.
© 2001 Prentice-Hall
Transparency 5-57
Actively Solicited Customer
Feedback Approaches
• A focus group allows a supplier to gather
feedback from a group of consumers at one time.
• The group are focused in two ways:
- First, focus groups narrowly address a single
topic or group of topics.
- Secondly, focus groups draw individual with
similar characteristics or demographics.
• Figure 5.5 shows steps included in performing a
focus group session.
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Transparency 5-58
Actively Solicited Customer
Feedback Approaches
Slide 4 of 6
Figure 5.5 Focus Group Steps
Identify Purpose
Narrow Scope of Questions
Select Target Population
Develop Questions
Run Multiple Groups
Summarize and Develop Common Themes
© 2001 Prentice-Hall
Transparency 5-59
Actively Solicited Customer
Feedback Approaches
• Customer Service Surveys
- The customer service survey is an important tool
for determining customer perceptions of
customer service and quality and is used by
marketers and quality professionals in defining
areas of strength and areas for improvement in
quality system.
- There are four steps to developing a useful
survey, as next slide.
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Transparency 5-60
Actively Solicited Customer
Feedback Approaches
Slide 5 of 6
Steps in Developing a Useful Survey
Identifying
customer
requirements
Developing and validating
the instrument
(See Figure5.6 and 5.7)
Analyzing
the Results
Implementing the Survey
(See Figure 5.8)
© 2001 Prentice-Hall
Transparency 5-61
Actively Solicited Customer
Feedback Approaches
1.Identifying customer requirements
- Customer requirements include the dimensions of
quality, service, and performance that are necessary
to satisfy the customer. It involves:
(1). Reviewing the purchase orders and contracts
established when the relationship with the customer
begins.
(2). Customer needs are reviewed with marketing and
production.
(3). Interviews are conducted with a sampling of
customers to determine what to add the list of customer
requirements.
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Transparency 5-62
Actively Solicited Customer
Feedback Approaches
2.Developing and validating the instrument
- As shown in Figure 5.6, the dimension of
timeliness is important for a fast-food
restaurant.
- Notice the survey items are not questions.
- They are simple declarative sentences that use
action verbs.
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Transparency 5-63
Actively Solicited Customer
Feedback Approaches
Figure 5.6 Timeliness at Henry’s Fast Food
Timeliness Dimension
_____ I received my food quickly.
_____ The server responded in a timely manner.
_____ The line moved quickly.
_____ I was served rapidly.
_____ The food service at Henry’s is quick.
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Transparency 5-64
Actively Solicited Customer
Feedback Approaches
2.Developing and validating the instrument
- An alternative means of developing survey items
is the critical incident approach.
- The critical incident approach involves obtaining
information from customers about the process
they use to receive goods and services.
- This approach is important in determining
whether your process performance is improving.
- Figure 5.7 shows the same dimension of
timeliness for the fast-food restaurant.
© 2001 Prentice-Hall
Transparency 5-65
Actively Solicited Customer
Feedback Approaches
Figure 5.7 Specific Incidents Relating to Timeliness
at Henry’s Fast Food
_____ I was greeted on entering Henry’s.
_____ There was a server available when I approached the
service counter.
_____ My line less than three people when I arrived.
_____ As soon as I reached the counter, the server
requested what I wanted immediately.
_____ My food was delivered within 60 seconds of entering
Henry’s.
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Transparency 5-66
Actively Solicited Customer
Feedback Approaches
3. Implementing the survey
- Reliability and validity are two different but
interrelated issues of survey development.
- If the target in Figure 5.8 is the dimensions of
customer service that you are trying to measure,
each bullet hole represents a single response
using the survey instrument.
- If the measure of dimension ascertains the
dimension perfectly, the shot will be right in the
center of the target.
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Transparency 5-67
Actively Solicited Customer Feedback
Approaches
Slide 6 of 6
Figure 5.8 Reliability and Validity
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Transparency 5-68
Actively Solicited Customer Feedback
Approaches
3. Implementing the survey
• It shows that reliability is directly related to
variability in responses from the respondents.
• Two approaches to testing for reliability are
test/retest reliability and inter-judge assessment.
- With test/retest, the instrument is administered to a
group of respondents randomly selected from the
population of interest in a pretest.
- With inter-judge assessment, the survey is administered
to multiple respondents and analyzed to gauge
consistency of response among the respondents.
© 2001 Prentice-Hall
Transparency 5-69
Actively Solicited Customer Feedback
Approaches
3. Implementing the survey
- Validity is related to reliability but a reliable
instrument is not guaranteed to be valid.
- There are different types of validity:
1. Construct validity refers to the use of certain
terms and whether terms really measure what it
is we want to measure.
2. Content validity refers to whether the item
really measures what we want to measure.
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Transparency 5-70
Actively Solicited Customer Feedback
Approaches
3. Implementing the survey
- To help ensure content validity, it is helpful to
ask some outside individuals to externally
validate an instrument.
- In validating a quality-related questionnaire, we
found that respondents did not understand the
term conformance, but they understand the term
meet specification.
© 2001 Prentice-Hall
Transparency 5-71
Actively Solicited Customer Feedback
Approaches
3. Implementing the survey
- Most of the questions will be close-ended because
close-ended questions provide a better basis for
data analysis.
- It is preferable to have at least one open-ended
question in the customer service survey to allow
customers to vent frustrations, make suggestions,
or other comments.
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Transparency 5-72
Actively Solicited Customer Feedback
Approaches
4. Analyzing the results
- Data analysis should generally be kept simple.
- Means, histogram or numerical responses, and
simple correlations are best for analyzing survey
responses.
- Open-ended questions are analyzed with Pareto
analysis using histograms of the various
categories of responses.
© 2001 Prentice-Hall
Transparency 5-73
Actively Solicited Customer Feedback
Approaches
4. Analyzing the results
- Data analysis using advanced statistical techniques,
such as multiple regression, analysis of variance, or
other procedures, should be performed if necessary.
- Business experience has shown that simpler analysis
is better because simple statistical results are easy to
communicate to managers and co-worker.
- Quality Highlight 5.1 shows how ADAC Industries
serves its customers.
© 2001 Prentice-Hall
Transparency 5-74
Passively Solicited Customer
Feedback Approaches
• Passively Solicited Customer Feedback
– Customer initiated contact, such as filling out a
restaurant complaint card, calling a toll-free
complaint line, or submitting an inquiry via a
company’s Web site, is considered passively solicited
customer feedback.
– Table 5.5 outlines several of the difference between
actively and passively collected data.
– It is found that passive collections result in low
ratings of quality than active collections.
– It is not clear which approach is more biased.
© 2001 Prentice-Hall
Transparency 5-75
Passively Solicited Customer
Feedback Approaches
Table 5.5, Differences between Actively and
Passively Collected Data
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Transparency 5-76
Passively Solicited Customer
Feedback Approaches
• Customer Research Cards
- Figure 5.9 shows an example of a customer
research card.
- Research shows that respondents to these cards
tend to be expressing extreme response– either
very highly pleased or extreme displeased.
- Response cards provide an opportunity for the
service provider to develop a relationship with a
customer through properly recovering from an
extremely poor service encounter.
© 2001 Prentice-Hall
Transparency 5-77
Passively Solicited Customer
Feedback Approaches
• Figure 5.9 Pizzaria Complaint Card
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Transparency 5-78
Passively Solicited Customer
Feedback Approaches
• Customer Response Lines
- Many companies provide toll-free phone lines for
customer complaints, questions, and inquires.
- These services are offered by many third parties
or can be offered in-house.
- Common problems with complaint lines occur
when there are insufficient phone lines, long
waits, poorly trained personnel, or unresponsive
personnel.
© 2001 Prentice-Hall
Transparency 5-79
Passively Solicited Customer
Feedback Approaches
• Web Site Inquires
- Figure 5.10 ( shown as page 145 and page
146) shows the design of Web pages that
gather passively solicited customer feedback.
- The first ( please see page 145) is for a fusion
jazz group, and the second ( please see page
146) is for Lands’ End.
© 2001 Prentice-Hall
Transparency 5-80
Managing Customer Retention
and Loyalty
Slide 1 of 2
• Customer Retention
– Customer retention is measured as the
percentage of customers that return for
more service.
– Customer retention will increase by
application of the service tools and concepts
contained in this chapter such as tools
for data gathering and analysis.
© 2001 Prentice-Hall
Transparency 5-81
Managing Customer Retention
and Loyalty
• Customer Loyalty
– Customer loyalty can be instilled by
offering specialized service not available
from competitors.
– This can take many forms including high
customer contact or technology
advancements.
© 2001 Prentice-Hall
Transparency 5-82
Managing Customer Retention
and Loyalty
• Customer Loyalty
– There is an intangible aspect to customer
loyalty.
– After all, how many products induce the
kind of loyalty that causes people to tattoo
the company logo on their bodies or buy
garish clothing reflecting their love of the
product.
© 2001 Prentice-Hall
Transparency 5-83
A Word on Excellent Design
• The Importance of Design
1. It should be noted that not all good ideas come
from customers. Some excellent products arise
from advances in technology resulting from good
engineering.
2. For this purpose, the ready-fire-aim approach
has been adopted by many high-technology
companies as the best way to market their goods.
An example of this was the Sony Walkman.
© 2001 Prentice-Hall
Transparency 5-84
A Word on Excellent Design
- The ready-fire-aim approach refers to developing
new products by identifying needs that customers
do not necessarily recognize.
- More recently, the MP3 technology for
downloading music was available for a long time
before it entered the mainstream for consumer
use.
- Other new products are developed by identifying
a need that customers do mot necessary
recognize.
© 2001 Prentice-Hall
Transparency 5-85
A Word on Excellent Design
• There is much work being performed in alternative
technologies to be use in Third World countries that
do not have the infrastructure of developed countries.
• This alternative technology was developed by an
engineer.
• Others are discovering that this type of technology is
friendly to the environment and demand is increasing.
• Good customer intelligence coupled with innovative
research and development programs appears to be the
best marriage of resources.
© 2001 Prentice-Hall
Transparency 5-86