Chapter 4
Focusing on
Customers
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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.
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Importance of Customer
Satisfaction and Loyalty
“Satisfaction is an attitude; loyalty is a
behavior” (ask/observe both!)
 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.

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Key Idea
Customer wants and needs drive
competitive advantage, and statistics
show that growth in market share is
strongly correlated with customer
satisfaction.
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American Customer
Satisfaction Index

Measures customer satisfaction at a national
level
 Introduced in 1994 by University of Michigan
and American Society for Quality
 Index continually declined from 1994 through
1997 with small improvements into 2004,
when it declined again, suggesting that
quality improvements have not kept pace
with consumer expectations
 www.theacsi.org
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ACSI Model of Customer
Satisfaction
Perceived
quality
Perceived
value
Customer
expectations
Customer
complaints
Customer
satisfaction
Customer
loyalty
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Customer-Driven Quality Cycle
Customer needs and expectations
(expected quality)
Identification of customer needs
Translation into product/service specifications
(design quality)
Output (actual quality)
Customer perceptions (perceived quality)
measurement and feedback
PERCEIVED QUALITY is a comparison of ACTUAL QUALITY
to EXPECTED QUALITY
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Key Idea
Many organizations still focus more on
processes and products from an internal
perspective, rather than taking the
perspective of the external customer.
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Customer-Supplier (or InputOutput Model) - SIPOC
Your
Suppliers
Inputs
Requirements
and feedback
Your
Your
Outputs
Processes
Customers
Requirements
and feedback
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Customer Segmentation
 Demographics
 Geography
 Volumes
 Profit
potential
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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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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.
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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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Customer Survey - Example
Worst
Best
Are We On Time?
5
4
3
2
1
Are We Courteous?
5
4
3
2
1
Does The Product
Work?
5
4
3
2
1
Is It Cost Effective?
5
4
3
2
1
Overall Rating?
5
4
3
2
1
General Comments:
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Example Customer Survey
Results - Quantas Airways
Survey of Frequent Flier Needs – Order of Priority:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
No lost baggage
No damaged baggage
Clean toilets
Comfortable seats
Prompt baggage delivery
Ample leg room
Good quality meals
Prompt reservation service
Friendly/efficient cabin crew
Clean and tidy cabin
Comfortable cabin temp
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
Assistance with connections
Being kept informed of delays
Transport to cities
Accurate arrival info
Well-organized boarding
Quick/friendly airport check-in
Self-service baggage trolleys
On-time arrival
Provision of pillows/rugs
Assistance with customs
On-time departures
Source: Juran Institute
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Survey Design

Identify purpose
 Determine who should conduct the survey
 Select the appropriate survey instrument
 Design questions and response scales
 Word questions carefully, and tie to key
business processes and actionable results
 Empower employees to listen and take
appropriate action to meet customer needs
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Kano Model of Customer
Needs
 Dissatisfiers:
expected
requirements that cause
dissatisfaction if not present
 Satisfiers: expressed requirements
 Exciters/delighters: unexpected
features
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Analyzing Feedback: Performance
- Importance Analysis
Low
Low
Performance
High
Who cares?
Overkill
Vulnerable
Strengths
Importance
High
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Tools for Classifying Customer
Requirements
Affinity diagram
Tree diagram
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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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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
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Importance of Complaint
Management
 The
average company never hears from
96 percent of its unhappy customers
 Of the customers who make a
complaint, more than half will do future
business if the complaint is resolved
 The average customer who has had a
problem will tell 9 or 10 others.
 Dissatisfied customers increasingly post
their feelings on the Web
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Key Idea
To improve products and processes
effectively, companies must do more than
simply fix the immediate problem. They
need a systematic process for collecting
and analyzing complaint data and then
using that information for improvements.
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Service Recovery (Just in case)

A real-time response to a service failure.

Involves training front-line workers to
respond to such situations as overbooking,
lost luggage, or a bad meal.

Turns the negative impact of defects into
positives!
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Service Recovery (Just in case)
“Empowerment can only take place when
every associate can personally assure
customer satisfaction every time!”
Gary K. Johnson, WMI
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Service Recovery - How it Works
Customer
Identification
Mission
Statement
Process Identification
Incidents
Remedies
Cost of Incident
Measurement of Frequency
Cost of
Poor Quality
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, loyalty, and
retention, and to business expansion.
3.1 Customer and Market Knowledge
3.2 Customer Relationships and Satisfaction
a. Customer Relationship Building
b. Customer Satisfaction Determination
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