Department of Business Administration

JUC-Male Branch

Total Quality Management

Dr. Ishaq Kalanther, PhD

Assistant Professor of Business Administration
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 Chapter 3

Customer Focus

MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 10E, © 2017 Cengage Publishing,
Importance of Customers
“Without customers, you don’t have a
business.”
“If the customer is satisfied with the
whole experience with the product, then
you have a quality product.”
- Executive Director of Global Quality Strategy at General
Motors

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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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 Customer Focus in ISO 9000
 “Top management shall ensure that customer requirements are
determined and are met with the aim of enhancing customer
satisfaction.”
 The standards require that the organization determine customer
requirements, including delivery and post-delivery activities,
and any requirements not stated by the customer but necessary
for specified or intended use.
 The organization must establish procedures for communicating
with customers about product information and other inquiries,
and for obtaining feedback, including complaints.
 The standards require that the organization monitor customer
perceptions as to whether the organization has met customer
requirements; that is, customer satisfaction.

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Key Customer-Focused Practices for Performance Excellence
(1 of 2)

 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.
 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.

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 Key Customer-Focused Practices for Performance
Excellence (2 of 2)
 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.
 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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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 - (Restaurant)

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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 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.
Businesses with a 98 percent customer retention
rate are twice as profitable as those at 94 percent.

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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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American Customer Satisfaction Index (ACSI)
Measures customer satisfaction at a national
level
Introduced in 1994 by University of Michigan
and American Society for Quality
Based on results of telephone interviews
conducted in a national sample of 46,000
consumers who recently bought or used a
company’s product or service.
Web site: www.theacsi.org

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ACSI = American Customer Satisfaction Index
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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) –Members in different departments in the
organization
External customers - those who fall between the
organization and the consumer, but are not part of
the organization.

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 Internal Vs External Customers

© 2017 Cengage Publishing, ALL RIGHTS RESERVED. May not be scanned, copied or duplicated, or published to a publicly accessible website, in whole or in part.
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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.

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 Customer Segmentation
Demographics
Geography
Volumes
“Vital few” and “useful many”
Profit potential
The vital few: A small number of sources that account for most of the
problem. The useful many: The large number of remaining sources that
individually and collectively account for a relatively small part of the entire
problem
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Net Present Value of the Customer (NPVC)
…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 Product Quality Dimensions
Aspect/Range

Performance – primary operating characteristics

Features – “bells and whistles” (Special features that are added
to a product to attract more buyers).
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 (appearance)

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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

Dissatisfiers (“must haves”): expected

requirements that cause dissatisfaction if
not present
Satisfiers (“wants”): expressed
requirements
Exciters/delighters (“never thought of ”):
unexpected features

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 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
Complaints
Internet and social media monitoring

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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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 Moments of Truth
Customer satisfaction or dissatisfaction takes place
during moments of truth—every interaction between
a customer and the organization.
Example (airline)
 Making a reservation
 Purchasing tickets
 Checking baggage
 Boarding a flight
 Ordering a beverage
 Requests a magazine
 Deplanes (arrive/get down)
 Picks up baggage

Moment of truth (MOT) in marketing, is the moment when a

customer/user interacts with a brand, product or service to form or change
an impression about that particular brand, product or service

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Customer Contact Requirements
…measurable performance levels or
expectations that define the quality of
customer contact with an organization.
Technical requirements: response time
(answering the telephone within two rings
or shipping orders the same day)
Behavioral requirements (using a
customer’s name whenever possible)

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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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 Complaint Resolution
Acknowledge that a customer had a problem
(“We’re sorry you had a problem”)
Express empathy for the inconvenience that the
customer encountered; willingly accepting the
complaint (“Thanks for letting us know about it”)
Describe corrective action concisely and clearly
(“Here’s what we’re going to do about it”)
Appeal to the customer for continued loyalty
(“We’d appreciate you giving us another chance”).

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Manage Customer Relationships
Customer-supplier partnerships - long-term
relationships characterized by teamwork and
mutual confidence
Customer-focused technology and analytics
Most major companies use advanced analytics to
“mine” and understand customer data. Grocery and
retail stores use loyalty cards to capture and analyze
detailed data about customer purchase behavior.
Customer relationship management (CRM) software,
designed to help organizations increase customer
loyalty, target their most profitable customers, and
streamline customer communication processes.
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Measuring Customer Satisfaction and Engagement

1. Discover customer perceptions of how well the organization is doing in

meeting customer needs, and compare performance relative to
competitors.
2. Identify causes of dissatisfaction and failed expectations as well as
drivers of delight to understand the reasons why customers are loyal or
not loyal to the company.
3. Identify internal work process that drive satisfaction and loyalty and
discover areas for improvement in the design and delivery of products
and services, as well as for training and coaching of employees.
4. Track trends to determine whether changes actually result in
improvements.

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 Designing Satisfaction Surveys
 Identify purpose – who will make decisions using the survey results?
 Identify the customer
 Determine who should conduct the survey (internal, third party,
etc.)
 Select the appropriate survey instrument (written, telephone, face-
to-face, etc.)
 Design questions and response scales to achieve actionable results:
 responses are tied directly to key business processes, so that what
needs to be improved is clear; and information can be translated
into cost/revenue implications to support the setting of
improvement priorities.

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Why Customer Satisfaction Efforts Fail
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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 Measuring Customer Loyalty
Overall satisfaction
Likelihood of a first-time purchaser to repurchase
Likelihood to recommend (Possibility)
Likelihood to continue purchasing the same products
or services
Likelihood to purchase different products or services
Likelihood to increase frequency of purchasing
Likelihood to switch to a different provider

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 Customer Perceived Value-CPV
CPV measures how customers assess
benefits—such as product
performance, ease of use, or time
savings—against costs, such as
purchase price, installation cost or
time, and so on, in making purchase
decisions.

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 Any Question

Thank You

© 2017 Cengage Publishing, ALL RIGHTS RESERVED. May not be scanned, copied or duplicated, or published to a publicly accessible website, in whole or in part.
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