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Chapter 4

Chapter 4. Focusing on Customers. Importance of Customer Satisfaction and Loyalty. “Satisfaction is an attitude; loyalty is a behavior” Loyal customers spend more, are willing to pay higher prices, refer new clients, and are less costly to do business with.

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Chapter 4

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  1. Chapter 4 Focusing on Customers

  2. Importance of Customer Satisfaction and Loyalty • “Satisfaction is an attitude; loyalty is a behavior” • 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.

  3. American Customer Satisfaction Index • Measures customer satisfaction at national level • Introduced in 1994 by University of Michigan and American Society for Quality • Continual decline in index from 1994 through 1998 with a small improvement into 2000 suggests that quality improvements have not kept pace with consumer expectations

  4. ACSI Model of Customer Satisfaction Customer complaints Perceived quality Perceived value Customer satisfaction Customer expectations Customer loyalty

  5. Creating Satisfied Customers • Expected quality • true customer needs and expectations • what the customer assumes will be received from the product • Actual quality • outcome of the production production and what is delivered to the customer • Perceived quality • The difference between actual quality and expected quality causing unexpected satisfaction or dissatisfaction

  6. 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 = ACTUAL - EXPECTED

  7. 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

  8. 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

  9. Key Customer Groups • Organization level • consumers • external customers • employees • society • Process level • internal customer units or groups • Performer level • individual internal customers

  10. Identifying Internal 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?

  11. Your Suppliers Your Processes Your Customers Inputs Outputs Requirements and feedback Requirements and feedback AT&T Customer-Supplier Model

  12. Customer Segmentation • Demographics • Geography • Volumes • Profit potential

  13. Key Dimensions of Quality (1 of 2) • Performance – primary operating characteristics • Features – “bells and whistles” • Reliability – probability of operating for specific time and conditions of use • Conformance – degree to which characteristics match standards

  14. Key Dimensions of Quality (2 of 2) • Durability – amount of use before deterioration or replacement • Serviceability – speed, courtesy, and competence of repair • Aesthetics – look, feel, sound, taste, smell

  15. 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

  16. Kano Model of Customer Needs • Dissatisfiers: expected requirements • Satisfiers: expressed requirements • Exciters/delighters: unexpected features

  17. Customer Listening Posts • Comment cards and formal surveys • Focus groups • Direct customer contact • Field intelligence • Complaint analysis • Internet monitoring

  18. Tools for Classifying Customer Requirements Affinity diagram Tree diagram

  19. Customer Relationship Management • Accessibility and commitments • Selecting and developing customer contact employees • Relevant customer contact requirements • Effective complaint management • Strategic partnerships and alliances

  20. 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

  21. Designing Satisfaction Surveys • Determine the purpose of the survey • Who should conduct the survey? • Define the sample frame • Select the appropriate survey instrument • Design the reporting format and the data entry methods

  22. The Lobby Was the lobby staff friendly and did they welcome you to the restaurant? Were you seated in a timely, efficient manner? The Table Area Was your table area clean when you were seated? The Server Was your server attentive and there when you needed him/her? Was your server knowledgeable and able to answer your questions about our food and beverages? How was the pace of your meal? The Food How would you rate the taste of your food? Please rate the temperature of your food, hot food being piping hot. Please rate your visit on the value for the money. Overall, how would you rate your visit Would you recommend this Olive Garden to a close friend or relative? Example: The Olive Garden Scale: 1 = poor ….5 = excellent

  23. 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

  24. Analyzing and Using Customer Feedback • Determine trends in satisfaction measures • Link satisfaction data to internal processes • Develop improvement plans based on results

  25. Performance-Importance Analysis Performance Low High Who cares? Overkill Low High Importance Strengths Vulnerable

  26. 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

  27. 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, and retention, and to business expansion. 3.1 Customer and Market Knowledge 3.2 Customer Relationships and Satisfaction a. Customer Relationships b. Customer Satisfaction Determination

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