CUSTOMERS

Anyone who thinks customers are not important should try doing without them for a week

Source : Unknown

CustomersIntroductionTypes of CustomersCustomer-driven InstitutionsCustomer Needs, Expectations and PrioritiesCustomer Relationships ManagementCustomer Identification and SegmentationCommunication TechniquesMultiple Customer Management and Conflict ResolutionCustomer PartnershipsCustomer Retention

INTRODUCTION

IntroductionCUSTOMERS are the most important people in any institution, not PROFITS or GROWTH.The element of customer satisfaction has advanced to the forefront of the Quality effort.

IntroductionCompanies that have placed an emphasis on customer satisfaction did so :To improve their product cost position through a total quality program which shifted to customer satisfaction.To improve their market positions which started with better product quality then moving to customer satisfaction.

IntroductionThe customers perception of Quality is the single most important factor for market share and profitability and companies must combine their product quality with the delivery of service to provide the highest customer satisfaction

TYPES OF CUSTOMERS

Types of CustomersCustomersShareholdersEmployeesCommunitySuppliersRegulatorsCompanyOrganizational Stakeholders

Types of CustomersExternal CustomersFinal Customers/End-UsersIntermediateInternal Customers

Types of Customers

The next operation as customer

- Kaoru Ishikawa

Internal CustomersTriple RoleSupplierProcessorCustomerInputOutputFeedbackFeedbackNeedsNeeds

Types of Customers

An Example

Types of CustomersExercise

External Customers - 3 main customers (describe type)Internal Customers - 3 main customers

CUSTOMER -DRIVEN INSTITUTIONS

Customer Driven InstitutionsA customer driven company serves the needs of its customers.The company should develop a customized approach to customer satisfaction. This means that the company will have progressed from product quality to customer satisfaction and into market perceived quality and value as compared to the competition.

Customer Driven InstitutionsThis customized approach will differentiate a company from its competitors. The customer will choose a business because it meets their needs in some way : better service, better quality, ease of use or ability to perform.

Customer Driven InstitutionsShareholder valueMarket share and profitabilityLoyaltyCustomer characteristicsBusiness environmentCustomer-perceived valuePriceProductqualityServicequalityInnovationImageControllable:Uncontrollable :

Customer Driven InstitutionsWhat does it require to build a customer driven company? A program format could be :Listen to the customer : customer needsDefine a service strategy : the customer focusSet standards of performance : needed for measures and results

Customer Driven InstitutionsWhat does it require to build a customer driven company? Select and train employees : the right employees and proper training are importantRecognize and reward accomplishment : Must follow this through properly(Shaaf & Zemke, 1989)

Customer Driven InstitutionsImplement the service strategy through peopleCompete for talentDevelop skills and knowledgeEmpower servers to serveWork at teamworkMeasure performance, reward excellenceImplement the service strategy through technologyImplement the service strategy through structure

Create a service strategyService reliabilityService surpriseService recoveryService fairnessNurtureServiceLeadershipBuild a service quality information system

CUSTOMER NEEDS, EXPECTATIONS & PRIORITIES

Customer Needs, Expectations and PrioritiesNeeds and expectations are the basic common denominators of customer retention.What are needs? Needs could be defined as the benefits to be fulfilled by the product or service defined in the customers own words. These ought to be identified and their specific effects on customer retention determined.

Customer Needs, Expectations and PrioritiesWhat are expectations? Expectations are closely related to needs except they are usually stated in more finite terms, such as the amount of time for obtaining an appointment with a physician. They are frequently dimensional in nature : time, size, price, completeness and so on.

Customer Needs, Expectations and PrioritiesProducts or services have to be provided that satisfy customer needs. Customer needs are not stable but continue to change. A service that satisfies certain needs may generate new needs. Maslows hierarchy of needs is a good illustration of the advancement of needs.

Customer Needs, Expectations and Priorities MASLOW HIERARCHYPhysiological NeedsSocial NeedsEgo or Esteem NeedsSelf-fulfillmentNeedsSafety Needs

Customer Needs, Expectations and PrioritiesJuran lists customer needs as such :Stated needs : What the customers say they want? (say, a car).Real needs : What the customers really want? (Transportation).Perceived needs : What the customer thinks is desired? (A new car is better than a used car).

Customer Needs, Expectations and PrioritiesCultural needs : Status of the product (a BMW).Unintended needs : The customer uses the product in an unintended manner (a BMW used to haul concrete blocks).Needs and their classification can also be thought of in three ways : time, state and level.

Customer Needs, Expectations and PrioritiesTIMEExisting needs : The needs that are currently present, such as reliability or safety.Future needs : They do not exist now but may be emerging because of changes in society, such as computers with more features.

Customer Needs, Expectations and PrioritiesSTATE

Emotional needs : These may have to do with self image, status and self-fulfillment such as in the Maslow hierarchy.Rational needs : These are functional and utilitarian in nature.

Customer Needs, Expectations and PrioritiesLEVELPrimary needs : These are the more basic needs in Maslows hierarchy such as for food, shelter, relationships and exercise.Secondary needs : They might be useful or helpful to the customer but are not essential, such as attractiveness, convenience and comfort.

Customer Needs, Expectations and PrioritiesThree Levels of Expectations Looking at different levels of expectations can help an organization determine where to place its priorities. Dr. Noriaki Kano of the Science University in Tokyo has stated three basic levels of customer reactions to quality features or characteristics which are described as take it for granted, expected and exciting attributes.

Customer Needs, Expectations and PrioritiesTake-it-for-GrantedExcitingAbsentFulfilledPresence of the CharacteristicExpectedDissatisfactionNeutralDelightPatient SatisfactionKano Model of Quality

Customer Needs, Expectations and PrioritiesTake-it-for-Granted Attributes Examples of attributes that patients take it for granted in a healthcare organization may include matters such as physician skills, availability of technology and equipment and systems set up so that tests are not misplaced.Patients expect hospitals to provide skilled physicians and may assume that medical skill is relatively the same across hospitals.

Customer Needs, Expectations and PrioritiesA patient may not respond favourably when a healthcare organization provides a competent service, but if the organization fails to provide it, the patient will probably become frustrated or angry. Ensuring that take it for granted features are present is considered by some to be the role of quality assurance.

Customer Needs, Expectations and PrioritiesExpected attributes Attributes that patients expect may include attention and concern shown by nurses and accommodation for visitors. Like take it for granted attributes, patients expect these characteristics to be present, but that expectation is not assumed to the same degree that, for example, appropriate equipment may be.

Customer Needs, Expectations and PrioritiesExpected attributesBy providing expected attributes an organization will help ensure that the patients conscious desires for care and service are satisfied.

Customer Needs, Expectations and PrioritiesExciting AttributesPatients may not expect exciting attributes but are delighted when they are present.Examples of exciting attributes could include no paper work on admission, extra time with physician or special concern from a nurse. The more useful yet unexpected a feature, the more likely it is to create true delight.

Customer Needs, Expectations and PrioritiesThree Levels of ExpectationsMeeting needs and expectations is like trying to hit a moving target. Something that was an exciting attribute 10 years ago may be a take-it-for-granted attribute today. That is one reason, it is important for all organizations to keep a constant tab on customers needs and expectations.

Customer Needs, Expectations and PrioritiesCustomer PrioritiesOnce organizations know the customers needs and expectations, they assign priorities by asking questions :What attributes are value?How desirable is each attribute (give some form of rating)?How do we compare to the competitors products?What other features or services would be of value?

CUSTOMER RELATIONSHIPS MANAGEMENT

Customer Relationships ManagementFor institutions which stress Total Quality as part of their operating plans, the interests of the customer comes first. The business becomes customer-oriented versus profit oriented. Customer relationship management is the art of managing your relationships with your customers, be they external or internal.

Customer Relationships ManagementInternal Customers : EmployeesInternal customers are the employees of the company. Ishikawa coined "the next operation as customer" in order to remove the sectionalism of departments towards each other. The essential idea is to enable employees of all departments to come together to solve problems.

Customer Relationships ManagementInternal Customers : EmployeesCustomer relationship management can be best viewed by showing the Service-Profit Chain which establishes relationships between profitability, customer loyalty, employee satisfaction and loyalty and productivity.

SERVICE-PROFIT CHAINThe links in the chain are as follows :Internal Service QualityEmployee SatisfactionEmployee RetentionEmployee ProductivityExternal Service ValueCustomer LoyaltyRevenue GrowthProfitabilityWorkplace designjob designemployee selection and developmentemployee rewards and recognitiontools for serving customersCustomer Satis-factionService concept : results for customersRetentionrepeat businessreferralService designed and delivered to meet targeted customers needsOperating Strategy and Service Delivery System

Customer Relationships ManagementSERVICE-PROFIT CHAIN

Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal and productive employees. Employee satisfaction, in turn, results primarily from high quality support services that enable employees to deliver results to customers.

Customer Relationships ManagementIt is most important in this analysis to consider the voice of the employees as customers. In this regard, employee surveys, interviews or roundtable meetings are extremely important to gather information on a number of factors such as :State of the company : A perception of the company through the employees eyes.State of quality efforts : Are the quality efforts worthwhile?

Customer Relationships ManagementState of the processes : Are there improvements?Reaction to policies and procedures : What dumb things were implemented?Rating of job satisfaction : Do I like my job, my boss, etc ..Rating of company satisfaction : Is the company a good place to work?

Customer Relationships ManagementResearch has shown that management practices relate to employee satisfaction, which also impacts customer satisfaction.When employees are satisfied with their treatment, given the right tools to do the job and supported by management, customers are more likely to have higher perceptions of quality and will continue to do business with the company.

Customer Relationships ManagementThe expression : The Moment of Truth" is where individuals from the company come into contact with the external customer. These employees at "the Moments of Truth" represent the company to the customer. The selection of these "customer contact" employees, therefore, is one of the most vital tasks for customer geared organizations. The selection criteria emphasize : teamwork potential and customer orientation.

Customer Relationships ManagementTraining is extremely crucial to such organizations which teach these employees all the necessary skills which will help ensure that the external customer is satisfied. In these outstanding customer service organizations, employees are treated with the same respect with which they are expected to treat external customers.

Customer Relationships ManagementCommunication with employees on customer satisfaction can be improved through the following options :Company newsletters : Basic information and corporate newsStoryboards : Display on specific company wall board; memos, letters, project papers or subjects that would effect the employees

Customer Relationships ManagementTeam meetings : Use them to share business news or announce news events.Posting customer letters of appreciation or dissatisfaction.Staff meetings to share the informationDisplay of goals, progress charts, etc.Quality awards from suppliers

Customer Relationships ManagementSome visible signs of employee satisfaction can be obtained from data that is accumulated by human resources such as turnover of personnel and absenteeism. Exit interviews should be conducted on all employees, with emphasis on gathering information on attributes and characteristics of the company climate.

Customer Relationships ManagementAs Jan Carlson has said "If you are not serving the customer, your job is to be serving someone who is".

Customer Relationships ManagementExternal CustomersThe seeking of customer satisfaction or delight are most important to the management and its employees. The management of the company can reinforce its commitment to the customer via its actions.

Customer Relationships ManagementExternal CustomersThe customer expects his or her needs and expectations about the product or service to be not only satisfied, but even exceeded. If there is a problem with a product or service, a customer wants an assurance that there will be help available.

Customer Relationships ManagementExternal CustomersSome of the other things that a customer expects the company to handle include :Guarantees e.g. Warranty which is a public commitment to satisfy the customer.

Customer Relationships ManagementExternal CustomersComplaints : But remember only 4% of the dissatisfied customers let the company know of the problem. The other 96% vote with their feet but do not complain because they may not know how to register a complaint, they don't think it will do any good, people feel pushy or awkward if they complain and they think that the service provider might fight back.

Customer Relationships ManagementExternal CustomersFeedback : Feedback provides information on customer dissatisfaction, establishes its quality priorities, compares performance against competition, identifies customer needs and determines opportunities for improvement.Corrective actions

Customer Relations ManagementAt the end of the day, such organizations will have to build commitment into their game plan where customer will always be right.

Customer Relations ManagementMost organizations talk about being customer-focussed but they really do not show real commitment. What passes for commitment is compliance. There are several definitions to consider :Compliance : Follows the letter of the law, the vision or the mission.Enrolled : A free choice to follow the company vision or the mission.

Customer Relations ManagementCommitment : Definitely wants the vision, the mission to come alive. Will do what is necessary to make it happen.In most organizations the vast majority of people are just compliant. They will follow the leader and do what is expected of them; few people are enrolled and fewer are committed to the vision/mission of the company.

Customer Relations ManagementThe committed people will have an energy, a passion and an excitement that is over and above the norm. The committed person will do what is takes; make new rules; or break the rules in order to achieve the vision. A group of committed people, a committed management, better yet, a committed company can achieve great things.

Customer Relationships ManagementExternal CustomersThe voice of the customer can be listened to through a number of ways :

Customer surveys Customer follow-up surveys (6 months, 1 year or 2 years). Community surveys : a look at what the community is doing.

Customer Relationships ManagementExternal CustomersPersonal customer contact.Customer contact reports : Customer fills out satisfaction report. The feedback is given directly to the employee.Customer counseling : Residents of specific functions form a council and provide feedback to the governing agency.

Customer Relationships ManagementExternal CustomersFocus groups : Small and large groupsCustomer interviewsElectronic mailTest marketing : small area is tested for useQuality guarantees : if not satisfied we will redo the training

Customer Relationships ManagementExternal CustomersInspectors : use of mystery shoppers, auditorsOmbudsmen : advocates for the customersSuggestion boxes

Customer Relationships ManagementExternal Customers

"You must take the customer's skin temperature every day"

Matsushita

Customer Relationships ManagementExternal CustomersThe Quality Function Deployment (QFD), sometimes referred to as the House of Quality, is a technique which provides a methodology for ensuring what customers want which are then translated into technical characteristics which the company could employ to provide a better product in time in line with the customers needs and expectations.

CUSTOMER IDENTIFICATION & SEGMENTATION

Customer Identification and SegmentationThey can have any color car they want, so long as its black

Henry Ford on Model T

Customer Identification and SegmentationBASIC PREMISEDetermine what consumers need and wantTry to satisfy those needs and wants, provided it is consistent with your strategy and rate of return.Move away from Product-Driven approach towards a Market or Customer-Driven approach.

Customer Identification and SegmentationThe biggest single barrier to the development of an effective corporate strategy is the strongly held belief that a company has to appeal to the entire market.

Customer Identification and SegmentationIdentify Customers :Core/Key CustomersNon-Core CustomersPotential CustomersAnother classification :Consumer CustomersBusiness CustomersFor ProfitsNot for Profits

Customer Identification and SegmentationSegmentation VariablesPurchase VolumeProfitabilityIndustryGeographicDemographicPsychographic

Customer Identification and SegmentationSegmentation Concepts

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Customer Identification and SegmentationSegmentation Concepts

No market segmentationComplete market segmentationSegmented by a single criterion Segmented by multiple criteria.

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Customer Identification and SegmentationPatterns of Segmentation

QualityPriceQualityPriceQualityPrice.

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Customer Identification and SegmentationPatterns of Segmentation

QualityPriceQualityPriceQualityPrice.

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Homogeneous preferencesDiffused preferencesClustered preferences

Customer Identification and SegmentationChoosing a Segmentation StrategyCreate and maintain a customer information systemUse SWOT analysis to determine competitive positionUse surveys to evaluate perceptions of your organization as well as your competitorsCreate a segmentation strategy that fits the strategic intent in the context of opportunity

Customer Identification and SegmentationBarriersFailure to Identify CustomersThe We Know our Customers MythFailure to align operations with Marketing StrategiesFailure to distinguish need for separate service delivery processes

COMMUNICATION TECHNIQUES

Communication TechniquesOrganization rely on various methods to gather, assess and act on information to serve customers and drive marketing activities.

Communication TechniquesKey BenefitsUsed to discovering customers needs and requirements.Management by fact (data-driven corrective action/process.Improved customer satisfaction, retention and advocacy (positive word of mouth).Pinpoint perceived performance and market position in terms of competition.

Communication TechniquesMethodsReactive feedbackComplaint monitoring, warranty systemsProactive feedbackWritten surveys, telephoning, visiting customers

Communication TechniquesInformation Gathering

Office of the customerStrategic planning issuesCorrective action teamsProcess improvement teamsCustomer recordsComplaintsSurveysBenchmarkingTransaction data

Communication TechniquesCompetition is driving companies to significantly improve 3 vital components of their communication systems :Customer databasesCustomer satisfaction systems (surveys)Complaint handling systems

Communication TechniquesSurveysPlease be aware of the following distinctions :Population versus SampleValidityReliabilityBiasQuantitative versus qualitative research

Communication TechniquesSurvey Tools / MethodsWritten/Mail SurveysTelephone SurveysIn-person Interviews (One-on-One)Focus GroupsCustomer CouncilsJoint Planning MeetingsPanelsComment Cards / Suggestion BoxesObservation (Murmurs)Mystery ShoppersOthers

Communication TechniquesMistakes made in determining customer satisfactionAssuming We KnowUsing Survey Questions that the company wants the customer to answerSurvey Samples of Customer that are neither random nor representativePoor Question definition and invalid statistical samples can lead the company in the wrong direction.

Communication TechniquesCommunications - A two-way processListen ---> TalkExternal Customers :Provide unsolicited informationMake information available on demandInternal CustomersNewslettersMeetingsStory boards

Communication TechniquesBarriers to effective communicationFailure to be ProactiveCustomer does not know/cannot articulate requirementsFailure to use the Customers LanguagePoor Research DesignIneffective Use of Results

Communication TechniquesBest PracticesDefine Customer RequirementsRegularly measure performance and customer satisfactionSystematically review survey and other customer informationCreate strategies, corrective action and process improvement plans on the basis of the information

MULTIPLE CUSTOMER MANAGEMENT & CONFLICT RESOLUTION

Multiple Customer Management and Conflict ResolutionMultiple Customers - Not OneVital Few (~ 20%) vs Useful Many (~80%)Looking at special needs

Multiple Customer Management and Conflict ResolutionMethodology to followKnow who your best customers are Segment the best customersPrice for profitConsider a strategy to remove excess services from the lower profit customers

Multiple Customer Management and Conflict ResolutionIn most dealings involving people, conflicts will occur.

Multiple Customer Management and Conflict Resolution6 basic ways to resolve a conflictChanging perceptionsAvoiding conflictSmoothingForcing : Win-LoseCompromise : Win-LoseConfrontation and problem-solving

Multiple Customer Management and Conflict ResolutionService Recovery ProcessApologizeListen and empathizeFix the problem quickly and fairlyOffer atonementDeliver on your promisesFollow-up

Multiple Customer Management and Conflict ResolutionResolving conflict helps establish trust and a long-term relationship.Conflict resolution is seldom possible in which the supplier tells the customer Thats the way we do it, take it or leave it.One requires excellent human relations to deal with resolving conflict.

CUSTOMER PARTNERSHIPS

Customer PartnershipsRefers to the relationships that can exist between customers and their suppliers for the mutual benefit of both.

Customer PartnershipsStrategic relationships are known by many names:An alliance : working together for a common purpose.Partnership : Implies a shared fate, mutual benefits and equal relationship.Strategic relationships : Co-operative undertaking which could involve technology, licenses, or supply/marketing agreements.

Customer PartnershipsWhy develop a customer-supplier partnership:A suppliers capabilities might exceed internal capabilities .hence outsource.Cost-cutting might force to look outside.Combining resources may be beneficial to attain technological breakthroughs, enter new markets and/or develop new products/services.

Customer PartnershipsDos of alliances :Take advantage of unique strengthsAdvantage of marketing channelsAdvance of capabilities : technology, skills, etc.

Customer PartnershipsDont of alliances :To correct a weaknessShare licensed technologyRally around certain products

Customer PartnershipsTwo different kinds of partnerships :a)Internal customer partnership : This is between departments.b)External partnerships with suppliers :Mutual benefitsTrust buildingOpen and complete communicationInterdependence of parties

Customer PartnershipsBenefitsCost/Time SavingsBetter products and servicesSupplier improvement

Customer PartnershipsBarriersCustomer dictates - No equalityTrust takes time

CUSTOMER RETENTION

Customer RetentionTotal customer satisfaction is a goal for the customer driven organization. There are two elements that make up Total Quality : good service quality and good product quality. Once customer purchases a service or product from the company, the work should start to retain them for further purchases. Most organizations spend the bulk of their resources on attaining new customers and a smaller amount on retaining customers.

Customer RetentionThe campaign for retention of customers can prove to be a major business decision that effects the company. High customer satisfaction numbers do not necessarily mean the company has good customer retention and good customer loyalty. It is an unreliable indicator.

Customer RetentionUnaware of the importance of customer retention, many customer service programs are geared wrong. It has been found that current customers are worth as much as five times more than new customers. The cost of holding and retaining a current customer is only a quarter of the costs of acquiring a new customer (Industrial Engineering, February 1995).

Customer RetentionThe longer a customer is with you, the more revenue/profit he or she will give you. Another study has shown that companies will boost profits by about 100% by just retaining 5% more of their customers.The life cycle of a customer is defined by 5 stages :Acquisition: converting a prospect to a customer, high costs

Customer RetentionRetention : keeping the customer. A quarter of the cost to acquireAttribution : customer enthusiasm fades as dissatisfaction creeps in Defection : Losing the customerReacquisition : Regaining the customer but at high cost

Customer RetentionThe effort to retain customers requires some effort on the company's part. Over 60% of dissatisfied customers are so sick and tired of poor service that they think it is futile to complain any more. Customers buy expectations, not just products and services.

Customer RetentionStudies indicate that if a problem does happen and it turns out to be a bad experience, the unhappy customer will tell 9 to 10 people about it. A happy customer might only tell five people about his good experience (Sinha J. 1993).

Customer RetentionSome techniques for getting to know your customer better :Don't use your own instincts as research data (you're not the customer).See the world from the customer's side.The higher you are in organization, the more out of touch you become (and arrogantly sure of what the customer wants).

Customer RetentionGo to the source of information (the customer), use multiple techniques of research : focus groups, mail/phone surveys, comment cards, customer exist research.Get customers to really talk : 96% of unhappy customers won't lodge a complaint.

Customer RetentionDo research to retain customers : Determine how satisfied customers were. Conduct research on customer expectations : friendly clerks, clean rest rooms, pricing, etc.Develop a customer profile : a customer information file can contain all pertinent data on the customer.

Customer RetentionShare the results of customer research studies but do not go overboard on the details and measurement.Use the research.Coordinate research efforts.Sometimes research does not help the situation.

Customer RetentionCustomer LoyaltyThe value of a loyal customer is not measured on the basis of one encounter but rather on his or her lifetime worth. Loyal customers account for a high proportion of sales and profit growth. Customer retention generates repeat sales.

Customer RetentionCustomer LoyaltyIt is cheaper to retain customers e.g in life insurance, new policy holders become profitable in three years and in the credit card business, the break-even point for a new customer is six years, due to high marketing and bad debt cost.

Customer RetentionCustomer LoyaltyCustomer loyalty is something that must be demonstrated through an act of execution, trust or delightful service. They could become partners with you through their journey as a customer.

Zone of defectionZone of indifferenceZone of affectionSatisfaction MeasureCustomer RetentionA Satisfied Customer Is Loyal1extremely dissatisfied2somewhat dissatisfied3slightly dissatisfied4satisfied5very satisfied100%

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terroristLoyalty Retentionapostle

CUSTOMERS

INTRODUCTION

Customers are the most important people in any institution. Most companies have generally forgotten this fact for the main purpose of business is described as profits. Business school graduates know that profits drive business and what is good for business is good generally. The important thing to understand is that profits may be important but many organizations can exist without them e.g not-for-profit enterprises such as hospitals have existed. However, companies cannot survive without customers.

The Japanese initially have made everyone rethink some of the theorems of business upgradation. One of these is the renewed emphasis on customers thus element of customer satisfaction is advanced to the forefront of the quality efforts and the emphasis and quality has moved from product quality to customer satisfaction. Most companies are in a very evolutionary stage and customer satisfaction and more attention needs to be paid in this critical area.

With respect to the emphasized goal on customer satisfaction it is important to know that a study done by the strategic planning institution of Cambridge, Massachusetts in cooperation with Harvard Business School found that the analysis were 3,000 strategic business units in 450 companies across the industries showed that the top 20% of the business units with high customer perception of quality average a 32% return on investment while the bottom40% averaged only a 14% return on investment (Whiteley, 1991).