Chapter 3

Focusing on Customers

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 Seatwork
• Why is customer focus considered as the most
important principle of quality management?
• Name an example of a service or product
failure in the news and tell something how the
company/organization addressed problem to
recover customer satisfaction.

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 Product Failure

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 What do the philosophies of Deming, Juran, and
Crosby Have in common?

• Customer Focused

• Commitment and Leadership from Top

Management

• Continuous Improvement Based on Facts

• Team Based
THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson LearningTM
 Definitions of Quality
• Transcendent definition: excellence
• Product-based definition: quantities of product attributes
• User-based definition: fitness for intended use
• Value-based definition: quality vs. price
• Customer benefit package
• Manufacturing-based definition: conformance to
specifications
• Customer Perspective: meeting and
exceeding customer expectations

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 Customer Focus
• Most important principle of quality management
• Customer is the ultimate judge of the quality of
goods and services
“WITHOUT CUSTOMERS, YOU DON’T’ HAVE A
BUSINESS”
• In Japanese “Okyakusama, means both “customer
and “ honorable guest”
• Customer focus is a key requirement of ISO
9000:2000
“CUSTOMER SATISFACTION”
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 Customer engagement is the depth of the
relationship a customer has with a brand.

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 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.

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 Leading Practices (1 of 2)
1. Define and segment key customer groups
and markets
2. Understand the voice of the customer
(VOC) – Gathering and Analyzing
3. Understand linkages between VOC and
design, production, and delivery

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 Leading Practices (2 of 2)
4. Build relationships through commitments,
provide accessibility to people and
information, set service standards, and
follow-up on transactions
5. Effective complaint management processes
6. Measure customer satisfaction for
improvement

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 Identifying Customer-Supplier Relationships
• 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?

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 (1) Customer Segmentation
• Customers generally have different
requirements and expectations
• Company usually cannot satisfy all customers
with the same products or services

So therefore , organizations must segment customers

into natural groups and customize products or services
to better able to respond customers’ needs

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 Customer Segmentation is the practice of dividing a
customer base into groups of individuals that are
similar in specific ways relevant to marketing.

• Demographics
• Geography
• Volumes
• Profit potential

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 Customer Segmentation
• Juran suggested classifying customers into
two main groups:
– Vital Few
– Useful many

• Other way is by profitability

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

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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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 (2) Kano Model of Customer Needs
• Dissatisfiers: expected requirements
“must haves”
• Satisfiers: expressed requirements
“wants”
• Exciters/delighters: unexpected features
“never thought of”

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 Customer Listening Posts – Voice of
the Customer
• Comment cards and formal surveys
• Focus groups
• Direct customer contact
• Field intelligence
• Complaint analysis
• Internet monitoring

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 Analyzing Customer Needs
• An affinity diagram shows the relationships
between information, opinions, problems,
solutions, and issues by placing them in
related groups. It allows a broad range of
ideas to be organized so they can be more
effectively analyzed

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 Tools for Classifying
Customer Requirements

Affinity diagram Tree diagram

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 Affinity Diagram

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 (3)Linkage of VOC to internal process
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
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 (4&5) Customer Relationship
Management
• Accessibility and commitments (queries will be
answered)
• Relevant customer contact requirements; Selecting
and developing customer contact
employees(behavior and attitudes of employees)
– Technical – knocking, answering phone, addressing
complaints within 24 hours or less
– Behavioral – greeting customers
• Effective complaint management (Service Recovery)
• Strategic partnerships and alliances (Customer-
supplier relationships)
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 Apologize for customer inconvenience

Listen, empathize, ask clarifying questions

Solve problem quickly in partnership with customer

Offer atonement

Keep the promise

Follow up

Prevent recurrence

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 Strategic partnerships and alliances
• A Starbucks-United Airlines alliance has resulted in their
coffee being offered on flights with the Starbucks logo on the
cups and a partnership with Kraft foods has resulted in
Starbucks coffee being marketed in grocery stores.

• Hewlett Packard and Disney. When Disney wanted to develop

a virtual attraction called Mission: SPACE, Disney Imagineers
and HP engineers relied on HP's IT architecture, servers and
workstations to create Disney's most technologically advanced
attraction.

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

Scale: 1 = poor ….5 = excellent

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 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?

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 Difficulties with Customer
Satisfaction Measurement
• Poor measurement schemes (sample size and scale)
• 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 (relates to future) with satisfaction
(relates only to future

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 Performance-Importance Analysis
Performance
Low High

Low Who cares? Overkill

Importance

High Vulnerable Strengths

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 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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