Chapter 7

Focusing on Customers

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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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 Process Vs. Customer
Listen to the voice Listen to the voice
of the customer Of the process
Predict customer Predict process
behavior behavior

Determine customer Determine optimum

Quality expectations Process outcomes
Propose and test
Process improvement

Three-part customer satisfaction system

1. company processes (operation)
I. company employees
II. customer expectation

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

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 Internal Customers Conflict
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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 Defining Quality
The several dimensions of quality:
People-focused management system
Focus on increasing customer satisfaction
and reducing costs
A systems approach that integrates
organizational functions and the entire
supply chain
Stresses learning and adaptation to change
Based on the scientific method

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 A Quality focus
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.
Marker break points, where improving
performance will change customer behavior.
Common theme: integrate the many individual or
group efforts that may have their own priority.
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 A Quality Focus

Perceived Customer
quality complaints

Perceived Customer
value satisfaction

Customer
expectations Customer
loyalty

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The Driver of Customer Satisfaction (1 of 2)
Key excellence indicators for customer satisfaction
Service standards derived from customer requirements
Understanding customer requirement
Thoroughness/objectivity
Customer types
Product/service features
Front-line empowerment (resolution)
Strategic infrastructure support for front-line employees
Attention to hiring, training, attitude, morals for
employees
High levels of satisfaction customer awards

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The Driver of Customer Satisfaction (2 of 2)
Proactive management of relationships with
customer
Use of all listening posts
Surveys
Product/service follow ups
Complaints
Turnover of customers
Employees
Quality requirements of market segments
Survey go beyond current customers
Commitment to customer
(trust/confidence/making good on word)
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 Getting Employee Input
Employee input can be solicited concurrent with
customer research
Identify barriers and solution to service and product
problem
Serving as a customer-company interface
Employee surveys can measure
(1)TQM effectiveness (2) skill and behaviors
improvement (3) effectiveness of team problem-
solving process (4) outcomes of training (5) needs of
internal customer

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Measuring Customer Satisfaction
Discover customer perceptions of business
effectiveness
Compare companys performance relative
to competitors
Identify areas for improvement
Track trends to determine if changes result
in improvements

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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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 The Role Of Marketing And Sales
Marketing and sales are function charged with
gathering customer input but in many firms the people
in these function are unfamiliar with quality
improvement. Shortcomings in marketing as identified
by critics include:
Partnering arrangement with dealers and distribution channels
Focusing on the physical characteristics of products and
overlooking the related services
Losing a sense of customer price sensitivity
Not measuring or certifying suppliers such as advertisers
Failing to perform cost/benefit analyses on promotion costs
Losing markets to generics and house brands

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 The Sales Process
TQM become a part of sales and marketing
processes -- Selling, advertising, promoting,
innovating, distribution, pricing, and
packaging as they relate to customer
satisfaction. sales a process that lends itself
to analysis and improvement for customer
satisfaction.

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Service Quality And Customer Retention
Service companies measure cost of customers
who will not come back because pf poor
services. These are customer defections and
they have a substantial impact on cost and
profit. Indeed, it is estimated that customer
defections can have a greater impact than
economies of scale, market share, or unit cost.
Many companies fail to measure defections,
determine the cause of defections, and
improve the process to reduce defections.

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 Customer Retention And Profitability
Internal Service Quality

Employee Customer
Satisfaction Employee Retention
Retention
External Service Quality
Profit
Customer Satisfaction

System

Profitability and customer Retention

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 Buyer-Supplier Relationships

Your Inputs Your Outputs Your

Suppliers Processes Customers

Requirements Requirements
and feedback and feedback

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