CHAPTER 4

Focusing on Customers 2

CHAPTER 5Focusing on CustomersTeaching NotesThis chapter focuses on customer satisfaction. Until a few years ago, this was a topic that was thought to be only a marketing activity and out of the area of responsibility of quality, human resources, or production and operations managers. Things changed when the TQ movement got underway. What was formerly reserved for a few specialists in "consumer behavior" within the "marketing research" discipline became a topic of concern to quality professionals and managers at every level. The focus on TQ has helped to change the former attitude. Students who are not marketing majors need to be made aware of this important refocusing of management's attention. Objectives of this chapter should be to:

Raise students' awareness of the concept that satisfying customers is perhaps the most important competitive goal of any business. To achieve customer satisfaction, an organization must identify customers' needs (the consumer benefit package), design the production and service systems to meet or exceed customer expectations, continually improve the consumer benefit package, improve the quality of internal operations and build good relationships.

Learn that key customer-focused practices for performance excellence include identifying the most important customer groups and market segments; understanding the voice of the customer through effective listening and learning strategies; understanding the linkages between customer needs and design/production/delivery processes; creating a customer-focused culture that contributes to customer engagement; managing and resolving complaints effectively, and measuring customer satisfaction, engagement, and dissatisfaction, and acting on the results to improve organizational processes.

Develop an appreciation for customer engagement, which refers to customers investment in, or commitment to, a brand and product offerings. Characteristics of customer engagement include 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. Define the customer benefit package as the total package of products and services that a business offers, and includes the physical product and its quality dimensions; pre-sale support, such as ease of ordering; rapid, on-time, and accurate delivery; and post-sale support, such as field service, warranties, and technical support. The customer benefit package influences perceptions of quality.

Introduce the American Customer Satisfaction Index (ACSI) - a national measure of customer satisfaction and a type of benchmark that can be useful to firms, industries, and consumers.

Define product quality dimensions including performance, features, reliability, conformance, durability, serviceability, and aesthetics. Service quality dimensions are reliability, assurance, tangibles, empathy, and responsiveness Study the Kano model, which segments customer requirements into dissatisfiers, satisfiers, and exciters/delighters. As customers become familiar with them, exciters/delighters become satisfiers over time. Eventually, satisfiers become dissatisfiers. Companies must take special efforts to develop products and services that truly excite/delight customers.

Know that gathering customer information is performed by various methods, or listening posts, including comment cards and formal surveys, focus groups, direct customer contact, field intelligence, and complaint analysis. Customers needs are expressed in the voice of the customer Profitability can be measured based on a net present value of the customer calculation. Affinity diagrams and tree diagrams are helpful tools for classifying customer requirements.

Learn that there are differences between consumers, who are end users of products and services; External customers who are outside organizations and fall between the organization and the consumer, and who have distinct needs and expectations; and Internal customers who are people, departments, or processes that depend on others to serve consumers and external customers.

Help students understand that customers form perceptions (perceived quality) of the quality of goods and services by comparing their expectations (expected quality) with outcomes they receive (actual quality). It is essential that careful attention be paid to design and production processes, as well as customer feedback, since positive perceptual differences can lead to satisfaction while negative ones can lead to dissatisfaction.

Appreciate that good customer satisfaction measures must be designed scientifically and include performance and importance measures. A good measurement process (often called a Customer Relationship Management [CRM] system) will provide actionable information to improve a company's operations and products to further satisfy its customers. Many customer satisfaction efforts fail due to poor measurement, useless questions, lack of proper focus, no comparative data, inattention to potential and former customers, and confusing satisfaction with loyalty.

Customer perceived value (CPV) is an alternative to traditional satisfaction measurement, and 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. CPV methodology identifies the most important product attributes that prospective customers use to compare one offering against another and provides a basis for strategic decisions.

Study how customer focus plays a vital role in each of the three major quality frameworks, the Baldrige process, ISO 9000, and Six Sigma, although they are treated in different ways within each system. The Baldrige includes Category 3, Customer and Market Focus, as well as strategic planning and deployment in goal setting and business results. In ISO 9000, the responsibility for customer focus is on senior leadership. In the Product Realization section, 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 also establish procedures for communicating with customers about product information and other inquiries, and for obtaining feedback, including complaints. In the Measurement, Analysis, and Improvement section, the standards require that the organization monitor customer perceptions as to whether the organization as met customer requirements; that is, customer satisfaction. In Six Sigma processes, customers are sometimes hidden because the focus tends to be on the improvement projects and measurement issues. However, a focus on the customer is vital at every DMAIC stage of Six Sigma projects. A fundamental aspect of Six Sigma methodology is identification of critical to quality (CTQ) characteristics that are vital to customer satisfaction.

The Instructors Resource materials also contain Baldrige video clips that can be used to supplement lectures. One of those, presenting Baldrige award recipient, Pals Sudden Service, has a number of scenes that show how a quick service restaurant can be customer focused.

ANSWERS TO QUALITY IN PRACTICE KEY ISSUESUnderstanding the Voice of the Customer at LaRosas Pizzerias1. The in-depth interviews required by the VOC methodology have strengths and limitations, just as any consumer research technique does. It is a form of focus group. As pointed out in the chapter, a focus group is a panel of individuals (customers or non-customers) who answer questions about a company's products and services as well as those of competitors. Focus groups offer a substantial advantage by providing the direct voice of the customer to an organization. A disadvantage of focus groups is their higher cost of implementation compared to other approaches. Also, the limited sample of customers means that some important aspects of the product and/or service may not be picked up on from the VOC group, but would be noticed in a broader survey.

2.LaRosas was able to identify and prioritize the most important customer requirements. In addition the perspective was changed from a product-out to a market-in mentality, forming the basis for a decision to pursue a directly related growth strategy. Three years of effort had been required to settle on a growth strategy that could be agreed on by top management. Finally, radical design changes in the new restaurant facilities were incorporated as a result of the VOC information that was collected.

3. Conducting a mock VOC study will be an interesting exercise that can help students understand the difficulties and benefits of action research in order to listen to, and obtain information from actual customers and consumers.

Customer Focus at Amazon.com

1. Amazons CRM software helps in multiple ways to gain market share and maintain competitive advantage over their rivals. The list of the characteristics that make up their vision of customer service points to numerous features that are hard to duplicate in conventional websites or store chains. For instance, Amazon:

has deep selection that is unconstrained by shelf space.

turns their inventory 19 times in a year.

personalizes the store for every customer.

trades real estate for technology

displays customer reviews critical of their products.

allows customers can make a purchase with a few seconds and one click.

puts used products next to new ones so customers can choose.

shares their prime real estate, their product detail pages, with third parties, and, if they can offer better value, they let them

adopts leading-edge technology for the companys website

has served customer needs by being one of the early pioneers to develop software for collaborative filtering of customer data

Thus, the firm demonstrates the advantages of their CRM approach through exploiting technology, as characterized in the text:

Segmenting markets based on demographic and behavioral characteristics,

Tracking sales trends and advertising effectiveness by customer and market segment,

Identifying which customers should be the focus of targeted marketing initiatives with predicted high customer response rates,

Forecasting customer retention (and defection) rates and provides feedback as to why customers leave a company,

Studying which goods and services are purchased together, leading to good ways to bundle them, and

Studying and predicting what Web characteristics are most attractive to customers and how the Web site might be improved,

2. Amazon.coms operating efficiencies in order fulfillment activities are almost bound to improve over time. The capabilities of its high-tech warehouses, such as its nearly perfect process for sorting multiple item orders, create a built-in method for driving out unnecessary costs. As it expands its offerings and adds more retail partners, Amazon's fulfillment capabilities pay dividends to its partners, as well as adding revenues to Amazon.

3.Customer privacy risks, besides the ones mentioned in the case, that Amazon.com must guard against include an increasing number of threats in order to continue to grow its business. These include the growing sophistication of computer hackers, the uncertainties about government surveillance, and the temptations to make potentially lucrative deals to share their database with partners. Hackers have already broken into some very secure e-commerce systems and stolen large numbers of credit card numbers and records. Expanded authority for government surveillance of on-line transactions may require some difficult decisions to be made about the amount of privacy that can be guaranteed to customers. The temptation of partners who may want access to Amazon.coms database, but where Amazon.com cannot guarantee privacy its customers is a troublesome prospect.

ANSWERS TO REVIEW QUESTIONS1. Key customer-focused practices for performance excellence include identifying the most important customer groups and market segments; understanding the voice of the customer through effective listening and learning strategies; understanding the linkages between customer needs and design/production/delivery processes; creating a customer-focused culture that contributes to customer engagement; managing and resolving complaints effectively, and measuring customer satisfaction, engagement, and dissatisfaction, and acting on the results to improve organizational processes. In a sense, Park Place Lexus and Mercy Health Systems reflect all of these practices. However, Park Place Lexus has excelled in measuring customer satisfaction, engagement and dissatisfaction and acting on results to improve organizational processes. Mercy Health Systems is particularly adept at understanding the linkages between customer needs and design/production/delivery processes.2.Customer satisfaction occurs when products and services meet or exceed customer expectations. Loyal customers spend more, refer new clients, and are less costly to do business with. Poor quality products and services, on the other hand, lead to customer dissatisfaction in the form of complaints, returns, and unfavorable word-of-mouth publicity. Dissatisfied customers purchase from competitors.

3.Customer engagement refers to customers investment in or commitment to a brand and product offerings. Characteristics of customer engagement include 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. Customer satisfaction, according to research leading to the development of the ACSI, is determined by: customer expectations, perceived quality, and perceived value. Thus, customers may be satisfied, but not engaged, or loyal to a particular organization or brand. 4.The consumer benefit package is the total package of products and services that a business offers, and is based on a comparison of price and features with competitive offerings. The consumer benefit package influences the perception of quality and includes the physical product and its quality dimensions; pre-sale support, such as ease of ordering; rapid, on-time, and accurate delivery; and post-sale support, such as field service, warranties, and technical support.

5.The American Customer Satisfaction Index is a national measure of customer satisfaction, linking expectations, perceived quality, and perceived value to customer satisfaction, which in turn is linked to customer loyalty and profitability. The econometric model used to produce ACSI links customer satisfaction to its determinants: customer expectations, perceived quality, and perceived value. Customer satisfaction, in turn, is linked to customer loyalty, which has an impact on profitability. You may want to review an excellent article in Fortune magazine relating the history and development of the ACSI and its impact [Wilton Woods. After All Youve Done for Your Customers, Why are They Still Not Happy? Fortune, December 11, 1995, 178-182]. This was the first cross-industry benchmark in the United States to measure customer satisfaction. In January 1998 it was announced that the Arthur Andersen consulting firm would join the earlier sponsors in funding and marketing the index. Similar indices had previously existed in Sweden and Germany, and in April, 2000, a new European Customer Satisfaction Model was announced. Both European Community and Non European Community companies that have substantial European Market Share base it on customer evaluations of the quality of goods and services that are purchased in Europe and produced.

As pointed out in the article: A test: if you cant demonstrate the link between increased customer satisfaction and improved financial results, youre not measuring customer satisfaction correctly. Happy customers should exhibit at least one of three measurable characteristics: loyalty (retention rates), increased business (share of wallet), and lack of susceptibility to your rivals blandishments (price tolerance). See ACSIs web site at http://www.theacsi.org for most recent data.

6.A company can expect to encounter external customers at the organizational level, who, as previously mentioned, may include both consumers and other companies within the "chain of customers." At the process level, internal customers or divisions within the company who receive products or services from suppliers within the company must be recognized and satisfied or delighted. If an organization remembers that its customers include both its employees as well as the public, then it will seek to consciously maintain a customer-focused work environment at the performer level, where each employee receives inputs from others and produces some output for individual internal customers.7.In AT&T's customer-supplier model, your suppliers provide inputs into your process. The process then provides outputs to your customers. The customers provide requirements & feedback on your process, and you, in turn, provide requirements & feedback to your suppliers.

8.Customers should be segmented because of, and according to, their different requirements and expectations. A company usually cannot satisfy all customers with the same products or services. Customer segmentation might be based on geography, demographic factors, ways in which products are used, volumes, or expected levels of service.9.The dimensions of quality defined by Garvin are:

a) Performance: a products primary operating characteristics. Using an automobile as an example, these would include such things as acceleration, braking distance, steering, and handling.

b) Features: the bells and whistles of a product. A car may have power options, a tape or CD deck, antilock brakes, and reclining seats.

c) Reliability: the probability of a products surviving over a specified period of time under stated conditions of use. A cars ability to start on cold days and frequency of failures are reliability factors.

d) Conformance: the degree to which physical and performance characteristics of a product match pre-established standards. A cars fit and finish and freedom from noises and squeaks can reflect this.

e) Durability: the amount of use one gets from a product before it physically deteriorates or until replacement is preferable. For a car this might include corrosion resistance and the long wear of upholstery fabric.

f) Serviceability: the speed, courtesy, and competence of repair work. An automobile owner might be concerned with access to spare parts, the number of miles between major maintenance services, and the expense of service.

g) Aesthetics: how a product looks, feels, sounds, tastes, or smells. A cars color, instrument panel design, control placement, and feel of the road, for example, may make it aesthetically pleasing.

The key dimensions of service quality include:

1. Reliability: the ability to provide what was promised, dependably and accurately. Examples include customer service representatives responding in the promised time, following customer instructions, providing error-free invoices and statements, and making repairs correctly the first time.

2. Assurance: the knowledge and courtesy of employees, and their ability to convey trust and confidence. Examples include the ability to answer questions, having the capabilities to do the necessary work, monitoring credit card transactions to avoid possible fraud, and being polite and pleasant during customer transactions.

3. Tangibles: the physical facilities and equipment, and the appearance of personnel. Tangibles include attractive facilities, appropriately dressed employees, and well-designed forms that are easy to read and interpret.

4. Empathy: the degree of caring and individual attention provided to customers. Some examples might be the willingness to schedule deliveries at the customers convenience, explaining technical jargon in laypersons language, and recognizing regular customers by name.

5. Responsiveness: the willingness to help customers and provide prompt service. Examples include acting quickly to resolve problems, promptly crediting returned merchandise, and rapidly replacing defective products.

Similarities are that they both require identification of the voice of the customer and translation of customer needs into product/service specifications to be met or exceeded. The differences revolve around the fact that Garvins dimensions were developed primarily for tangible products. Therefore, they emphasize characteristics that are subject to direct, tangible measurements, such as conformance, reliability, and durability. The service dimensions emphasize attitudes and feelings about the services received, such as assurance, empathy and responsiveness. Although they are real they are more difficult to measure.

10. Noriaki Kano, a Japanese professor, has suggested three classes of customer requirements:

DissatisfiersRequirements that are expected in a product or service. If these features are not present, the customer is dissatisfied.

SatisfiersRequirements that customers say they want, but secretly do not expect. Fulfilling these requirements creates satisfaction.

Exciters/delightersNew or innovative features that customers do not expect. The presence of unexpected features leads to high perceptions of quality.

The focus, then, of quality management is to continually research and determine these requirements and develop them to their fullest extent.

11. As suggested in answer 9 above, the voice of the customer is an expression of the product or service characteristics that are considered important by customers. They are often expressed in laymans terms and must be translated into product specifications that can be used in design, manufacture, and delivery of the product or service.

12.The major listening and learning approaches to gather customer information include:

Comment cards and formal surveys--These are easy ways to solicit information on customer satisfaction and perceptions of the importance of various quality dimensions. However, only a small percentage of customers regularly respond to such surveys.

Focus groups--A focus group is a panel of individuals (customers or non-customers) who answer questions about a company's products and services as well as those of competitors. Focus groups offer a substantial advantage by providing the direct voice of the customer to an organization. A disadvantage of focus groups is their higher cost of implementation compared to other approaches.

Direct customer contact--In customer-driven companies, top executives commonly visit with customers personally. This approach also works well with the rank-and-file employees.

Field intelligence--Any employee who comes in direct contact with customers can obtain information simply by engaging in conversation, observing, and listening to customers. The effectiveness of this method depends on a culture that encourages open communications with superiors.

Study complaints--These allow companies to learn about product failures and service problems. The downside, of course, is that you hear of customer dissatisfaction only after the fact.

13.Affinity diagrams and tree diagrams (see Chapter 5 Bonus materials on the Premium website for additional details on the 7 Management Tools) are used to organize customer requirements into logical categories. An affinity diagram allows teams to sift through large volumes of information, and identify key quality issues and their elements. Tree diagrams, showing hierarchical structures of facts and ideas, are used in designing implementation plans for projects.

14.The customer-driven quality cycle involves the interaction between expected quality, actual quality and perceived quality. Expected quality includes true customer needs and expectations, that is, what the customer assumes will be received from the product. Actual quality is the outcome of the process and what is delivered to the customer. Perceived quality is actual quality minus expected quality. If the amount of actual quality provided is equal to or more than the expected quality, the customer perceives positive satisfaction. If the amount of actual quality provided is less than the expected quality, the customer perceives negative or dis-satisfaction.

In the customer-driven quality cycle, (1) expected quality is identified, and (2) translated into product/service specifications (design quality) to produce (3) output. Customer perceptions concerning the output (perceived quality) are then measured as being positive or negative, and necessary improvements are continually built into the first three steps of the process.

15.A "moment of truth," in a service industry, is the moment when a customer comes in contact, either directly (i.e. face-to-face, by telephone) or indirectly (i.e. by letter or fax), with an employee of the company. This is the make-or-break moment for customer satisfaction. Problems result from unkept promises, failure to provide full service, service not provided when needed, incorrectly or incompletely performed service, or failure to convey the correct information.

16.Accessibility and commitments are needed in order to build strong customer relationships. Organizations that truly believe in the quality of their products make sincere commitments to their customers. Effective commitments address the principal concerns of customers, are free from conditions that might weaken customers trust and confidence, and are communicated clearly and simply to customers. A customer commitment might guarantee that calls or e-mail inquiries will be returned promptly, provide explicit guarantees and warranties, or give extraordinary guarantees that promise exceptional, uncompromising quality and customer satisfaction, and back that promise with a payout with few, if any, strings attached. For example, L.L. Beans guarantee is: Everything we sell is backed by a 100 percent unconditional guarantee. We do not want you to have anything from L.L. Bean that is not completely satisfactory. Return anything you buy from us at any time for any reason it proves otherwise.

Customer-focused organizations make it easy for customers to do business. Many, like Procter & Gamble, install a toll-free number for its products, or use e-mail and website access are the media of choice for many consumers. Premier, Inc. provides a wide variety of avenues for customers to seek assistance, conduct business, and make complaints or suggestions. These include toll-free telephone, Internet, a Customer Solution Center, customer advisory committee meetings, product user group meetings, field staff site visits, technical assistance fax, regional performance improvement forums, and product support centers. The City of Coral Springs provides a website, CityTV, CityRadio, CityBlog, Customer Care Center, a quarterly mangaine, annual report, neighborhood and business meetings, and advisory boards and committees.

17. Customer contact employees are the face of the company to customers. This group may include any employee who comes in direct contact with customers, such as salespeople, repair technicians, telephone operators, and receptionists. They are critical because, not only do they take customer orders, field inquiries and complaints, and often deliver the product or service, but they can also obtain useful information that helps translate the voice of the customer simply by engaging in conversation and listening to customers. The effectiveness of this method depends upon a culture that encourages open communication with superiors.

18.Good customer relationship management depends on the quality of training of customer-contact personnel. Many companies begin with the recruiting process, selecting those employees who show the ability and desire to develop good customer relationships. Companies committed to customer relationship management ensure that customer-contact employees understand the products and services well enough to answer any question, develop good listening and problem recovery skills, and feel able to handle problems. As mentioned several time, The Ritz-Carlton Hotel Company, L.L.C. is one of the benchmark organizations for training customer contact employees. Empowering employees allows them to make decisions on their own to satisfy customers, who dislike being transferred to a seemingly endless number of employees to obtain information or resolve a problem.

19.Customer contact requirements are measurable performance levels or expectations that define the quality of customer contact with representatives of an organization. These might include technical requirements such as response time (answering the telephone within two rings), or behavioral requirements (using a customers name whenever possible). Customer needs and expectations form the basis of measurable contact requirements. They are important because companies must communicate these requirements to all customer-contact employees, they must then be used to maintain the consistency and effectiveness of their standards, and companies must continually reinforce their standards. Additionally, many customer-contact employees depend on internal customers for support, who also must understand the role they play in meeting the requirements. Finally, companies must generally implement a process for tracking adherence to the requirements and providing feedback to the employees to improve their performance. 20.Companies should make it easy for customers to complain both for short-run customer satisfaction and for long-run process/product improvement reasons. By listening to, and resolving complaints quickly, companies may retain dissatisfied customers. Furthermore it may cut down the negative word-of-mouth advertising about the problem. Complaints also provide a valuable source of product and process improvement ideas. A generic complaint management process similar to that used by BI (Figure 5.7) could be developed. Steps include: a) apologize; b) listen, empathize, clarify; c) solve problem quickly; d) offer atonement; e) keep the promise; f) follow up; g) prevent reoccurrence.

21. Service recovery is very important, according to recent research. Studies in the service management literature suggest that customers who rated service quality highly also had the highest expectations for service recovery. Loyal customers are most likely to lose loyalty when problems are not resolved, but are most likely to increase or maintain loyalty whenever the problem is deemed to have been resolved successfully. However, non-loyal customers show the greatest likelihood of decreasing their loyalty even when a failure is resolved. This suggests that there is much to gain from responding to service failures to non-loyal customers, but it also highlights how difficult this may be to accomplish.22.Strategic partnerships and alliances are useful to organizations because it permits them to look outside their organization for assistance with non-critical support process, thus allowing more time to focus on improving their own core competencies. In addition, the organization can often obtain access to technology or distribution channels not available to them internally, share risks in new investment and product development, improve products based on supplier capability, and reduce costs through better communications.

23. There are several issues associated with customer focus in e-commerce. In many cases, customer service and understanding of the voice of the customer has not kept up with the expanding technological capabilities to advertise and deliver products. Thus, customers who are hoping to experience quick, easy, reliable transactions that will reduce stress and save time and money, are finding that the opposite is happening. Recent studies have shown the importance of customer focus and the limitations of poor website design and inadequate service to these customers.24.CRM software is designed to help companies increase customer loyalty, target their most profitable customers, and streamline customer communication processes. A typical CRM system includes market segmentation and analysis, customer service and relationship building, effective complaint resolution, cross-selling goods and services, order processing, and field service. CRM helps firms gain and maintain competitive advantage by:

Segmenting markets based on demographic and behavioral characteristics

Tracking sales trends and advertising effectiveness by customer and market segment

Identifying which customers should be the focus of targeted marketing initiatives with predicted high customer response rates

Forecasting customer retention (and defection) rates and provides feedback as to why customers leave a company

Studying which goods and services are purchased together, leading to good ways to bundle them

Studying and predicting what Web characteristics are most attractive to customers and how the Web site might be improved

25.By measuring customer satisfaction, a company can learn how pleased or dissatisfied its customers are with products or services. It can discover customer perceptions of how well the business is doing in meeting customer needs, discover areas for improvement, and also track trends to determine if changes actually result in improvements. Steps in designing effective customer surveys include:

Determine the purpose

Address who should conduct the survey

Define the sample frame

Select the appropriate survey instrument

Design proper questions with proper wording

Develop measurable service characteristics (when applicable)

Design a reporting format and data entry methods

26. Customer satisfaction survey questions must be properly worded to achieve actionable results. Actionable results mean that 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.

27.Typically, only firms that are more customer-sensitive than most recognize the need to analyze their customer satisfaction surveys to determine the relationship between importance and performance (the FP&L Quality in Practice incident in the Bonus Materials is an excellent example). The concept simply recognizes that certain key quality characteristics are of major significance to customers, while others are of little or no interest. If companies do not perform well on the significant characteristics, customers perceive that the organization has poor quality, even if they perform very well on other dimensions.

28.Many customer satisfaction efforts fail due to poor measurement, useless questions, lack of proper focus, no comparative data, inattention to potential and former customers, and confusing satisfaction with loyalty.

29. Customer perceived value measures how customers assess benefitssuch as product performance, ease of use, or time savingsagainst costs, such as purchase price, installation cost or time, and so on, in making purchase decisions. Organizations can benefit from measuring it because it provides an alternative to traditional customer satisfaction measurement that focuses more on customer loyalty than on satisfaction. For example, sellers that provide the greatest CPV at the time of the purchasing decision always win the sale. CPV measurement includes potential buyers rather than just existing customers, is forward-looking rather than retrospective, and examines choices relative to alternatives rather than relative to expectations. Typical questions that are asked include What benefits are important to you? and How well do you believe that each product or supplier will deliver those benefits? and focus on perceptions of future value rather than past experiences. CPV methodology identifies the most important product attributes that prospective customers use to compare one offering against another, and their relative importance and performance.30. In the Baldrige Award Criteria, Item 3.1, Customer Engagement, examines an organizations processes for determining product offerings and mechanisms for customer support, and how an organization builds a customer-focused culture. The criteria ask the key question of: How do you engage customers to serve their needs and build relationships? The item also asks how an organization creates a customer-focused culture that contributes to customer engagement and builds and manages customer relationships and engagement. Finally, the item asks how an organization improves its customer-focused approaches so that it can keep current with changing business needs and directions. Continuous improvement of business processes is a core concept of the Baldrige criteria.Baldrige Award Criteria Item 3.2, Voice of the Customer, examines an organizations processes for listening to customers and acquiring satisfaction and dissatisfaction information, and using this information to improve marketplace success. It asks the key question: How do you obtain and use information from your customers? It addresses how organizations listen to customers to obtain actionable feedback, management complaints and service recovery processes, determine customer satisfaction and engagement and compare results with competitors and industry benchmarks, and measure customer dissatisfaction for use in improvement.

Customer focus is a key requirement of ISO 9000:2000. For example, in the Management Responsibility section, one requirement is Top management shall ensure that customer requirements are determined and are met with the aim of enhancing customer satisfaction. This puts the responsibility for customer focus on senior leadership. In the Product Realization section, 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. In addition, the organization must establish procedures for communicating with customers about product information and other inquiries, and for obtaining feedback, including complaints. In the Measurement, Analysis, and Improvement sections, the standards require that the organization monitor customer perceptions as to whether the organization has met customer requirements; that is, customer satisfaction. Note that even though some basic customer-focused processes are required, the scope is not as broad as in Baldrige.

Customers are sometimes a hidden part of Six Sigma efforts, because the focus tends to be on the improvement projects and measurement issues. However, a focus on the customer is vital at every stage of Six Sigma projects. For instance, product design (and design of associated manufacturing or service delivery processes) will be far more successful if the voice of the customer, is included. A fundamental aspect of Six Sigma methodology is identification of critical to quality (CTQ) characteristics that are vital to customer satisfaction.

During the process of producing a product or service, it is important to gather information needed by internal customers for process control activities to ensure that the product is meeting the CTQs. If the CTQs are not being met, then the organization needs to develop a better measurement and control system. Often, internal data that can improve control processessuch as whether materials arrived on time, how often an accounting report had incorrect data, or how many employees were absent from workare kept in departmental records, where they are difficult to access. The solution may require a Six Sigma study to determine the types of data and information that are needed to provide necessary monitoring and control, and how the information gap (if one exists) can be closed. Finally, at the delivery stage, customer satisfaction measures can provide clear information about the success of Six Sigma efforts. In fact, many common Six Sigma projects revolve around developing appropriate customer satisfaction measurement processes, as well as trying to improve the design and delivery of CTQs identified through voice of the customer processes.

The focus for Baldrige, ISO 9000 and Six Sigma is on obtaining actionable information from customers. Thus, an organization should be able to tie the information to key business processes, and should be able to determine cost/revenue implications for improvement priority setting. Complaint aggregation, analysis, and root cause determination should lead to effective elimination of the causes of complaints and to priority setting for process, product, and service improvements. Successful outcomes require effective deployment of information throughout the organization.

A key aspect of customer satisfaction determination is satisfaction relative to competitors and competing or alternative offerings. Such information might be derived from comparative studies or from independent studies. The factors that lead to customer preference are of critical importance in understanding factors that drive markets and potentially affect longer-term competitiveness.

ANSWERS TO DISCUSSION QUESTIONS1.One customer-focused organization with which this author has done business is (believe it or not) a doctors office! This cardiologist effectively uses his front-office staff, medical assistant, and physiotherapists to give the patient the best possible experience under sometimes-extreme medical conditions. The front-office staff has a modern computer system, so records are almost never lost or mixed up. Reminders are delivered via telephone a few days prior to appointments. The medical assistant is trained to use the computer system so that she has full information on each patient, is able to set up future appointments without handing the patient off to the front office staff, explains the medical procedure after the doctor has examined the patient, and handles prescription refill requests directly for the patient. The physiotherapist phones to explain what is required during the test (such as a stress test), and what follow-up exercises (if any) should be done after the test. The cardiologist is rarely more than 10 minutes late taking a patient for a scheduled appointment, and even then, apologizes for running that far behind on his schedule!

The aspects that impress patients most are the empathy for patients, the scheduling efficiency (reliability), and the obvious skill and trustworthiness (assurance) of the empowered team in the organization.

2.The No Waivers, No Favors, approach was probably instituted by management as a result of losing revenues and profits, and possibly because of employee abuses of the system. It is the unbending, bureaucratic approach that generally causes an organization to experience a downward spiral of customer dissatisfaction, losses, and employee stress. External customers who are affected will probably take their business to another airline, if the route structure permits them a choice. Internal customers (the employees) will probably continue to be in a state of fear and doubt and be less effective in doing their jobs, and in treating their customers as they should be treated.

3.Until faced with a crisis, firms may fail to recognize the importance of customers for various reasons -- long running success in the marketplace, a dominant market share, seeing the product from an "internal" perspective, failure to train employees to be sensitive to customers, lack of in-depth knowledge of the product or the systems for producing it, and failure to heed warnings of quality declines or competitive threats.

4.This list of names for customer will vary depending on the experience and imagination of the student. Some might include: patient, student, plaintiff, taxpayer, patron, applicant, subject, passenger, complainant, insured, visitor, camper, investor, trainee, taxpayer, fan, guest, buyer, client, and inmate (!).

5.The chain of customers for a prescription may include the patient, the pharmacist, the drugstore chain, a distributor, the manufacturer, and the raw materials suppliers and processors. In the case of an Internet fulfillment process (for those who wish to use it), the patient, the Web site designer, the pharmacist, the distributor, the manufacturer, and the raw materials suppliers and processors would make up the chain.

6.The answers will vary here, depending on students' perspectives. A starting point would be to look at the types of bank services that the customer uses. For a rough-cut estimate, the analyst might summarize customers by type (individuals, business, institutional) to determine what their average fees were and how frequently they purchased various services, such as checking, stock, mortgages, personal loans, etc. In addition, an analyst might try to measure the amount of business that was received each year from word of mouth referrals. From this a rough multiplier might be determined to say that each loyal customer brought in 0.1 new customer per year, for example.

A more sophisticated approach was presented in a sidebar to the Fortune article about the ACSI, cited in the chapter. It consisted of the following steps:

Decide on a meaningful period of time over which to do calculations (months, years, decades), depending on the type of business.

Calculate the profit (net cash flow) per customer per year, segmented by age, income, sales channel, etc.

Chart customer life expectancy by segment (what percent of older customers versus new ones leave?)

Calculate net present value of each customer group for each year into the future, using the desired return on assets as a discount rate.

According to the author, these figures can be used to do such what if calculations as how much should be spent to attract customers, how much you should spend to retain customers, etc.

7.This question should generate a great deal of discussion about who are the "customers" in a university setting. Customers will certainly include students (But the discussion here should also bring in the difference between customers and clients. The latter go to an expert, such as a lawyer, tax accountant, MD or professor, for their professional advice, which must be followed, if satisfactory outcomes are to result). It will also include parents, employers, alumni, business and non-profit organizations, taxpayers, the state government administrators, and the general public. The customer-driven quality cycle may be seen as applying to anything from registration processes to program and course design to executive development courses to student athletics.

8.This is a "hands on" exercise, based on students organizational involvement. Answers will vary, depending on the organization chosen. For example, a fraternity would see members, alumni, campus student affairs administrators, parents, charitable organizations for whom projects are done, and the general public as customers.

9.Once again, the question of "who is a customer?" must be addressed. The publics with which a college or university interacts are important input for this discussion. They include students, employers, faculty, administrators, parents, the state and federal government, public and private organizations, and the general public. They would have various needs that often overlap, but many are unique. For example students may need detailed information about course schedules each term, but employers would only need information about what classes were completed by candidates (and perhaps the grades received). The employers generally would not need specific course schedules, unless courses were offered on the employers premises.10. Best Buys segmentation of its customer base into fictitious people: Barryan affluent tech enthusiast, Jilla busy suburban mom, Buzza young gadget fiend, Raya price-conscious family guy, and Mr. Storefronta small business owner, might all help the company to better design its stores and train its employees. Customer focus requires customer relationship management principles to be applied to both facilities and employee training. Things that the company might do to customize its stores and service to these customer segments include using CRM principles, such as: Segmenting markets based on demographic and behavioral characteristics

Tracking sales trends and advertising effectiveness by customer and market segments

Identifying which customers should be the focus of targeted marketing initiatives with predicted high customer response rates

Forecasting customer retention (and defection) rates and providing feedback as to why customers leave a company

Studying which goods and services are purchased together, leading to good ways to bundle them (including training of customer service representatives) Studying and predicting what Web (and store) characteristics are most attractive to customers and how the Web site (or store) might be improved

The article shows what some of the impacts of applying these principles were for Best Buy, as they developed the concept of centricity.

In late 2002 Best Buys CEO, Brad Anderson, started preaching the gospel of centricity to upper management. Here's how it works: Figure out which customers make you the most money, segment them carefully, then realign your stores and empower employees to target those favored shoppers with products and services that will encourage them to spend more and come back often. Then, test it out in stores.Best Buy's researchers used sales and demographic data to determine whether a particular location should be tailored to Ray or Buzz or one of the other archetypes. Nearly 40 percent of the 300 stores that have been redone aim at Barry -- containing a separate department of home-theater systems, expert salesmen, and specialists in mobile electronics.

Jill stores feature personal shopping assistants (PSAs) who know how to steer a homemaker to the right digital camera for her family. Buzz stores have broad assortments of video games. Stores can target more than one segment -- Jill and Barry departments often share a location -- and a handful of Best Buys, like the one in the Dallas suburb of Frisco, have all five segments going at once.

"Centrizing" a store is a big investment -- a typical Barry department alone requires as much as $600,000 for lighting and fixtures. Best Buy also invests in schooling employees in financial metrics such as return on invested capital so that they can gauge for themselves the effectiveness of merchandising displays. (Recent example: Buzz departments have an area where kids can try out Dance Pads, a video game accessory you activate with your feet.) Specialized salespeople, such as PSAs and home-theater experts, get additional training that may last weeks.11.Garvins manufacturing-oriented dimensions of performance, features, reliability, conformance, durability, serviceability, and aesthetics may be used to assess quality of tangible products, such as an electronic game, like a Wii. However for service products, such as an Internet service provider, Garvins dimensions might need to be related to the 5 dimensions of reliability, assurance, tangibles, empathy and responsiveness in many ways. It might be argued that it is difficult to fit customer personal service characteristics of assurance, empathy, and responsiveness, from the second list, into more tangible definitions of performance, conformance and durability.

12.For each of the retail banking characteristics, we can see that:

a) Following through on promises -- reliability

b) Offering convenient banking hours -- responsiveness

c) Providing prompt customer service -- responsiveness

d) Properly handling any problems that arise -- responsiveness

e) Maintaining clean and pleasant branch office facilities -- tangibles

f) Demonstrating knowledge of bank products and services -- assurance

g) Giving undivided attention to the customer -- empathy

h) Never being too busy to respond to customer requests -- responsiveness

i) Charging reasonable service fees -- reliability

j) Maintaining a professional appearance -- tangibles

k) Providing error-free bank statements -- assurance

l) Keeping customer transactions confidential -- assurance

13.Deer Valley Resort exemplifies many of the dimensions of quality defined by Garvin such as:

a) Performance: a products primary operating characteristics. Personnel mountain hosts, friendly cafeteria workers; capacity - limited number of skiers on the slopes.

b) Features: the bells and whistles of a product. Curbside ski valet services, heated walkways, place to store skis without charge.

c) Reliability: the probability of a products surviving over a specified period of time under stated conditions of use. Complementary mountain tours (ensures that both expert and intermediate skiers wont get lost or risk injury due to unknown mountain terrain.)

d) Conformance: the degree to which physical and performance characteristics of a product match pre-established standards. Food is consistently rated number one by ski enthusiasts magazines.

e) Durability: the amount of use one gets from a product before it physically deteriorates or until replacement is preferable. Ski storage to prevent equipment damage.

f) Serviceability: the speed, courtesy, and competence of repair work. Well-designed and spacious central gathering area by base lifts to speed access.

g) Aesthetics: how a product looks, feels, sounds, tastes, or smells. Over lodge, parking, and ski slopes appear to be aesthetically pleasing.

Other key dimensions of service quality include:

1. Assurance: the knowledge and courtesy of employees, and their ability to convey trust and confidence. Examples include mountain hosts, tour guides, and ski instructors

2. Tangibles: the physical facilities and equipment, and the appearance of personnel. Tangibles include attractive facilities, and well-designed gathering areas for skiers.

3. Empathy: the degree of caring and individual attention provided to customers. Some examples are the attitude of Bob Wheaton, VP and general manager, we want our guests to know that they come first.

4. Responsiveness: the willingness to help customers and provide prompt service. No specific examples were given, but it is likely that all personnel are trained to act quickly to resolve problems.

14.Professors Kanos definitions, listed below, can form a starting point from which to begin the discussion. Kano suggested three classes of customer requirements:

Dissatisfiers: requirements that are expected in a product or service. In an automobile, a radio, heater, and required safety features are examples, which are generally not stated by customers but assumed as given. If these features are not present, the customer is dissatisfied.

Satisfiers: requirements that customers say they want. Many car buyers want a sunroof, power windows, or anti-lock brakes. Although these requirements are generally not expected, fulfilling them creates satisfaction.

Exciters/delighters: new or innovative features that customers do not expect. The presence of unexpected features, such as a weather channel button on the radio or separate rear-seat audio controls that allow children to listen to different music than their parents, leads to high perceptions of quality.

15.Several of these items are open to variations in individual opinion. For example, as more and more fast food restaurants have play areas for children, it may become merely a satisfier, rather than an exciter/delighter. Using Kanos model, the following may be seen for items a through j:

a) Satisfier

b) Dissatisfier

c) Dissatisfier

d) Dissatisfier

e) Dissatisfier

f) Exciter/delighter

g) Dissatisfier

h) Dissatisfier

i) Satisfier

j) Exciter/delighter

16.Freshness might be classified by considering the appearance, smell, feel, taste, and texture of items. This could be expanded on in an affinity diagram. To measure satisfaction, a questionnaire might be developed, or a focus group might be convened.

17.Colleges and universities might use the customer-driven quality cycle in improving processes such as online registration. Customer needs and expectations might include ease of entry of data, easy correction of errors, ability to drop/add a course before a certain deadline, and ease of payment. The university might identify these customer needs through an online survey and/or a focus group. After software designers translated the voice of the customer into product/service specifications for the online registration module, various ways of testing the proposed design would have to be developed. Once the design testing was done, the actual output could be tested (perhaps using the same focus group as before). Finally, after the registration system went live, student users could then be asked to respond to a satisfaction survey to assess whether improvements were needed, for the measurement and feedback phase.18.The answers will vary here, depending on students' perspectives. Some examples of moments of truth in universities may be seen when registering for classes; paying fees; coming in contact with advisors, food service, or housing personnel; and day-to-day contacts with professors in the classroom.

19.A customer satisfaction policy might be the following: Our employees are dedicated to doing everything possible to ensure that our customers are delighted, not just satisfied, with our products and services. To achieve this high level of product and service delivery, we promise to:

a. Treat customers with respect

b. Provide knowledgeable service

c. Replace any defective product, regardless of reason, within the first year after it is purchased

d. Match any legitimate price of a competitor for the same or equal product

e. Measure the level of customer satisfaction that we have and constantly strive to improve it

20.What lessons can organizations learn about customers from the following experiences? In shopping for a cell phone, a customer met a salesperson who introduced herself, asked her name, went through the features that related to her needs, and didnt try to sell her the most expensive phone.

A woman encountered a sales person in a home improvement store who commented, Oh, shopping for your husband?

A couple stranded in a restaurant booth with no waiter or silverware made eye contact with a waitress who quickly replied, Your waiter is late. I cant take your order because this isnt my station.

While shopping for a TV antenna, a customer asked the difference between various models. The salesperson replied, Some cost more because they look better.As pointed out in the article, the main lessons to learn are to train customer contact people (CCPs) to focus on the basics of courtesy and product knowledge. The above responses were a few of those experienced by authors Cindy Lewis and Marian Brzykcy last summer , who decided to channel their own mounting dissatisfaction as customers into a full-flung survey of almost 500 retailers. At home-improvement stores, gas stations, and fast-food restaurants, the sisters shopped, spent money, and took careful notes. Their bottom line, after a three-month, unscientific $5,000 shopping spree, was a sad conclusion: Only 3% of their store visits had left them "very satisfied." The remaining 97% failed. Their advice to CCPs:The consultants offered these lessons learned to CCPs who want to be successful:Make It A Relationship (as did the salesperson in point 1, above)Listen Carefully. (As a salesman Lewis encountered in a home-improvement store didn't bother to do in point number 2. The [expensive] power tool that she had come in to buy stayed comfortably on its shelf.Embrace Positivity. "Shouldn't," "can't," "not my department"-- have no place in customer service as the waitress in situation 3 had failed to learn.Assume All Customers Are Royalty. Any customer can make your day--so treat every customer like they're the one. Dressed in casual garb, Brzykcy walked in expecting to open up an account for her aunt. After being "treated like an unwelcome guest" she decided to take her aunt's money-market accounts and investments elsewhere.Do Your Homework. Product knowledge and common courtesy will go a long way towards making the sale (which escaped the attention and/or training of the salesperson in situation number 4)."Ask yourself," Lewis says, "is the way you treated your last customer the way you'd treat your mother? If the answer is 'I don't know,' you need a few tips."21.This is a "hands on" applied exercise for the student group. For example for the employees who take phone orders, it should be specified that the employee obtain information on the name, address, phone number; directions to location, if not easily found; pizza type, including crust, toppings, and size; side items; enter the order into the register or computer; relay the total cost to the customer; relay the order to the kitchen; provide any special instructions, as needed to cooks or delivery people. Training could take the form of a process checklist, watching an experienced employee, and supervised order taking for a specified time period until the process is well demonstrated.

22.Answers will vary, depending on the e-commerce business that is chosen. One of the case studies on Amazon.com provides a benchmark for how customer-focused such a business can be. 23.The experience of the student who asked for the satisfaction survey and then received better service indicates that the company is using the customer satisfaction survey to control, rather than to continuously improve, customer service. This is similar to a manufacturer who tries to use quality control to weed out defective product at the end of the production process. In this case, the company is trying to weed out poor service by reviewing the comment cards after the customer is gone, then asking, What could we have done to improve service? Also, employees who fear that they will be punished for bad comments on the survey will do as this employee did, or else try to find a way to hide or destroy the unfavorable comment cards.

24.As pointed out in the text: Customer satisfaction measures may include product attributes such as product quality, product performance, usability, and maintainability; service attributes such as attitude, service time, on-time delivery, exception handling, accountability, and technical support; image attributes such as reliability and price; and overall satisfaction measures. Thus, to design satisfaction surveys for high school students on behalf of colleges where they attend, or businesses who might hire them directly out of high school, questions relating to recruitment and enrollment at the college or recruitment and hiring at the business would be appropriate. Specifically, satisfaction with the colleges or business application form (ease of use, relevant questions, etc.) could be probed. The satisfaction survey could also ask for responses on degree of empathetic interactions with counselors or job interviewers, amount of waiting time versus service time experienced, and comfort level of surroundings. Of course, a measure of overall satisfaction would also be a must item on such satisfaction surveys. 25.There are a number of problems with the design of the questions for this survey:

a. What does professional mean -- well dressed, knowledgeable, polite?

b. Whats an ETA -- estimated time of arrival, electronic transmission act?

c. What does reasonable mean -- five minutes, 30 minutes, an hour?

d. Is food safety ever not important? This is an obvious answer!

e. Besides not specifying the meanings of friendly and helpful this question asks the respondent to lump the two characteristics together. How should one respond if the representative was friendly but not helpful, helpful but not friendly, both, or neither?

Also, questions that are not asked correctly can provide little or no information because they may be ambiguous, loaded, too complex, filled with acronyms, or self-evident.

26.On the importance ratings, it appears that the three top items are mechanical condition, car cleanliness and staff friendliness. Checkout and check-in speed and getting reserved car or better are moderately important. All others are relatively unimportant.

Regarding customer ratings of performance, there are some significant perceived differences between business users and personal users of the rental cars. In general, the business users give lower marks than the personal users on all categories, except getting reserved car or better and employee appearance. For the top items, business users rate the mechanical condition highest of all the items (tied with check-in speed/efficiency), while personal users rate it the second lowest of all categories. Staff friendliness is rated highest of all categories by the personal users, while being seen as somewhat lower by the business users. Interestingly, cleanliness of the vehicle and the facilities, seen as very important or important as attributes, is viewed as being on opposite ends of the scale on performance by the personal versus business users. The personal users rate cleanliness of both at second from the top, while the business users rate it as the bottom two items in performance.

This survey shows that customers are generally well satisfied on overall performance, with a 4.5 out of 5 being the lowest rating. However the survey also indicates what the car agency may do to improve their customers satisfaction even more. True or not, personal users perceive that the mechanical condition of their cars is not as high as most other factors. Mechanical standards for both groups should meet or exceed customer requirements and there should be no differences between the conditions of car. Work also needs to be done to ensure that cleanliness of vehicles and facilities is improved and then maintained at a high level. Finally, a goal should be set to improve the attitudes of business users about staff friendliness. Staff should be informed, during training, about survey results showing that business customers are pickier than personal users.

27.The importance ratings show that the top three items are fast service, clean tables, and drinks that are not watery. Next are crisp fries, fresh buns, and availability of a childrens menu. Overall performance ratings appear to be good, with only one item below 4 on a 5-point scale. Highest ratings for the six important items are for clean tables, fresh buns, and crisp fries. Work may be needed to provide a childrens menu, make service faster, and ensure that drinks are not watery. Efforts should be made to increase food variety. Food variety was not in the top six items in importance, but there seems to be a substantial gap between importance and performance ratings.

28.This is probably the most challenging question of all, for a business. It would be particularly hard to come up with a single verifiable figure or average value per customer. A bank might attempt to quantify the value of a customer by determining the revenue generated by various classes of customers (individual account holders, small businesses, and large businesses). Then, the number of years that the average customer in each class remained a customer would have to be researched. Finally, a discount factor (for discounted present value calculations) might have to be chosen and used for comparison purposes. As Deming pointed out, the impact of poor or good word-of-mouth concerning the quality of the banking experience and how that may result in friends and family members lost or gained as customers can never be estimated with any accuracy.29.As pointed out earlier (see review question 28), customer satisfaction efforts fail due to poor measurement, useless questions, lack of proper focus, no comparative data, inattention to potential and former customers, and confusing satisfaction with loyalty. The Baldrige criteria (see review question 30) deal with some of the questions of why customer satisfaction efforts fail by examining how a company determines requirements, expectations, and preferences for customers and markets, and how it builds relationships with customers and determines their satisfaction.

SUGGESTIONS FOR PROJECTS, ETC.1. The ACSI uses a proprietary survey technique, where fee-paying subscribers provide data about themselves and their industry to surveyors and receive comparative information and the very latest survey results. The broad ACSI results are published after-the fact each year. See the source in Review Question 5, above. For the most recent information on the ACSI, consult their web site at http://www.theacsi.org

2.This project can provide some interesting insight into students perceptions of how customer satisfaction may be measured beyond traditional course evaluations. Some possibilities might include fast feedback forms at the end of each class, anonymous Internet messaging, used of discussion boards on the class web site, etc.

3. Some characteristics that are brainstormed may include location of the store, store hours, layout of the store, knowledge of sales staff, friendliness of personnel, variety of selections, price, up-to-date merchandise, policies and procedures for purchase returns and availability of technical support and service. Review Question 24 can be used as a guide to developing an appropriate survey.

4. Western American Airlinesa.An affinity diagram could be constructed by putting each of the customer service requirements on a 3" x 5" card and clustering items that were similar to each other under a category heading. Category headings might include: reservations, baggage handling, facilities and preflight service, aircraft, amenities, food service, and in flight service. See diagram below, where customer service items are matched with categories.

b.Once the Affinity Diagram has been developed, the design of a customer survey questionnaire would be straightforward. Sections could be included for each of the designated categories of: reservations, baggage handling, facilities and preflight service, aircraft, amenities, food service, and in flight service. Questions could be constructed on a scale of 1-7 or 1-10, with 1 = Very poor and 7 = Outstanding. For example, in baggage handling, the questions might include:

Very Poor

Outstanding

1 2 3 4 5 6 7

Convenience of baggage check-in +-----+-----+-----+-----+-----+-----+

1 2 3 4 5 6 7

Timely baggage claim on arrival +-----+-----+-----+-----+-----+-----+

Responsiveness/ability to solve 1 2 3 4 5 6 7

problems & answer questions +-----+-----+-----+-----+-----+-----+

1 2 3 4 5 6 7

Overall quality of service provided +-----+-----+-----+-----+-----+-----+

Note that questions on overall satisfaction might be appropriate for each of the categories. Also, questions about service personnel courtesy might be appropriate in any category where there is face-to-face contact of employees with customers.

AFFINITY DIAGRAM FOR WESTERN AMERICA AIRLINESReservationscourteous reserva-

tion personnel

reservation calls

answered promptly

correct explanation of fares and schedules

ability of reservation agents to answer questions

Baggage handlingconvenient baggage check-in

timely baggage claim upon arrival

ability to solve baggage claim problems

Facilities and

Preflight Service

timely & accurate communication of pre- boarding

information

efficient ticket line & waiting

procedures

convenient ground transportation

courteous, efficient gate personnel

efficient seat selection process

courteous, efficient sky cap

provide assistance for passengers with special needs

courtesy of ticket counter personnel

convenient parking close to terminal

Food Service quality food

good beverage selection

sufficient quant-

ity of food

Amenities good selection

magazines and

newspapers

interesting Western American in-flight

magazine

good variety of audio/visual programming

Aircraft

appealing interior

appearance

seats in good condition

clean lavatories

Aircraft (Continued)

good quality audio /visual system

in-flight telephone access

comfortable seating and leg room

quality public address system in-flight

Inflight Service ability to solve problems, answer questions in flight

efficient, attentive attendants

flight attendants with good attitudes

flight attendants know airline programs & policies

timely, accurate flight information (in-flight)

5.Answers will vary, depending on the sophistication of the business in complaint handling. Many small businesses will ensure that making restitution, or providing perks satisfies the complaining customer. Not many will gather and analyze data over an extended period in order to categorize and make improvement in the process.

6.Answers will vary, depending on the type of business and the web sites involved. There are sites that have won awards that may be looked at for some ideas on best practices

7.Answers will vary, depending on the cards that are gathered and who designed them.

8.This is a hands-on exercise to provide practice in developing an affinity diagram.

9.This is a hands-on exercise in designing a questionnaire and testing it out.

10.This is also a hands-on exercise in designing a questionnaire. This type of questionnaire might be useful for the college or university, because it could reveal aspects of the campus tour that students are very interested in and those that they could care less about. More time might be spent on the former stops on the tour, while the latter features of the tour might be reduced or eliminated.

ANSWERS TO CASE QUESTIONSI. Paulis Restaurant and Microbrewery

This is an actual author experience. One of the authors had sent the email to the restaurants corporate office in another city, and the next day received this reply from the general manager of the restaurant:

I would like to take this opportunity to thank you for your comments regarding your unacceptable experience at [our restaurant] on Saturday. I cannot begin to apologize enough or to express how disappointed I am that we failed to deliver you the exceptional service experience that you and your guests deserve.I truly appreciate that you brought your guests here before going tothe theater and I know that when you have tickets to a show, the last thing you need is to have to rush through your dining experience to avoid being late. If you will allow me, I would like to invite you, your wife, and your friends back to our restaurant as my personal guests. Please call me xxx-xxxx or contact me via e-mail so that I may confirm a reservation. I look forward to hearing from you so Imay have the opportunity tomake this right for you and your guests.Most students will probably create a similar response. Good service recovery is prompt, empathetic, and provides some way to entice the customer to return and make up for the upset. Needless to say, this restaurant made a customer for life.

II. First Internet Reliable Bank1. The closed-ended and open-ended questions provided different perspectives on customer needs for FIRs leadership team. The closed ended responses, when matched with customer demographics, confirmed that FIR customers were generally typical of Internet banking customers, as suggested by the Pew survey. Most had high-speed Internet connections, were men, and were in medium to high socio-economic categories. As might be expected, because of their location in the northwest U.S., approximately 50% of their customers were in technical occupations.

One of the most important (open-ended) questions involved customer service perceptions. Customers were asked to name the dimension of customer service that gave them the most satisfaction. Interestingly, these responses centered on personal contact with customer service representatives. The top responses included: the accessibility provided by FIR to discuss problems with customer service representatives (CSRs) (16 percent); the relatively short time it takes to resolve most problems (15 percent); the quality of the response provided by CSRs (14 percent); and the manner and approach of CSRs (11 percent).

2. FIR is targeting customer segments that include both individual and commercial accounts. On individual accounts, bill-paying and various types of loans, such as mortgage and home equity credit lines seemed to be the most important services. Commercial customers are using the bank for loans, credit lines, and national and international money transfers. The issues that were brought out in the open-ended questions point to the need for improvements. Customers perceived the need to have access to cash, and perhaps to make deposits, via an ATM, and for the bank to provide more security features. Commercial customers also saw an added need for risk protection when/if hackers accessed their accounts.3. FIR might consider some specific activities and practices to address these issues, such as: Partnering with another bank to provide ATM access. If this partner could also handle deposits, that would alleviate two of the issues mentioned in the survey Developing processes to prevent hacking and to educate customers on how to avoid identity theft

Develop a way to insure against losses from hackers for commercial customers, perhaps by providing low-cost insurance policiesIII. Gold Star Chili (A)1.Some moments of truth in Gold Stars environment start with the corporate franchisee relationship, where: corporate managers have signed a pledge guaranteeing to return calls within 24 hours. The moment of truth is whether those calls are consistently received within that time frame. Another moment of truth opportunity relates to franchisees reporting any problem with product quality, and whether Gold Star will follow up by hand-delivering replacement product the same day. There is an excellent moment of truth opportunity for the many franchisees who strive to build relationships through local store marketing. They, and the owner/managers who are active in the community with sponsorships of teams, school programs, and school achievement awards must follow through to ensure that the moment of truth in delivering what was promised is realized.2. Gold Star Chili defines two key customer groups: direct customers who use Gold Star products and services, and indirect customers with whom Gold Star has other relationships. Direct customers are divided into six customer segments, determined by product use: restaurant customers, franchisees, franchise applicants, retail customers, retail wholesalers, and mail-order customers. Indirect customers include product suppliers, service suppliers, co-packers, brokers/consultants, shareholders, and regulatory agencies. Each of the key customer groups and the segments within them must have their own customer-focused practices. For example data on customer satisfaction, complaints and complaint resolution, and product wants and needs must be tailored to each group and segment. One size fits all wont. 3.Gold Star could collect direct data from franchisees, retailers and wholesalers on complaints, product movement, and what works well, or not so well, through frequent personal contact between company franchise coordinators and franchisees. For suppliers, methods of supply, billing problems, etc. could be areas in which Gold Star could listen and learn from these customer groups. From restaurant customers, satisfaction surveys and focus groups could be used.4. For franchisees, wholesalers and retailers effective listening and learning could take place using formal surveys and focus groups, as well as informal determination of product and service features through quarterly and semiannual meetings, daily and weekly phone calls to franchise service representatives (FSRs), and discussions with delivery personnel. For restaurant customers, in addition to the traditional satisfaction surveys, customer comment cards, and complaint monitoring, use of store managers contacts and discussion with regular customers could be another very effective method for listening and learning.

5. It would seem that customer loyalty is an important requirement for success in Gold Stars competitive retail business environment. Thus questions relating to loyalty would be desirable, such as measures of: Overall satisfaction.

Likelihood of a first-time purchaser to return to the restaurant.

Likelihood to recommend.

Likelihood to continue purchasing the same products from the menu.

Likelihood to purchase different products.

Likelihood to increase frequency of visits to the restaurant.

Likelihood to switch to a different restaurant or chain.For franchisees (who are customers of the corporation), survey questions relating to franchise service to the franchisee would need to be asked. For example, franchisee satisfaction with:- Geo-demographic analysis of locations prior to building

- Reliability, empathy, accuracy, responsiveness, etc. of service from FSRs who are responsible for staying in touch with franchisees and meeting their needs when placing orders

- Opportunities to listen, learn, and trade ideas through regular franchise meeting and training sessions

- Quality of competitive data available from Gold Star, such as might be obtained using mystery shoppers who visit Gold Star and competitor locations

IV. Novel Connect Customer Focus

Although not required for this exercise, the feedback report comments for this case, based on the 2008 Baldrige criteria, are enlightening and serve the purpose of addressing the issues of the Category 3 response of Novel Connect. The companys response in their application will not be duplicated here. See the Novel Connect case materials in the Baldrige Materials folder.

3.1 Customer and Market Knowledge

STRENGTHS

During the SPP, the Marketing and Public Relations Team reviews existing market segments and identifies new segments. The team has identified seven key niche customer groups (Figure 3.1-1) that are subsegments of the three main market segments (personal, business, and government consumers). Market data and information are provided to Novel Connects Product Engineering and Design Team to develop new products/features. A cycle of improvement resulted in reversing the sequence of incorporating customer input into the process; information from customers and potential customers is now considered before identifying potential products and product features.

To gather information on customer requirements, needs, and changing expectations, Novel Connect has established Five Voices of the Customer (VOC, Figure 3.1-2): customer complaints, market research, customer surveys, customer relationship management, and customer advisory group communications. These mechanisms vary in their methods, locations, and frequency of use.

VOC data are available to all employees in the MAP database for use in process improvements and are provided to the Customer Service Team, which oversees the call center. VOC data are sent to retailers and the carrier on a quarterly basis. All customer data and information are analyzed and used as inputs to the SPP and to the Product, Feature, and Process Development (PFPD) Process.

To help keep its VOC methods current, the Marketing and Public Relations Team reviews them annually during the PIP that precedes the SPP. In addition, the Allegiance Survey, which is reviewed at the annual Improvement Day, includes a question about ways to improve listening and learning methods.OPPORTUNITIES FOR IMPROVEMENT

While plans are in place to seek information from customers of competitors, it is unclear how Novel Connect currently includes customers of competitors and other potential customers and markets in its determination of customer groups and market segments. Without considering the requirements and expectations of all customer groups, Novel Connect may not succeed in fulfilling the requirements of all of its target customers and markets and may miss opportunities to penetrate new niche markets with innovative products.

While Novel Connect uses the Five Voices of the Customer (Figure 3.1-2) to gather information from and about customers, a systematic process is not described for using this information to determine customer requirements, needs, and expectations or to determine needed improvements in its work systems and processes. Without such a systematic process, Novel Connect may not be able to fully understand its customers purchasing decisions, achieve customer loyalty, or build customer relationships.

It is not clear how Novel Connects listening and learning methods include former customers or vary for its customers, customer groups, and market segments. The absence of a systematic process to tailor its listening and learning methods for its diverse customers (which range from preteens to the Department of Homeland Security) or to most effectively use the information gathered from its numerous sources may make it difficult for Novel Connect to address customer requirements and achieve its vision to be the most innovative company for mobile communication in the world.

In general, it appears that Novel Connect is in need of systematic processes in order to receive maximum advantage from analysis of the Five VOC framework. Specifically, they need to survey customers of competitors and potential customers to determine requirements and expectations. In addition, they must develop a systematic process for analyzing and understanding customers purchasing decisions and factors that lead to increased customer loyalty and better customer relationships. Finally, work needs to be done to tailor its listening and learning methods to diverse customer segments. The company has a good complement of tools in its Five VOC framework, including customer complaints, market research, customer surveys, customer relationship management, and customer advisory group communications. It needs to systematically apply these tools, plus use more effective statistical analysis, perhaps using the Key Customer Focused Practices for Performance Excellence in Table 5.1 as a guide.BONUS MATERIALS

Quality in Practice - Waiting Time and Customer Satisfaction at Florida Power and Light1.People who are waiting almost invariably overestimate the time that they have waited when they have no objective means of measurement. As FP&L found, People were willing to wait longer and more patiently when they had an estimate of the required waiting time. For organizations that are trying to set standards, two conclusions may be drawn: a) people don't like to be made to wait, so try to minimize waiting time, and b) if waiting time is inevitable, try to provide an estimate of the length of the wait for customers.

2.FP&L's analysis went beyond the "rules of thumb" given above and classified the interactions between waiting times and customer satisfaction. In summary, they found:

Customer satisfaction generally decreased as the length of wait increased.

Customers were generally willing to wait longer if they had an estimate of the amount of time that they would have to wait.

If customers were given a choice of waiting or calling back later, they had higher levels of satisfaction.

Customers expected to wait different lengths of time, depending on the type of service that they were trying to receive.

With analysis to "tailor" to these findings to specific firms, thes