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CHAPTER 3
Focusing on Customers
Teaching Notes
This 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 of the three determinants of profitability –
productivity, cost, and quality – the most significant factor in determining the long-run
• To 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.
• To define Customer satisfaction is “the result of delivering a product or service that
meets customer requirements.” Customer engagement refers to customers’ investment
in or commitment to a brand and product offerings.
• Develop an appreciation for customer engagement, which refers to customers’ investment
Focusing on Customers 2
• 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.
serve consumers and external customers.
• 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.
• Appreciate that technology can greatly enhance an organization’s ability to leverage
customer-related information and provide improved customer service. Technology is a
key enabler of customer relationship management (CRM) software, which typically
includes market segmentation and analysis, customer service and relationship building,
effective complaint resolution, cross-selling goods and services, order processing, and
field service, and is focused on increasing customer loyalty, targeting the most profitable
customers, and streamlining customer communication processes.
Focusing on Customers 3
• Study how Customer perceived value (CPV) can provide 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,
ANSWERS TO QUALITY IN PRACTICE KEY ISSUES
Harley-Davidson
1. The dimensions of quality introduced in this chapter include product quality dimensions
of performance, features, reliability, conformance, durability, serviceability, and
aesthetics. Service quality dimensions are reliability, assurance, tangibles, empathy, and
responsiveness. Harley-Davidson’s quality characteristics that are important to its
customers can be pretty well aligned with these dimensions.
The company’s manufacturing strategy is designed to continuously improve product
quality and productivity while reducing costs and increasing flexibility to respond to
ongoing changes in the marketplace. Flexible manufacturing processes and flexible
supply chains, combined with cost-competitive and flexible labor agreements, are the key
enablers to respond to customers in a cost-effective manner. These contribute
substantially to performance, reliability, conformance, and durability. Design quality can
be seen in the features, serviceability, and aesthetics provided for each of their customer
segments:
Harley defines its customer segments for heavyweight (651+ cc) motorcycles as:
• Traditional (a basic motorcycle which usually features upright seating for one or two
passengers);
Focusing on Customers 4
the company established what it calls a “Creativity Model,” whereby it uses web-based
2. Harley-Davidson uses multiple approaches to help it to maintain a focus on its customers
and enhance customer satisfaction, loyalty, and engagement. Harley-Davison provides a
variety of services to its independent dealers including service and business management
training programs, customized dealer software packages and delivery of its motorcycles.
Unique Online Furniture, Inc.
1. Unique Online Furniture, Inc.’s key customer requirements compare, almost point-for-
point, with the Key Customer-Focused Practices.
Table 3.1 Key Customer-Focused Practices for Quality Management
• Identify the most important customer groups and markets, considering competitors
and other potential customers, and segment the customer base to better meet differing
needs.
• Understand both near-term and longer-term customer needs and expectations (the
“voice of the customer”) and employ systematic processes for listening and learning
Focusing on Customers 5
customer experience, provide feedback, obtain assistance, receive prompt resolution
of their concerns, and facilitate improvement.
Unique On-Line Furniture’s - Key Customer-Focused Requirements
1. Affordability: Customers want unique items at affordable prices. Practice:
Understand both near-term and longer-term customer needs and expectations.
2. Variety: Customers in our market are looking for variety in home furnishing
products that they cannot necessarily find in their local brick and mortar stores. Practice:
Understand the linkages between the voice of the customer and design, production, and
delivery processes; and use voice-of-the-customer information to identify and innovate
product offerings and customer support processes
3. Online purchase security: When purchasing large ticket items online, our
customers want to feel safe and secure during the transaction. Practice: Create an
2. The Client Experience Checklist might be used to identify ways of gauging customer
satisfaction levels and/or enhance the customer’s positive experience. Specifically, any of
ANSWERS TO REVIEW QUESTIONS
1. The factors that influence customer value and satisfaction include an organization’s
efforts extending well beyond merely meeting specifications, to reducing defects and
errors, and resolving complaints. They also include designing new products that truly
Focusing on Customers 6
2. 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
3. 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-
4. 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
Focusing on Customers 7
5. 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
6. 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
7. A company can expect to encounter external customers or consumers, outside of the
company. Amazon.com may sell copies of Managing for Quality and Performance
Excellence to consumers. Cengage Publishing will supply copies of the text to their
customer, Amazon, which is not a consumer. At the process level, internal customers or
Focusing on Customers 8
8. 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
10. There are two classification systems for quality dimensions, one each for goods and for
services. The dimensions of quality defined by Garvin are:
a) Performance: a product’s 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 product’s surviving over a specified period of time
under stated conditions of use. A car’s 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
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,
Focusing on Customers 9
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.
11. Noriaki Kano, a Japanese professor, has suggested three classes of customer
requirements:
▪ Dissatisfiers—Requirements that are expected in a product or service. If these
features are not present, the customer is dissatisfied.
12. 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 “layman’s terms”
and must be “translated” into product specifications that can be used in design,
manufacture, and delivery of the product or service. The major listening and learning
approaches to gather customer information include:
• Comment cards and formal surveys--These are easy ways to solicit information on
Focusing on Customers 10
• 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
13. Affinity diagrams and tree diagrams (see Chapter 3 Bonus materials on the Student
Companion Site for additional details on the 7 Management Tools) are used to organize
14. The gap model shown in Figure 3.5 can be used to explain the customer-driven quality
cycle. It 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
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,
Focusing on Customers 11
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
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
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.
Focusing on Customers 12
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 customer’s name whenever
possible). Customer needs and expectations form the basis of measurable contact
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
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
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
23. CRM software is designed to help companies increase customer loyalty, target their most
profitable customers, and streamline customer communication processes. A typical CRM
Focusing on Customers 13
• 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
24. 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
25. Customer satisfaction survey questions must be properly worded to achieve actionable
results. Actionable results mean that responses are tied directly to key business processes,
26. Typically, only firms that are more customer-sensitive than most recognize the need to
analyze their customer satisfaction surveys to determine the relationship between
27. 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.
Focusing on Customers 14
28. Today, many firms use a metric called the net promoter score (NPS), which was
developed by (and is a registered trademark of) Fred Reichheld, Bain & Company, and
Satmetrix. NPS is claimed to correlate strongly with market and revenue growth. The
metric is based on one simple question, “What is the likelihood that you would
recommend us?” evaluated on a scale from 0 to 10. Scores of 9 or 10 are usually
29. Customer perceived value 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. Organizations can
benefit from measuring it because it provides an alternative to traditional customer
ANSWERS TO DISCUSSION QUESTIONS
1. One customer-focused organization with which this author has done business is (believe
it or not) a doctor’s 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
Focusing on Customers 15
2. Answers about examples of organizations known by students to exhibit customer-focused
practices will vary.
3. Answers will vary depending on which businesses students claim loyalty to. Customer
4. Student opinions about organizations, such as banks, which offer significant incentives to
attract new customers, but do not offer them to existing customers may vary. The
5. 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
6. 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,
7. 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
8. Using the AT&T customer–supplier model in Figure 3.2, internal or external customers
and suppliers may be:
a. Operations – suppliers may include engineering, purchasing, outside venders,
Focusing on Customers 16
scheduling; customers may include the warehouse/shipping
b. Information Systems – suppliers may include accounting, purchasing, operations,
quality control; customers may also include all of the above. This depends on whether IS
is designing systems for the organization’s use, or running reports and analyses using
input data supplied by their clients
9. The question of "who is a customer?" must be addressed in order to determine the proper
categories for segmentation. 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
10. Best Buy’s segmentation of its customer base into fictitious people: Barry—an affluent
tech enthusiast, Jill—a busy suburban mom, Buzz—a young gadget fiend, Ray—a price-
conscious family guy, and Mr. Storefront—a 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
Focusing on Customers 17
The article shows what some of the impacts of applying these principles were for Best
11. Wal-Mart and Target have a similar customer base. Therefore, they might do similar
things in designing their stores and operations to ensure that they meet these
requirements. Some of these might include:
1. Increasing Reliability: training their customer service representatives responding in the
promised time, following customer instructions, providing error-free invoices and
statements.
2. Increasing Assurance: Training employees to answer questions knowledgeably,
ensuring that the employees have the tools and capabilities to do the necessary work,
Focusing on Customers 18
13. Colleges and universities might use the gap model in Figure 3.5, or 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
15. 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
16. Organizations who have associates who make the following errors should endeavor to
learn about customers from their mistakes.
Focusing on Customers 19
▪ 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
As pointed out in the article, the main lessons to learn are to train customer contact
people (CCP’s) 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 CCP’s:
The consultants offered these “lessons learned” to CCP’s who want to be successful:
Focusing on Customers 20
17. 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
18. The restaurant manager needs to know the facts about complaints and adapt them to his
situation. Customer-focused organizations consider complaints as opportunities for
improvement. Encouraging customers to complain, making it easy for them to do so, and
effectively resolving complaints increases customer loyalty and retention. Of the
customers who make a complaint, more than half will again do business with that
20. The article entitled “Stop Trying to Delight Your Customers,” obviously has a catchy title
to attract readers. It is likely that the authors are correct to imply that delighting
21. 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
