week2-1rans

Customer-driven quality represents a proactive approach to satisfying customer needs that is based on gathering data about our customers to learn their needs and preferences and then providing products and services that satisfy the customers. Customer-driven quality is one of the core values of the Malcolm Baldrige National Quality Award. A Closer Look at Quality 5-1 shows that companies have varying degrees of success in responding to customers.

Video Clip: Customer Satisfaction at Marriott

Even though it is generally understood that listening to and understanding the customer is a good thing, there are some companies that implement customer feedback mechanisms incorrectly. As a result, these companies are placed in a reactive rather than a proactive mode with their customers.

One of the difficulties in satisfying customer requirements is that in a dynamic environment, customer needs are constantly changing. Consider the example of military suppliers. For many years, cost overruns and missed schedules were allowed by the military customers. When the purchasing standards were changed by the military, many suppliers such as McDonnell Douglas were incapable of adequately responding. The results have been layoffs, corporate restructuring, and mergers. Figure 5-1 shows a model of reactive customer-driven quality (RCDQ). This model shows that a firm’s quality performance is increasing while customers’ expectations also are increasing. Problems occur when customer requirements increase at a faster rate than quality and service improvement. This places a firm in a reactive mode that may signal the need for major process and service redesign.

The RCDQ model demonstrates conceptually and graphically the primary pitfalls and dangers of RCDQ. In a sense, manufacturers and service organizations attempting to meet customer expectations are pursuing a moving target. As the supplier’s competitors improve quality and competition increases, customers demand higher levels of quality and service. The difference between world-class and ordinary suppliers lies in whether suppliers stay ahead of the target or fall behind the target. Although a supplier to a customer might desire to provide high-quality service to the customer, the reactive posture engendered in the RCDQ approach will cause the supplier to fall farther and farther behind the moving target over time.

A Closer Look At Quality 5-1: Customer Service on the Internet a

aWeber, T., “Simplest E-Mail Queries Confound Companies,” Wall Street Journal (October 21, 1996):B1.

Perhaps you have had questions that you would like to ask the producer of a product, such as whether Duracell batteries will last longer if stored in a refrigerator, how much corn is in a single Frito, or how McDonald’s made round bacon for its egg McMuffins. To get answers to these questions, you can simply leave a message for these companies on the World Wide Web. However, you may not always get an answer in a timely fashion.

Many companies invite dialogue with their customers on Internet homepages, but they are often poorly prepared to answer queries. Tony Pittarese, a college professor from Florida, contacted Coca-Cola’s Web site to help him plan a visit to the Summer Olympic Games in Atlanta, Georgia. The screen at Coca-Cola said “We’re all ears.” Sure, they were all ears, but no mouth. He never received a reply. He ended up dialing Coca-Cola’s 1–800 number for the information. “If you’re going to go on the Web and you can’t do it right, then don’t do it at all,” says Pittarese. Coke apologetically stated that it had a large e-mail backlog at the time of the query.

Web sites offer a variety of approaches to e-mail. Some offer e-mail addresses and encourage inquiries. Others have a systems administrator Web address with no e-mail access.

In a research project, the Wall Street Journal sent e-mail inquiries to several major corporate Web sites with e-mail capabilities (see Table 5-1). Many never responded to the inquiries. Two took three weeks to reply. Others sent stock responses that failed to address the specifics of the query. Only three companies responded within a day with substantive responses.

When someone comes to your Web site, a customer is seeking you out,” says Elizabeth Stites, marketing director of Matrixx Marketing, Inc. “If you’re not talking back to them, you’re crazy.”

Why do companies have such a poor e-mail record? Many firms simply do not understand the maintenance hassle associated with placing a Web site on the Internet. Internet users often make inordinate demands and have high or unrealistic response expectations. That’s why Saturn Corp. explicitly states on its Web site that it doesn’t use e-mail. “You don’t want to diminish the customer’s passion by not responding when they take the time to contact you,” according to Greg Martin, a Saturn spokesperson.

McDonald’s Corporation has a typical Web site full of colorful animation, merchandise, and entertainment. In the McDonald’s feedback section, users are questioned on their eating habits and asked how often they have eaten at McDonald’s in the recent past. This is where the Wall Street Journal staff asked the question about the round bacon. No answer was ever received.

“I don’t think we’ve taken our Web site to a high level of interactivity at this point,” admitted a McDonald’s spokesperson. An “appropriate response system does not exist.”

The voice of the customer represents the wants, opinions, perceptions, and desires of the customer. Firms perform a variety of activities to become familiar with the needs and wants of customers to better design products and services. Customers are also a source of knowledge concerning the performance of the production and service systems.

There is also a technical definition of the voice of the customer. It has to do with a standardized, disciplined, and cyclic approach to obtaining and prioritizing customer preferences for use in designing products and services. This definition of the voice of the customer is sometimes associated with quality function deployment (QFD) or the house of quality. 2 QFD translates customer wants into a finished product design. The Japanese developed this approach in the 1960s, 3 and it has been used in the United States since the 1980s. The QFD approach is discussed in Chapter 7.

2Hauser, J. R., and Clausing, D., “The House of Quality,” Harvard Business Review 66, 3 (1988):63-73.

3Akao, Y., Quality Function Deployment (Cambridge, MA: Productivity Press, 1990).

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As we stated in Chapter 1, quality is as the customer sees it. In spite of all of our efforts and work, if we do not adequately please the customer, we will cease to be economically viable. Therefore, companies spend a great deal of resources attempting to understand the customer, which is the focus of this chapter: How do we get to know our customers, and how do we develop systems from this information to constantly and forever improve our systems?

Much of the focus in marketing today is on maintaining the existing customer base that a firm has established. If it is true that 90% of the business for many service firms is in the form of repeat business, the focus of process and system design must be on developing relationships with customers rather than simply providing clean transactions at each stage of the process.

Process design in services often has focused on the transaction. For example, a university might focus on discrete processes for improvement in areas such as registration, financial aid, test taking, and so forth. However, some universities have learned that focusing on these internal processes does not help in the retention of students. Therefore, new programs for student retention focus on familiarizing the student with the university and developing the skills students need to be successful in a college setting. Some of these skills might involve study skills, social skills, or managing on a limited budget. In this way, the university begins to look at the whole system relating to the student and not just internal university processes.

Many times when you purchase products you are asked for your name and other personal information. Sometimes providing this information seems an intrusion on your privacy. Indeed, sometimes it is, because firms sell their mailing lists to other entities. For example, did you know that many states in the United States sell driving records to commercial firms to earn money? This is often so that other firms can direct market materials to you based on the kind of automobile you drive. These same firms may use the information they gather from you to develop databases to better serve you as a customer. This knowledge about customers is a very powerful marketing tool.

For many firms, the focus on process design includes the aspect of customer-relationship management. This view of the customer asserts that he or she is a valued asset to be managed. According to the introduction to the show “Cheers”: “Sometimes you want to go where everybody knows your name.” This is relationship management. The tangibles (such as facilities and machinery) meet the intangibles (such as professionalism and empathy) to provide a satisfying experience for the customer. There are four important design aspects (see Figure 5-2) to customer-relationship management that will be addressed here: complaint resolution, feedback, guarantees, and corrective action or recovery. For practical reasons, I will distinguish between CRM and Customer Relationship Management Systems (CRMS). CRMS are systems used for capturing customer-related data. CRMS are discussed later in the chapter.

As the famous saying goes, “you can please some of the people some of the time, but you can’t please all of the people all of the time.” As a result, complaint resolution is an important component of a quality management system. Complaints come in many forms. For our discussion, we will focus on three types of complaints that need to be resolved: regulatory complaints, employee complaints, and customer complaints. Although the focus of this chapter is on the customer, it is important to recognize all three types of complaints as potential sources of information for improvement. Donald Beaver, the owner of New Pig Corporation of Tipton, Pennsylvania, has the right attitude about complaints. 4 He states, “You should love complaints more than compliments. A complaint is someone letting you know that you haven’t satisfied them yet. They have gold written all over them.” Complaints should be viewed as opportunities to improve. Because only a small percentage of customers ultimately will complain, they should be taken very seriously. This small percentage of customers may represent a much larger population of dissatisfied customers.

4Whitely, R., The Customer-Driven Company: Moving from Talk to Action (Boston: Addison Wesley, 1991).

The complaint-resolution process involves the transformation of a negative situation into one in which the complainant is restored to the state existing prior to the occurrence of a problem. In extreme cases, the complainant has incurred a loss, as in the case of a malfunctioning product leading to injury and liability. In the case of personal injury, if the complainant was injured as a result of the malfunction of a product, it is ethical that the company should restore the person by reimbursing him or her for the product, any medical expenses, and other costs such as lost time from work.

Typically, losses incurred by customers are not quite so dramatic. The losses are smaller, such as lost time, lost money, or lost patience. The first component of a complaint-resolution process is to compensate people for losses. This may be as small as an easy return policy with no questions asked. The second component to complaint resolution is contrition. The firm should apologize to the customer for the mistakes made and invoke the Macy’s mantra, “The customer is always right.” (See A Closer Look at Quality 5-2.) Third, the complaint-resolution process must be designed to make it easy for complainants to reach resolution to simple complaints.

The process associated with resolving complaints is called the complaint-recovery process. Recovery design is an important activity for many firms. Complaints can come from a variety of sources, such as questionnaires (low scores on key quality indicators can be considered complaints), formal direct inquiries, or informal channels. The recovery process must be developed for documenting complaints, resolving the complaint, documenting recovery, and feedback for system improvement.

To understand customer behavior, wants, and needs, data about the customer are necessary. Some of these data come directly from the customer. Some customer data are solicited, and other data are provided without solicitation. The following pages discuss different approaches to collecting and analyzing customer data. One way to gather data is to receive customer feedback. There are two main types of feedback—feedback to the customer and feedback to the firm as a basis for process improvements. The customer-feedback loop includes reporting the resolution of the complaint to the customer. Many times this requires a data-gathering mechanism, such as a computerized information system, to ensure that the customer complaint has been resolved adequately. Feedback to the firm should occur on a consistent basis with a process to monitor changes resulting from the process improvement.

A Closer Look at Quality 5-2: The Customer is Always … Thwarted? b