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
success or failure of any organization is quality.

 To appreciate that creating satisfied and loyal customers is perhaps the most important
aspect for long-term competitive success.

 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

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.

1
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.

 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.

 Learn that there are differences between consumers, who are end users of products and
services; external customers who are outside of 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.

 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 customer requirements, expressed in the customer’s own terms, are called the
voice of the customer. Gathering the voice of the customer is accomplished by various
methods, or “listening posts,” including comment cards and formal surveys, focus
groups, direct customer contact, field intelligence, complaint analysis, and Internet and
social media monitoring. Affinity diagrams are helpful tools for classifying customer
requirements.

 To help students understand that the linkage of the VOC to internal processes is often
described by the gap model. Customers form perceptions (perceived quality) of the
quality of goods and services by comparing their expectations (expected quality) with
outcomes they receive (actual quality). Differences between these can result in
unexpected satisfaction dissatisfaction. Thus, careful attention must be paid to design
and production processes, as well as customer feedback.

 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,
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.

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

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);
• Sportbike (incorporates racing technology, aerodynamic styling, low handlebars with a
“sport” riding position and high performance tires);
• Cruiser (emphasizes styling and individual owner customization);
• Touring (incorporates features such as saddlebags, fairings, or large luggage
compartments and emphasizes rider comfort and load capacity); and
• Dual (designed with the capability for use on public roads as well as for off-highway
recreational use).

Harley-Davidson builds its service quality characteristics through its emphasis on

customer focus. To attract customers and achieve its goals, the company participates in
motorcycle rallies, major motorcycle consumer shows, racing activities, music festivals,
mixed martial arts activities and other special promotional and charitable events. In 2010,
 Focusing on Customers 4

the company established what it calls a “Creativity Model,” whereby it uses web-based
crowd-sourcing as a source for its main marketing creative development. These best
reflect the service quality dimensions of: assurance, tangibles, and empathy of Harley and
its customer service representatives. As will be explained below, Harley develops the
quality dimensions of reliability and responsiveness throughout its dealer network
through the provision of numerous services.

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.
Products are marketed to retail customers worldwide primarily through advertising and
promotional activities via television, print, radio, direct mailings, as well as electronic
advertising and social networks. Additionally, local marketing efforts are accomplished
through a cooperative program with the Harley’s independent dealers.

In addition to its dealer support and event sponsorship, mentioned above, Harley is
known for its well-established Harley Owners Group. In 1983 they established the Harley
Owners Group® concept which quickly became the largest factory-sponsored motorcycle
club in the world, and now has approximately 1 million members worldwide. This group
promotes Harley-Davidson products and the related lifestyle and also sponsors many
motorcycle events, for Harley motorcycle enthusiasts throughout the world.

You may want to research and include further information from recent annual reports.

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
from customers, potential customers, and customers of competitors to obtain
actionable information about products and customer support.
 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 to meet and exceed
customer requirements and expectations, to expand relationships, and to identify and
attract new customers and markets.
 Create an organizational culture and support framework that allows customers to
easily contact an organization to conduct business, receive a consistently positive
 Focusing on Customers 5

customer experience, provide feedback, obtain assistance, receive prompt resolution

of their concerns, and facilitate improvement.
 Manage customer relationships that build loyalty, enhance satisfaction and
engagement, and lead to the acquisition of new customers.
 Measure customer satisfaction, engagement, and dissatisfaction; compare the results
relative to competitors and industry benchmarks; and use the information to evaluate
and improve organizational processes.

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
organizational culture and support framework that allows customers to easily contact an
organization to conduct business, receive a consistently positive customer experience.
4. Guarantees or low risk: Customers want the risks of buying sight unseen
minimized. Practice: Manage customer relationships that build loyalty, enhance
satisfaction and engagement, and lead to the acquisition of new customers.
5. Free or low cost shipping: Customers want large items delivered to their front
door at no additional cost. Practice: Measure customer satisfaction, engagement, and
dissatisfaction; compare the results relative to competitors and industry benchmarks; and
use the information to evaluate and improve organizational processes.

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
the customer “touchpoints” might potentially be used for this purpose. The most obvious
ones are the “Confirm Order with Client via Phone,” the “Mail Thank You Gift,” and the
“E-mail Survey” steps. In each of these, the client might be asked a few questions about
their experience, so far, in the order placement cycle, such as: Do you have any problems
that need to be resolved?; Would you be willing to refer the company and/or its website
to a friend or family member?; and Can the customer service representative be of further
assistance?

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

delight the customer and responding rapidly to changing consumer and market demands.
An organization that is close to its customer knows what the customer wants, how the
customer uses its products, and anticipates needs that the customer may not even be able
to express. It also continually develops new ways of enhancing customer relationships.

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
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.

The focus for ISO 9000 and other models for performance excellence 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.

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-
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.

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

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.

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
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.

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
the ACSI and its impact [Wilton Woods. “After All You’ve 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 can’t demonstrate the link between increased
customer satisfaction and improved financial results, you’re 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 ACSI’s web site at
http://www.theacsi.org for most recent data.

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
divisions within the company who receive products or services from suppliers within the
company, must be recognized and satisfied or delighted. Thus, editors, who prepare the
manuscript for production, are internal customers of the authors, who write the
manuscript. In turn, the authors become internal customers of the editors when the edited
copy is sent back to the authors for review and approval, before the final text is printed. If
 Focusing on Customers 8

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.

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
“requirements & feedback on your process,” and you, in turn, provide “requirements &
feedback to your suppliers”.

9. 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.

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
product match pre-established standards. A car’s 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 car’s 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
 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.
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 customer’s
convenience, explaining technical jargon in layperson’s 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 Garvin’s 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. A product-service comparison is in Table 3.2 in the text.

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.
 Satisfiers—Requirements that customers say they want, but secretly do not expect.
Fulfilling these requirements creates satisfaction.
 Exciters/delighters—New 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.

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
customer satisfaction and perceptions of the importance of various quality
dimensions. However, only a small percentage of customers regularly respond to
such surveys.
 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
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 3 Bonus materials on the Student
Companion Site 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 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
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,
 Focusing on Customers 11

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. Bean’s 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.
 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
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. 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:
 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
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

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
 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

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,
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.

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
importance and performance (the FP&L Quality in Practice incident in the Instructor
Reserve 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.

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
associated with loyal customers who will typically be repeat customers (“promoters”);
scores of 7 or 8 are associated with customers who are satisfied but may switch to
competitors (“passives”); and scores of 6 or below represent unhappy customers who
may spread negative comments (“detractors”). Promoters are less price-sensitive and are
more profitable, while detractors are more-price sensitive, defect at higher rates, and
consequently are less profitable. NPS is the difference in the percentage of promoters and
detractors.

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
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.

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
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!
 Focusing on Customers 15

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. 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
loyalty is extremely important to long-term business success. 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. 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
implications, and questions – pro or con – are also varied. For example, will the new
customers “stick with” the organization, especially if expectations are built up, but not
realized? How might treatment of existing customers be adjusted to reduce the chances
that they will be irritated by not getting the incentives received by new customers? Does
“raising the bar” for service to new customers then mean that the “bar” will also be raised
for day-to-day customer service?

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
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.

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,
subject, passenger, complainant, insured, visitor, camper, investor, trainee, taxpayer, fan,
guest, buyer, client, and inmate (!).

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
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.

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
c. Human Resources – suppliers may include purchasing, payroll, operations; customers
may include the same organizations. Once again, this depends on whether HR is
designing a system for recording absentees (perhaps in consultation with IS), or whether
they are gathering information on training hours conducted.
d. Mailroom – suppliers will include the USPS, FedEx, all departments in the company;
customers will also include all of the above, as mail is delivered or sent out to other
organizations.
e. Payroll – suppliers are all departments which supply payroll information; customers
are all departments which receive a payroll check or direct deposit.

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
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
employer’s premises.

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
 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
 Focusing on Customers 17

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 Buy’s 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. 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,
ensuring that they monitor credit card transactions to avoid possible fraud, and being
polite and pleasant during customer transactions.
3. Designing Tangibles: Ensuring that the design of physical facilities, equipment, and
the appearance of personnel reflects the company image. These might include attractive
facilities, appropriately dressed employees, and well-designed forms that are easy to read
and interpret.
4. Increasing Empathy: Ensuring that employees are trained to exhibit a high degree of
caring and to provide individual attention to customers. Some examples might be the
 Focusing on Customers 18

willingness to deliver packages to customer’s cars in the parking lot, explain technical
jargon in a layperson’s language, and recognize regular customers and call them by
name.
5. Increasing Responsiveness: Teach employees to help customers and provide prompt
service. Employees should be seen acting quickly to resolve problems, promptly crediting
returned merchandise, and rapidly replacing defective products.

12. 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.

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
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.

14. 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.

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
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

16. Organizations who have associates who make the following errors should endeavor to
learn about customers from their mistakes.

 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
didn’t try to sell her the most expensive phone.
 Focusing on Customers 19

 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 can’t take your
order because this isn’t 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 (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:

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."

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
found; pizza type, including crust, toppings, and size; side items; enter the order into the
 Focusing on Customers 20

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.

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
organization if their complaint is resolved. If the customer feels that the complaint was
resolved quickly, the figure jumps to 95 percent. Poudre Valley Health System calls their
service recovery program CARE: Clarify the customer’s concerns and expectations,
Apologize and acknowledge the problem, Resolve the problem and Explain how the
problem will be fixed.

Taking these facts into account, those who feel that they should receive exceptional
service, should get it, as should every customer in the restaurant. Exceptional service
should become the “norm.” If the regular customers experience a problem with their
service, the CARE steps should be immediately implemented. The customers in large
groups should be encouraged to make reservations ahead of time, but should be listened
to, and ways should be provided to “entertain” them while they wait.

19. Answers will vary, depending on the e-commerce business that is chosen. One of the
Instructor Reserve case studies on Amazon.com provides a “benchmark” for how
customer-focused such a business can be.

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
customers by exceeding service expectations does not build loyalty, by itself. It is almost
inevitable that service problems will occasionally occur, even in the most customer
focused organization. This is where reducing the effort customers must do to get a
satisfactory resolution to a service issue comes into play. They are not necessarily at odds
with one another, because organizations must do both.

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
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 has 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.

22. A customer survey for a pharmacy asks customers to rate the pharmacy according to the
following:
 Focusing on Customers 21

 Friendly pharmacist
 Knowledgeable pharmacist
 Friendly pharmacy technician
 Knowledgeable pharmacy technician
 Quick checkout

They use a 1-5 Likert scale ranging from Disappointed to Excellent. Comment on how
actionable this survey is to measure performance and enable the pharmacy to improve.
Are there any other things you can suggest to improve the survey?

As it stands, the survey questions do not appear to be actionable, since they aren't 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.

The first four items seem to focus on only one of the five service characteristics of
quality: assurance. In addition, “friendliness” can sometimes also mean “empathy” in a
pharmacy setting, where the pharmacist knows the customer’s names, and takes time to
explain the technical features of a medicine. The context is unclear. Quick checkout is an
indicator of reliability, but how “quick” is “quick”?

To improve the survey, questions should be asked about tangibles, such as legibility of
labels, or the ease of opening containers. Also, questions to clarify the empathy of
pharmacists and technicians, such as willingness to spend time with customers, should be
included. Questions should be added about responsiveness, such as how quickly were
prescriptions filled, and is there a systematic process for handling them in a timely
fashion? Questions about reliability, such as “Were the prescriptions filled accurately?”
should be included.

In addition to covering the dimensions of service quality, a better format might be to

make each of the questions open-ended, such as asking: “Did the pharmacist take time to
answer your questions about your prescription? Explain.”

Problems

1. Ski magazine conducts and annual survey of readers to rate ski resorts. They used the
following attributes as the basis for the survey: snow, grooming, terrain variety,
challenge, value, lifts, service, weather, access, on-mountain food, lodging, dining, après-
ski, off-hill activities, family programs, scenery, terrain parks, overall satisfaction.
Classify each of these attributes using the eight dimensions of quality (that is,
performance, features, etc.)

Answer
The ski attributes may be classified as:
Snow - performance
Grooming - durability
 Focusing on Customers 22

Terrain variety - performance

Challenge - performance
Value - reliability
Lifts - performance
Service - serviceability
Weather - reliability
Access - performance
On-mountain food - features
Lodging - performance
Dining - performance
Après-ski - features
Off-hill activities - features
Family programs - features
Scenery - aesthetics
Terrain parks - features
Overall satisfaction- conformance

2. Classify the following customer requirements for a hotel using the five key dimensions of
service quality—reliability, assurance, tangibles, empathy, or responsiveness.
 Hotel equipment is always functioning
 Hotel staff is knowledgeable to answer guest’s questions
 Hotel has comfortable beds, furniture, and fittings
 Guests feel safe as services are delivered to their rooms
 Hotel services are provided as promised
 Hotel has well-dressed staff
 Hotel staff is always willing to help guests
 Hotel furnishings appear to be clean and shiny
 Guests receive individual attention
 Guests feel that hotel services are provided at a competitive and affordable price

Answer

Using the five key dimensions of service quality the following customer requirements for
a hotel, the following are classified as:

 Hotel equipment is always functioning - reliability

 Hotel staff is knowledgeable to answer guest’s questions - assurance
 Hotel has comfortable beds, furniture, and fittings - tangibles
 Guests feel safe as services are delivered to their rooms - assurance
 Hotel services are provided as promised - reliability
 Hotel has well-dressed staff - tangibles
 Hotel staff is always willing to help guests - responsiveness
 Hotel furnishings appear to be clean and shiny - tangibles
 Guests receive individual attention - empathy
 Guests feel that hotel services are provided at a competitive and affordable price
reliability
 Focusing on Customers 23

3. Consider the following customer expectations for a fast-food (quick-service) restaurant.

Classify them as dissatisfiers, satisfiers, or exciters/delighters. Justify your reasoning.
a. Special prices on certain days
b. Food is safe to eat
c. Hot food is served hot
d. Service is friendly
e. Background music
f. Playland for children
g. Restaurant is clean inside
h. Food is fresh
i. A “one-bite” money-back guarantee
j. Orders can be phoned in for pickup at a separate window

Answer
Several of these customer expectations items for a fast-food (quick-service) restaurant 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 Kano’s model, the following may be seen for items a through j:

a. Special prices on certain days - satisfier

b. Food is safe to eat - dissatisfier
c. Hot food is served hot - dissatisfier
d. Service is friendly - dissatisfier
e. Background music - satisfier
f. Playland for children – exciter/delighter
g. Restaurant is clean inside -dissatisfier
h. Food is fresh - dissatisfier
i. A “one-bite” money-back guarantee - satisfier
j. Orders can be phoned in for pickup at a separate window – exciter/delighter

4. Table 3.6 is a hypothetical list of customer requirements as determined through a focus

group conducted by an airline. Develop an affinity diagram, classify these requirements
into appropriate categories, and design a questionnaire to survey customers. Be sure to
address any other pertinent issues/questions as well as customer information that would
be appropriate to include in the questionnaire.
Table 3.6 Airline Customer Requirements
 Quality food
 Ability to solve problems and answer questions during flight
 Efficient boarding procedures
 Appealing interior appearance
 Well-maintained seats
 Reservation calls answered promptly
 Timely and accurate communication of information prior to boarding
 Good selection of magazines and newspapers
 Efficient and attentive flight attendants
 Focusing on Customers 24

 Good beverage selection

 Clean lavatories
 Efficient ticket line and waiting procedures
 Convenient ground transportation
 Courteous reservations personnel
 Good-quality audio/visual system
 Sufficient quantity of food
 Interesting in-flight magazine
 Courteous and efficient gate personnel
 In-flight telephone access
 Good variety of audio/visual programming
 Flight attendants knowledgeable of airline programs and policies
 Correct explanation of fares and schedules
 Efficient seat-selection process
 Courteous and efficient sky cap
 Timely and accurate communication of flight information (in-flight)
 Convenient baggage check-in
 Timely baggage check-in
 Comfortable seating and leg room
 Assistance for passengers with special needs
 Courteous ticket counter personnel
 Convenient parking close to terminal
 Ability to solve baggage claim problems
 Ability of reservation agents to answer questions
Answer
Airline customer requirements

a. 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 +-----+-----+-----+-----+-----+-----+
Focusing on Customers 25

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.
 Focusing on Customers 26

AFFINITY DIAGRAM FOR AIRLINE

Facilities and Aircraft

Reservations Preflight Service Food Service (Continued)

courteous reserva- timely & accurate quality food good quality audio
tion personnel communication of /visual system
pre- boarding good beverage
reservation calls information selection in-flight telephone
answered promptly access
efficient ticket line sufficient quant-
correct explanation & waiting ity of food comfortable seating
of fares and procedures and leg room
schedules
convenient ground Amenities quality public
ability of transportation address system in-
reservation agents good selection flight
to answer questions courteous, efficient magazines and
gate personnel newspapers
Inflight Service
Baggage handling efficient seat interesting
selection process Western American ability to solve
convenient baggage in-flight problems, answer
check-in courteous, efficient magazine questions in flight
sky cap
timely baggage good variety of efficient, attentive
claim upon arrival provide assistance audio/visual attendants
for passengers with programming
ability to solve special needs flight attendants
baggage claim with good attitudes
problems courtesy of ticket Aircraft
counter personnel appealing interior flight attendants
appearance know airline
convenient parking programs &
close to terminal seats in good policies
condition
timely, accurate
clean lavatories flight information
(in-flight)

5. A local franchise of a national car rental firm conducted a survey of customers to

determine their perceptions of the importance of key product and service attributes as
well as their perceptions of the company’s performance. The results are given in Tables
3.4 and 3.5. In Table 3.4, importance was measured on a four-point scale ranging from
“not at all important” to “very important.” Note that Table 3.5 is segmented by personal
and business use, and that two different scales were used (the percentage values are based
on the percentage of “yes” responses; all others are on a 5-point scale from “poor” to
“excellent”). What conclusions might you make from these data? What possible
improvements can you suggest?
Table 3.4 Importance Ratings of Product/Service Attributes
Mechanical condition of car 4.50
 Focusing on Customers 27

Check-out speed/efficiency 4.35

Cleanliness of vehicle 3.98
Getting reserved car or better 3.85
Friendliness of staff 3.80
Check-in speed/efficiency 3.75
Cleanliness of facility 3.60
Employee appearance 3.52
Getting nonsmoking car 3.50
Speed of coach service 3.29

Table 3.5 Customer Ratings of Performance

Personal use Business use

Mechanical condition of car 4.515 4.710
Check-out speed/efficiency 4.853 4.163
Cleanliness of vehicle 4.929 4.688
Getting reserved car or better 4.259 4.888
Friendliness of staff 96% 91%
Check-in speed/efficiency 4.315 4.105
Cleanliness of facility 4.193 3.500
Employee appearance 100% 100%
Getting nonsmoking car 86% 100%
Speed of coach service 90% 85%

Answer

On the importance ratings, it appears that the three top items are mechanical condition,
checkout speed, and car cleanliness. Getting reserved car or better, friendliness of staff
and check-in speed/efficiency 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 for
mechanical condition, getting reserved car or better, and getting a non-smoking car. For
the top items, business users rate the mechanical condition second highest of all the items
(after getting the reserved car or better), while personal users rate it the third lowest of all
categories. Staff appearance is rated at 100% by all users, while friendliness is rated
higher by the personal users, and 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.
 Focusing on Customers 28

This survey shows that customers are generally satisfied on overall performance, with a
3.5 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, business
users perceive that the speed of check-in, checkout, and coach service is not as high as
most other factors. Mechanical standards for both groups should meet or exceed customer
requirements, but there may be a difference between the conditions of cars issued to
personal drivers versus business drivers. Work also needs to be done to ensure that
cleanliness of vehicles and facilities is improved, especially for business users, 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.

6. Versele Sporting Goods is a family-owned regional sporting goods store located in a small
Midwestern town, and competes with a larger national sporting goods chain in a larger city
about 40 miles away, as well as major national retail “superstore” with generally lower
prices. Versele’s specializes is athletic equipment, accessories, and clothing and it seeks to
create a competitive advantage through high-quality customer service. Their vision is to be
the “best-run sporting goods store in America.” They hire people who are passionate about
sports, engage in sporting activities so that they can better relate to the products and
customers, and cross-train associates so that they are a good knowledge of all product lines,
no matter what their personal interests are.
To better understand what customers value and how they perform relative to their
competition, they conducted a survey to rate customers’ perceptions for their store and their
two main competitors on the following attributes (using a 1-7 Likert scale):
1. Friendliness of employees
2. Knowledge of products
3. Helpfulness in selecting the right product
4. Store layout
5. Product availability
6. Product quality
7. Ease of checkout
8. Overall customer satisfaction
9. Willingness to recommend to others
a. Results from the survey, taken from a random sample of 50 customers per month for 12
months, can be found in the Excel file C03Data.xlsx in the Bonus Materials Folder in the
Student Companion Site. From your analysis, what might Versele’s do to create
“exciters/delighters” that would help them compete with the larger national chain and
local superstore?
b. Using the five dimensions of service quality, what other attributes might the store
include in the survey?
Answer
a. The results, found in spreadsheet Prob03-06 in the IRCD site show three sets of
interrelated patterns.

For the employee attributes of friendliness, knowledge, and helpfulness show some
interesting variation. The knowledge of products by employees appears to be fairly
Focusing on Customers 29

stable, between 5.7 and 6.9, except for a 2 month slump in the first half of the year. The
friendliness and helpfulness ratings mirrored each other with three-month declines in
ratings. Product knowledge ratings indicate that the employees have been trained well in
factual knowledge, but the inconsistencies in friendliness and helpfulness indicate that
behavioral training may be lacking.

Employee Atributes
8.0
7.0
6.0
Attribute Rating

5.0 1.  Friendliness of employees

4.0 2. Knowledge of products
3. Helpfulness in selecting the right
3.0 product
2.0
1.0
0.0
1 2 3 4 5 6 7 8 9 10 11 12
Months

The product and store characteristics of store layout, product availability, product quality,
and ease of checkout show a great deal of variability, except for product quality. Perhaps
the greatest variability is shown by the “ease of checkout.” This might be due to
inconsistent staffing or inadequate training at checkout counters. It is possible that
unreliable equipment might also play a part. Store layout is fairly consistent, but the
rating is only moderately high, and generally between 4 and 5. Finally, product
availability is more variable than other characteristics, and ranges between 3 and 5.

Product and Store Characteristics

Product and Store Attributes

8.0
7.0
6.0
4.  Store layout
5.0
4.0 5. Product availability
3.0 6. Product quality
2.0 7. Ease of checkout
1.0
0.0
1 2 3 4 5 6 7 8 9 10 11 12
Months
 Focusing on Customers 30

The two measures of customer satisfaction and referrals appear to be closely related.
They generally range from slightly below 5 to as high as 6.6.

Customer Satisfaction and Referrals

7.0
Satisfaction and Referral Ratings

6.0
5.0
4.0 8. Overall customer satisfaction
9. Willingness to recommend to
3.0 others
2.0
1.0
0.0
1 2 3 4 5 6 7 8 9 10 11 12
Months

To create “exciters/delighters,” Versele’s should spend time training their employees in

friendliness, helpfulness, and perhaps checkout skills. Other aspects of checkout
problems such as length of lines, and equipment reliability should also be evaluated and
improved. Customers should also be surveyed to find out what products are missing, and
why.

b. Using the five dimensions of service quality, reliability, assurance, tangibles, empathy,
and responsiveness, it appears that the dimensions of reliability (product quality, product
availability), assurance (helpfulness in selecting the right product, friendliness of
employees), tangibles (store layout, ease of checkout), and empathy ((knowledge of
product). The store might add measures of reliability and responsiveness to the survey.
Examples of reliability might be, “Do our customer service representatives respond in the
promised time? Do they follow customer instructions? Do they consistently provide
error-free invoices and statements? Examples of responsiveness might include: Do our
employees act quickly to resolve problems? Do employees promptly credit returned
merchandise? Do our associates rapidly replace defective products?

7. Ramsey’s Radical Reservations (RRR.com) takes and processes reservations on land, sea,
air, and even space travel and prides itself in being a “one-stop” service for adventure
travel. Data in spreadsheet C03Data.xlsx in the Student Companion Site shows results
from 200 customers who were sampled during one representative week. Count the
number of responses at each level (10 through1), determine the number and percentage of
customers at the promoter, passive, and detractor levels. Then calculate net promoter
score (NPS). Is it at a high, medium or low level? What should Ramsey do, considering
that this is a typical week’s score?

Answer
The promoter percentage is not extremely high, but the passive percentage is fairly high,
and the detractor percentage is almost as high. Consequently, the “point score” of the
 Focusing on Customers 31

NPS is rather low at 32.5%. Ramsey should first focus on ways to convert passives to
being promoters. Since Ramsey’s niche is adventure travel, it is likely that his customers
are high-energy and enthusiastic about their search for adventure. Ramsey’s should seek
ways to make every aspect of the travel, “an adventure,” so as to achieve referrals and
word-of-mouth advertising from customers. Ramsey might survey customers for ideas, as
well as talking to contractors with whom the firm does business.

Results
Promoters (10-9) 53.5%
Passives (8-7) 25.5%
Detractors (6-1) 21.0%

NPS 32.5%

8. Angelina’s Beauty Emporium started out with a mission of providing hair care, beauty
treatment and spa services to middle income women. Angelina would like to move to a
more upscale clientele, if possible. She has collected weekly data for the past two years
(104 weeks) by asking over 200 clients per week to answer the question: “What is the
likelihood that you would recommend us?” evaluated on a scale from 0 to 10. Data can be
found in C03-Data.xlsx in the Student Companion Site. Compute the percentage of
respondents who are promoters, passives, and detractors, and then compute the NPS score.
a) Plot these scores on several graphs and give an explanation for possible causes of any
trends that you see in the data. b) Angelina tried a promotion for upscale clients during 8
weeks (from week 41 to 49) and four weeks (between weeks 92 and 95). What do the
results show?
Answer
As the charts of Promoters, Passives, and Detractors Scores (see spreadsheet Prob03-
08.xlsx for details) show, the Promoters scores actually began climbing prior to the
beginning of the promotion in week 41. This could have been due to training or other
effects that were being instituted by Angelina, prior to the promotion period. At about the
same time, the Passive and Detractors scores fell, and then remained relatively stable
within a broad range, for most of the rest of the data cycle. However, they sharply
increased during the last 9 weeks. Although the percentages of Promoters increased
during the promotion period, they fell off after the promotion was over, indicating that
long-term effects were not present. This was especially true after the second promotion
period, as shown on the NPS chart. The percentages of NPS scores fell sharply at the end
of the promotion period. Angelina should train her employees to continue the behaviors
used during the promotions, and search for long-term “levers” for customer commitment.
 Focusing on Customers 32

Angelina's Beauty Emporium - Promoters Scores

80.0%
Promoters Percentages

60.0%
40.0%
Promoters (10-9)
20.0%
0.0%
1 7 13 1 9 25 3 1 37 43 4 9 55 6 1 67 7 3 79 8 5 91 9 7 0 3
1

Weeks

Angelina's Beauty Emporium - Passives Scores

40.0%
35.0%
30.0%
Passives Percentages

25.0%
20.0%
15.0% Passives (8-7)
10.0%
5.0%
0.0%
1 6 11 16 21 2 6 3 1 3 6 4 1 4 6 5 1 5 6 6 1 66 71 76 81 86 9 1 9 6 0 1
1

Weeks

Angelina's Beauty Emporium - Detractors Scores

30.0%
25.0%
Detractors Percentages

20.0%
15.0%
10.0% Detractors (6-1)
5.0%
0.0%
1 7 13 1 9 2 5 31 3 7 4 3 4 9 5 5 6 1 6 7 73 7 9 8 5 91 97 0 3
1

Weeks
 Focusing on Customers 33

Angelina's Beauty Emporium - NPS Scores

80.0%

70.0%

60.0%

50.0%
NPS Percentages

40.0%
NPS Score
30.0%

20.0%

10.0%

0.0%
1 6 1 1 1 6 2 1 26 3 1 36 41 46 5 1 5 6 6 1 6 6 7 1 76 81 86 9 1 9 6 0 1
1

Weeks

9. Premier Computer Designs is trying to design a powerful, portable computer targeted

toward quality managers. They have surveyed a panel of quality managers and have
found that the characteristics that are important to such managers are: speed, active
memory, portability, reliability, and price. Premier has two different models that they had
the panel to rate. The relative importance percentages and ratings are shown in the table
in spreadsheet C03-Data.xlsx in the Student Companion Site. Calculate the relative
performance and weighted customer perceived value (CPV) of each pilot computer
product. Which one should Premier scale up for full production? If they wanted to
produce the other design as a “backup,” which one characteristic of the second best
computer should they try to enhance?
Answer
The results (see spreadsheet Prob03-09.xlsx for details) are shown in the table, below.
Computer A should be chosen for production, based on comparison of CPV-A versus
CPV-B. To enhance the attractiveness of computer B, as a backup, either the reliability or
the active memory could be enhanced. If the reliability of Computer B could be brought
up to the level of Computer A without any increase in the rating for price, its CPV score
would almost equal that of Computer A. If the active memory of Computer B could be
brought up to the level of Computer A without any increase in the rating for price
(unlikely) or changes In the rating of other factors, its CPV score would exceed that of
Computer A. Therefore, the best alternative is to try to increase the reliability of
Computer B, without increasing the rating for price or changing the rating of other
factors.
 Focusing on Customers 34

Relative Relative
CPV- CPV-
Attribute Importance Computer A Computer B Performance A B
Speed 20% 7.5 7.8 -0.3 1.50 1.56
Active memory 25% 8.5 8.0 0.5 2.13 2.00
Portability 15% 6.5 5.3 1.2 0.98 0.80
Reliability 30% 9.1 8.8 0.3 2.73 2.64
Price 10% 3.1 5.2 -2.1 0.31 0.52

SUM 7.64 7.52

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 student’s 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. 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.

5. 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

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

7. The Banana Republic, Gap, and Old Navy are divisions of the same company, Gap, Inc.,
which are targeted at different demographic market segments from upscale to middle
market to bargain hunters. Key dimensions of service quality which should be considered
for customer satisfaction surveys should include:

1. Reliability: The ability to provide what was promised, dependably and accurately.
 Focusing on Customers 35

Examples include customer service representatives (CSR’s) in retail clothing

stores, such as Banana Republic, Gap, and Old Navy responding in the promised
time, following customer instructions, providing error-free invoices and
statements, and making repairs correctly the first time. Since customers are much
more likely to have requests for tailoring of their clothing and giving instructions
to CSR’s at Banana Republic, rather than at the Gap, reliability will be more
important in customer satisfaction results.
2. Assurance: the knowledge and courtesy of employees, and their ability to convey
trust and confidence. Examples include customer service representatives who
serve customers at Banana Republic. Customers are likely to have much higher
expectations for CSR’s for up-to-date fashion knowledge, and ability to advise
customers on their selections.
3. Tangibles: the physical facilities and equipment, and the appearance of personnel.
Tangibles include attractive facilities, and well-designed gathering areas for
skiers. Customers expect the whole range of physical facilities for Banana
Republic versus the Gap versus Old Navy. Banana Republic’s customers relish
old, elegant, classic buildings which are refurbished as upscale stores. Old Navy’s
customers want facilities which border on “warehouse” in style.
4. 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.” Again, Banana Republic
customers wan CSR, who say, and mean, “We care.” In Old Navy stores,
customers are accustomed to CSR’ who will leave them alone, with a “Who
cares?” attitude, except when asked a direct question.
5. 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.

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.

11. This is a “hands-on” exercise which depends on the product or service failure which is
chosen.

ANSWERS TO CASE QUESTIONS

I. Rosie’s Pizzeria
 Focusing on Customers 36

1. 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. Rosie’s 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.

Note: There is a Power Point presentation for LaRosa’s Pizza on store design in the Instructor
Reserve Materials folder for this chapter. LaRosa’s was the model on which this case was based.

II. Pauli’s Restaurant and Microbrewery

This is an actual author experience. One of the authors had sent the email to the restaurant’s
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 to the 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 I may
have the opportunity to make this right for you and your guests.
 Focusing on Customers 37

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.

III. First Internet Reliable Bank

1. The closed-ended and open-ended questions provided different perspectives on customer

needs for FIR’s 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 (CSR’s) (16
percent); the relatively short time it takes to resolve most problems (15 percent); the
quality of the response provided by CSR’s (14 percent); and the manner and approach of
CSR’s (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 policies

IV. Gold Star Chili: Customer and Market Knowledge

1. Some moments of truth in Gold Star’s 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
 Focusing on Customers 38

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” – won’t.

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 (FSR’s), 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
Star’s 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.
 Focusing on Customers 39

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 FSR’s 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

INSTRUCTOR RESERVE MATERIALS

Quality in Practice - Customer Focus at Amazon.com

1. Amazon’s 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 company’s 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,
 Focusing on Customers 40

 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.com’s 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.com’s database, but where Amazon.com cannot guarantee privacy its customers
is a troublesome prospect.

Quality in Practice - Improving Customer Satisfaction at a Software Support Call Center

1. The case suggests that it is often difficult to understand customers’ true needs and
expectations. The study required an iterative process to get past the “obvious”
conclusions, develop a workable hypothesis, and test it out. The case also shows that it is
often necessary to bring the perspectives of diverse groups to bear on a problem, rather
than depend on the analysis and insights of only one or two people. Finally, the case
shows that it is possible to train individuals to combine technical skills with human skills
in order to be effective in service delivery situations.

2. The transparency principle is a 3-stage process that involves:

 Immediate establishment of the engineer as a problem solver and expert

 Initiating the troubleshooting
 Open admission of a wrong hypothesis (if required)

These three steps appear to be extremely simple and almost intuitive. However, it took
considerable research effort to develop them. The implications of this are that it takes
more than technical expertise to satisfy/delight the customer in service delivery (as well
as in providing more tangible products). The voice of the customer must be sought out
and listened to. The difficult work of translating the voice of the customer into technical
 Focusing on Customers 41

requirements must be done. Finally, thorough, effective training is required so that

customer service personnel know their roles and can deliver the expected service.

3. The learning from this case could be applied to similar technical situation, but might
extend even further than the high tech applications in which it was first developed. In
similar high tech areas, the transparency principle could certainly be applied to a number
of different technical products, such as computer hardware, printers, VCR’s, fax
machines, etc. It might also be applied to other customer service situations, such as a
travel agency, parts distribution center, etc.

Case - The Case of the Missing Reservation

1. Although it is difficult to speculate on the amount of "empowerment" that a restaurant

hostess/manager might have, it is apparent that she did not attempt to "move heaven and
earth to satisfy a customer" as employees are empowered to do at Ritz-Carlton. As one
student pointed out in a write-up of this case, “... any business’ top goals include
customer satisfaction, customer retention, and increase in market share.” None of the
actions of the restaurant personnel seemed to be aimed towards meeting these goals.

In this situation the manager might have seated the Mark’s party and made plans to set up
another table for other guests who were arriving later. She might also have provided
some compensating factor, such as giving the party 25% off on their bill.

2. Different people have a higher and lower tolerance for poor service. Most people would
not have taken the time to write and send a letter as Mark did. The complaint should have
been taken seriously, since only a small percentage of unhappy customers bother to
complain. Again, the response from the hotel inadequate. The letter was "delegated" to
the "quality person," the response letter was polite, but simply stated the facts without
apology for any mistake. There was no offer of service, refund or other compensation for
inconvenience. The student cited above developed this table:

Measurement Perceived Performance

Reliability (-) Customer had made reservation and rightly expected guaranteed and timely
restaurant seating.
Assurance (-) Although not unpleasant, manager was not accommodating and did not
exude confidence that customers would be seated ASAP.
Tangibles n.a.
Empathy (-) No sign of caring or individual attention; not empathetic or sympathetic.
Responsiveness (-) Not at all responsive; no sense of urgency to provide prompt service to
customers.

Case - Cincinnati Veteran’s Administration Medical Center

1. The CVAMC offers a wide range of services to veterans, who comprise their major
patient category. They include primary and internal medical care, with several sub-
 Focusing on Customers 42

specialties; general surgery, with several sub-specialties; mental health, with psychiatric
and psychological support care including several disorders; neurology, and physical
medicine and rehabilitation services. In addition they support trainee education and
pursuit of new knowledge through research. Other customers include the families of
veteran patients, the veterans support organizations (VSO), the trainees including
residents and medical students, and the staff at the other VISN facilities. There is a
special relationship with the University of Cincinnati. This involves all three major
missions of this medical center. The majority of the staff physicians have joint
appointments with the University. Some specialized care is provided through sharing
agreements with the University, including radiation therapy, special radiological studies,
and cardiac surgery. The CVAMC is a major teaching center for many of the
University's residents and medical students. The CVAMC also supports researchers with
joint appointments at the University. There is a partnership between the unions and the
Medical Center. Finally, there is a partnership between the Medical Center and a local
elementary school.

To achieve its vision of being truly customer focused, the CVAMC should develop a
number of approaches to understand customer expectations, deploy short-term and long-
term requirements, ensure relevance of current products/services, and develop new
opportunities.

 It should determine which of its services are the strongest in meeting current
customer needs, which have opportunities for improvement, and what factors
contribute to each. For example, how could it build on its strength in having ties to a
research facility (the University of Cincinnati), its ability to purchase materials at low
cost through a buying network, the vertically integrated health care delivery system
that it has built, and specialties in areas of use to an aging population of health care
customers?
 It should determine market needs of current customers that are well served versus
those that are under-served and consider ways to extend services to the under-served.
Using targeted surveys or focus groups to investigate needs could do this.
 It should determine the factors that competitors use to appeal to potential customers
who might switch to CVAMC if those factors were available. For example, how
might veterans who receive Medicaid support be served by CVAMC?
 It should determine areas of possible growth of products or services. For example,
could outreach programs be established in other areas, similar to those in Kentucky?

2. The VA Survey appears to have broad coverage, but has some opportunities for
improvement, as well. The following is a brief case analysis according to the dimensions
of service quality developed earlier in the chapter.

Analysis

Introduction

The focus of a customer satisfaction survey, such as developed by the CVAMC, should
be to obtain actionable information from customers. To be actionable, an organization
 Focusing on Customers 43

should be able to tie the information to key business processes, and should be able to
determine cost/revenue implications for improvement priority setting.

CVAMC’s vision is to “… shape our future by breaking the traditional VA mold,

building on our strengths, and emerging as the health care center of choice for all
Veterans. As pioneers of change we will:

A. Establish the patient at the core of all processes with the focus on continuity of
care leading to optimal patient outcomes.
B. Develop a united team of competent, caring, empowered employees committed to
providing service that exceeds expectations.
C. Foster unprecedented labor/management trust and cooperation.
D. Create a proactive organization that is responsive, streamlined, and personal.
E. Be recognized as an innovative, vital health care leader and educational resource
in our VA system and the Greater Cincinnati community.”

Information for Analysis

The following classifies the questions in the questionnaire according to characteristics of

service quality.

Measurement Perceived Performance

Reliability Questions 2, 21, 24, 34
Assurance Questions 3, 5, 6, 7, 8, 10, 12, 16, 18, 23, 26, 38, 39, 40, 41, 42, 43
Tangibles
Empathy Questions 8, 9, 11, 14, 15, 17, 20, 22, 28, 35, 36, 37
Responsiveness Questions 4, 13, 19, 25, 27, 29, 30, 31, 32

A few questions were too general or global to classify into one of the above
characteristics of service quality, such as Questions 1, 44, 45, 46, 47.

Note also that there were no questions relating to tangibles, such as facilities and
paperwork, which could affect the patients’ overall perceptions of quality.

The following sections analyze the extent to which the survey provides actionable
information for improvement, address key patient needs and expectations, and address
satisfaction and loyalty.

Actionable information for improvement

Although a number of the questions addressed areas related to key business processes and
key patient needs and expectations, few would be considered actionable for improvement
purposes. For example, it is unlikely that patients would be able to accurately judge how
long their wait should be, whether enough information was given to family members, and
how long they had to wait before receiving pain medicine.
Address key patient needs and expectations
Focusing on Customers 44

The background information provided by hospital management indicated that patients

have the following needs and expectations:

1. Veteran patients require accessibility to care. This includes the need to be seen at
a location convenient to them, as much as possible.
2. They must be able to get an appointment with their clinicians within a reasonable
period of time. A thirty-day limit for specialty clinic consultation has been
targeted as a key customer service standard.
3. Patients do not want to have to wait for long periods on the day of their
appointments.
4. They need access to the latest technology and specialty skills as appropriate for
their medical conditions. This is important even if the CVAMC does not have the
necessary equipment or personnel on site. The CVAMC must then contract for
those services.
5. Veteran patients need to have continuity of care. They want to see the same
clinician each visit to develop rapport with someone who understands their
particular needs.
6. They want that provider to be aware of the results of any specialty consultations
or hospitalizations.
7. These patients deserve the availability of a range of services to meet their needs.
8. They recognize the need for interdisciplinary approaches to solve some of their
health problems.
9. They demand to be heard during medical decision-making and want their end-of-
life wishes respected.

Needs indicated in items 1, 2, 4, 6, and 7 were not specifically addressed in the survey.
Others were touched on, but not fully addressed, such as 3, 5, 8, and 9.

Address satisfaction and loyalty

General questions were asked in order to ascertain an overall quality rating, determine
whether a person would choose free care at another hospital if available, and assess
whether a complaint was registered. However, these do not fully address whether the
patient was delighted, satisfied, or dissatisfied; why the patient would or would not
choose to return to the VA hospital; and whether the complaint was major or minor.

Conclusions and recommendations

The patient survey can be one of several tools that the CVAMC uses to assess whether it
is meeting or exceeding the goals listed in its vision statement. The survey should be
redesigned to provide actionable information for improvement, address key patient needs
and expectations, and address satisfaction and loyalty. Thus, each question must be tied
directly to goals in the vision statement and to patient needs and expectations. Additional
questions should be developed to address tangibles, customer satisfaction, and loyalty.
Finally, the questionnaire should be pilot-tested with a panel or focus group containing
staff members, doctors, nurses, and patients, in order to gage validity and reliability.
 Focusing on Customers 45

WML/JRE – 10/4/12