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Amity Business School

Strategic Quality Management

….. Semester III

40 Contact Hrs.

4 Credits


Transition from Old to New age Policies

Philosophy of integrating market driven focus elements for continuousimprovement in all work processes of the enterprise becomes necessarydue to:

Customer driven market revolution Fierce global competition Unpredictable market, changing expectations & moving targets Need to develop a customer focused culture

Integrate market driven culture Focus on quality, cost, productivity Customer loyalty & Change Management


Evaluation of Competitive Capabilities

What is that you do that the customers value better than the competition

Evaluation of your resources is of no value unless done in respect to your competitors

If you are not the best in a critical activity, you are sacrificing the competitive advantage by continuing to do what you are doing with old practices

Only the firms that are able to continually build new strategic assets faster and cheaper than the competition will earn superior customer value and returns over long period


Focus Elements of a Market Driven Enterprise

Commitment to customer satisfaction Human Resource Development Total Quality Culture Error Prevention Philosophy Zero Error Solutions Design & Product Quality Quality Services Quality of Management & Services People Development Productivity, efficiency and effectiveness Process & Technologies for continuous improvement


Total Quality Management ……concepts & understanding

“TQM is a philosophy that represents a set of guiding principles that lays the foundation of a continuously improving and customer driven organization”

“The first job we have is to turn out quality merchandise that consumers will buy and “The first job we have is to turn out quality merchandise that consumers will buy and keep on buying. If we produce it efficiently and economically, we will earn a profit, in which keep on buying. If we produce it efficiently and economically, we will earn a profit, in which you will share.” you will share.”

- William Cooper Procter - William Cooper Procter


TQM IS

– Encompassing and mobilizing entire organization to satisfy the customer

– Improving each individual and groups within the organization

– Integrating the philosophy and practices in day to day approach to work

– Influencing all product, services, systems, process & technology

– Long term and continuous and is sensitive to the social responsibilities of the enterprise

– Supporting ‘High Performance Culture through teamwork, trust & leadership

IT IS NOT

– A program, that has a beginning & an end.

– It is a continuous journey.


History…

• Craftsmen… Early days, generations learning, own inspector.

• Early 20th Century… Unskilled repetitive, start of interchangeability.

• Ford Story…. Standardization, concepts for quality, Mass Mfg.

• Post War….. American Society for Quality 1944 Safety, Public interest ‘producer beware’

• Dr. Joseph Juran & Dr. Edward Demming story Pioneering work in Total Quality ( in Japan ) Demming returns to US (1980-1993)

• Product Quality to Performance Excellence ‘Quality of Management’ as important as ‘Management of Quality’

• American Society for Quality identifies future challenges Partnering, Learning system, Adaptability and speed of change Environmental Sustainability, Knowledge Focus, Globalization Customization & Differentiation, Shifting Demographics


TQM All Employees involved

EmpowermentTeamwork

Quality Strategy

Quality Assurance•Quality Systems ISO•Quality Planning•Quality Policy•Quality Controls•Problem Solving

Journey to TQM….

Quality Control

Quality StandardsStatistical ControlsProcess PerformanceTreat Quality Problems

Inspection

Error DetectionRectificationUnhappy Customer


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History of Quality History of Quality ( Contd.)( Contd.) History of Quality History of Quality ( Contd.)( Contd.)

• Quality awareness in U.S. manufacturing industry during Quality awareness in U.S. manufacturing industry during 1980s: from “Little Q” to “Big Q” - Total Quality 1980s: from “Little Q” to “Big Q” - Total Quality ManagementManagement

• Malcolm Baldrige National Quality Award (1987) Malcolm Baldrige National Quality Award (1987)

• Disappointments and criticismDisappointments and criticism


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• Emergence of quality management in service industries, Emergence of quality management in service industries, government, health care, and educationgovernment, health care, and education

• Evolution of Six SigmaEvolution of Six Sigma

• Current and future challenge: keep progress in quality Current and future challenge: keep progress in quality management alivemanagement alive

History of Quality History of Quality ( Contd.)( Contd.) History of Quality History of Quality ( Contd.)( Contd.)


Contemporary Influences on QualityContemporary Influences on Quality

• Partnering

• Learning systems

• Adaptability and speed of change

• Environmental sustainability

• Globalization

• Knowledge focus

• Customization and differentiation

• Shifting demographics


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Definitions of QualityDefinitions of QualityDefinitions of QualityDefinitions of Quality

• Transcendent definitionTranscendent definition: excellence: excellence

• Product-based definitionProduct-based definition: quantities of product attributes: quantities of product attributes

• User-based definitionUser-based definition: fitness for intended use: fitness for intended use

• Value-based definitionValue-based definition: quality vs. price: quality vs. price

• Manufacturing-based definitionManufacturing-based definition: conformance to specs: conformance to specs


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Quality PerspectivesQuality Perspectives

CustomerCustomer

DistributionDistribution

productsproducts and and servicesservices

needsneeds

transcendent &transcendent &product-basedproduct-based user-baseduser-based

manufacturing-manufacturing- basedbased

value-basedvalue-based

MarketingMarketing

DesignDesign

ManufacturingManufacturing

InformationInformation flowflowProductProduct flowflow


Paradigm Shift

From….

Management of Quality

to

Quality of Management


Criteria

• Leadership

• Strategic Planning

• Customer & Market Focus

• Information & Analysis

• Human Resources Development & Planning

• Process Management

• Business Results

Weightage

12%8%8%8%

10%10%44%

Malcolm Baldrige


Understanding of Criteria

1. Leadership

– Leadership System.. How the senior leaders guide the company in setting directions and in developing and sustaining an effective leadership system.

– Company Responsibility & Citizenship… How the company addresses the its responsibility to the public and how it practices good citizenship.

2. Strategic Planning

– Strategy Development Process.. How the company sets strategic directions to better define and strengthen its competitive position and how the development process leads to action plan for deploying and aligning key plan and performance requirements.

– Company Strategy.. How the performance requirements and measures align with the human resource plan and how the plans project the co’s future as compared to the competitors and key benchmarks.

3. Customer & Market Focus

– Customer & Market Knowledge.. How the company determines the long term requirements and preference of target and potential customers and market and anticipate needs to develop business opportunities .

– Customer Relationship & Satisfaction Enhancement..How the company determines and enhances the satisfaction of customers to strengthen relationships to improve current offerings and to support customer and market related planning.


4. Information & Analysis– Selection & Use of Information & Data…How the co. selects, manages and uses the

information and data needed to support key company process and improve the co’s performance.

– Selection & use of comparative information & data.. How the company selects, manages and uses comparative information data to improve co’s competitive position.

– Analysis & Review of Company’s Performance..How the co. analyses and reviews overall performance to assess the progress relative to plans to identify key areas of improvement.

5. Human Resources Development & Management– Work Systems.. What is the company’s work & job design and its compensation and

recognition approaches to enable and encourage all employees to contribute effectively to achieve the co’s performance and learning objective.

– Employee Education Training & Development.. How the co’s training and education addresses its plan and needs including building knowledge & capabilities & contribute to improved employees’ performance and development.

– Employee Well-Being & Satisfaction..How the company maintains its work environment and work climate to support the well-being, satisfaction and motivation of all its employees

Understanding of Criteria (…contd.)


6. Process Management

– Management of Product & Service Processes..How the significantly modified and customized products and services are designed. How the product/services delivery systems are designed, implemented and improved.

– Management of Support Process.. How the co’s key support processes are designed, managed and continuously improved.

– Management of Supplier and Partnering..How the co’s supplier and partnering processes, performance and relationships are managed and improved.

7. Business Results

– Customer Satisfaction Results..How the co. performance on Customer Satisfaction

– Financial & Market Results….Co’s key financial & marketplace performance

– Human Resource Results…Co’s Human Resource results including employee well-being, satisfaction, development and work system performance

– Supplier & Partner Results…Co’s supplier and partner results

– Company-Specific Results…How the company’s key operational performance and results significantly contribute to key company goals- customer satisfaction, operational effectiveness and financial/market place and performance.

Understanding of Criteria ( Contd.)


LeadershipLeadership

The ability to positively influence people and The ability to positively influence people and systems under one’s authority to have a systems under one’s authority to have a meaningful impact and achieve important meaningful impact and achieve important resultsresults


The Baldrige “Leadership Triad”The Baldrige “Leadership Triad”

Leadership

Strategic Planning

Customer andMarket Focus

Operations


Executive LeadershipExecutive Leadership Defining and communicating business directionsDefining and communicating business directions Ensuring that goals and expectations are metEnsuring that goals and expectations are met Reviewing business performance and taking appropriate Reviewing business performance and taking appropriate

actionaction Creating an enjoyable work environmentCreating an enjoyable work environment Soliciting input and feedback from customersSoliciting input and feedback from customers Ensuring that employees are effective contributorsEnsuring that employees are effective contributors Motivating, inspiring, and energizing employeesMotivating, inspiring, and energizing employees Recognizing employee contributionsRecognizing employee contributions Providing honest feedbackProviding honest feedback


Key IdeaKey Idea

Effective leadership requires five core leadership skills:

• vision

• Empowerment

• Intuition

• self-understanding

• and value congruence.


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LeadingLeading Practices – LeadershipLeadingLeading Practices – Leadership

• Create a customer-focused strategic vision and clear quality values

• Create and sustain leadership system and environment for empowerment, innovation, and organizational learning

• Set high expectations and demonstrate personal commitment and involvement in quality

• Integrate quality values into daily leadership and management and communicate extensively

• Review organizational performanceReview organizational performance• Create an environment and governance system that fosters Create an environment and governance system that fosters

legal and ethical behaviorlegal and ethical behavior• Integrate public responsibilities and community support into Integrate public responsibilities and community support into

business practicesbusiness practices


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Leadership SystemLeadership SystemLeadership SystemLeadership System

• Leadership SystemLeadership System

… ….. how decisions are made, communicated, and .. how decisions are made, communicated, and carried out at all levels; mechanisms for leadership carried out at all levels; mechanisms for leadership development, self-examination, and improvementdevelopment, self-examination, and improvement

• Effectiveness of Leadership SystemEffectiveness of Leadership System

…… ……depends in part on its organizational structuredepends in part on its organizational structure


Key IdeaKey Idea

An Effective Leadership System respects the capabilities and requirements of employees and other stakeholders, and sets high expectations for performance and performance improvements.


GovernanceGovernance

• Governance …. The system of management and controls

exercised in the stewardship of an organization.– Approving strategic direction– Monitoring and evaluating CEO performance– Succession planning– Financial auditing– Executive compensation– Disclosure– Shareholder reporting


Leadership and Social Leadership and Social ResponsibilitiesResponsibilities

• EthicsEthics• Health, safety, and environmentHealth, safety, and environment• Community supportCommunity support


Key IdeaKey Idea

Practicing good citizenship refers to leadership and support—within the limits of an organization’s resources—of publicly important purposes, including improving education, community health, environmental excellence, resource conservation, community service, and professional practices.


Leadership …..TQM relevance

• Definition– Traditional – Leadership for Quality … Assortment of behaviors

vision, hope, stimulation, mission, transformation dreams to reality, stewardship, Integration, courage, communication, consensual, conviction, empowering

deploying, motivating, motivating and tenacity.• ‘Executive Leadership’-not the only one

– Changed Business Scenario & New Economy demanding Unit, Team, Project and Transformational Leadership

‘No more the one or few men show’• Strategic Plan Integration

– Quality is the key element to strategic planning for ‘ Quality management’ and ‘Performance Excellence’ under the current business environment

– Identification of such competitive advantages that is driven by customer and market.


Leadership …..TQM relevance

• Effective LeadershipFive Core Skills– vision, empowerment, intuition, self-understanding & value

congruence

• Leadership Practices– Customer Focus, Strategic vision, Quality value– Creating sustainable leadership, environment, empowerment, innovate– Setting high expectations, demonstrate substantial personal commitment and

involvement, missionary zeal and constancy of purpose– Integrating quality values in daily values, extensive communication– Integrate public responsibility and community support in business practices

• TQ Leadership Contrasts….. Details• Leadership & Public Responsibilities

– Public Health, safety & environment– Compliance– Corporate Citizenship, Community education, welfare, conservation– Industry Obligation to Community


TQ Leadership Contrasts

Traditional

• Plan Projects– Make plans– Organize resource– Preach M.B.O

• Push Products– Lip service to quality– Sell to customer– Perform R&D

• Control People– Control through systems– Reward conformance punish

deviation– Maintain status QUO

TQ Leaders

• Practice– Envision the future– Optimize the resource– Participative management

• Produce– Exemplary quality– Service the customer– Innovate

• Motivate people– Development, talent & system– Reward effort, skill

development and empower– Continuous improvement


Strategic Planning

“The process of envisioning organization’s future and developing necessary procedures and operations to shape and achieve that future”

Concept• Plan that integrates an organization’s major goals• Policies and actions sequences in alignment and supporting the goals• Marshalling and allocating organization’s resources into an unique

and viable posture• Based on one’s relative strengths and competencies and anticipated

changes in the environment• Counter measures and actions anticipating contingent moves by

intelligent opponents


Leading Practices• Top management, employees & even customers actively participate in

the planning process• Systematic planning process for strategy development and deployment

including measurement, feedback and review.• Gathering and analysis of variety of data external & internal factors• Alignment of short-term action plans with long term strategic objectives.• Derive human resource plans from strategic objectives and action plansDerive human resource plans from strategic objectives and action plans

Strategic Planning …Influence of TQ culture

Vision

Mission

Guiding Principle

Strategies ObjectivesActionPlans

Environmental Scan

Strategy Development


MissionMission

Definition of products and services, markets, Definition of products and services, markets, customer needs, and distinctive competenciescustomer needs, and distinctive competencies

SolectronSolectron: “…: “…to provide worldwide responsiveness to our to provide worldwide responsiveness to our customers by offering the highest quality, lowest total customers by offering the highest quality, lowest total cost, customized, integrated, design, supply chain, and cost, customized, integrated, design, supply chain, and manufacturing solutions through long-term partnerships manufacturing solutions through long-term partnerships

based on integrity and ethical business practices.”based on integrity and ethical business practices.”


VisionVision

…….Where the organization is headed and.Where the organization is headed and

what it intends to be.what it intends to be.– Brief and memorable - grab attentionBrief and memorable - grab attention

– Inspiring and challenging - creates excitementInspiring and challenging - creates excitement

– Descriptive of an ideal state - provides guidanceDescriptive of an ideal state - provides guidance

– Appealing to all stakeholders - employees can identify withAppealing to all stakeholders - employees can identify with

Solectron:Solectron: “ “Be the best and continuously improve”Be the best and continuously improve”


Values (Guiding Principles)Values (Guiding Principles)

Defines attitudes and policies for all employees, which Defines attitudes and policies for all employees, which are reinforced through conscious and subconscious are reinforced through conscious and subconscious behavior at all levels of the organization.behavior at all levels of the organization.

Pepsico:Pepsico: Integrity, Honesty, Teamwork, Balance,Integrity, Honesty, Teamwork, Balance,

AccountabilityAccountability

Whirlpool: Whirlpool: Respect, Integrity, Teamwork, Trust Respect, Integrity, Teamwork, Trust

Leadership, Customer PassionLeadership, Customer Passion


Environmental AssessmentEnvironmental Assessment

TEMPLES or PESTLE

• Customer and market requirements, expectations and opportunitiesCustomer and market requirements, expectations and opportunities

• Technological and other innovationsTechnological and other innovations

• Organizational strengths and weaknessesOrganizational strengths and weaknesses

• Financial, societal, ethical, regulatory and other potential risksFinancial, societal, ethical, regulatory and other potential risks

• Changes in global or national economyChanges in global or national economy

• Factors unique to the organization, such as partner and supply Factors unique to the organization, such as partner and supply

chain needschain needs


Key Idea

•Strategies are broad statements that set the direction for the organization to take in realizing its mission and vision.

•Strategic objectives are what an organization must change or improve to remain or become competitive.

•Action plans are things that an organization must do to achieve its strategic objectives.


“Converting the strategies into small doable goals and then ultimately

deployed to the right teams & people in form of SMART objectives”

• Balance Scorecard

• Hoshin Kanri or Hoshin Planning or Policy Deployment

• Management by Planning

‘Team based deployment is most suited to TQ environment’

Strategic Deployment …TQ way


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Policy Deployment (Hoshin Kanri)

Policy Deployment (Hoshin Kanri)

• Top management vision leading to long-term Top management vision leading to long-term objectivesobjectives

• Deployment through annual objectives and action Deployment through annual objectives and action plansplans

• Negotiation for short-term objectives and resources Negotiation for short-term objectives and resources (catchball)(catchball)

• Periodic reviewsPeriodic reviews


Leadership and Organizational Leadership and Organizational StructureStructure

Basic types of organizational structuresBasic types of organizational structures– Line organizationLine organization– Line and staff organizationLine and staff organization– Matrix organizationMatrix organization


Key Idea

As more and more companies accept the process view of organizations, they are structuring the quality organization around functional or cross-functional teams.


Strategic Planning– Customer & market driven quality ‘integrated into bloodstream’

– Integrated into the product, operations and service processes

– Operational Excellence to deliver on above

Deployment– Deployment to the right people with ‘smart’ objectives

– Organization’s ability to translate strategic objective into action plans

Caliberations …What the auditor will look for

Customer DrivenQuality

Operational Excellence

TQM way to implement strategy

TQ aspects include•Empowerment•Diffused Leadership•Institutionalized Learning•Innovation and Experimentation


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Focusing on CustomersFocusing on Customers


Key IdeaKey Idea

To create satisfied customers, the organization needs to identify customers’ needs, design the production and service systems to meet those needs, and measure the results as the basis for improvement.


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Importance of Customer Importance of Customer Satisfaction and LoyaltySatisfaction and Loyalty

“Satisfaction is an attitude; loyalty is a behavior”

• Loyal customers spend more, are willing to pay higher prices, refer new clients, and are less costly to do business with.

• It costs five times more to find a new customer than to keep an existing one happy.

• A firm cannot create loyal customers without first creating satisfied customers.


Key IdeaKey Idea

Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer satisfaction.


Customer Satisfaction ModelCustomer Satisfaction Model

Perceivedquality

Customercomplaints

Perceivedvalue

Customer satisfaction

Customerexpectations Customer

loyalty


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Customer-Driven Quality CycleCustomer-Driven Quality Cycle

measurement and feedback

Customer needs and expectations (expected quality)

Identification of customer needs

Translation into product/service specifications (design quality)

Output (actual quality)

Customer perceptions (perceived quality)

PERCEIVED QUALITY is a comparison of ACTUAL QUALITY to EXPECTED QUALITY


Key IdeaKey Idea

Many organizations still focus more on processes and products from an internal perspective, rather than taking the perspective of the external customer.


Leading PracticesLeading Practices

• Define and segment key customer groups and Define and segment key customer groups and marketsmarkets

• Understand the voice of the customer (VOC) Understand the voice of the customer (VOC) • Understand linkages between VOC and design, Understand linkages between VOC and design,

production, and deliveryproduction, and delivery• Build relationships through commitments, provide Build relationships through commitments, provide

accessibility to people and information, set service accessibility to people and information, set service standards, and follow-up on transactionsstandards, and follow-up on transactions

• Effective complaint management processesEffective complaint management processes• Measure customer satisfaction for improvementMeasure customer satisfaction for improvement


Key Customer Groups• Organization levelOrganization level

– consumersconsumers– external customersexternal customers– employees employees – societysociety

• Process levelProcess level– internal customer units or groupsinternal customer units or groups

• Performer levelPerformer level– individual internal customersindividual internal customers


Identifying Internal CustomersIdentifying Internal Customers

• What products or services are produced?What products or services are produced?• Who uses these products and services?Who uses these products and services?• Who do employees call, write to, or answer Who do employees call, write to, or answer

questions for?questions for?• Who supplies inputs to the process?Who supplies inputs to the process?


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AT&T Customer-Supplier ModelAT&T Customer-Supplier Model

Requirementsand feedback

Requirementsand feedback

Your Suppliers

YourProcesses

YourCustomers

Inputs Outputs


Key IdeaKey Idea

The natural customer-supplier linkages among individuals, departments, and functions build up the “chain of customers” throughout an organization that connect every individual and function to the external customers and consumers, thus characterizing the organization’s value chain.


Customer SegmentationCustomer Segmentation

• DemographicsDemographics• GeographyGeography• VolumesVolumes• Profit potentialProfit potential


Key IdeaKey Idea

Segmentation allows a company to prioritize customer groups, for instance by considering for each group the benefits of satisfying their requirements and the consequences of failing to satisfy their requirements.


Key Dimensions of QualityKey Dimensions of Quality• Performance – primary operating characteristics• Features – “bells and whistles”• Reliability – probability of operating for specific time

and conditions of use• Conformance – degree to which characteristics

match standards• Durability - amount of use before deterioration or

replacement• Serviceability – speed, courtesy, and competence of

repair• Aesthetics – look, feel, sound, taste, smell


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Key Dimensions of Service QualityKey Dimensions of Service Quality

• ReliabilityReliability – ability to provide what was – ability to provide what was promisedpromised

• AssuranceAssurance – knowledge and courtesy of – knowledge and courtesy of employees and ability to convey trustemployees and ability to convey trust

• TangiblesTangibles – physical facilities and appearance – physical facilities and appearance of personnelof personnel

• EmpathyEmpathy – degree of caring and individual – degree of caring and individual attentionattention

• ResponsivenessResponsiveness – willingness to help customers – willingness to help customers and provide prompt serviceand provide prompt service


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Kano Model of Customer NeedsKano Model of Customer Needs

• Dissatisfiers:Dissatisfiers: expected requirements expected requirements

• Satisfiers:Satisfiers: expressed requirements expressed requirements

• Exciters/delighters:Exciters/delighters: unexpected features unexpected features


Key IdeaKey Idea

As customers become familiar with them, exciters/delighters become satisfiers over time. Eventually, satisfiers become dissatisfiers.


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Customer Listening PostsCustomer Listening Posts

• Comment cards and formal surveysComment cards and formal surveys

• Focus groupsFocus groups

• Direct customer contactDirect customer contact

• Field intelligenceField intelligence

• Complaint analysisComplaint analysis

• Internet monitoringInternet monitoring


Key IdeaKey Idea

Companies use a variety of methods, or “listening posts,” to collect information about customer needs and expectations, their importance, and customer satisfaction with the company’s performance on these measures.


Tools for Classifying Customer Tools for Classifying Customer RequirementsRequirements

Affinity diagram Tree diagram


Moments of TruthMoments of Truth

• Every instance in which a customer comes in Every instance in which a customer comes in contact with an employee of the company. contact with an employee of the company.

• Example (airline)Example (airline)– Making a reservationMaking a reservation– Purchasing ticketsPurchasing tickets– Checking baggageChecking baggage– Boarding a flightBoarding a flight– Ordering a beverageOrdering a beverage– Requests a magazineRequests a magazine– DeplanesDeplanes– Picks up baggagePicks up baggage


Key IdeaKey Idea

An organization builds customer loyalty by developing trust, communicating with customers, and effectively managing the interactions and relationships with customers through approaches and its people. Companies must carefully select customer contact employees, train them well, and empower them to meet and exceed customer expectations.


Customer Relationship ManagementCustomer Relationship Management

• Accessibility and commitmentsAccessibility and commitments• Selecting and developing customer contact Selecting and developing customer contact

employeesemployees• Relevant customer contact requirementsRelevant customer contact requirements• Effective complaint managementEffective complaint management• Strategic partnerships and alliancesStrategic partnerships and alliances• Exploiting CRM technologyExploiting CRM technology


Key IdeaKey Idea

To improve products and processes effectively, companies must do more than simply fix the immediate problem. They need a systematic process for collecting and analyzing complaint data and then using that information for improvements.


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Measuring Customer SatisfactionMeasuring Customer Satisfaction

• Discover customer perceptions of business Discover customer perceptions of business effectivenesseffectiveness

• Compare company’s performance relative to Compare company’s performance relative to competitorscompetitors

• Identify areas for improvementIdentify areas for improvement

• Track trends to determine if changes result in Track trends to determine if changes result in improvementsimprovements


Key IdeaKey Idea

An effective customer satisfaction measurement system results in reliable information about customer ratings of specific product and service features and about the relationship between these ratings and the customer’s likely future market behavior.


Survey DesignSurvey Design

• Identify purposeIdentify purpose

• Determine who should conduct the surveyDetermine who should conduct the survey

• Select the appropriate survey instrumentSelect the appropriate survey instrument

• Design questions and response scalesDesign questions and response scales


Key IdeaKey Idea

The types of questions to ask in a survey must be properly worded to achieve actionable results. By actionable, we 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.


Performance-Importance AnalysisPerformance-Importance Analysis

Performance

Imp

orta

nc

e

Low High

Low

Hig

h

Who cares? Overkill

Vulnerable Strengths


Key IdeaKey Idea

Appropriate customer satisfaction measurement identifies processes that have high impact on satisfaction and distinguishes between low performing processes low performance and those that are performing well.


Difficulties withDifficulties with Customer Satisfaction MeasurementCustomer Satisfaction Measurement

• Poor measurement schemesPoor measurement schemes• Failure to identify appropriate quality dimensionsFailure to identify appropriate quality dimensions• Failure to weight dimensions appropriatelyFailure to weight dimensions appropriately• Lack of comparison with leading competitorsLack of comparison with leading competitors• Failure to measure potential and former customersFailure to measure potential and former customers• Confusing loyalty with satisfactionConfusing loyalty with satisfaction


Customer Perceived ValueCustomer Perceived Value

CPV measures how customers assess benefits—CPV measures how customers assess benefits—such as product performance, ease of use, or such as product performance, ease of use, or time savings—against costs, such as purchase time savings—against costs, such as purchase price,installation cost or time, and so on,in price,installation cost or time, and so on,in making purchase decisions.making purchase decisions.


CUSTOMER LOYALTY RELATIONSHIPSNon-competitive zone Regulated, Monopoly or few substitutes. Dominant Brand Equity. High cost of switching. Powerful Loyalty Prog.

Proprietary Technology.

Highly competitive zone.

Commoditization or low differentiation. Consumer Indifference. Many substitutes. Low cost of Switching

→Relationship of Customer Satisfaction and Profitability

→Total Satisfaction for captive customers

→Tyranny of Averages

→Satisfying Target Segments

→Ultimate Source of Focus: affinity Groups


THE IMPORTANCE OF FOCUS

• “Organization that have not identified the customers they are targeting have a special handicap in achieving total customer satisfaction and create many “merely satisfied’s”.

– Customer tell about only extra-ordinary experience

– Only on third of the ‘dissatisfied’ tell – but the talk alright.