TOTAL QUALITY MANAGEMENT - II Chapter – 14:

“Customer Driven Quality”

Dr. Shyamal Gomes

Introduction:

Quality begins with the customers and also ends with them. Therefore, the most important asset of any organization today is its customer. An organization’s success depends on how many customers it has, how much they buy, and how often they buy. Customers that are satisfied will increase in number, buy more, and buy more frequently. Who is Customer? Webster defines: a customer as “ one that purchases a commodity or services”. Here customers and sellers are two different entities and customers are beyond the bounds of an organization. But the concept of TQM tries to point that “a customer is anyone who receiving and uses what an organization or individual provides. Here, customers are not just outside the org. but also within it and customers are not beyond the bounds of an organization.

• The most important people in any organization

• Not dependent on us, we depend on them

• Not an interruption in our work – they are the purpose of it.

• A part of our business , not outsiders

• Not just a statistic, they are flesh and blood creatures with feelings and emotions – like us.

• People who come to us with needs & wants. It is our job to fulfil them.

• The lifeblood of any business, without them we have to shut shop.

John Brune defines a customer as” one who purchases a product or services” there are two types of customers: 1. External Customer 2. Internal Customer An external customer is people who exists outside the organization and buys its final product and services. An internal customer are also people who exists within the organization as an employee An internal customer is as important as the external customer, because every function – engineering, order processing, or production – each employees receives a product or service responsibility. Hence, each worker must ensure that he / she meets the expectation of the next worker. When that happens in manufacturing, sales and distribution chains, the total satisfaction of the external customer is assured. Therefore, satisfaction of internal customer is directly linked with the satisfaction of external customer and org. must understand how their support and care enhances the total satisfaction of the internal customers.

Total Satisfaction

of Internal

C

QUALITY

(Product &

Services)

Total Satisfacti

on of

External

Voice of ext. Customer

Commitment of employees and management

Customer Satisfaction:

“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. From a company’s view point CS results from the following: 1. Basic Requirements 2. Performance Requirements 3. Delight Requirements Basic Requirements relate to those that the customer takes for granted. There is never a subject of negotiation. Example: Safety of an Airline. Performance requirement relate to customer expectations that are negotiated and agreed. Example: Flight schedule of an airline. Delight requirements relate not only to meeting the customer expectations but exceeding them. Example: An on - flight fashion – show. According to N. Kano, if a company wants to stay top , it must delight the customer. Evidently a delighted customer takes six times less effort to retain and has a five times higher probability of providing continued business compared to a fresh customer. Therefore, CS should not be treated as mere slogan. CS leads to customer loyalty, while drives market growth and share and profitable return on investment (ROI). CS bound to effectively invest resources through empowered people in the face of market competition.

Kano Model

Customer Needs

Cus

tom

er S

atis

fact

ion

Excitement

Expected

Must Have

Kano Model

Customer Needs

Cus

tom

er S

atis

fact

ion

Excitement

Expected

Must Have

Customer Perception of Quality: One of the basic concept of the TQM philosophy is Continuous Process Improvement. This concept implies that there is no acceptable quality level because: The customer’s needs, values and expectations are constantly changing and becoming more dependent Before making a major purchase, some people check consumer magazines that rate product quality. During the period 1980 – 1988: the quality of the product and its performance ranked first, price was second, and service was third. During the period 1989-1992: product quality remained the most important factor, but service ranked above price in importance. 1996-97, American Society for Quality (ASQ) survey on end user perceptions of important factors that influenced purchases showed the following ranking: 1. Performance 2. Features 3. Service 4. Warranty 5. Price 6. Reputation The factors of performance, features, service and warranty are part of the product or service quality. Therefore, it is evident that the quality of a product and / or service are more important than price Performance involves ‘ fitness for use’ – a phrase that indicates that a product and / or service is ready for the use of customers at the time of sale. Other considerations are: 1. Availability, which is the probability that a product will operate

when needed. 2. Reliability, which is freedom from failure over time. 3. Maintainability, which is the ease of keeping the product

operational Features: Identifiable features or attributes of a product or service are psychological, time – oriented, contractual, ethical and technological.

Features are secondary characteristics of a product or service. For example, the primary function of an automobile is transportation whereas the stereo system is a feature. Service An emphasis on service is emerging as a method for organization to give the customer added value. However, Customer service is intangible and made up of many small things. All these are geared to change the customer’s perception. Intangible characteristics are traits that are not quantifiable but contribute greatly to customer satisfaction. Providing excellent customer satisfaction is different from and more difficult than achieving product excellence Warranty: Product warranty represents a public promise an org. makes about the quality of a product. This is backed up by a guarantee of customer satisfaction. Ideally, it represents a public commitment to guarantee a level of service sufficient to satisfy the customer. Price: Today, customers are willing to pay, a higher price to obtain value. They are constantly evaluating an organization’s products and services against its competitors’ to determine who provides greater value. In highly competitive environment, a customer’s concept of value is also changing all the time. An organization must know the pulse of the customer and make ongoing efforts to keep him/her satisfied. Reputation: Total customer satisfaction is based on the experience with an organization and not just the product. Customers are willing to pay a premium for a trusted brand name. It costs five times as much as to win new customers as it does to retain the existing customer. Therefore, Customer driven quality represents a proactive approach to satisfying customer needs that is based on gathering data about our customers to learn their needs and preferences and then providing products and services that satisfy the customer. Here the most important part is gathering relevant data and its proper analysis in time. Therefore, Customer feedback must be continually solicited and monitored in every business organization. Feedback enables the organization to:

Discover customer’s dissatisfaction Discover the relative priorities of quality

Compare its performance with competition Identify consumer’s needs Determine opportunities for improvement

Questions come, how? The Principal methods for collecting customer’s feedback, the voice of customer (VOC) are:

Comment cards - which is usually attached to the warranty card and included with the product at the time of purchase

Survey – a questionnaire where the customer is asked to furnish answers relating to the quality of products and services

Focus groups – a specialized group of customers is assembled in a meeting room to answer a series of questions. Meetings are designed to focus on the current, proposed and future products and services

Toll – free telephone lines – an effective technique for receiving complaints

Customer visits – Periodic visits to a customer place of business provides

Report cards – usually sent to each customer on a quarterly basis. Data is analysed to determine areas for improvement.

Internet: immediate feedback about product and services Employee feedback- Employees are, often, an untapped source of

information. Employees can offer valuable insights into what inhibits quality in an organization. Customer research reveals what is happening but employee research finds out why it is happening.

Customer Retention: Customers expect certain things from an organization. The inability of the organization to meet those expectations leads to dissatisfaction. The ways for the organization to keep a high level of customer satisfaction and still operate efficiently are:

1. Translates customer wants into a finished product design - QFD.

2. Mastering the art of optimum level of Performance. 3. Designing Service standards to meet each expectation of

customer. 4. Low discrepancy between expectations and perception of the

service. And these ways we can conclude in a single process - Customer-Relationship Management. CRM is a process by which an organization can view of the customer asserts that he or she is a valued

asset and their satisfaction to be managed. This process has four important Components:

1. Complaint resolution 2. Feedback 3. Guarantees 4. Corrective action or recovery

1. Complaint Resolution is an important part of the quality management system. Three common types of complaints

regulatory complaints employee complaints customer complaints.

The complaint-resolution process involves the transformation of a negative situation in one in which the complainant is restored to the state existing prior to the occurrence of the problem.

Complaint-recovery process

Feedback: There are two main types of feedback

feedback to the customer feedback to the firm as a basis for process

improvements Feedback to the firm should occur on a consistent basis with a process to monitor changes resulting from the process improvement. Some customer data is solicited and other data is provided without solicitation (talep).

Guarantees A guarantee outlines the customer’s rights.

Apologize to the customer (contrition)

Compensate people for

losses

Make it easy for the

complainant to resolve his or her problem

The guarantee is both a design and an economic issue that must be addressed by all companies before the first sale occurs.

To be effective, a guarantee should be: Unconditional Meaningful Understandable Communicable Painless to invoke

Corrective Action: When a service or product failure occurs, the failure is documented and the problem is resolved in a way that it never happens again. Corporate teams or committees should be in place to regularly review complaints and to improve processes so the problems don’t recur.

Customer Retention Programmes:

How can organizations retain customers? The marketing programme should be derived from and support the company’s mission and business plans. The following step-by-step approach gives a methodology to develop a comprehensive customer retention programme: Step – 1: Review the mission Statement Step – 2: Research your Customer Base. Step – 3: Measure Customer Defection Rates. Step – 4: Stay in Front of Customers. Step – 5: Take the extra mileage. Step – 6: Create a Proprietary way of communicating of servicing Customers.

Customer Value Management: CVM offers a roadmap to acquiring, developing and retaining the most valuable customers. CVM improves customer profitability by understanding the value of each individual customer and implementing marketing strategies, retention campaigns and loyalty programmes that maximises that value.

Customer Relationship Management: (CRM):

CRM is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. It involves the integration of marketing, sales, customer service and the supply-chain functions of the organization to \achieve greater efficiencies and effectiveness in delivering customer value.

CRM was first coined in the early 1990s. It was a major strategic approach to customer service and businesses are now investing millions of dollars to acquire CRM services and solutions. It is the leading business strategy of the new millennium. The scope of CRM has the customer at the centre, the other four constituencies are suppliers, owners / investors, employees and other partners, all of who must be managed and coordinated to ensure that preferred value propositions are created, communicated and delivered to the selected customer.

Purpose / objectives of CRM: CRM enables an organization to analyse the behaviour of customers and their value. The main areas of focus are CUSTOMER, RELATIONSHIP and the MANAGEMENT of relationships. The main objectives of implementing CRM in business strategy are:

• To simplify marketing and sales processes • To make call centres more efficient. • To provide better customer services. • To discover new customers and increase customer revenue. • To cross-cultural products more effectively.

The CRM processes should fully support the basic steps of customer lifecycle. The basic steps of customer lifecycle are: • Attracting present and new customers. • Acquiring new customers • Serving the customers • Finally, retaining the customers.

Three customer value management cycles can be broken down into three stages: Right Customers (acquisition), Right Relationship (development) and Right Retention (Keeping valuable customers) Conclusion:

This is a very general question - Why customers quit their relationship with a particular supplier? Le Boeuf (1987) cited reasons: 3% move away without giving a reason 5% develop other supplier relationship, 9% leave for competitive reasons, 14% dissatisfied with the product, and 69% quit because an attitude of indifference towards the customer by the owner, manager or some employees. Le Boeuf claimed that business spend 6 times more to get a new customer than to retain an old one. Customer loyalty is worth 10 times the price of a single purchase, in an average case.

Therefore we should not forget the old “Customers will tell three people if they like the service but they will tell eleven if they don’t it”. Finally, “ when a company’s customers are happy with the service and product and find enthusiastic and knowledgeable personnel who are anxious to help, chances are that the company will continue to enjoy the lucrative patronage of those customers for a long, long time.”- Red Pope (1979).

References:

• D.H.Besterfield – Total Quality Management (third edition) • Poornima M. Charantimath – Total Quality Management • Kanishka Bedi – Quality Management

Prof. (Dr.) Shyamal Gomes