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Know Thy Customer & Service expectation

Traditional Organizational Pyramid

Top Mgmt

Middle Mgmt Frontline Staff

Inverted Pyramid with a Customer & Frontline Focus


Customer Base

Frontline Staff

Middle Mgmt & Top Mgmt Support Frontline

Customer Behavior Styles


Very enthusiastic, buying decisions often based on emotion, as well as facts Very direct, forceful, and result oriented, make quick decisions

Talkers

Doers

Controllers
very detail oriented, deliberate, and well organized They rely on facts, evidence and data

Supporters
They are very careful and need time to process information, and very reluctant to change their current buying habits

Dimensions of Service Quality


Tangibles Reliability Responsiveness Assurance
competence, courtesy credibility security

Empathy
access communication understanding of customer

Hard and Soft Measures of Service Quality


Hard measures refer to standards and measures that can be counted, timed or measured through audits
typically operational processes or outcomes e.g. how many SWO pending which should have been delivered?

Soft measures refer to standards and measures that cannot easily be observed and must be collected by talking to customers, employees or others
e.g. SERVQUAL, surveys, and customer advisory panels.

Control charts are useful for displaying performance over time against specific quality standards.

Productivity
Productivity measures amount of output produced relative to the amount of inputs. Improvement in productivity means an improvement in the ratio of outputs to inputs.

Efficiency, Effectiveness, and Productivity


Efficiency: comparison to a standard--usually timebased (e.g., how long employee takes to perform specific task)
Problem: focus on inputs rather than outcomes May ignore variations in quality or value of service

Effectiveness: degree to which firm is meeting its goals


Cannot divorce productivity from quality/customer satisfaction

Productivity: financial valuation of outputs to inputs


Consistent delivery of outcomes desired by customers should command higher prices

Six Sigma Methodology to Improve and Redesign Customer Service Processes


Recognize Define Measure

Analyze

Improve

Identify the problem Define requirements Set goals Validate problem/process Refine problem/goal Measure key steps/inputs Develop causal hypothesis Identify root causes Validate hypothesis Develop ideas to measure root causes Test solutions Measure results Establish measures to maintain performance Correct problems if needed

Process Improvement

Identify specific or broad problems Define goal/change vision Clarify scope & customer requirements Measure performance to requirements Gather process efficiency data Identify best practices Assess process design Refine requirements Design new process Implement new process, structures and
systems

Process Design/Redesign

Control

Establish measures & reviews to maintain performance Correct problems if needed

Defining Functional Imperatives


Marketing Imperative
Target right customers and build relationships Offer solutions that meet their needs Define quality package with competitive advantage

Operations Imperative
Create, deliver specified service to target customers Adhere to consistent quality standards Achieve high productivity to ensure acceptable costs

Importance of Customer retention


As markets have become stagnant Increased competition (Price & other relative factors) Customers becoming increasingly informed & skeptical

Loyalty is Important to Profitability : Index of Customer Profits over Time


350 300 250 Profit Index (Year 1=100) 200

150
100 50 0

Year 1

Year 2
Industrial products

Year 3

Year 4
Auto servicing

Year 5

What Makes Loyal Customers More Profitable?


Tend to spend more as relationship develops may consolidate purchases to one supplier

Cost less to serve less need for information and assistance make fewer mistakes
Recommend new customers to firm (act as unpaid sales people)

Trust leads to willingness to pay regular prices vs. shopping for discounts

Analyzing Why Customers Are More Profitable over Time


Profit from price premium

Profit from references

Profit from reduced Operating costs Profit from increased usage

Base Profit

Year

Basic Segmentation Issues: Building an Appropriate Customer Portfolio Target customers whose needs match firms capabilities (operational efficiency) Focus on value of prospective customers within each segment, not just numbers Create a mix of segments to reduce risks of volatility during swings of economic cycles

Customer-Led versus MarketOriented Philosophies of Management


Firms may lose market leader position if listen too closely to current customers Service leadership requires curiosity, risk taking Customer-led businesses focus on understanding expressed desires of customers in currently served markets

Market-oriented businesses commit to understand current/ latent customer desires plus competitors plans, capabilities
Scan market more broadly, have longer-term focus Work closely with lead users Combine traditional research with experimentation, observation Conclusion: Pursue customer satisfaction, but set limits on being led by customers, especially during rapid change

The Service Profit Chain


Internal
Operating strategy and service delivery system
Loyalty EMPLOYEES Satisfaction Productivity & Output Quality Capability

External
Service concept Target Market

CUSTOMERS Service Value

Revenue Growth
Satisfaction

Loyalty

Profitability

Service Quality

Workplace design Job design Selection and development Rewards and recognition Information and communication Tools for serving customers

Quality and productivity improvements yield higher service quality and lower costs

Lifetime value Retention Repeat business Referral

Causal Links in the Service Profit Chain


Customer loyalty drives profitability and growth

Customer satisfaction drives customer loyalty


Value drives customer satisfaction Employee productivity and retention drive value Employee loyalty drives productivity Employee satisfaction drives loyalty and productivity

Internal quality drives employee satisfaction

Changing Corporate Culture


Shared perceptions regarding what is important Shared values about what is right and wrong Shared understanding about what works and what doesnt Shared beliefs about why these things are important Shared styles of working and relating to others

Service as Theater
All the worlds a stage and all the men and women merely players. They have their exits and their entrances and each man in his time plays many parts
William Shakespeare

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