UNIT - 3

Customer Satisfaction and

Customer Involvement
 Introduction
The most important asset of an organization 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.
Satisfied customers also pay their bills promptly,
which greatly improves cash flow - the lifeblood of
any organization.
• Increasingly, manufacturing and service organizations
are using customer satisfaction as the measure of
quality.
• The importance of customer satisfaction is not only
due to national competition but also due to worldwide
competition.
• This fact is reflected in the Malcolm Baldrige
National Quality Awards, where customer satisfaction
accounts for 30 percent of the total points.
• Similarly, customer satisfaction standards are woven
throughout ISO 9000:2000.
• Customer satisfaction is one of the major purposes of
a quality management system.
Customer Satisfaction Organizational Diagram
The most successful TQM programs begin by
defining quality from the customer’s perspective.
Quality means meeting or exceeding the
customer’s expectations.
Dr. Deming added that quality also means
anticipating the future needs of the customer.
Customer satisfaction, not increasing profits,
should be the primary goal of the organization.
It is the most important consideration because
satisfied customers will lead to increased profits.
 The circle represents the customer’s needs and the
square depicts the product or service offered by the
organization.
Total satisfaction is achieved when the offer matches the
need, or the circle is superimposed on the square.
The goal is to cover the expected performance level
better than the competitors.
The customer as satisfying perceives that part of the
square that lies within the circle and the part of the
square outside the circle is perceived as unnecessary.
It is important that the organization listens to the “voice
of the customer” and ensures that its marketing, design,
production and distribution processes truly meet the
expectations of the customer.
Customer satisfaction seems simple enough and yet it is
far from simple. Customer satisfaction is not an objective
statistic but more of a feeling or attitude.
Although certain statistical patterns can be developed to
represent customer satisfaction, it is best to remember that
people’s opinions and attitudes are subjective by nature.
Because customer satisfaction is subjective, it is hard to
measure.
• If customer satisfaction strategies are developed
around clearly stated, logical customer opinions and
the emotional issues of a purchase are disregarded,
this can be a costly mistake.
• The value customers place on one product compared
to another may be a better indicator of customer
loyalty.
• Customer loyalty can be sustained only by
maintaining a favorable comparison when compared
with competitors.
 Who is the customer?
• There are two distinct types of customers-- external and
internal.
• An external customer can be defined in many ways,
such as the one who uses the product or service, the
one who purchases the product or service, or the one
who influences the sale of the product or service.
For instance, McDonald’s determined the customer to be the
child when they introduced their “happy meals.” The child never
paid for the meals but the child influenced the sale.
Oftentimes, parents purchase mobiles and yet the teenage
children use the mobiles.
The identity of the external customer is not always easy
to determine.
• An external customer exists outside the
organization and generally falls into three
categories--current, prospective and lost
customers.
• Each category provides valuable customer
satisfaction information for the organization.
• Every employee in an organization should know
how his or her job enhances the total satisfaction
of the external customer.
• Performance should be continually improved in
order to retain existing customers and to gain
new ones.
• An internal customer is just as important. Every
function, whether it is engineering, order processing,
or production, has an internal customer-- each
receives a product or service and, in exchange,
provides a product or service.
Every person in a process is considered a customer of
the preceding operation. Each worker’s goal is to
make sure that the quality meets the expectations of
the next person.
When that happens throughout the manufacturing,
sales and distribution chain, the satisfaction of the
external customer should be assured.
 Who is the customer

The formula for successful internal customer/supplier

relationships varies. But it always begins with people asking
their internal customers three basic questions.
1. What do you need from me?
2. What do you do with my output?
3. Are there any gaps between what you need and what you get?
 Customer Perception of Quality
• Before making a major purchase, some people check consumer
magazines that rate product quality.
• During the period 1980 to 1988, the quality of the product and its
performance ranked first, price was second and service was third.
• During the period 1989 to 1992, product quality remained the most
important factor, but service ranked above price in importance.

• An American Society for Quality (ASQ) survey on end user

perceptions of important factors that influenced purchases showed
the following ranking:
Customer Perception of Quality
 Performance
• Features
• Service
• Warranty
• Price
• Reputation
 Performance
• Performance involves “fitness for use.” It is a
phrase that indicates that the product and
service is ready for the customers use at the
time of sale.
Other considerations are as follows:
• Availability which is the probability that a
product will operate when needed.
• Reliability which is freedom from failure over
time.
• Maintainability which is the ease of keeping
the product operable.’
 Features
Identifiable features or attributes of a product or
service are psychological, time-oriented,
contractual, ethical and technological.
Features are secondary characteristics of the
product or service.
For example, the primary function of an
automobile is transportation, whereas a car
stereo system is a feature of an automobile.
 Service
• An emphasis on customer service is emerging as a
method for organizations to give the customer-added
value.
• However, customer service is an intangible, i.e. it is made
up of many small things, all geared to changing the
customer’s perception.
• Intangible characteristics are those traits that are though
not quantifiable yet contribute greatly to customer
satisfaction.
• Providing excellent customer service is different from
and more difficult to achieve than excellent product
quality.
• Organizations that emphasize service never stop looking
for and finding ways to serve their customers better, even
if their customers are not complaining.
 Warranty
• A product warranty represents the organization’s public
promise of a quality product backed up by a guarantee of
customer satisfaction.

• Ideally, it also represents a public commitment to guarantee a

level of service sufficient to satisfy the customer.
• A warranty forces the organization to focus on the customer’s
definition of product and service quality.
• A warranty generates feedback by providing information on
the product and service quality.
• It also forces the organization to develop a corrective action
system.
• Finally, a warranty builds marketing muscle. The warranty
encourages customers to buy a service by reducing the risk of
the purchase decision and it generates more sales from
existing customers by enhancing loyalty.
 Price
• Today’s customer is willing to pay a higher price to
obtain value.
• Customers are constantly evaluating one
organization’s products and services against those
of its competitors to determine who provides the
greatest value.
• However, in our highly competitive environment,
each customer’s concept of value is continually
changing.
• Ongoing efforts should be made by everyone
having contact with customers to identify, verify
and update each customer’s perception of value in
relation to each product and service.
 Reputation
Total customer satisfaction is based on the entire experience
with the organization, not just the product.
Customers are willing to pay a premium for a known or
trusted brand name and often become customers for life.
Because it costs five times as much to win a new customer
as it does to keep an existing one, customer retention is an
important economic strategy for any organization.
Investment in customer retention can be a more effective
bottom-line approach than concentrating on lowering
operational costs.
An effective marketing retention strategy is achieved
through using feedback form information collecting tools.
 Customer feedback should be continually solicited
and monitored as customers continually change.
They change their minds, their expectations and
their supplier.
Customer feedback is not a one-time effort. In
fact, it is an ongoing and active probing of the
customers’ mind.
Feedback enables the organization to do the following:
• Discover customer dissatisfaction.
• Discover relative priorities of quality.
• Compare performance with the competition.
• Identify customers’ needs.
• Determine opportunities for improvement.
Listening to the voice of a customer can be
accomplished by numerous information collecting
tools. The principal ones are the following:
i) Comment cards
ii) Questionnaires
iii) Focus groups
iv) Toll free telephone lines
v) Customer visits
vi) Report cards
vii) The Internet
viii) Employee feedback
ix) Mass customization
x) The American Customer Satisfaction Index
i) Comment Card
It can be attached to the warranty card and
included with the product at the time of purchase.
The intent of the card is to get simple
information, such as name, address, age,
occupation and what influenced the customer’s
decision to buy the product.
Generally, people respond only if something very
good or very bad has happened.
Comment cards are also used in the hospitality
industry. Restaurants and hotels provide them at
the ends of tables and in hotel rooms.
They can even be found at the bottom of the
restaurant sales receipts.
ii)Customer Questionnaire
A customer questionnaire is a popular tool for
obtaining opinions and perceptions about an
organization and its products and services.
However, they can be costly and time consuming.
Surveys may be administered by mail or
telephone. In the form of questionnaires, the
customer is asked to furnish answers relating to
the quality of products and services.
Most of the surveys ask the customer to grade the
question on one-to-five scale or a one-to-ten
scale, where the highest number typically has a
description like “highly satisfied.”
To make surveys more useful, it is best to remember the
following eight points.

1. Clients and customers are not the same.

2. Surveys raise customer’s expectations.
3. How you ask a question will determine how the question is answered.
4. The more specific the question, the better the answer.
5. You have only one chance and only 15 minutes.
6. The more time you spend in survey development, the less time you will spend in
data analysis and interpretation.
7. Who you ask is as important as what you ask.
8. Before the data is collected, you should know how you want to analyse and use the
data.
iii) Focus groups
Customer focus groups are a popular way to obtain
feedback, but they too can be very expensive. These
groups are very effective for gathering information on
customer expectations and requirements.
Surveying a focus group is a research method used to
find out what customers are really thinking. A group of
customers is assembled in a meeting room to answer a
series of questions.
These carefully structured questions are asked by a
skilled moderator who probes into the participants'
thoughts, ideas, perceptions or comments.
The moderator has a clear understanding of the type of
information wanted and a plan for obtaining it.
The people selected to participate have the same
profile as the customers that the organization is trying
to attract. As an incentive to participation, these
people are reimbursed for their time. Focus groups
are sometimes used with an organization's employees
to examine internal issues.
Imprint analysis is an emerging technique used in
focus groups. This is a good way to obtain the
intrinsic feelings associated with a product or service.
For instance, a major ice cream company discovered
through customer satisfaction surveys that their
customers wanted to eat healthier. Before
implementing a line of low fat ice cream, the
company decided to do an imprint analysis.
The imprint analysis discovered that these customers
would consume low fat foods and deprive themselves of
desserts during the week.
But on the weekends, these same people wanted a super
rich ice cream, containing more fat than any ice cream
presently on the market. These customers wanted to
reward themselves for eating healthy during the week.
Needless to say, the ice cream company launched a new,
full fat and extra creamy product and sold it at a
premium. Their market share increased significantly,
creating many loyal customers due to the extra insight
that the imprint analysis provided.
iv) Toll free telephone lines
Toll free telephone numbers are an effective technique for receiving
complaint feedback. With the help of these, organizations can
respond faster and more cheaply to the complaint. Such a number
does not, however, reach those who decided not to buy the product
or those who discovered some likable feature(s) on a competitor’s
product.

Toll free numbers are in use by atleast 50% of all organizations

with sales of at least $10 million.

Implementation of toll free telephone numbers has grown

tremendously. In six years, the Cadillac division of General Motors
has added 24 toll free numbers. In response to what customers said,
Cadillac eliminated deductibles on warranties and pioneered 24-
hour roadside service.
v) Customer visits
Visits to a customer’s place of business provide another
way to gather information. An organization can
proactively monitor its product’s performance while it
is in use and there by identify any specific or recurring
problems. Senior managers should be involved in these
visits and not delegate them to someone else. However,
it is a good idea to take along operating personnel so
that they can see firsthand how the product is
performing.
A site visit by L-S Electro Galvanizing Company made
to its customer, General Motors, produced a
surprisingly simple idea. An arrow was needed on the
finished 25-ton rolls of steel to show which way the
steel unrolled. Previously, GM employees had to guess
and often times had to re-summon a crane to turn the
roll around which wasted 30 minutes.
vi) Report cards
Another very effective information-gathering tool is the
report card.
It is usually sent to each customer on a quarterly basis.
The data are analyzed to determine areas for
improvement.
For instance, the University of California in San Diego
uses a report card to grade the quality of campus
business services such as the payroll department and the
bookstore.
vii) The Internet and Computers
Some managers are beginning to monitor discussions that take
place on the Internet to find out what customers are saying about
their products.
Internet users frequently seek advice regarding their everyday
activities or activities related to specific interests, hobbies or
sports.
Monitoring interest conversations is timely, the cost is
minimal and it can be a source of creative ideas.
There are even Internet sites that take consumer complaints
and compliments about businesses and give organizations
grades based on their ratio of complaints to compliments.
For example, planetfeedback.com also sends letters to
companies on behalf of consumers. The organization’s Web
page also provides an easy way for customers to e-mail the
company with their thoughts on the organization’s products
and services.
viii) Employee feedback
Employees are often an untapped source of information.
Employee groups can brainstorm ideas to come up with
solutions to problems that customers have identified.
Customer research reveals what is happening and employee
research reveals why it is happening. Employee feedback
should be proactively solicited, instead of checking the
wooden suggestion box once a year.
For instance, Chrysler regularly surveys employees for
issues because employee are timely compared to customer
surveys. When staff members cannot get what they need or
have low morale, they cannot provide good service.
Chrysler requires that management share the survey results
with employees and uses the findings to make substantial
changes.
ix) Mass Customization
The ultimate in customer satisfaction is giving
customers exactly what they want. In the past, the price
tag for this was prohibitive.
But mass customization is a way to provide variety at
an affordable cost. It is a direct result of advances made
in manufacturing, such as flexible manufacturing
technologies, just-in-time systems and cycle time
reduction. It has been done in the car industry for years.
Customers determine what type of seat coverings, color
and stereo system they want. Mass customization is
now being used in many other industries too.
Levi Strauss customers are measured for jeans,
choose the fabric and choose the pattern at a local
store. The custom fit jeans are then manufactured
to order at a central factory and sent to the local
store. The voice of the Levi Strauss customer is
heard at the fabrication stage of production.
Dell assembles computers according to each
customer's requirements by adding or subtracting
components from one of several base systems. In
this way, customers get the computer they want at
a reasonable price through mass customization at
the assembly stage.
Point of customer improvement
x) The American Customer Satisfaction Index
ACSI established in 1994 as a joint project b/n
University of Michigan and the ASQ, quantifies
quality and customer satisfaction and relates them to
firm’s financial performance.
ACSI looks at products sold in US and not just those
produced in US. In this way , US quality is compared
to international quality.
ACSI reports scores on a 0-100 scale at the national
level. It also produces indexes for 10 economic
sectors, 44 industries and for more than 200
companies.
Ten sectors of the economy are:
1. Transportation and warehousing.
2. Manufacturing(nondurable)
3. Manufacturing(durables)
4. Healthcare and social assistance.
5. Accommodation and food services
6. Information
7. Public administration/government
8. Retail trade
9. Finance and insurance
10. E- commerce
Each sector has industries , and under each industry
are specific companies.
ACSI score structure is regularly reviewed and
updated to add newer sectors and industries. Whenever
new sectors are added, year of addition is taken as
baseline scores.
ACSI allows comparisons b/n individual firms,
comparisons b/n firms and the industry average, and
comparisons over time.
ACSI is considered to be one of the forecasts of
consumer spending in United States.
Customer Satisfaction Surveys in India
 Using Customer Complaints
Although complaints are reactive, they are very vital in
gathering data on customer perceptions.
A dissatisfied customer can easily become a lost
customer.
• Some actions organizations can take to handle
complaints are as follows:
1.Investigate customer’s experiences by actively soliciting
feedback, both positive and negative, and then acting on it
promptly.
2. Develop procedures for complaint resolution that include
empowering front- line personnel.
3. Analyze complaints, but understand that complaints do not
always fit into neat categories.
4. Work to identify process and material variations and then
eliminate the root cause. “More inspection” is not corrective
action.
5. When a survey response is received , a senior manager should
contact the customer and strive to resolve the concern.
6. Establish customer satisfaction measures and
constantly monitor them.
7. Communicate complaint information, as well as the
results of all investigations and solutions, to the people
in the organization.
8. Provide a monthly complaint report to quality council
for their evaluation and , if needed, the assignment of
process improvement teams.
9. Identify customer’s expectations beforehand rather
than afterward through complaint analysis.
 Service Quality

Customer service is the set of activities an organization uses to win

and retain customer’s satisfaction. It can be provided before, during
or after the sale of the product or exist on its own. The elements of
customer services are as follows:
Organization
• Identify each market segment

• Write down the requirements

• Communicate the requirement

• Organize processes

• Organize physical spaces

Customer Care
• Meet the customer’s expectations

• Get the customer’s point of view

• Deliver what is promised

• Make the customer feel valued

• Respond to all complaints

• Over-respond to the customer

• Provide a clean and comfortable customer reception area

Communication

• Optimize the trade-off between time and personal attention

• Minimize the number of contact points

• Provide pleasant, knowledgeable and enthusiastic employees

• Write documents in customer-friendly language

Front-Line People

• Hire people who like people

• Challenge them to develop better methods

• Give them the authority to solve problems

• Serve them as internal customers

• Be sure they are adequately trained

• Recognize and reward performance

Leadership
• Lead by example

• Listen to the front-line people

• Strive for continuous process improvement

Additional comments
Translating Needs into Requirements

Kano model
 Customer Retention
The following steps are important for customer retention.
1. Top management commitment to the customer satisfaction.
2. Identify and understand the customers what they like and dislike about the
organization.
3. Develop standards of quality service and performance.
4. Recruit, train and reward good staff.
5. Always stay in touch with customer.
6.Work towards continuous improvement of customer service and customer retention.
7. Reward service accomplishments by the front-line staff.
8. Customer Retention moves customer satisfaction to the next level by
determining what is truly important to the customers.
9. Customer satisfaction is the connection between customer satisfaction and
bottom line.
Voice of a customer
 Employee Involvement
Motivation
Employee surveys
Empowerment
Teams
Suggestion system,
Recognition and reward
Gain sharing
Performance
Appraisal
Unions and employee involvement
Case studies.
Employee involvement is one approach to improve quality and productivity.
It is a means to better meet the organization’s goals for quality and productivity.

MOTIVATION

Maslow’s Hierarchy of Needs

 Herzberg’s Two Factor Theory
Two-factor theory distinguishes between:
Motivators (e.g. challenging work, recognition for one’s
achievement, responsibility, opportunity to do something
meaningful, involvement in decision making, sense of
importance to an organization) that give positive satisfaction,
arising from intrinsic conditions of the job itself, such as
recognition, achievement, or personal growth
Hygiene factors (e.g. status, job security, salary, fringe benefits,
work conditions, good pay, paid insurance, vacations) that do
not give positive satisfaction or lead to higher motivation,
though dissatisfaction results from their absence.
The term “hygiene” is used in the sense that these are maintenance
factors. These are extrinsic to the work itself, and include
aspects such as company policies, supervisory practices, or
wages/salary.
Employee Wants
Achieving a Motivated Work Force
1. Know thyself.
2. Know your employees.
3. Establish a positive attitude.
4. Share the goals.
5. Monitor progress.
6. Develop interesting work.
• Job rotation
• Job enlargement
• Job enrichment
7. Communicate effectively
8. Celebrate success.
Employee surveys help managers assess the current state of
employee relations, identify trends, measure the effectiveness of
program implementation, identify needed improvements, and
increase communication effectiveness.
STEP 1 : The Quality Council to create a multifunctional team

STEP 2 : The Team will develop survey instrument using in- house and

external expertise.

STEP 3 : Administer the survey

STEP 4 : Results are compiled and analysed

STEP 5 : Determine areas for improvement

 Empowerment
Empowerment is investing people with authority. It’s purpose is to
tap the enormous reservoir of potential contribution that lies within
every worker.
In order to create the empowered environment, three conditions are
necessary.

1. Everyone must understand the need for change.

2.The system needs to change to the new paradigm.
3. The organization must enable its employees.
 TEAMS
 Employee involvement is optimized by the use of teams.

 A team is defined as a group of people working together to achieve

common objectives or goals.

 Teamwork is the cumulative actions of the team during which each

member of the team subordinates his individual interests and
opinions to fulfil the objectives or goals of the group.
Why Teams Work
1. Many heads are more knowledgeable than one.
2. The whole is greater than the sum of its members.
3. Team members develop a rapport which each other.
4. Teams provide the vehicle for improved communication.
TYPES OF TEAMS

1. Process improvement team.

2. Cross – functional team.

3. Natural work teams.

4. Self – Directed / Self – Managed work teams.

CHARACTERISTICS OF SUCCESSFUL TEAMS
1. Sponsor
2. Team Charter
3. Team Composition
4. Training
5. Ground Rules
6. Clear Objectives
7. Accountability
8. Well-Defined decision procedure
9. Resources
10. Trust
11. Effective Problem Solving
12. Open Communication
13. Appropriate Leadership
14. Balanced Participation
15. Cohesiveness
 TEAM MEMBER ROLES
Team Leader
• Ensures the smooth and effective operation of the team.
• Facilitates the team process.
• Serves as a Contact Point.
• Organizes the implementation of changes.
• Prepares the meeting agenda.

Facilitator
• Supports the leader.
• Focuses on the team process.
• Acts as a resource to the team.
• Provides feedback to the team.
Recorder
Documents the main ideas of the team’s
discussion, the issues raise, decisions made, action
items etc.
Presents the documents and distributes the MOM.
Participates as a team member.

Timekeeper
• Ensures that the team maintains the schedule.
• Participates as a team member.
Team Member
Contributes best, without reservation.
Respects other people’s contributions.
Listens carefully and asks questions.
Works for consensus on decisions.
Supports the decision of the team.
Understands and is committed to the team
objectives.
Respects and is tolerant of individual
differences.
Acknowledges and works through conflict
openly.
Carries out assignments.
 Effective Team Meetings
• Meeting should be regularly scheduled
• Development of an agenda
• Agenda should have opening focus, previous meeting
feedback, agenda review ;
• Periodic meetings.
Stages of team development
• Forming
• Storming
• Norming
• Performing
• Adjourning
 Ten common people problems and their solutions

1. Flounder Floundering
2. Overbearing participants
3. Dominating participants
4. Reluctant participants
5. Unquestioned acceptance of opinions as facts
6. Rush to accomplish
7. Attribution
8. Discounts and plops
9. Wanderlust
10.Feuding team members
 COMMON BARRIERS TO TEAM PROGRESS
Insufficient training.
Incompatible rewards and compensation.
First-line supervisor resistance.
Lack of planning.
Lack of management support.
Access to information systems.
Lack of Union support.
Project scope too large.
Project objectives are not significant.
No clear measures of success.
 No time to do improvement work.
 Team is too large.
 Trapped in groupthink.
 Training
• Training is essential for an effective team.
• Experimental
• Training is essential for an effective team.
• Credibility
• Experimental
• •Credibility
Awareness about training program.
• Awareness about training program.
• Action oriented trainings results in a right way.
• Action oriented trainings results in a right way.
• •Team leaderleader
Team role role
 Suggestion system
Ground rules for suggestion system

1. Be progressive

2. Remove fear

3. Simplify

4. Respond quickly

5. Reward the idea

 RECOGNITION AND REWARD
Various ways for Recognition and Rewards are

1. Recognition can be expressed using verbal and written praise.

2. Rewards may be in the form of certificates and plaques.
3. Reward is normally in the form of cinema tickets, dinner for family etc.
4. The financial compensation (for recognition) can be paid in terms of increased
salaries, commissions, gain sharing etc.
5. The efforts of employees can be recognized by promotions, special job assignments
etc.
6. A letter of appreciation from the CEO or the Top Management will increase the
employee’s involvement.
7. Reward may be delayed but recognition should be in a timely basis.
8. Rewards should be appropriate to the improvement level.
9. People like to be recognized than any reward.
10. Special forms of recognition include pictures on the bulletin board, articles in news
letters, letter to families etc.
11. Supervisors can give on-the-spot praise for a job which is done well.
Potential income = 535000
Labor cost as a percent of sales = 27%
Team goal = 535000 * 0.27 = 144450
Actual team cost = 138365
Gain = 144450 – 138365 = 6085
Appraisal format
Type Description
Ranking Compares employees ranking from highest to lowest

Narrative Gives a written description of employee’s strength and

weakness

Graphic Indicates the major duties performed by the employee

and rates each duty with a scale, which is usually from
a(poor) to 5(excellent)

Forced choice Places each employee in a category with a

predetermined percentage – for example, excellent 10%,
very good – 25%, good- 30%, fair – 25% and poor 10%
Suggestions for rating employees
1. Use rating scale that have fewer rating categories.
2. Require work team or group evaluation that are at least equal in emphasis to
individual-focused evaluations.
3. Require more frequent performance reviews where such reviews will have a
dominant emphasis on future performance planning.
4. Promotion decisions should be made by an independent administrative
process that draws on current job information and potential for the new job.
5. Include indexes of external customer satisfaction in the appraisal process.
6. Use peer and subordinate feedback as an index of internal customer
satisfaction.
7. Include evaluation for process improvement in addition to results.
BENEFITS OF EMPLOYEE INVOLVEMENT

Employee involvement improves quality and increases

productivity because
Employees make better decisions using their expert
knowledge of the process
Employees are better able to spot and pin-point areas for
improvement.
Employees are better able to take immediate corrective
action.
Employee involvement reduces labour / management
friction.
Employee involvement increases morale.
Employees have an increased commitment to goals because
they are involved.